Remote Work or Office Absence?
Last week we spent 3 days in the middle of Queensland with Capricorn Space searching for property. We covered about 1000 kms in 2 days and worked as we travelled. We even had connectivity almost 200 kms from the nearest main regional centre.
This got us talking about remote work in particular McKinsey Global Institute’s recent July report; “Empty spaces and hybrid places – the pandemic’s lasting impact on real estate”.
The pandemic only started 2.5 years ago, but businesses are only coming to grips with the future this year. Legacy leases, systems, platforms, and business thinking are still very prevalent. That being the case, we have not yet turned a half cycle of lease expiries in the office markets, so we have not experienced the full impacts of the pandemic on the office markets.
Relative to 2019, global office attendance is low. New technology, work practices, and systems will reduce office attendance further. McKinsey notes – “in a moderate scenario …… demand for office space is 13 per cent lower in 2030 than it was in 2019 for the median city.”
Much of the report relates to the US but, the concepts and reasoning are relevant to Australian capital cities which we believe are better placed than those in the US. Thankfully, we have not been as affected as San Francisco or Portland.
In 2022, we predicted the structural shift following Covid would create an average annual 2% negative net absorption effect on the office markets through to 2027. Based on McKinsey’s report and our further research, we think this is still the case.
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