Article: Boosting office space occupancy with proptech

Office vacancies, according to the AFR, neared a 30-year high when they climbed to 14.8% nationally in February. Demand is weakening as the hybrid working trend continues and tenants with expiring leases reassess their office space needs. Meanwhile, a wave of new office space completions have contributed to excess supply. 

The Property Council’s latest Office Market Report notes a “flight to quality” as organisations abandon older, low-quality stock and move into new, premium office buildings. Similarly, offices outside of CBD areas are becoming less popular as businesses seek centralised, new office space.

The numbers show a marked preference for premium and A-Grade property, but what does this mean, exactly? The value of commercial property is driven by the traditional factors: age, condition, size, and location, but increasingly, there’s another factor at play: technology. The preference that we are currently witnessing for newer buildings may be influenced by the fact that newer offices are more likely to come equipped with game-changing proptech that potential tenants see as an enormous value-add.

Ahead of the 6th annual Australian Proptech Summit (Sydney, 30 July to 1 August), we spoke with Sonya Alexander, Head of Workplace Strategy Consulting, JLL, and John Preece, Chief Property Officer at Hub Australia, to gain the latest insights into proptech innovations, the emergence of AI in proptech, and evolving tenant expectations.

What proptech innovations are being used specifically to deal with low occupancy in commercial real estate?

According to Preece, proptech innovations have a crucial role to play in addressing low occupancy rates by enhancing the appeal, functionality, and flexibility of spaces.

“In the flexible workspace industry”, Preece says, “one significant innovation is the use of dynamic pricing algorithms, similar to those used in the hospitality and airline industries. This can adjust prices in real-time based on demand, seasonality, and market conditions. Virtual reality (VR) tours and augmented reality (AR) experiences are also gaining traction, allowing potential customers to virtually explore and customise spaces from anywhere in the world, thus easing the transaction process”.

Alexander also notes the rise of VR and AR tech: “Virtual and Augmented Reality can enable remote walkthroughs and immersive digital experiences for prospective tenants who wish to detail office spaces without physical visits, especially when the decision makers reside in another part of the world”.

More broadly, both Preece and Alexander highlighted the rise of smart building technologies that optimise energy use and maintain optimal indoor air quality. “These technologies are being deployed to make properties more attractive by promising lower operating costs and a healthier and more sustainable environment”, explains Preece. “This is critical as ESG takes centre stage, and also to minimise operating costs when traditional office buildings are suffering from significant under-utilisation”.

“Post-pandemic innovation has centred around sustainability and resilience; that is, the health and well-being of our planet and the people who inhabit it”, says Alexander. “This includes smart building technologies that remove friction from the environments, prompt users where to go and enables managers to measure occupancy data in real-time. We are seeing more integration of dashboards to include IoT devices, sensors, and automation systems that help optimise the operational efficiency of buildings as tenants become savvier when looking for future premises. This includes touchless access control systems, occupancy monitoring, air quality sensors, and energy management solutions”.

What are some of the essential “need to have” proptech solutions that tenants want and expect in 2024?

Space-as-a-Service (SPaaS) is nothing new. It simply means monetising access to office space, which co-working space providers such as WeWork have been doing for years. But Alexander notes that increasingly sophisticated workplace analytics platforms can leverage data on space utilisation and employee patterns to optimise office layouts and provide occupiers with on-demand and scalable office space solutions. In other words, today, anyone can become an SPaaS provider.

Preece has observed the same trend. “Platforms that facilitate pop-up leasing and flexible short-term rentals are providing landlords with the means to fill vacant spaces quickly, even if temporarily, thereby mitigating the impact of low occupancy”.

Serve tenants like a high-end hotel manager with the help of proptech

Other proptech solutions in the spotlight in 2024 are those that create a frictionless, personalised, and wellness-focused customer experience, aligned with the hospitality-led experience expected of a high-end hotel.

“Customer experience is absolutely paramount”, says Preece, “and I would go as far to suggest that any technological solutions that do not have a CX use case as the primary objective are flawed from the outset. Building managers must aim to offer a level of service and personalisation that not only meets, but exceeds tenant expectations, drawing from the best practices of the hospitality industry to redefine the workplace experience”.

