To know the truth, look below the deck.

On the stage, at the big property event, the well-known landlord Exec will talk of the importance of understanding the nuance of asset bifurcation. They will talk through the data, proving that flight to quality is real and very much alive. They will talk about the accelerated population growth that skilled migration brings to Sydney and detail its projected impacts on office uptake. They will talk about the tide-turning, as workers come back to offices in droves, citing Opal Card data or other. And they will talk about the considerable office stability that Australian cities have in comparison to other gateway cities, such as London, New York and Toronto. It is understandable and right for them, in their role, to present this narrative.

Behind the scenes, where the real stuff gets done, the people who assign the money, the lenders, are offering a different narrative, by way of their lending appetite.

Only 10% of Australian lenders now categorise Office as a favourable asset class.
Industrial, Build-To-Rent, Build-To-Sell, and Alternative Assets are now, respectively, the top 4 lending asset classes across investment grade real estate.
Office is currently ranked below Retail.
Most Lenders now require a pre-lease commitment above 60% for Office to be considered, while Industrial requires no pre-lease commitment at all.
In 2023 Australian banks reduced their exposure to Office debt to its lowest mark since 2010.

To say that Office is an investment concern is a bona fide understatement. A better simile would be to say it's a boat with a gaping hole in its hull, and the captain and crew members are quietly suiting up with life jackets.

And while in the short term this Office paradigm does indeed present tenants with a powerful bargaining chip to secure quality office with high incentives, in the long term it means that the overall product, particularly lower grades, may deteriorate through lack of available investment. It may also mean that fringe and suburban Office Hubs, like Mac Park and Chatswood, become dingy and soulless.

Many landlords have provided an excellent service over the years, and no one wants to see them fail, but Office, in its post-industrial era form, is radically changing. Crucially, however, the businesses and people that used to congregate within them, are not.

They are very much here and thriving and are just looking for new environments to suit a new purpose.

For many of us, this transition from past to future will be a struggle. Today's entrenched leaders are unlikely to be the right people to lead tomorrow's workforce, as the temptation to go on another "in my day" rant may prove too great.

And so, as autumn turns to winter, eventually the green shoots of spring will arrive, and a peaceful rhythm will settle in once more.