When the ultimate aim for companies is attracting workers back to the office, what have become their guiding principles for securing a new workplace?

Experts unravel the ingredients that set the best offices apart from the rest - the

buildings that help shape cities and brands.

Located from Sydney to San Francisco to London and cities in between, guests handpick some of the world’s most coveted new workplaces, explaining why they’re quickly filling up with people.

Hear from:

Jessica Van Raay, senior director, tenant representation - South Australia and Victoria, JLL

Simon Crotty, senior director, leasing - central London, JLL

Tim Ogilvie, executive vice president, brokerage - San Francisco Bay Area, JLL

James Montague, head of office leasing - Queensland, JLL

Katie Rodrigues, managing director, consulting, JLL Work Dynamics

Sonya Alexander, head of workplace strategy consulting - APAC, JLL work Dynamics

Podcast host: Rebecca Kent, content director - Australia, JLL 

Rebecca Kent

When the ultimate aim for companies is attracting workers back to the office, what have become their guiding principles for securing a new workplace?

Well, in this episode of the perspectives podcast, we unravel the ingredients that set the best offices apart from the rest. These are the buildings that help shape cities and brands.

And to make the point, a panel of experts, from Sydney to San Francisco to London and cities in between, handpick some of the world’s most coveted new workplaces, explaining why they’re so quickly filling up with people.

This episode has been reproduced from a JLL webinar entitled The Competitive Edge: Leading Office Precincts and Amenities, hosted by JLL’s Sonya Alexander.

I’m Rebecca Kent. Enjoy.

Sonya Alexander

This is a competitive edge webinar all about the best of the best precincts.

We're not going to be able to cover all of them, but we will certainly touch on a few that particularly stand out, and hence the global team that you've got here online representing those and can talk a little bit more about each one.

So, our global panellists are: Tim Ogilvie, who is an executive vice president, representing U.S. leasing. He is in Silicon Valley, he is, of course, with JLL; We also have Jess Van Raay, who's a senior director and representing tenant representation. She's looking after Victoria and South Australia; We have James Montague, who is a senior director and head of leasing for Queensland, at JLL in Australia; and we have Simon Crotty, who is a director, and based in central London. He is representing leasing at JLL and he is going to tell us about what he's seeing on the ground as well through global best practice.

And finally, myself, I'm a senior director here in workplace consulting, based in Sydney, for JLL in Australia. I’m so glad to have my colleague, Katie Rodrigues who is a managing director for U.S. consulting at JLL’s San Francisco Office.

Tim and Jess, with your individual geographies in mind, can you talk a little bit more about the state of the market as you're seeing it?

Tim, when we spoke earlier, I really liked the fact that you spoke about the technology sector. That's very situational to your region, but also that idea of big tech, and what some of the differences are you’re seeing.

And similarly, Jess, if you can also tell us what you're seeing in Melbourne or South Australia, and the industries that are driving the demand for that top quality best practice precinct.

Tim Ogilvie

So, Silicon Valley, I've been here eight years with JLL. It’s an exciting place to be and

really defined, as you all know, by technology.

It really is a variety of technology. We've got the mega cap that occupies some 66 million square feet in the (San Francisco) Bay Area, of Google, NVIDIA, Microsoft, Amazon, Meta, and I've forgotten someone in here, but they're all in there, who have deep pockets and can build their own mini cities just like this Google Bay View.

But in addition, we've got a thriving startup scene driven by venture capital money and who could be the next big Google.

In terms of market dynamics, we're at around 16% direct vacancy, which isn’t unhealthy. It still allows some good growth, and good rents, but what we're really seeing is, to use the often-used word, that flight to quality. There's much lower vacancy and retained rents in those higher quality products when you get outside of those owned campuses.

The other thing we are seeing is the quality of landlords and their ability to perform on delivering tenant improvements and other things. That's becoming increasingly important in this environment with some distressed assets and maybe even some distressed quality assets.

Sonya Alexander

It sounds like they're differentiating that ‘best of the best’ and it's continuing to attract a particular type of tenant – as you said, technology companies who are bringing people back into the office. So it's probably shifting the demand a little bit more towards that.

