Many top-tier Australian companies reduced office space in 2020, CBRE report finds
A new report has highlighted the intertwined fortunes of Australia’s ASX-listed companies and inner-city office markets, with the vast majority of industries reducing their floorspace in 2020.
The report analysed the footprint of top 100 companies on the ASX across Sydney, Melbourne, Brisbane, Perth and Adelaide in the wake of the COVID-19 pandemic.
Materials companies, including the mining sector, were the only ones to increase their office footprint (by about 7500 square metres) in the first nine months of the year, according to CBRE’s Office Spaces Report.
The materials sector is the second-largest occupier of CBD space, taking up 8 per cent, and overall it recorded a 1.7 per cent rise on the ASX Index during the first nine months of the year.
The financial services sector, which includes the big four banks and accounts for 54 per cent of office space in capital city CBDs leased to ASX100 companies, is the largest.
That sector reduced its CBD floorspace by about 23,000 square metres during the same nine months, and overall it recorded a 17.5 per cent fall in the ASX Index during the same period, the report found.
CBRE associate director research Tom Broderick predicted that this contraction could have further to run.
“Our expectation is that companies within the financial services sector are likely to contract the most given their large footprint and cost containment pressures,” Mr Broderick said.
However, so far the communications services sector has contracted the most this year, with a 29,000-square-metre reduction in its footprint.
But the report may also have some positive news.
The top 100 companies occupy only 13 per cent of office space across all of the cities, suggesting that any protracted downturn in sharemarket performance may not automatically flow onto CBD office market performance.
Downsizing a result of many factors
The contraction in space isn’t solely related to the COVID-19 pandemic, however, with some downsizing a hangover from large-scale restructuring in the banking sector, including the exit from the wealth sector by the major banks in the aftermath of the Hayne royal commission.
For example, ANZ is returning four levels of space in ANZ Tower at 242 Pitt Street, in Sydney, to its landlord following the decision to offload its wealth business to IOOF and Zurich.
The decision was reached last year but the company has only recently applied for a development application with the City of Sydney to convert the four floors into separate spaces.
“Across ANZ’s offices demand for collaborative space is increasing and the needs for individual desking is becoming more versatile,” ANZ’s group general manager of property Kate Langan told Commercial Real Estate.
“In response to these changing work practices, and following the sale of our wealth businesses, last year we agreed to return four floors of our Pitt Street offices to the landlord under the terms of our lease.”
Ms Langan said the COVID-19 crisis had led to other changes in the way ANZ assessed its office space requirements.
“We anticipate that COVID-19 will increase flexible working practices across the bank. In response we have developed the ‘How We Work’ program – a holistic initiative capturing all aspects of our operations including health and safety, remote management and adoption of new technologies,” she said.
