Artificial intelligence is transforming daily life and professional activities, from virtual helpers and transportation networks to composing correspondence. Its influence on commercial real estate, though, has been less apparent. This is changing.
Australia’s prominent standing in global artificial intelligence, achieving a place among the top 20 nations as evaluated by JLL across various criteria such as infrastructure, workforce, business conditions, scholarly inquiry, and public policy, coupled with possessing the second largest pool of skilled professionals after Singapore, suggests a substantial requirement for extra office space. A JLL study, “The Impact of AI on CRE,” projects that the nation will probably require 483,000 square meters of supplementary workspace by 2030 as a consequence of the expansion of AI.
Aimed at helping property investors anticipate a spike in workspace requirements, this forecast is based on the fast-paced expansion of AI in the United States, primarily in the cutting-edge technology sector surrounding San Francisco. It factors in the strong presence of international AI companies in Australia, with 37% operating locally, as well as the rise of local AI startups and businesses that rely on AI advancements to stay ahead in the market.
Ronak Bhimjiani, a real estate economist with JLL, notes that Australia’s output has fallen for the first time in years. This decline occurs even as the nation anticipates some of the world’s strongest economic and demographic gains over the next decade. Bhimjiani emphasizes the importance of leveraging AI to capitalize on these growth opportunities.
The following five trends illustrate how AI will reshape the Australian office market.
Sydney and Melbourne are on track to become major players in the global tech landscape
The San Francisco and Silicon Valley experience demonstrates the importance of location for Australia’s AI industry. Bhimjiani suggests that Sydney and Melbourne are likely to develop into hubs for AI firms, attracting a significant portion of Australia’s skilled workforce and population. Furthermore, AI businesses often congregate to facilitate knowledge exchange and enhance their competitive edge. Currently, a substantial majority of AI companies operate within Sydney and Melbourne. However, their continued success depends on overcoming key infrastructure limitations. This involves boosting data center resources, modernizing communication networks, and minimizing slowdowns.
Proactive property owners who adopt artificial intelligence advancements are likely to benefit considerably, according to Bianca Docker, head of growth, office leasing, JLL. She suggests that by strategically locating properties, landlords can be pioneers in attracting a new generation of occupants. They can achieve a competitive edge by factoring in AI agglomeration and developing office spaces near essential resources, such as data centers and technology centers.
Growing Need for Office Space Ahead
The San Francisco office market witnessed substantial growth in 2024, with approximately 100,000 square meters of leases attributed to artificial intelligence firms. This represents a significant expansion in the sector’s footprint, showing a 23.7% increase compared to the previous year. Over the past decade, AI businesses have dramatically increased their presence in the Bay Area, occupying 5.0% of the office market in 2023, a considerable jump from just 0.2% in 2014.
As of now, AI comprises 0.7% of the Australian market. According to JLL’s projections, the requirement for office space will rise to 483,000 square meters by 2030, equating to a 2.5% market share for AI.
Leading AI firms like Salesforce, SAP, Google, and Infomedia have played a key role in Sydney and Melbourne’s office market, compensating for the lessened appetite from the banking industry.
Unleashing Workforce Potential
The expansion of artificial intelligence is expected to be a net creator of employment opportunities. The Tech Council of Australia estimates a substantial growth in AI-related jobs, perhaps as much as 500% by 2030, resulting in 166,400 new roles. This increase will require the formation of new positions, including machine learning engineers, software developers, data scientists, and AI legal experts. Furthermore, the present labor market will be reinforced by an increase in highly competent professionals in these particular domains.
Adaptive Office Spaces on the Horizon
A significant proportion, 26%, of global AI enterprises in Australia are presently located in adaptive office spaces, aligning with the growing preference among Australian tech startups for small co-working spaces. These spaces are well-suited for short-term projects that align with their scaling needs. The advantages of co-working offices include their ability to house five to ten workers, provision of short-term leases, cost benefits, attractive locations, and rapid availability. For landlords to effectively address the demand for AI office space, tracking the growth trajectory of these companies in Australia will be paramount.
According to Docker, emerging AI ventures within the incubator program will require adaptable workspace solutions to accommodate fluctuating needs as they grow. He emphasizes the critical nature of readily available, scalable office options for these developing firms. Bhimjiani points out that as organizations adjust and refine their mixed work strategies, the need for adaptable office spaces grows. However, businesses will still require premises that can handle times of high occupancy.
Intelligent Spaces Power Business Growth
The JLL report highlights that a seamless user experience in the workplace will be crucial for enhancing productivity and retaining high-performing employees in a workforce that is becoming more tech-oriented. One example of this integration already present in daily operations is room booking apps, which help optimize space usage efficiently. AI companies are aware of the benefits that smart buildings and streamlined network infrastructure provide and will actively pursue these features for their operations.
