Commercial real estate predictions for 2022

13 Dec 2021 06:03 PM

The year 2021 produced both challenges and opportunities for commercial tenants and occupiers. The LPC team have some ‘serious’ and some ‘not so serious’ thoughts about what 2022 may bring.

Some 'serious' thoughts about 2022

Data in 2022 will become king for decision making.  

"As we navigate out of 2021 into 2022, what has become clear is that every tenant's accommodation strategy will have evolved in the last year more than in the last 10 years combined.  Strategies will be reset based on updated business plans, workplace trends, and the impacts and lessons of covid.  An ongoing emphasis, on the ability to pivot and change course during a Lease term will be supported by flexible Lease and Workplace arrangements, and informed by data whether it be workplace sensors measuring utilisation, or productivity data available in most online applications.  Data in 2022 and beyond will inform accommodation decisions like never before.” - Julian Kurath

Businesses will go through a period of creativity and experimentation

"There has been 12 - 18 months of businesses contemplating what post-pandemic, future ways of working may look like for their workforce – from people fully returning to the office to working from anywhere and every hybrid model in-between.  In 2022, businesses will go through a period of creativity and experimentation, turning their ideas into actions and trialling different ways of working to inform their long-term decision making." - Dylan O'Donnell

Collaboration space will be key

"Collaboration space will be key to employees return to the office – whether it is the interaction and collaboration during planned meetings or unplanned moments over the water-cooler and coffee machine. Businesses will need to be looking at how and where space is required to foster collaboration such as meeting rooms, informal meeting spots and kitchen/breakout areas." - Gillian Heath

Vacant hospitability and retail space to re-purposed to other uses.

"With the current work from home arrangements and the lack of foot traffic in retail precincts, it will force retail landlords with vacancy to reconsider alternative uses for their sites in order to recover holding and operating cost. We expect that hospitality and retail premises, will be converted to other uses such as office, advertising space and storage." - Ken Lam

High vacancy rates will incentivise Landlords to produce more Spec Fitouts.

"Whilst vacancy rates in Sydney CBD hover around / above 10% Landlords will continue to build Spec Fitouts to streamline the leasing process." - Rebecca Pelling

Hybrid Working is set to become the norm

"Over the past two years, workplaces have had to change the way they work. Remote working has no longer remained a ‘radical’ solution employed by ‘Tech’ companies to attract talent. To the contrary it is now part of the workplace strategy moving forward. As there will always be a place for the office, especially to enhance collaboration and workplace culture, the way forward is undoubtedly a combination of both, “Hybrid Working”. Whilst the Hybrid Working Model seems effective, there will remain the challenge of enticing employees back to the office. Some businesses have organized free coffee or lunches on Mondays and Fridays to lure their employees back into the office on low occupancy days." - Ed Andrews

Proactive retailers will reap rewards

"The last year of the pandemic-fuelled rollercoaster has left many a small retailer in dire need of a strong recovery. Sadly, for many the recovery won’t have come soon enough, and I expect more vacant shops to pop up across the country. The astute retailer will take advantage of this, and secure brick-and-mortar stores in desirable locations that might once have been out of reach. Of course, a good commercial lease in this case will be the ticket to a long and successful business." - Ian Potgieter

Flexibility will be the number one thing on occupier’s minds

"Flexibility will be the number one thing on occupier’s minds in 2022, with the pandemic highlighting the need to build in the ability to adapt to changing conditions. This transfer of risk from tenants to landlords will see the continued growth and demand for “early termination” clauses, “first rights of refusal”, and other tenant favourable terms which allow them to flex up and down at their discretion." - Henry Mathews

The demand for industrial real estate will increase

"The demand for industrial real estate will continue on its growth trajectory and outstrip available supply.  This will place upward pressure on industrial rents and land values.  Industrial occupiers will look to become more sophisticated in their approach to their business through the adoption technology and refinements to their operational processes.  The supply side will respond and new releases of industrial land will come on line further away from the CBD, providing industrial occupiers the opportunity to take advantage of the lower values and rents through pre-commitments to purpose built facilities." - Michael Raymond

Technology will be a must for commercial tenants

"Technology for tenants will become a must when determining how their office space is being utilised, and what their future needs will be. Measuring space by the density of staff to workstations will become redundant; instead, tenants will look to smart sensor technology to analyse how often workstations, meeting rooms and collaborations spaces are used. The tenants who install this technology now will be armed with a set of data based on new hybrid ways of working that will better inform them of space requirements before their next lease expiry." - Adrian Gerber

There will be an increase of innovation and enhanced productivity

"I think 2022 will see a release of pent up energy with increased innovation and enhanced productivity.  As far as the workplace is concerned I expect many occupiers to review, reset and revitalise their accommodation arrangements." - John Reed

Some 'not so serious' thoughts about 2022

"With fewer people in the city does that mean I can use my golf umbrella when it rains!" - Julian Kurath

"Workplace strategists are having their time in the sun and that means trouble for those employees hoping that 2022 will bring a return to pre-pandemic normality in the office." - Dylan O'Donnell

"Those phone batteries might last a little longer with the opportunity for more in person conversations." - Gillian Heath

"There'll probably be an introduction of robots to fill the skill shortage." - Ken Lam

"We'll witness the rise of the power track suit and uggies in the workplace!" - Rebecca Pelling

"Company’s expense cards will receive a workout on Monday’s and Friday’s to entice the workforce back to the office." - Ed Andrews

"The number of New Year’s resolution gym-goers will be tenfold come January – perhaps better to GFH (gym from home) if you want to get a spot on the treadmill!" - Ian Potgieter

"Global shipping constraints causing delays to tenant’s receiving workstations and chairs for new office fitouts will result in an increased usage of beanbags." - Henry Mathews

"My local café, coffee (and bottle) shop will see a decline in trade as my household returns to the office." - Michael Raymond

"My dog is in for a serious culture shock when he will be home alone instead of having the lockdown company of the whole family!" - Adrian Gerber

"I think it will be easier to get a seat on the train on Mondays and Fridays than it was before the pandemic." - John Reed

Why LPC?

At LPC, we partner with tenants and occupiers across Australia and New Zealand to optimise their office, industrial and retail property portfolios providing an integrated suite of services including transaction managementportfolio and lease management and project management.  We provide conflict-free advice and representation, meaning we have no ties with owner-developers or landlords. Tenants and occupiers interests remain at the core of what we do as we negotiate on your behalf and endeavour to rebalance the scales in a market which favours landlords.

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