Friday on my mind: The workers avoiding the CBD
Staff incentives fail to fire with workers as NSW State Government gets a jump start on the weekend
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Massages, pilates classes, free food and beverages and discounted parking have not been enough to lure office staff back to the CBD, a commercial property expert said this week.
Head of research at Ray White Commercial, Vanessa Rader said despite best efforts by employers, staff have been less inclined to come into the city on Fridays, prompting calls for the introduction of a four-day week.
“While office owners and employers are doing their bit to encourage staff interaction in the office by way of perks and experiences such as massages, pilates classes, free cannolis and iced lattes, occupancy levels remain subdued,” she said. “Now Transport NSW has weighed in, Sydney’s public transport prices are set to increase next month, weekly caps however have remained unchanged and Friday is now considered a weekend.”
Last weekend, NSW Transport announced that weekend fares will also apply on Fridays, providing all-day travel for no more than $8.90 for adults on metro, train, light rail and bus services.
“However, half-price trips after eight journeys will no longer be available when the fare change comes into effect,” the statement said. “Fewer people are travelling five days a week, resulting in lower uptake of the half- price trips benefit, which has dropped from 24 percent pre-Covid to 14 percent in 2023.”
City office vacancies are at their highest rates since the late 1990s, with Sydney and Melbourne recording 11.5 percent and 15 percent respectively. Ms Rader said there were several factors keeping occupancy rates consistently low.
“The prolonged historically low 3.7 percent unemployment rate is a stumbling block for many businesses, the lack of quality talent leading to employers having to provide greater flexibility to secure quality staff,” she said. “Hybrid working models allow remote working, be it from home, in regional areas or even interstate with limited need for “in the office” interaction continuing to be commonplace.”
However, data released by CoreLogic last month showed the desire for regional areas has cooled, with key areas such as the Richmond-Tweed, Shoalhaven and Southern Highlands in NSW and Ballarat and Geelong in Victoria experiencing falls in values between -10.4 percent and -20.4 percent, indicating a return to city areas.
In the meantime, Ms Rader said the case for a four-day week to entice workers back to the city while maintaining work-life balance is growing.
“The mandating of staff back into the workplace for a four-day week, would do much to stimulate the office market’s demand for space, while promoting better work/life balance, reduced stress and growth in health benefits,” she said. “(This would) leave the three-day weekend to explore Sydney on public transport at a discounted rate, or travelling across toll roads, growing family time and healthy lifestyle habits.”
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Strong consumer spending and tight supply have driven retail to the top of commercial property, but signs of pressure are starting to emerge.
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Australia’s retail property sector entered 2026 as the strongest performing commercial asset class, but rising geopolitical risks and cost pressures are beginning to test its resilience, according to new research from Knight Frank.
The latest Australian Retail Review shows the sector rode a wave of consumer spending and constrained supply through 2025, delivering total returns of 9.2 per cent and driving transaction volumes up 43 per cent year-on-year to $14.4 billion.
That momentum carried into early 2026, with around $3.6 billion in deals recorded in the first quarter alone.
“Retail clearly emerged as the standout commercial property performer in 2025,” said Knight Frank Senior Economist, Research & Consulting Alistair Read.
“Improving household spending, limited new supply and stronger leasing fundamentals combined to drive better income growth and renewed investor confidence in the sector.”
Spending rebound drives retail strength
A lift in household spending has been central to the sector’s performance. Consumer spending rose 4.6 per cent year-on-year to February 2026, supported by easing inflation and improving real incomes.
That shift flowed directly into retailer performance, with average EBIT margins across major retailers rising to 8.9 per cent in the first half of 2026, their strongest level in several years.
“Stronger consumer spending was critical in restoring momentum to the retail sector,” Mr Read said.
“Retailers have generally been better able to absorb costs, rebuild margins and support sustainable rental outcomes, particularly in higher-quality centres.”
Improved trading conditions also pushed leasing spreads up 4.2 per cent in 2025, reinforcing income growth and supporting capital values.
Geopolitical tensions begin to bite
But the outlook has become more complicated. The report warns that escalating conflict in the Middle East and its impact on fuel prices, supply chains and interest rates could weigh heavily on consumer spending.
“Higher fuel prices, flow-on cost pressures across supply chains, and recent interest rate increases are collectively squeezing household budgets, and early consumer sentiment data suggests confidence is already softening,” Mr Read said.
“While household balance sheets remain generally resilient, heightened uncertainty over future costs is likely to weigh on spending — particularly in discretionary categories — in the months ahead.”
The impact is already being felt in investment activity. While the year began strongly, transaction volumes slowed in March as investors paused amid the uncertainty.
“Early indicators suggest elevated uncertainty has already begun to affect the market. While retail investment enjoyed its strongest start to a year in a decade, with nearly $3 billion transacted by the end of February, activity stalled in March, as investors took a pause amid elevated uncertainty,” Mr Read said.
Solid foundations support medium-term outlook
Despite the near-term headwinds, Knight Frank maintains that the sector’s underlying fundamentals remain strong. Limited new supply, high construction costs and population growth are expected to continue supporting rental growth over the medium term.
“Retail has entered this period of uncertainty from a position of strength,” Mr Read said.
“Supply-side constraints, population growth and improving income fundamentals remain powerful structural supports for the sector.”
The report highlights several trends shaping the year ahead, including steady yields as interest rates rise, mounting pressure on tenant margins, continued outperformance of prime centres, the growing need for logistics integration, and risks linked to underinvestment in capital expenditure.
For now, retail remains a sector with momentum, but one increasingly at the mercy of forces far beyond the shopping centre.
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