The modern workplace is undergoing a fundamental transformation. In this episode of the JLL Perspectives podcast, Alana Hannaford, JLL’s Head of PDS Advisory moderates a fascinating discussion live from JLL’s Signature event, with Doug Hall, Property, Fleet, Assets and Transaction Management Principal, Telstra, Catherine Sullivan, Head of Workplace, Westpac, and Michael Green, Head of Tenant Representation, JLL on how organisations are reimagining corporate real estate strategy. 

[00:01:04] So we're going to jump straight into things because we have a lot to talk about. As an opening question for the panelists: Our recent cost guide indicated that an impressive 72% of organisations in Australia plan to increase investment in space design and fitouts over the next five years, exceeding both global and APAC averages. This trend reflects a flight to quality that we're observing across the market. What do you see is driving this and how are you seeing it play out in your organisations? Doug?

[00:02:31] - And Catherine? - So just general rising costs. But I, I have a view that actually through COVID we didn't do much. And as a result of that, some of the things we now need to do to actually not only just catch up but actually expedite where we're at, needs to be more interesting and often more complex, particularly if you overlay or insert digital connection through there, then actually there's a lot more to do, particularly if you want to attract a workforce and retain them that actually isn't mandated to be there.

[00:03:06] - Well, there's always an opportunity when there's a market downturn to get into better space. But actually the market was moving against the tenants at the moment, but it just shows that companies are prepared to invest to get their people back into the office and work together. And fit outs are very expensive in Australia as well as construction costs rises, so do your fit outs. That also means there's almost like a natural floor under the level of incentives. The tenant doesn't get enough incentive, they're not going to move because most organisations will not put their hand in their pocket to pay for a full fit out, especially at the level we do in Australia.

[00:03:59] - It's really interesting. We have, you know, At Telstra we have such a strong, I guess, distributed workforce across the whole of Australia - globally, but the whole of Australia, it's, it's rare that teams actually sit in the same state or the same city. Our teams are typically spread all over the country on purpose. So the coming together piece, isn't always just for work, it's actually around knowledge share or, or trying to build some of the culture piece. And in that there's a real encouragement for cross generational sharing, but we're not there yet. We don't have the answers around how to do that better. One of the things we've really noticed and, and have always had our guess, but it's been unlocked with, with the breaking down of work hierarchy by place, is that everyone seems to be much more accessible and I think that might be a generational shift where digital natives feel more connected to an organisation because the collaboration tool is digital. So that's, I guess the trend we've seen and that, and that really it plays into a value discussion then about how much do we invest in space when we've got that new platform as being probably the primary. So what, what role does the secondary place take? So we, we are grappling with that, how much we spend. We, we wonder whether if we spent nothing, would we still have the same sort of attendance or whether we spent, you know, a lot and I, and I guess I try and look at the life cycle of, of a lease or of a tenure and, and equate that to the, the, the, the things that you provide. The technology has a half life cycle. The, the furniture, the fittings might have a full life cycle of a lease, but get appropriate quality to, to make sure you get the whole way through. But, but the generational piece is, is probably quite hard. I think, you know, we've got, we've got different people that, I guess management layers that, that are very comfortable in home environments, you know, with dedicated offices and spare spaces and then other generations that don't have that at all at home. So we find that they, they do tend to want to come to a workplace.

[00:06:15] - So it's interesting, I think the younger generations, not only are they desiring to be on site, it's around the collaboration, but more so the connection that they're actually getting. We had a grad recently talk to us about how all the grads, and this was, and history wise, most people would know being at Telstra. Same kind of feedback I guess is that all the grads collaborate together and then what happens is they build a tight cohort amongst themselves and then what ends up happening is they're actually looking and desiring access to, would refer to the more senior people in the organisation or who have had longer tenure there. So actually finding the right opportunities to bring that melting pot together is actually something that I think we are trying to do more of. So that actually, not only that you can then model behaviour, but you can be seen as actually, you know, acquiring the skills or the learning that you get by watching and you know, you don't necessarily learn that when you watch a video or hear these are the key KPIs you need to achieve. So a lot of that kind of blended sort of learning is something that I think we're focused on. And we've had a lot of feedback through recent surveys that people want that investment in development.

[00:07:49] - Knowing what type of furniture to provide to encourage that. It's really hard though, you know, designers, designers pretend like they know how to do that, but I, so I'm not sure, I'm not convinced that we have the answers to those here.

[00:08:32] - And Catherine with Anthony Miller recently stepping into the CEO role, what does hybrid look like at Westpac and how is it translating into your space design strategy and your physical environments?