Timothy Ogilvie

Absolutely. The U.S. has been one of the slowest to return to office. The tail end of that has been the Bay Area. That's probably out of technology entitlement and employees having the opportunity to say, ‘Hey, I don't want to come back into the office, I can work from my desktop (at home)’. But we're seeing more mandates roll out in a variety of forms and it has been effective. They have been packaged as flexible mandates rather than strict mandates and I think employees are really starting to get on board that, with big tech.

So, I think we're going to see a lot more occupancy increasing over the next 12-18 months, and then a drive back to more space demand once we get back to parallel and they shed some of the sublease space that's out there.

Sonya Alexander

Jess, what are you seeing? Is it different as far as Australia goes. We know Victoria and South Australia have nuances, especially a different type of tenant profile.

Can you talk a little bit about that?

Jessica Van Raay

We certainly don't have these mega campuses that Tim has been able to showcase here like the Google campus. But in Melbourne, our office market sits at around 5.3 million square metres. We currently have nearly 20% of the office market with direct vacancy compared to a lot of the other capital cities around Australia in the mid-teen range.

A standout that James might speak to later is certainly Brisbane, where vacancies are tracking around 10%. So Brisbane is a bit of the golden city at moment when you look at office vacancy across Australia.

In Melbourne, we don't need to harp on about the long lockdown that we had here, but we are still in a recovery, and I think vacancies are a direct impact of the strict work-from-home orders that we had.

What we're certainly seeing for the clients we represent is that while the headline story talks to this high vacancy and very tenant-favourable market, when you peel back the layers and actually look at the options that tenants want to go to, there are two tiers: The buildings that provide all of the experience, amenity, the lunch options, the third spaces that they can use or borrow from the landlord, and the base building. And they can right-size their footprint as well. We're seeing strong take-up in those buildings.

An interesting thing as well is the movement in the sub-1,000 square metre range of offices. There's great value across Melbourne, certainly for tenants that were previously priced out of the CBD (central business district). They have been able to make that transition in because it's still a flight to quality for tenants that didn't have the CBD previously.

Sonya Alexander

You both touched a little bit on location specifics, but what are locations offering from an asset and amenities point of view? What are you seeing as a non-negotiable? What are they negotiating around, where is the flexibility?

Jessica Van Raay

Tenants are very educated in terms of their approach to their leasing decision. They take a pretty holistic view of what their future home will be and what that lease commitment will mean.

There's a strong focus on the partnership with the landlord they're entering into that arrangement with. And it’s not only about what the building might look like today, but for the next three, five, 10 years. While lease terms are getting shorter and a bit more flexible, the office moves don't happen at the same pace, the changeover is not there.

So, I think it's very much trying to forward think about what those capital upgrades will be if they're not here now, and what the timing and impact of those will be.

Tenants are also considering ‘how will this landlord work with me on my pathway to net zero? How can we ensure this space is going to be a key driver for talent, and staff, and a great place for our people to come?’

We've just done this exercise ourselves here in Melbourne. We’re four weeks into our refreshed office at 101 Collins Street. We knew it was a great asset, it had terrific base building amenity and services, our staff love coming to this location and so now it's just a refresh of a beautifully designed space that works for JLL in the way we work.

Sonya Alexander

The transformation of the asset had to happen, didn't it? How did that lead to more consultative conversations?

Jessica Van Raay

The landlord here would have paid close attention to the tenant feedback. Also, as a tenant in the building, we were able to help influence their upgrades. This building has now got such beautiful wellness facilities, and business lounge offerings. The landlord also went on that pathway to electrification. That was really important for JLL to align with our purpose and environmental commitments as well.

Sonya Alexander

Tim, a final word from you on this subject, including on the ESG front. Are you seeing as much of an uptake in the U.S. as you are in Australia?

Tim Ogilvie

It's highly important. It's coming from a reporting perspective. I would say Silicon Valley's been an area of riches and as a result, landlords have rested on their laurels a little and say, ‘Hey, if we build four walls and a roof they will come’.

