Australian Office Market trends - 2024 and beyond (Technology)

The last of our three key trends impacting the Australian Office Market in 2024 is Technology, held up as the solution to various challenges.

The prize for successful technology deployment in commercial real estate is obvious. Reduced operating costs, increased asset lifecycle and a more attractive leasing proposition for occupiers. It's a win-win-win scenario for investments in technology—sustainable, profitable, and investible.

As Australian owners grapple with declining office values during 2024, speed to value in technology deployment is a top priority, reflecting a widespread sentiment. According to a recent commercial real estate report 76% of professionals surveyed prioritised automation across all aspects of their business from 2024 to 2028. This highlights the focus on operational efficiency and the tangible gains that are within reach.

Accessible technologies now offer real-time analytics, energy management, predictive modelling and AI optimisation. Regardless of the chosen technology approach, quick payback timeframes and speed to value are priorities as a defensive measure against falling values.

As such, the focus on the biggest consumers of energy (with the most savings to gain) continues to see a high number of technology providers targeting Heating, Ventilation and Cooling (HVAC) systems, which typically account for 30% of the water and up to 50% of the energy in a commercial building.

Targeting these resource-hungry systems offers significant opportunities for energy savings, often exceeding 20% in the first year of deployment. In addition, the impact on improved ESG performance is an added benefit to owners looking to improve NABERS ratings and position their portfolio well for an increasingly ESG-focused investment community.

In the medium term, operational efficiency brings incremental benefits but requires time to realise value gains. Operational efficiency may partly be driven by technology and systems, but also requires organisational and cultural change to be successful. While many technology solutions can provide significant opportunities for operational efficiency and savings, the people running buildings are still a critical component of a program’s success.

Success stories in this space have been delivered less by Software As A Service, and more through Software With A Service, with Proptech providers including access to mechanical and performance engineers as part of their offering - to ensure needles in the haystack are identified quickly.

Looking ahead, increased asset lifecycle is an inevitable benefit of better-managed buildings as capital expenditure is delayed or deployed more effectively, reducing the risk of “stranded assets” as they relate to energy performance, climate change and decarbonisation.

Tenant retention remains the only outcome that focuses on revenue creation and protection instead of reduced outgoings. Evidence will be naturally less consistent, as leases don’t expire every day, however, technology strategies that enhance the overall experience, comfort and connectivity of tenants will be best placed to protect precious income in years to come.

Finally, a word on one of the most common barriers to successful technology strategy in real estate: “digital readiness”. With decades of legacy systems and data silos in place, technology can only do great things when it is deployed against a platform that is accessible, secure, open and reliable - and taking the time to get this first step right is the foundation for all future returns on technology investment.

Dermot Lowry
Group Executive Director - Commercial and Advisory
— Sydney Property Valuers - Corporate & Commercial
  |  LinkedIn
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