23 September 2020

Metro market magic

by Jason Huljich, Joint CEO

Within recent months, I’ve read half a dozen or more research papers outlining an emerging, COVID-induced trend referring to a ‘Hub-and-Spoke’ work model. JLL, CBRE, Colliers… even WeWork, are reporting on this trend – not only in Australia but across EMEA and North America.

Why? Because people have discovered they want to work closer to home, have easier commutes but still be in a vibrant business environment that also offers ‘social infrastructure’ such as cafes, restaurants, bars, gyms and shops

Welcome to the Metro Magic era.

I’m referring to metropolitan office markets – or, as I prefer to call them, decentralised office markets. The magic of these markets is that they cater to the hub-and-spoke model where a business’ centralised, CBD office HQ shrinks (hub) and more satellite offices in fringe markets open (spoke).

The model works in favour of modern families where both parents work. Instead of rushing from work early to collect the child/children from day care in the suburbs and beat peak-hour traffic, decentralised office workers can leave on time and enjoy a short commute home via the day care centre. The time saved by avoiding traffic, enables both more family and work time.

I’d also argue that since lockdown began, workers aren’t necessarily banging the drum to continue working from home as much as singing the virtues of avoiding the daily lengthy, traffic-jam commute. According to the Household, Income and Labour Dynamics in Australia (HILDA) research, weekly commuting time rose to 4.5 hours in 2017, up from 3.7 hours in 2002[i], which indicates work travel times are getting longer and longer. The research was based on interviews with more than 17,000 Australians.

Employers are seeing the merits of the Hub-and-Spoke model, too, as shorter commutes and better adaptability to family needs lend themselves to a more productive work environment.

Better still, metro markets are affordable markets.

Considering Australia is in its first recession in 29 years, many businesses are paying close attention to their expenses. Affordable rents help businesses manage their bottom line. Below are JLL statistics measuring prime office rents across several Australian cities, showing the premium CBD office rents have in comparison to decentralised office markets as at Q2 2020.

Prime rents CBD vs Metro

Source: JLL Research (June 2020)

Current COVID conditions means space between employees in the office needs to increase. So, for those companies looking to increase their footprint, it makes sense to lease affordable space.

In years gone by, people worked in close communities, which generated a sense of belonging. Think of shops with apartments above. Villages were workers attended crops/livestock in neighbouring fields. In the past few decades we moved away from this tradition – probably thanks to better transportation – which has created siloed work environments. I believe the Hub-and-Spoke model is moving us back towards more integrated communities where we have a better work-life balance.


1. https://theconversation.com/australian-city-workers-average-commute-has-blown-out-to-66-minutes-a-day-how-does-yours-compare-120598