Commercial office buildings: Nero fiddles while Rome burns

There is an opportunity now for vision to transform what will be (if they are not already) ‘at risk’ assets into highly desired workspace for a new breed of tenants seeking fantastic experiences.

Office landlords appear largely unable to adequately respond to the declining demand for their space. Many Australian landlords’ rhetoric espoused by their CEOs, in-house researchers and agencies is that it will all be OK …“nothing to see here”.

Yet their practical response is typically quite different. Owners have started to offload underperforming assets and focus on cost reduction. I am already hearing of plans to reduce spend on customer services and experience.

The classic business response to downturns is to tidy the balance sheet and reduce spend. But is it the right approach in this set of circumstances?

Probably not.

While none of us knows what office consumption will look like 5 years from now, there are plenty of tenants that have the budget to spend on the right space. A weak link is the availability of truly compelling offerings that anticipate and deliver to the needs of occupiers.

Ironically, many large landlords seemed to be more actively focussed on delivering against tenant and customer needs in the year prior to Covid than they are now. Yes, there are still efforts around the delivery of shared amenity, flexibility, wellness and workplace hospitality - but not with the breadth of vision or resolve required.

A new wave of tenants will be attracted to and pay a premium for truly compelling workspaces, the likes of which are currently rare. In particular, there is an opportunity now to transform secondary assets (A- to C grade) into customer-centric individualised offerings.