But we're seeing it (ESG) start to be a key consideration.

I think given Silicon Valley and the Bay Area has lagged, the most important thing at the moment is really minimising the commute still for us to get people back in. That impacts people personally, that impacts their family life, so that's a that's a real critical piece on top of those amenities Jess mentioned.

Amenities are important and I think we're seeing more tenants change the conversation to say, ‘I don't care if something's 20% cheaper, it's no good to me if no one goes in there so I’m willing to pay more for something that's well utilised and effective’. That's a real different conversation and I think it's the right conversation and they're the assets retaining those higher ends and get the most activity.

Sonya Alexander

So, minimise the commute, but double the experience, essentially?

Tim Ogilvie

Yeah. And some landlords might say double the expense, but that's our job to maybe make it a bit less.

Katie Rodrigues

And right size the space, too, right?

Sonya Alexander

Yeah. Thank you, Katie. Exactly what you do every day.

I'm keen to jump to the next section. These are a couple of cool assets and precincts, and really a juxtaposition.

I'm always curious about the location aspect. And this is where we invite James and Simon to comment. The best practice standard that we're seeing coming through from new developments, and repositioned buildings, is the human centric theme.

There’s also that aspect of making sure a building is location specific, and culture specific. I’d love for James to talk about whether putting his Brisbane building elsewhere would work.

But let’s start with the big shiny beacon in London. Simon, talk us through a couple of aspects of this precinct.

Simon Crotty

Just by context, the London market is very strong. But it's two-tier market. We've got huge amounts of demand from banking and financial, and legal businesses and it’s focused very much on that core market – the example I’ve got being 2 Finsbury Avenue. The moment you move out of the core market, vacancy rates are up to 12% or 13%. For new builds in the core markets, where we're down to 1% vacancy, 2 Finsbury Avenue is a good example of best-in-class stock – it’s the next generation of product coming through.

What's interesting about it is this is a building that's four and a half years away from delivery. We have pre-let 60% of it, and we have interest in the remaining 40%.

That just endorses the ‘flight to quality’ term we keep using, towards these products that are the standouts, the exemplar.

What we need to do is scrutinise the stock coming through both in America and in Australia and try to get the best bits of all of those and put them together.

But it is very much that human centric model, getting that whole arrival experience, making sure you've got that outside space, a lot of communal areas.

The one aspect that's very strong in London is that whole community and social interaction. So being able to give something back as part of that construction and occupation process.

The other area which played quite heavily for this building was the integration of accessibility and neurodiversity that we see coming through. That's a that's a growing piece here in London.

But the main concern that we've got is the lack of stock coming through and that's why we're seeing occupiers commit to buildings earlier and earlier.

Sonya Alexander

It's really interesting. For tenants who want that right location, but perhaps not the shiniest building and best of the best amenities, what are they looking at in the next tier down?

Simon Crotty

That's a really interesting point because we're now at that tipping point where occupiers have got the choice of going into the best-in-class product but in less core markets or looking at slightly downgrading their aspirations but staying in the core, which they see as absolutely imperative for staff retention, attraction, and getting their employees back to work.

What we're seeing is occupiers focusing more on the slightly lower grade product in core markets over the better product in non-core markets.

I think that will have to change purely because we are running out of stock in the core markets.

But what has happened is we've seen occupiers take a slightly more liberal approach to ESG in particular because of the age of some of the older stock. They're prepared to turn a blind eye just to make a building work even if it's on a short term, interim basis of five years.

What we’re also seeing is where typically in our market you might have 10% of occupiers re-gear in their existing buildings, that is now nearly 50% because of the concerns over not getting the best-in-class stock.

There is a pricing issue now as well because we're seeing rents grow significantly in response to that supply and demand ratio.

Sonya Alexander

I’m keen to hear also from James just on the great success story with 80 Ann Street, in Brisbane. This one seems to have the lot, but a much smaller development and much more boutique. Talk us through how it feels and how it's attracting tenants right now.

