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Is Australian commercial property being hacked by the digital revolution?
RARELY is the tumult in Australia's commercial property market adequately explained. Digital Business insights CEO John Sheridan's research reveals the commercial property industry in Australia has not understood that the digital revolution has brought about a fundamental shift in the commercial property landscape.
A raft of recent newspaper articles and commissioned reports by industry experts offers a range of ‘traditional' explanations that point towards some sort of 'light at the end of the tunnel'.
These range from a mining boom investment phase transition, in the cases of Queensland and Western Australia, to residual effects of the international Great Recession in the case of the Sydney and Melbourne markets and various other influences such as rising bond rates and even the transition of the Australian dollar.
But Mr Sheridan's research indicates that the commercial property tunnel is being extended for the foreseeable future, because of the effects of the digital revolution on business in Australia. In a recent blog, Mr Sheridan said he was intrigued by the ongoing commentary in major newspapers about the ‘soft' state of the commercial property market.
"Week after week, office vacancy rates are published for the major cities - Melbourne 10 percent empty, Brisbane 14 percent empty, Sydney 10 percent, Perth 8 percent and so on," Mr Sheridan said. "The general view is that things are unlikely to improve soon.
"Each week I now search in vain for some reference to the impact on commercial property of the digital revolution. There is no mention.
"In article after article, and interview after interview with industry experts not one of them raises the issue at all. Maybe they are frightened of lifting it onto the radar? I would have thought it was obvious."
Mr Sheridan said the digital revolution was having an enormous impact on commercial property and its prospects for recovery. He said even such an obvious factor such as the rapid growth in ‘teleworking' has not rated a mention among industry commentators.
This surprised him as the Federal Government has been promoting teleworking over the past year and is staging another Telework Week this November.
"Businesses and organisations are teleworking already," Mr Sheridan said. "Forget the Telework Week. It is happening right now.
"In all of our recent surveys roughly half of organisations have one or more members of staff that work from home for some part of the week. Some for all of the week."
Digital Business insights research has found teleworking present in "58 percent of professional services, 67 percent of public administration, 72 percent of rental, hiring and real estate, 51 percent of wholesale, 50 percent of Information media businesses", Mr Sheridan said.
"Which means less demand for office space. And as more and more organisations become comfortable with teleworking, what possible evidence is there that vacancy rates are going to drop some time in the future?
"They won't. Vacancy rates will soar and the situation will get much worse. And businesses will become increasingly selective as a result.
"Every organisation we speak with is reducing their demand for office space and in some cases getting rid of it completely."
DBi's research was showing that the types of commercial spaces that will be in demand in the future are markedly different to those on offer now.
He said indications were that mixed use spaces offering WiFi and fast broadband, combined with comfortable and flexible meeting spaces - "and lots of them" - would increasingly become the order of the day
"And what businesses and other organisations will want from a commercial office in the future is very different to today."
Importantly, Mr Sheridan's research is already suggesting: "It's the same thing with retail space."
* John Sheridan is CEO of Digital Business insights, an organisation based in Brisbane which focuses on helping organisations and communities adapt to, and flourish in, the new digital world. He is the author of Connecting the Dots and getting more out of the digital revolution. Digital Business insights has been researching and analysing the digital revolution for more than 12 years and has surveyed more than 50,000 businesses, conducting in-depth case study analysis on more than 350 organisations and digital entrepreneurs.
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