[00:09:42] - And you've seen, I guess when you think about that flexibility, are you looking at how you allocate and manage space differently?

[00:10:40] - Well let's make that segue to AI. You know, AI is our new reality and we are finding that clients not only asking us, you know, if we should use it, but how do we use it. As AI automates routine tasks, many employees can focus on creativity and collaborative work, but how has this technological shift changing your approach to workspace planning, operations and design?

[00:12:29] - The day that it creates the Maxwell Smart cone of silence is the day that true flexibility will really happen in the workplace.

[00:13:39] - So AI is interesting and just to do the boss justice who planted me on stage today, Nathan Taylor has promised the boss that actually AI is actually going to actually streamline and serve him up the most interesting insights out of his portfolio with Azara. So in terms of the reporting analytics that can actually be delivered out of what you capture out of your database, that's game changing in terms of how you manage your portfolio and where you actually optimise across your business. So that's one. Secondly, if you've ever used Chat GPT - tuning Chat GPT and getting it calibrated correctly, I think that's another interesting aspect. And if you look at the generations, the conversation we had the other day, Mo and I were debating this, that this generation and my kids like they are checking Google searches in Chat GPT for facts and not self-checking any of what is served up to them. So it's going to be really interesting how they use AI to validate stuff or are we actually making us dumber. So it is, it is going to be interesting to see how this actually manifests out.

[00:15:19] - The other commentary, I guess from my perspective, it's not related to design, but from a portfolio basis, it's, it's really, I was having a conversation with a landlord on Wednesday and his response was, well, anyone that thinks they know what our workforce looks like from 2030 onwards, that's we are doing, we're trying to do deals from 2030 onwards now. It's a good point. I just thought, wow, how, how much smaller will Telstra get? It will get smaller. Vicki said it, we don't know how much, like is it 30% smaller headcount? I'm not sure. And I'm, I have to say I'm really nervous about places which, which outsource large manual tasks. You know, what does the India outsource environment look like in 18 or 24 months time or the Philippines, I I, I'm not sure, maybe they do different work, but I think there's a, there's a potential social sort of risk to, to full adoption of AI and, and everyone in the C-suite is absolutely gagging for, for AI tools to showcase. So I think it's interesting like what, what that actually means for workplaces.

[00:16:32] - Yeah, we've been doing a lot of work around open sourcing. So when you occupy space, you have all your data, the landlord has their data, everyone's got all these data points, but how do we actually bring it together? And and the, the really interesting one is now, you know, sustainability and carbon reporting, because the landlord's got to report, you've got to report, you need their data, they need your data. So you've got to share your data. And then actually if you look at the data together, you can start seeing patterns and you know, BHP is saying they got 3, 2, 1. So three days in the office, two at home, one must be a Monday or a Friday. And of course everyone comes in on a Monday and Friday's a disaster in terms of turn up. So between the landlord and the tenant, you could analyse the data and say, well why don't we just shut down half the floors? Like no one's going onto them on a Friday. Why aren't we even turning them on? So let's start, you know, being better with our carbon footprint, using our sensors and consolidating and say a building or a landlord who's prepared to share that data and work with you. It's very important to understand and, and to the point about AI telling you how people are actually using your space. So we need the whole building and the whole system to be tech enabled and shareable. The shareable part's interesting. Sorry. Because when you're, sorry, when you're like one tenant in one building, you can control that total environment. But when you've actually multi-tenanted how you then work together, I think that's super interesting to unlock some of that potential. I don't think anyone's particularly good at doing that.

[00:18:08] - We're all trying to make high performance environments because you know, when you have people coming to the office and they feel happy and satisfied, they are high performing. As companies shift, you know, real estate from a cost centre to a value driver and we focus on high performance workplaces, how can we measure return on investment, you know, from a workplace investment beyond traditional metrics. Doug, you're shaking your head. Do you have an answer for me?

[00:20:57] - Katherine, are you measuring return on investment? - We're trying to figure it out. I think it's the right conversation to be having. You can't measure. So we still traditionally measure by, you know, square metre per seat per this and it's not the right measure. Definitely looking to kind of packages up almost like a sort of ESG principle. We actually have a whole factor that equates to the productivity that comes from your workspace and just take a poll from I guess the use of the space. So how intense it is, but also people's propensity to be there without mandate but also a wellness factor. So at the moment we are piloting or about to pilot some different uses of space, some sort of free bookable space. Others just open just to see kind of what the appetite is. But yeah, it's not the metric we once used, which we still use all over the place. It's not the right one.

