New way of life for Australia’s CBDs

In Community, Featured Home Page News, Victoria

The effect covid has had on CBDs around the country cannot be understated, as Australia approached 2 years since the lockdowns started. In those 2 years, the country has seen a move to working from home and a rise in communication technologies to assist in this transition.

Now as Sydney and Melbourne reopen after a long delta lockdown, the question of what these cities will look like post-pandemic is being asked.

Key points: 

Simon Kuestenmacher, a demographer and geographer with The Demographics Group believes that the work from home trend will continue, however, it won’t be as high as it was during the pandemic.

Liz Allen ANU demographer believes that the rush to the regions won’t last, as families realise that opportunities are limited.

 

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from AFR 22.10.21

As Melbourne’s pandemic restrictions lifted in the early hours of Friday morning, workers at Arbory Afloat, a bar and restaurant on a 50-metre-long barge on the Yarra River, were counting the hours to reopening. Decked out in a new beach club theme, the hospitality business at Flinders Walk was preparing for a burst of activity from customers keen to escape lockdown, even with fewer staff and seats than before the pandemic.

Arbory Afloat on the Yarra River reopened on Friday for business as Melbourne came out of lockdown. Arsineh Houspian

“We’re expecting to welcome excited Melburnians back,” said Tim Botterill, a director of HQ Group, which owns the floating bar. “We will miss the interstate and international tourists. However we are looking forward to strong support from Melburnians once again.”

Melbourne’s post-vaccination reopening, like Sydney’s almost two weeks earlier, marks the start of a new phase for the country’s two largest cities and a real-time experiment in what “normal” life could look like.

It’s a pivotal moment for residents of the world’s-most-liveable-turned-most locked-down city but, as Harvard University economist and cities thinker Edward Glaeser told a Committee for Sydney audience earlier this month, cities have been picking up and resetting themselves from major health crises ever since the Plague of Athens in 430 BC.

The centre of efficiency

This is because cities offer the most efficient way to get things done and grow. Ideas and knowledge spread faster among dense populations; they are the best way to encourage innovation and efficiency. And cities, which have always offered the best opportunity for social and economic advancement, constantly draw in a new pool of ambitious and hopeful workers.

“Cities and disease are old companions,” says Glaeser, who argues that since the nineteenth century, pandemics – and the need to protect workers from them – have shaped cities in more deliberate ways. A cholera outbreak in New York City in 1832, for example, led to wide-scale public investment in water and sewerage infrastructure, he says.

Urban Australia’s experience shows that, despite conjecture and warnings sparked by the pandemic, cities are not going into decline or about to fail.

For the very reason people have always flocked to cities, the much-documented rush to the regions will be temporary, says ANU demographer Liz Allen.“This won’t last,” says Allen. “People who moved to regional areas over the last two years are about to face a rude shock as opportunities for them and, potentially their children, become constrained and, in turn, limit future possibilities.”But there will be some changes. This is the first pandemic that has allowed remote working. That will not disappear, but nor will offices be deserted. Instead, a new level will be established, says Simon Kuestenmacher, a demographer and geographer with consultancy The Demographics Group.Before the pandemic, census figures show about 5 per cent of all paid jobs in Australia were performed from home on any given day, Kuestenmacher says. “At the height of COVID, about 50 per cent of jobs were being done from home,” he says. “Post-lockdown, we won’t have 50 per cent of people working from home, but it will also not be at 5 per cent. It will be something in the middle. My best guess is 12-15 per cent on any given day.”

Innovation on the cards

Other changes will come, too. One business to see an opportunity coming out of the pandemic is PropPay, a start-up that offers commercial property landlords up to three years’ rent in advance, to give them cash to reposition their properties, update them, or just to meet other cashflow demands.

“CBDs in general have been completely changed during the COVID-19 period,“ PropPay chief executive Tim Rahn says. “This is allowing landlords to get some flexibility and certainty on the income of their rent.” So far, the company has completed about 18 deals with SME landlord partners.

The business, founded by Sydney developer John Virgona and former PwC partner Ian Clark, is eyeing a $50 million raising next year to allow it to finance larger deals.

“It’s going to be interesting to see who the winners and losers [of the pandemic] are,” Rahn says. “But at the same time, the ability to go back into the market and attract the tenant you want, for your commercial premises, whether with our product or any other product … is front of mind right now.”

When it comes to white-collar work, single and younger workers may be keen to return to the office, a place of on-site training and a key part of their social life. But those with carer or other responsibilities, or people with underlying health conditions, are more likely to make use of increased opportunities to keep working from home.

Adjustment times will also vary by city, Kuestenmacher says.

“The time required to go back to normal, if you will – if this will happens at all – differs vastly between different cities based on how long you were in lockdown,” he says.

By next March, Melbourne office workers will have had almost two full years of working from home. “That is plenty of time to build ingrained habits and ingrained preferences,” he says.

“By March-April next year – I would say COVID-19 is still a thing but not a big danger and Melbourne will have a much lower rate than Sydney. We’re talking 10 percentage points or thereabouts, I would guess.”

He cites the example of Dropbox, which last year said it would no longer have offices with desks for staff to work at and would not allow a hybrid model of working from both home and office. Instead, all staff would do solo tasks remotely and would only come on to company premises, rechristened Dropbox Studios, for collaborative tasks.

This showed one way cities could develop in future, Melbourne-based Kuestenmacher says. “If quite a few companies in the Melbourne CBD were to act like Dropbox and split work in a way that you do quiet work at home and collaborate in the CBD, all of a sudden, the CBD changes completely,” he says. “The CBD in this fantasy scenario becomes more lively. This would be a great CBD.”

Big versus small

Glaeser says there will be some overall reduction in demand for CBD office space. The world’s bigger and more dynamic cities won’t suffer from this, but smaller ones will, he warns.

“The impact of a pandemic on reduction for office space, which I believe will happen from the rise of hybrid work, that will show up primarily in expensive markets, including Sydney, in terms of lower prices, not in terms of vacancies,” he says.

“Even if, in a place like New York or San Francisco, prices drop by 20 per cent, those prices are still plenty high enough for people to still occupy them.

“In contrast, in places like Grand Rapids [Michigan, 200,000 people], or Detroit [Michigan, 675,000 people] or Columbus [Ohio, 879,900 people], you could have a really substantial drop in prices that could actually lead to vacancies and then those vacancies could spill over throughout the overall economy.”

Back on the Yarra, in the lee of Melbourne’s Flinders Street Station, HQ Group is making adjustments for a changed trading environment.

Arbory Afloat, which in previous seasons has closed at the end of summer, will extend its season, both as a way of increasing its patronage, but also as a way of reinforcing other efforts to open up the city, Botterill says.

“We intend to operate until the Queen’s Birthday long weekend in June to support Melbourne’s Rising Festival,” he says.

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