Perhaps the most overused phrase of 2022 will be “new normal”. And while we may all roll our eyes each time we hear it, there’s little doubt that the pandemic continues to have a huge impact on almost every part of daily life. In the property sector, we will see significant changes in everything from occupancy levels and how spaces are used through to an increased focus on air flow and quality to prevent the spread of illness and changes in how operational and capital expenditures will be managed.We highlight five key changes that will affect the Australian commercial property industry in 2022.
1 - Lower CBD occupancy rates will become normal
Across almost all CBD commercial real estate markets, there has been a significant decline in occupancy rates with lockdowns and now omicron severely limiting workers ability to access their workplace.Post-lockdown and pre-omicron CBD occupancy was increasing but based on the Property Council of Australia data below you can see that for Melbourne, Sydney and Canberra it was almost 80% of pre-COVID levels.
When employees are able to safely return to the office we expect occupancy rates to settle around 70% and not return to pre-COVID levels.This will be primarily driven by employees' continued preference for a hybrid work week and organisations embracing activity-based work (“Hot desking”). Many building owners will also redesign their properties with more communal and shared spaces to support more tenants.
2 - Occupancy and air quality data will be even more important
As hybrid and activity-based work becomes more entrenched and communal and co-working spaces increase, average occupancy will be more variable than ever before and fluctuate significantly on a daily basis.Density and occupancy tracking has historically not been widely utilised in the commercial sector, so sourcing equipment and onboarding the data will all be very important foundational steps.We also anticipate an increased focus on building ventilation and air quality metrics by organisations and employees, especially once COVIDSafe requirements relax. In particular, CO2 monitoring and reporting will become mainstream as tenants will demand greater visibility and transparency in order to restore confidence and ensure safety. By measuring the level of CO2, it’s possible to make an accurate inference about the number of people in a building and their location - see below:
Figure 1: average daily indoor CO2 levels profile daily average for a commercial office shows the low CO2 levels during the NSW lockdown period.In order to ensure that buildings are kept as comfortable and safe as possible, there will be pressure on building owners and operators to efficiently manage tenant comfort in real-time.
3 - Greater focus on operational efficiency
As CBD rents are unlikely to rise until at least 2023 and significant investment in equipment is required to make progress on sustainability initiatives, we anticipate a greater priority on driving opex efficiencies through technology in 2022.Building owners will move from a reactive break/fix mode to a data driven maintenance model. Equipment will be more closely monitored so operational anomalies are detected sooner so they can be resolved before they fail or cause increased operational costs.The property industry will be particularly interested in generating operational insights, making more accurate predictions and forecasts, automating decision making in order to speed up maintenance and response, and better integration of customer data.We also expect building acquisitions and disposals to increase in 2022 - a trend that we started seeing in late 2021 that is backed by research by Jones Lang LaSalle. In order to maximise valuations, we expect there will be an increased focus on NABERS ratings, GRESB, occupancy % and operational efficiency.
4 - A new generation of facilities managers
The traditional facilities manager typically comes from a trade or technical background. We expect an acceleration in a trend we’ve been noting for a while. CIM has been tracking an increasing trend towards non-technical Facilities Managers.This will place an additional emphasis on documenting operational and building knowledge - historically a weak point of the industry. And it also increases the importance of data and fault detection and diagnostics analytics as many Facility Managers will not have the past trade experience to deeply understand faults and issues. They will need tools and technology to help them make sense of the data they are presented with.The past two years have seen significant disruption in the property industry, leading to a reset in how commercial buildings are managed and used. The key to managing this shift is the intelligent collections and use of data to provide insights that allow building owners and facilities managers to make informed decisions in order to maximise returns for investors while maintaining and improving comfort and safety for tenants.
5 - The rise of the remote facilities manager
Like the majority of the working population, Facilities and Operations Managers have also mainly worked remotely during the pandemic. SaaS building analytics platforms have allowed them to securely connect, monitor and manage many of their essential systems remotely and we anticipate that many will not return to the “office” full-time.
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