This article is from the Australian Property Journal archive
ASKING employees to work full time in the office is no longer a priority for businesses, as 91% of CEOs are backing hybrid working, a decision which is expected to impact office market valuations and lead to further repricing of assets, which are already trading at a discount to book value.
According to new research by International Workplace Group, which surveyed more than 500 CEOs, 75% of respondents said adopting hybrid working has led to an improvement in productivity, with 76% saying it has resulted in improved staff retention.
74% said asking employees to be in the office full time was not a business priority, 77% noting improved engagement and 75% saying there was more efficient collaboration between teams and colleagues.
73% agreed that hybrid work has enabled them to attract and hire top talent and expanded their pool of talent, with 71% of CEOs saying they have been able to consider and subsequently offer roles to a more diverse range of candidates.
This is in line with a IWG report from March, which found hybrid working has opened the door for more women from minority backgrounds to apply for senior positions within their companies.
“This latest research highlights the continued impact of hybrid work on today’s business landscape. The adoption of flexible work models by CEOs has driven productivity, enhanced employee retention and strengthened company culture,” said Damien Sheehan, country head for Australia at International Workplace Group.
With 65% believing they would lose talent if they insisted on their employees being present in a central office five days a week.
This is in line with the 56% of Australian hybrid workers who said they are likely to resign from their job in 2024 if they had to commute long distances daily.
With a recent report finding nearly three quarters of working parents say they would look for new employment if they were required to come into the office five-days a week.
To work with this new normal, 94% of CEOs said they had invested in new technology to improve their hybrid experience over the last 12 months, with 43% saying this had been their top investment over the year.
“By embracing hybrid working, businesses are not only attracting top talent, but also fostering greater employee engagement and collaboration. Investing in the hybrid model is also proving essential for companies aiming to secure a competitive edge and long-term success,” added Sheehan.
The latest data spells more bad news for office landlords and is expected to result in further repricing of assets in the sector.
Recent flurry of office transactions across Australia has seen sellers meet the market and accept major discounts to get deals across the line.
This week the Australian Unity Office Fund (AOF) sold a Parramatta office tower and adjacent car park for $80.5 million – nearly $70 million less than what the asset was valued at just two-and-a-half years ago. The sale followed the divestment of 94-96 York Street in Beenleigh for $29.7 million, below what AOF paid in 2021 when it bought the then-new building for $33.52 million, and 150 Charlotte Street in Brisbane for $64.5 million. That price came in above the book value of $60 million, but represented a hefty capital loss for AOF, which paid $105.75 million in 2017 when it acquired the Brisbane CBD office building.
A deal has reportedly been in the making for some months for AOF’s 468 St Kilda Road asset in Melbourne, at close to book value of $70 million, and a completed sale would leave it only 64 Northbourne Avenue in Canberra.
Office sales filtering through at discount
Office sales transactions increased from a low base in the June quarter as large institutional sales started to filter through, typically at notable discounts to peak and prior book values.
Among those was another Parramatta asset, at 130 George Street, which Dexus offloaded at 63% below peak valuation.
Meanwhile, Cbus Property is spending $310 million to acquire a 50% share of 5 Martin Place in the Sydney CBD, as reported by Australian Property Journal, which had previously shown a valuation of $405 million two years ago, while Mirvac has just divested the 40 Miller Street, North Sydney office building to Barings for $140 million, and 367 Collins Street in Melbourne for $345 million, with both deals struck at a 20% discount to peak book values.
In Brisbane, Quintessential has bought 240 Queen Street at a 17% discount to peak valuation.