James Montague

I love that you have described a 60,000 sqm office tower as boutique.

It is an exemplar project. When you look at it against something like a Google Bay View, which is creating a city within a building, or a campus within one place for one tenant, this asset has done the opposite.

What's been really pleasing to see, in having done this exercise and having looked at different projects across different geographies, is how hard Australian assets punch against their competitors. Typically, we tend to look at the tech industry as leaders in workplace; Everybody talks about the Google campus and what it offers.

But if you look at an asset like 80 Ann Street (The building is called Heritage Lanes), it's giving something back to the city, to your point earlier. It was designed by Woods Bagot and by Mirvac. Mirvac had a really strong placemaking view of this asset. In collaboration with Suncorp as the anchor tenant, Mirvac really wanted to create a quintessentially Queensland building. It has a ground plan that connects a whole city block. I've been working in the office market for nearly 20 years and I didn't know that the heritage listed fruit market there existed because it was previously occupied by a yum cha restaurant. This development has brought the area back to life and it's given back a green spine, places for respite, public art, a sense of discovery as you wander through the building, and then above it, a corporate office tower that ticks every box.

We talk about ESG a lot. But I think the environmental and social aspects are the bits that really matter when you talk about what occupiers are looking for. This building gives back in spades with third space and public art installations, and collaboration with the First Nations peoples in a really tasteful way. It has created a place for people to visit even if they're not visiting a tenant within the building.

Sonya Alexander

That's a great point because placemaking is an exercise that really never ends.

So what you talked about there is that it's become part of the cultural piece of the city. It’s a destination, a go-to.

As an add-on to what you were both saying, when we're looking at measuring the success of these precincts, Simon, is 2 Finsbury fully pre-committed?

Simon Crotty

2 Finsbury is 60% pre-committed to date. It’s 800,000 square feet (74,300 sqm) in total. There is interest in the remaining 40% and that is typical of nearly all the new or proposed stock that's coming through.

In London there’s a bit of an issue in that we've had a lot of foreign investment over the past 10 years. But those foreign investors aren't necessarily aware of the construction costs and the annoyances of the London market, so therefore they have less credibility in terms of bringing forward new product.

So the focus and the competition is very much towards the smaller number of established REITs and development clients we have that have got that credibility of bringing forward stock.

So, there's a polarisation towards a smaller number of potential schemes coming through which is causing a bit of demand on some buildings and others are just sort of being relinquished as empty sites and they'll continue to be sites for the foreseeable future.

Sonya Alexander

And how about you, James? What are you seeing with 80 Ann Street, or buildings within its proximity? Are there any other investment happening as a result of its success?

James Montague

To answer your first question, there's only one small 365 sqm suite remaining in the whole asset of 80 Ann Street, so it's certainly a success story in that aspect.

What it has also done is created an exemplar for what the next wave of development needs to offer in the way it has created a place and what it's delivered in terms of the lobby experience and the retail experience.

Equally, the building itself is a standout. It exceeds the Property Council of Australia premium grade matrix on a number of fronts.

What it has delivered in built form is complemented by all of the other social elements, so it really has been a place that people want to visit.

I'm sure Suncorp are sick of taking tours through their office because everybody wants to see inside it. It really is a standout project in the Brisbane city.

It is the newest office tower and there is a wave of new buildings on the way, so it will be interesting to see what their success looks like when delivered and whether they have the same energy about them when they are completed over the next couple of years.

Sonya Alexander

Alright, thank you.

I think you've got us to that next subject quite nicely because Katie, yes, we build it, yes, we put amenities in, we put everything in the right location. But then, the people. Will they come?

Katie Rodrigues

Will they come?

Sonya Alexander

You're in San Francisco, and I can talk a little bit about what we're seeing in Australia and in APAC. In Australia, we have Salesforce Tower (in Sydney), where JLL is.

Here's an employer (Salesforce) that is creating quite a strong property strategy globally – a consistent property strategy.

But there's a difference globally in the uptake of their spaces, how people are using them, how they're fitting their spaces out and sharing them when it comes to subleases, for example.