[00:22:02] - They've actually got very good at providing a whole lot more value add for the tenant in the building. So third spaces, flexible space, a lot of community type fields and you know, we do work for BHP and they now would like to have at least 5 and as much as 7% of the total NLA of the building as space that they can use for training rooms, project space, you know, just town halls, anything like that. In the UK most buildings now are up to 10%. So the landlords have grasped that idea and run with it. It's always interesting though when the tenant has to make a decision about do they still go, where do they go because it's often cheaper to stay but you know, the new building is better and what premium will they pay to get the better space. So if you talk to the CFO, it's nothing. We've got to stay put, we'll never move. And it's often up to the CEO and what their vision is of the organisation and what they want to do and are they prepared to pay a premium or not.

[00:23:37] - There's a talking point for drinks. I've been given the firm 'a couple of minutes to go' signal. So I would actually like to ask a closing question for each of you. Looking ahead three to five years, what's one strategic decision organisations should be making now about their workplace that they might regret not making? What's the biggest risk of inaction? Michael, I'll start with you this time.

[00:24:30] - Kathryn? - I agree with the talent attraction. You need to figure that out and what market you are targeting. But also if you are not trialling things now, then you definitely should start because I think there is so many different things happening at the moment. Technology's starting to move quickly and people assume things will be adopted and used and actually the quickest way to figure out what you need to do is actually just pilot some things and actually figure out if they are successful or not.

[00:25:52] - And leave enough time. When I look at the timeframe we all agree to and I think where we are now, it always takes more time than you think. Leave enough time. - Yeah, it's true.

[00:26:18] - This is a question to the panel. Do you think you've seen workplace design taken as far as it can go? Or do you still see innovation and creativity coming in the future or what have you seen that is new? - Can I answer first? Can I be so rude? - Go for it Alana. - I recently returned from a neuroscience and environmental psychology conference in Barcelona and it was a wonderful week of learning about neuroscience and I think that is really the next layer of awareness that's coming that we will really understand our physiological responses to space and designing for that. And I'm really excited about the horizon of design and architecture because of what I've been able to learn in that week. Don't, sorry, I past years. I

[00:28:30] - I know you've given the job. I'm happy with that. - Are there any other questions?

[00:28:56] - Telstra are grappling with this so much. We've got a history of pre and post COVID attendance and we try and marry it up against what we call our addressable sort of community, our kind of our HR data, you know, so in Sydney we've got about three and a half thousand people that are office workers that could come to an office. We've built 500 and something desks in our new fit out and we've scaled for about yeah. You know, like whatever that works out to be in another, there's another three or 400 places to work. So we could accommodate at least a third of them on one day sitting at a desk doing work. But of course the workplace can accommodate more people than that on any given it looks like Tuesday, Wednesday, or Thursday. Is that right? Like it's just based on what we can see people are doing not, not based on much more science than that. And we've tried to engage with anyone that will sort of have a view, you know, the head of HR, the CEO, anyone, like what what do you want as a setting. It's a really hard answer. And I think that's why mandates don't work. I don't believe, you're not going to convince people to turn up. And I look at, I look at the way Jones Lang operate in Melbourne, you know, you've got about the same amount of space. Sorry, there's about the same amount of people turning up. - Yeah. - You know, but that's everyone in your business and, and you're doing it out of four and a half thousand square metres. We're doing that out of 12,000 square metres. It's just, - And it's, it is interesting as well when you look at, you know, we created place attachment in our organisation, we've created moments that matter. We enable our employees with the right settings and the right technology and also wonderful lighting. It's the thing you don't notice is that that lighting in the environment, and I'll make a a segue to Sydney Swans. beause we, we actually have similar coffee, Michelle well we, we we have weighed up whether or not to put the same coffee machines is that, that you guys have, because coffee is, is such a, a part of community and team building. And when we did our post occupancy for Sydney last year, we engaged our champion network and they told us their favourite part of the day was waiting for their coffee because they got to talk to people they don't normally talk to and they get to talk about their families and their children and, and really bond in a meaningful way. That's not work. So, yeah, I have listened and heard about your coffee machines as well. - It's the favourite part about education university wasn't the lectures and the theatres. But why does work have to be sort of so formal in a, in an environment that which is mostly now hybrid? Well, I think we can get much better at creating spaces that are much more normal if you like people already intuitively know how to use. We haven't got there though. - Well, I would like to thank everybody for listening in. Nathan, my passing back to yourself. Great.