Preece highlights the following types of proptech that will make this happen:

  • Personalisation Tech: “Similar to how hotels use data to customise the guest experience, office spaces will benefit from AI-driven platforms that can learn user preferences and adapt environments and services accordingly. This might involve adjusting lighting, temperature, or suggesting available desks and meeting rooms that suit individual work patterns”.
  • Integrated Building Management Systems (IBMS): “These systems will become the norm, providing a single pane of glass for managing all aspects of the building's operations – from energy efficiency to booking amenities – enhancing the user experience while optimising building performance”.
  • Health and Wellness Monitors: “With an increased focus on well-being, sensors and systems that monitor air quality, noise levels, and occupancy levels are becoming more widespread. The data collected can also inform cleaning schedules and maintenance tasks to ensure a safe and healthy work environment”.
  • Community Building Platforms: “Digital platforms that foster community by facilitating networking, social events, and professional development are a key aspect of tenant amenities, much like the concierge services of luxury hotels”.
  • Flexible Space Management Solutions: “As the demand for flexible workspaces grows, so does the need for technology that can efficiently manage these spaces. From real-time availability, dynamic pricing and usage analytics, these solutions will help maximise space utilisation and adapt to changing demands”.
  • Virtual Concierge Services: “Borrowing from the hotel sector, offices might offer digital concierge services that assist with everything from IT support to booking local restaurants, adding a layer of convenience and hospitality to the workday”.
  • Security and Access Control: “Mobile Bluetooth and biometric systems and contactless entry solutions will ensure security while maintaining ease of access”.

What are some of the exciting proptech solutions AI could enable in the future?

“By leveraging AI algorithms, analytics platforms enable a more intelligent approach to managing commercial spaces, improving operational efficiency, and enhancing occupants’ experience”, says Alexander. “In the Australian market, companies are looking to leverage AI in assisting them with reaching net zero goals and decarbonising their environments for a more energy-efficient world”.

Preece notes that AI in this sector is currently focussed on operational efficiency, predictive analytics, and personalised experiences. “AI-powered chatbots and virtual assistants are improving tenant engagement and automating routine tasks. Predictive maintenance, enabled by AI, uses data from IoT sensors to anticipate and address building maintenance issues before they escalate. Furthermore, AI-driven analytics are providing insights into tenant behaviour and preferences, enabling customised services and space optimisation”.

Looking ahead, Preece believes AI could enable more sophisticated predictive analytics for investment and development decisions, forecasting trends and identifying optimal uses for properties. “AI might also drive the evolution of autonomous buildings [the next step beyond smart buildings], where systems operate with minimal human intervention, adapting in real-time to changes in the environment or occupancy. Moreover, AI could enhance virtual reality property viewings with interactive elements that respond to the viewer's preferences, creating fully personalised virtual experiences”.

Sean Gallagher, Founder of Humanova and expert on the future of work, will speak at the Proptech Summit about how technology (including AI) will have a significant impact on the future of property. “I expect the role and purpose of property to be radically different as Generative AI begins to change work – how we work, where we work and even what work is. So, from my perspective, the bigger picture of GenAI is not as a proptech solution, but as a disruptor of property”.

How do you see tenant expectations evolving in the future, and how will proptech change to keep pace?

Alexander is confident that tech advances in corporate real-estate will keep pace with human expectations and changing patterns of work. “Technology is maturing to give tenants a more intuitive experience of spaces and tools, while workplace analytics platforms utilise machine learning algorithms to analyse data on space utilisation and employee behaviours”, she says. “AI will play a critical role in analysing big data to derive actionable insights and automate operations such as predictive maintenance and real-time alerts for potential issues. Tenants will ‘see’ less of technology but will ‘feel’ more as powerful algorithms automatically collect data on employee sentiment and feedback, enabling companies to tailor the workplace environment faster”.

Preece says that tenants already have elevated expectations regarding the customer experience, flexibility and ESG (“and rightly so!”), and landlords needs to step up. “Proptech will play a significant part in this. It will likely focus on delivering hyper-personalised experiences, where spaces adapt to individual preferences for lighting, temperature, and even layout at the touch of a button. Sustainability is a core expectation, with tenants demanding properties that not only minimise their environmental impact but also actively contribute to the wellbeing of the community”.

To keep pace, Preece expects proptech innovations will integrate more deeply with smart city initiatives, enabling buildings to interact with the wider urban ecosystem for energy sharing, traffic management, and public services. “AI and IoT will be central to this transformation, providing the data and insights needed to create responsive and adaptive environments”, he says. “Additionally, blockchain could emerge as a key technology for ensuring transparency in property transactions, smart contracts, and the management of building operations, further aligning with tenant expectations for trust and efficiency”.

Don’t miss out on hearing directly from Sonya Alexander, John Preece and other thought leaders at the 6th Australian Proptech Summit 2024 in July.

Remember to read the agenda to find out what else is on offer at the event.

Book your tickets here.