What have you seen in your geography? Also in the technology sector, given that it’s your specialty?

Katie Rodrigues

I would say there’s so much diversity. Google and Salesforce are taking a very different approaches.

Silicon Valley and the city of San Francisco are both very nuanced, too. It's the most diverse, the most complex period of time with so many different factors that are impacting companies’ decisions around where to go and what to prioritise from their location, from their space.

There has been some thought that the best amenity is other people, that is, the more people there are, the more that will show up.

And I think that is what we're seeing. So, getting more people to show up, drawing people in is critical.

And to what Tim was saying before, we're seeing an uptick in the mandates because people aren't volunteering to come in. They're having to be nudged a little bit harder, but that is turning into a bit of a snowball effect.

One of the things that I'm seeing is that it’s hard for employers to be telling their employees to come in without that real sense of purpose and why.

That's something we’re investigating with some of our clients, that is helping to tell that story a little bit better.

So the amenities are very crucial to have. It's almost table stakes. But then the second piece of it is really, ‘Why you asking me to come in? What am I going to do here that I can't do at home, from a work perspective? And then also from a social and a community perspective too?’

So there are a lot of complexities in trying to get the right space, and the right priorities from a business perspective and employee experience perspective.

Sonya Alexander

That's brilliant.

And I did like when we caught up, how you talked about the return to office being an old conversation now. Because even though it's been challenging, what we're seeing in consulting is that our clients are asking us to delve further into their business vision, further into their cultural transformation, and understanding how they need to change organisationally. It’s almost establishing a new DNA so workers don’t feel like they’re just filling in office space, but actually coming in and connecting to the company culture, and purpose, and the idea that, OK, it's not just a space, it's actually a place where we all come together to achieve something bigger and greater than the tactical stuff that's in front of our screens.

Katie Rodrigues

Yeah, it's not just coming in because I was told to. As Tim said, there is a lot of entitlement. Maybe it's the area, maybe it's the sector, maybe both.

People really want to have that sense of purpose in what they do. They want to have the sense of purpose and feel they're contributing, of course.

And it's a real factor that the commutes are brutal.

There's a question in the Q&A here about how we alleviate some of that. There are different tactics that are happening. Not only is it finding the right location, a commuter-friendly location, with easy access to public transportation – those buildings are going to be picked up first for sure. Those are the flight-to-quality type of locations.

But there is also creativity around the experience models that companies are trying with their employees to alleviate their commutes.

There is definitely some flexibility being offered in the times that employees can come into the office. It's not nine-to-five anymore and it's not Monday to Friday anymore. So that's kind of nice.

It can be more flexible for different types of workers and people navigating families and care and activities outside of work too.

So there is a bit of that balance.

But then also with companies that have some money and for whom it is a priority to get people in the office, they're actually supporting commutes in the form of providing shuttles from neighbourhoods and straight to the office front door, along with supporting public transportation costs through benefits. They’re also supporting that last mile from a hub spot to the office.

Sonya Alexander

Thank you for that. Thanks for sharing. I'm just wondering too, because I’m in the Salesforce tower in Sydney, a lot of times I come into the lobby and see activities happening and lots of people mingling about and they make you want to get amongst it.

What else are you seeing in terms of let's say, is there anything being shared in terms of strategies, in terms of service design or experience design, further activation?

How does that fall into the street and the precinct side of things?

Katie Rodrigues

I mean, I think Salesforce is adamant about their strategy globally around taking towers, having that really great brand presence. But unlike other tech companies, they're not insular in their amenities and services. They very much want to support the local economy and I think it's also smart from a financial perspective that they're not having to run and operate those amenities themselves. They're asking their employees to go out. And that's why location for their towers in their CBDs are very, very important. They want convenience for their employees as well.

And so that's a win for the employees, a win for their business and their bottom line, and actually a win for the local community. It activates the streets.

There's more permeability in their buildings that we're seeing too, so I see that as a little bit of an uptick in a trend.

