Hot desking’ emptying Australia’s office towers

Hot desking’ emptying Australia’s office towers

Wednesday, Feb 05, 2014

Jonathan Pearlman

The Straits Times

OFFICE towers in Australian cities are at their emptiest in years as firms have sought to cut costs by “hot desking” and moving to flexible or open plan offices.

Companies including banks and big law and accounting firms have been looking to reduce their office space and limit their spending on expensive city centre rents.

The amount of empty office space in central business districts (CBDs) across Australia has risen to 11.8 per cent of the total supply, the highest since 1997. Analysts say the trend began as firms looked to cut costs following the 2008 global financial crisis.

According to research by real estate firm Jones Lang LaSalle, last year was the first in more than a decade that there were more tenants vacating office space than renting it, with a total of 242,500 sq m of extra office space made available.

Mr Tim O’Connor, the firm’s head of office leasing, said the main cause of the extra space was that companies were cutting back on floor space. Insurance firms and retail banks were looking to hot desk, or switch from individual desks to shared spaces, he said, while law and accounting firms were largely sticking to individual desks but shifting to open floor plans.

“People are trying to do more with less,” he told The Straits Times.

“Companies are looking for opportunities to increase density and (reducing) the amount of floor space they take, particularly through technology. You used to have a computer on your desk with a hard drive – now people are onto laptops and other devices.”

Australia’s most expensive CBD office rents are in Perth, which is at the centre of the mining region, and has an average price of US$560 (S$715) per sq m a year – the seventh-highest in the Asia-Pacific. According to November data compiled by Jones Lang LaSalle, Hong Kong’s office space, at US$1,489 per sq m, is the region’s most expensive, with Singapore’s (Raffles Place) in fifth place at US$738. Sydney’s is 12th at US$406 per sq m.

While hot desking can save 30 per cent of floor space and an open plan can save up to 25 per cent, studies have questioned the impact on worker satisfaction and productivity.

Research published last September by the University of Sydney found that open plan offices do not improve interaction or teamwork. The study, based on surveys of 42,764 workers in 303 office buildings in the United States, Finland, Australia and Canada, found open-plan workers tended to be less satisfied and that most workers believed the lack of privacy and extra noise outweighed the benefits of increased interaction.

“Our results categorically contradict the industry-accepted wisdom that open-plan layout enhances communication between colleagues and improves occupants’ overall work environmental satisfaction,” the study found.

Some firms in Sydney, such as Microsoft, Macquarie Bank and the Commonwealth Bank, have begun moving away from hot desking and open plan offices to more flexible spaces.

International accounting firm KPMG is experimenting with an “agile workplace” in which staff can choose from a range of work areas such as workstations, quiet areas, lounge areas and meeting rooms.

The trial began in 2012 and involves 40 to 80 employees occupying a trial space on one of its 15 floors for three-month periods.

“It is a movement away from the traditional office design,” KPMG’s director of change management, Ms Suzanne Murray-Prior, told The Straits Times. “Our key driver is to be more collaborative and to create a space to do that.”

According to the firm’s internal surveys, 82 per cent of staff believed the space led to increased collaboration, 91 per cent believed it was “freer” and 80 per cent said they “love” the space. The firm has introduced a similar workplace in its London offices and is due to begin a trial in Melbourne later this year.

Ms Murray-Prior said the aim of the new workplace was not to reduce space.

But studies have found that agile or activity-based workplaces can save 20 per cent to 40 per cent of office space because about 40 per cent of staff are not in the office at any given time.

The current levels of vacancy in Australia are striking because cities have not been adding much supply. Mr O’Connor said the current high vacancies were due instead to a big drop in demand.

“This has been caused by organisations wanting to get rid of space,” he said. “The (2008) financial crisis probably refocused people around cost. That focus hasn’t dropped off.”


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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