More than half of Australian occupiers have a return to office mandate in place, either  through an official mandate or unofficial guidelines, and an enticing workplace is seen as one of the  tools to effectively bring people back into the office, according to a new Knight Frank report. 

Knight Frank’s (Y)our Space – Australia and New Zealand report Q1 2025, which largely presents the  findings from a survey of Australian and New Zealand occupiers, found 25% of respondents had a  return to office mandate in place, while a further 29% said they strongly agreed with a return to office  mandate or had unofficial guidelines. 

Despite the majority of occupiers favouring a return-to-work policy, the Knight Frank research found  the majority of respondents intend to keep their average office occupancy stable over the next three  years, while 42% said it would increase and 13% indicated it would decrease. 

Knight Frank Partner, National Head of Occupier Strategy and Solutions Australia Neil Murray said the effects of COVID-19 were still being felt, with the workplace undergoing significant changes in  office occupancy patterns. 

“Nearly 40% of occupiers who responded to our survey said COVID had a huge and lasting disruption  to their corporate real estate strategy, which is still being shaped by a mix of return to office mandates  and flexible working agreements,” he said.

“However increasingly real estate is being seen as a strategic device for supporting organisational  culture, productivity and talent attraction. From the survey and our interactions with occupiers, we  know that enhancing workplace experience including improving building quality and amenities is  crucial for enticing employees back to the office. AI and hybrid work models have led to a re evaluation of office design, emphasising flexible, collaborative and productivity-enhancing  environments. 

“While there is a focus on using real estate to attract people into the office, we also know there is a  focus on occupancy budgets, with nearly half of our respondents aiming to reduce real estate costs. As cost management and efficiency remains a top priority, respondents are looking to get the most of  out their existing spaces rather than expanding to align with both cost reduction and sustainability  goals. This is a great time for tenants to engage with our Tenant Representatives to develop strategies  to optimise their real estate.” 

The Knight Frank report found 46% of survey respondents were targeting a reduction in real estate  costs. 

Reducing costs was also identified as a key challenge by half the respondents to delivering real estate  strategy over the next three years, with 54% also indicating a challenge was enhancing the workplace  experience. 

For occupiers who are going to move, 77% said they would move to a premium CBD location to  enhance workplace experience, while 80% of those who had moved within the past three years said it  was for an “improvement in building quality/amenity”. 

When considering what amenities to prioritise, respondents expect staff to value food and beverage  offerings most in in their building (61%); followed closely by cycle storage and facilities, and gym and  fitness facilities – both tied at 52% each.

Knight Frank Chief Economist Ben Burston said how businesses deal with the two overarching  objectives of providing the optimal workplace experience while also providing excellent value for the  investment outlay would be central to shaping the evolution of workplace strategy in 2025. 

“Looking ahead, occupiers expect to see overall occupancy numbers continue to tick up, which will  continue to ramp up expectations of the quality of the workplace experience,” he said. 

Alongside this, however, is the spectre of cost pressure, which ranked second on the list of strategic  priorities – up from fourth two years ago – and was cited by nearly 50% of respondents as a major  consideration, no doubt reflecting cautious sentiment and a sluggish economy over the past 12  months.  

“Corporates are wary of the potential for subdued growth and political uncertainty to drag on near term  profitability and make decision making more difficult. In addition, higher construction costs and higher  incentives have shifted the financial metrics driving the stay versus go decision faced by occupiers. A  high level of incentives can still be obtained on lease renewals, making staying put more attractive,  while steep rises in material and construction costs have driven up the cost of new fitouts. 

“In the short-term cautious sentiment will win out, with a higher-than-normal proportion of tenants likely  to opt to stay put. Those that do opt to move will be seeking good quality fitted space that can be  adapted to suit a new user with relatively little cost.  

“By late 2025, however, we expect that more tenants will be opting to move once again, as confidence  picks up off the back of an improving economic picture and the prospect of a tightening supply  dynamic starts to influence decisions. Despite rising costs, occupiers will have an eye on the need to  future-proof their workplace and secure higher quality space ahead of the competition.”

Other key findings from Knight Frank’s (Y)our Space – Australia and New Zealand report Q1 2025 include:  

• 95% of respondents agreed that sustainability considerations will influence their real estate  strategy over the next three years 
• 71% say a key benefit of occupying buildings with sustainability accreditations is to support  their organisation’s ESG goals 

To download Knight Frank’s (Y)our Space – Australia and New Zealand report Q1 2025 you can visit:  ANZ (Y)OUR SPACE - download the report