But there are also companies that will very much always want to keep their people inside the four walls of their office and keep them as productive as they can for as long as they can too.

So I'm hopeful that there's a little bit more of that ground level activation, more retail with the multipurpose, and activation within a whole building too.

So I think that's definitely a trend that we're seeing more. Tenant lounges and community spaces and coworking spaces where there's activity throughout the building in a multi-tenant too.

That seems to be definitely an increase in demand that the landlords can provide for as well.

Sonya Alexander

Maybe I can just quickly throw out there to I know there's a lot of desire to collaborate between the landlords and the tenants.

So take the opportunity to hold workshops or connective, community type engagements where those two sides of the story are heard.

I think it's amazing what insights you can get out of that to take you into the future, even if the capital is not ready to take advantage of.

Can we now go to Simon?

Simon Crotty

Yeah, absolutely. Using 2 Finsbury Avenue as an example, Citadel, the tenant that has pre-let the 60%, works very closely with British Land, the developer. So there were a lot of modifications made to the building to suit them, including their own outside terrace, auditorium space within their own reception (they had a dedicated reception). But the one area where we are seeing a lot of growth for part of that futureproofing is the whole data side of things. It’s making building smarter, making occupiers use building smarter. And I think the integration of tech into buildings is growing apace – we're talking about AI. It'll be interesting to see how that integrates further as the next generation of office space comes through at the end of this decade.

Sonya Alexander

James, over to you.

James Montague

It feels to me like the tenant market wants the landlord to deliver all the extras.

Jess, you might disagree with me as soon as you get the microphone. But it feels like the building itself and the workplace need to sit on top of all the things that typically were housed within the office.

So that includes the third space, the auditorium, the retail amenity, the food and beverage, conferencing space, coworking space. They're looking to the landlord to solve a problem. They don't know the question and so we're trying to figure out what the answer is to a question that is still not yet resolved.

Certainly, it feels like an arms race in the new development space where the one building owner-developer creates something really unique and special. But it's about how do you get something that is better than that for the next round?

So, a little bit of everything is my view, Sonya.

Sonya Alexander

We want it all.

Jess?

Jessica Van Raay

Yes, the tenants do want a lot from their landlords, James. But you know, one doesn't work without the other. So maybe a better conversation is required to figure it out.

A lot of the comments in the chat are around this commute and how we get people back in the office.

A lot of the tenants we represent certainly want to make the office better than home.

I had a really warming story the other day of a client that moved from more of a A/B-grade location in Melbourne to a premium-grade tower on Collins Street. And everyone is now dressing better, they're coming into the office, they're so proud.

And that was something that we wouldn't have ever factored into the selection criteria or decision making around that lease.

We're talking about places that have a vibe. People don't want to miss out, so if more people are coming in, you're soon going to be that person at home that's missed out on the team lunch or those snippets (of team interaction). They're going to be really important for their career. Naturally, there will be a correction to something.

What is utopia? I don’t know. Maybe we will all be flying to work in drones so the commute isn’t a drama.

Sonya Alexander

I love that. You’re trying to look beyond the immediate problem. That's future thinking right there. Tim?

Timothy Ogilvie

They took all the good ones. But I don't think this conversation is anything new to real estate and what we all do, especially at JLL

We've got to think like the hospitality industry, right? People want that hospitality experience. I want to feel like the office is the Shangrila every day.

And then experience is not just starting at nine o'clock. It starts from when I wake up and open my computer and there's a connection back to the workplace.

What can I book early? What can’t I book. Et cetera. It's just a constant strive for what we always say, that hospitality experience, and constantly trying to up it, just like great hotel operators.

I think if we stay on that path then we'll keep delivering great product, great experiences and that's what matters to tenants. And I think that's what landlords want, tenants to be happy.

Rebecca Kent

If you enjoyed this episode of the Perspectives podcast, give it a ‘like’ on your listening platform. And for more conversations around the industry’s biggest topics, do check out another of JLL’s podcasts – Trends & Insights: The Future of Commercial Real Estate, wherever you listen to your podcasts.