As the world fights the current pandemic, cities everywhere are facing their own fight for survival.
As various debates rage over what the ‘new normal’ might be for many aspects of our daily lives post pandemic, there are complex questions being posed about the future of cities, in particular the CBD.
Will they remain economic drivers and hatcheries of innovation and exciting places to live? And that applies equally to our own big cities, including Sydney, or has the lustre, appeal and seduction of city CBDs faded beyond recognition?
It’s easy to forget that until only a few months ago Sydney was waging a campaign to establish itself as Australia’s (only) true ‘International City’. And while that quest might ring a little hollow in today’s world, it did reflect the huge importance we attached to such a marque, a testament of 21st Century validity.
The Future
Looking to the possible future of CBDs and cities as workplaces, let’s consider just two contrasting points of view. One perspective from Google and the other from Atlassian.
Atlassian employees can work from almost any location and will only be expected to come to the office just four times a year. For Atlassian’s 5,000 staff technology, flexibility and teamwork underpin the policy which has been called ‘Team Anywhere’.
Facebook have taken a similar path – until recently a heroic office-builder, Facebook has announced that it will let many employees keep working remotely even after the virus is seen off.
Google by contrast have just announced plans to spend over US$7 billion this year on new offices and data centres across the U.S.
According to CEO Sundar Pichai “Coming together in person to collaborate and build community is core to Google’s culture, and it will continue to be an important part of our future. “So, we continue to make significant investments in our offices around the country.”
Despite endorsing WFH this shows Google’s view of the importance they attach to keeping a physical office culture. However, even as lockdowns lift, international travel restrictions and fear of infection will linger.
According to Cameron Williams, Colliers National Director Office Leasing and Director in Charge Sydney CBD – “WFH for many people delivers a bunch of pluses that have helped drive up suburban and regional house prices.
“The same trend has also greatly accelerated an already growing trend for work-life balance. I think it’s necessary to consider both these trends and the potential impact they will have on major city centres.” He said.
However, as vaccines are being deployed some of the WFH momentum is already starting to fade, while work-life balance is back in the spotlight.
Where have all the people gone?
Two of the major drivers of a vibrant CBD are office workers and tourists, and pre-COVID conditions still look to be a way off. However, after the major upheaval caused by recent events, office workers are starting to return.
“Sydney is going well, and Colliers first noticed a pickup of enquiry in September 2020 with much more interest since January/February 2021.” Said Mr. Williams.
While there may be no great desire from some employees to return quickly, some fatigue with WFH is evident.
“However, driven by increased supply and competitive terms, including sub-lease terms, there’s also been a shift in the type of users considering the CBD, helping to create a broader demographic.” He said.
Work from home fatigue
Around this time last year, thousands of us went from working in an office, to working at home. However, twelve months on, Mayo Clinic Health System research sees a toll on our social relationships and with a disproportionate negative effect among women.
People are missing building relationships, the conversations and interaction of the office. Setting boundaries between home and work has started to blur, and we mostly need that separation.
Housework, looking after kids and stuff like working through lunch, throwing on a load of washing all messed in with WFH can trigger fatigue. If people have been working all day at home, it can be hard to relax. And this creates declining socialisation habits and mental health can suffer.
The ABS notes that 20% of Australians have experienced high levels of COVID-related psychological distress. Psychiatrists say the best way to cope with work from home fatigue is making a real effort to socially connect with friends and family, balancing stress and adaptability.
While for many years people had been wanting flexible working hours, the pandemic has forced that on both employers and employees. There’s also post-COVID a new focus on work-life balance and there’s also a direct connection to WFH.
The desire for flexibility is also making a difference to the demand profile for CBD office space. Small business is gaining a footprint in the CBD, there’s also demand for more centralised office space. While the amount of space might have fallen, flexibility is allowing previously decentralised, and often secondary space, to be consolidated in the CBD with WFH and more attractive rents.
“WFH and work-life balance is easier to manage if users are able to combine several locations into one. It’s much harder to do this with a scattered and decentralised workforce.” Said Mr. Williams.
There’s debate looming to encourage the big employers to get their staff back into offices, but as we’ve seen there are contrasting views. According to the Household Impacts of COVID-19 Survey published by the ABS, Canberra say 48% of people are working at home followed by Sydney at 40% with a higher concentration in the Eastern Suburbs.
There’s also been a trend towards people shopping on–line and locally, which means that CBD locations are having to re-invent themselves. Much the same applies to office space, creating more diversity among users.
People back to the city
There’s still some a cautiousness about coming into the CBD, and that’s despite very low levels of community transmission of coronavirus. Those concerns really shouldn’t be there, however disruptions to the vaccine delivery in Australia did re-kindle caution nevertheless, the outlook remains positive.
There’s pressure being exerted on public sector and bigger private sector employers to accelerate the return of workers into city offices.
Banking giant JP Morgan last month became the first major US bank to mandate a return to offices for its entire US workforce, with staff having been told they’ll need to come back in about two months. It’s reasonable however, to expect that a full recovery will involve incremental steps so that CBD workers and visitors alike re-engage the city buzz.
There’s already visible evidence this is happening in Sydney and will keep on growing. Not so much because of what cities do for businesses, but because they bring together talented people eager to share ideas. It’s a key reason why CBDs are so productive, so appealing.
That’s not to discount or reflect the obvious appeal of WFH, although in some industries covering 12-16% of the workforce that’s not possible, and WFH is also far less widespread in regional areas. However, today many workers have alternatives. People have learned to work from home; some have discovered that they like it, but some miss the nine-to–five routine.
According to Blake Schulze, Director Residential with our Sydney Residential team – “Commercial and residential property markets could stumble if the bulk of jobs move out of cities, even if only for part of the week. Although to date that’s not really happened.”
“The CBD may become more accessible to both business and residents and this will help build numbers. The prime core CBD looks set to continue being tightly held for both commercial and high-end residential development, but other areas are becoming much more flexible and competitive.” He said.
There are also sectors where employees are very costly and it’s hard to see these groups working endlessly from a kitchen bench. In the short-term CBDs need to adjust to the cut in office workers, tourists and students. The ties between the demand for office space and apartments will also evolve, also becoming more flexible.
“As WFH creates more flexibility a split week may in fact drive more demand for CBD apartments, and competitive rents more attractive with young professionals, a trend already impacting London.”
“I think the reality now starting to spread is that cities will adjust and with the right mix of housing and office space, we could suddenly discover that life in the city is more affordable and accessible.
“Not all apartments need to be high-end and expensive. It’s one key reason why CBD apartments need to continue to offer variety including BTR, a trend that is finally arriving. This mix of apartments helps energise the CBD.” Said Mr. Schulze
Resilient & Flexible
Cities are stronger and remain resilient, and their fate partly hangs on reliability of treatments and vaccines. But also, on the flexibility and adaptability of cities, which previous experience would indicate that cities will do just that.
As noted by Google, cities remain invaluable as places where people build networks and collaborate. Those of us now facing into Zoom meetings from kitchens or cafes can do so because we have previously formed working relationships in corporate offices or in city cafes. We will continue to need these current relationships, but also importantly new ones as well.
“Offices have an important social and business role because they allow chatter to sit alongside business conversation. Answering emails can be done anywhere, personal engagement on the other hand even via the biggest Zoom screens has its limits.
“You cannot share a coffee or an after work drink over Zoom!” Said Mr. Williams.
To encourage more workers, residents and tourists, cities need to continue to run efficiently. Sydney for example is already improving how, by becoming more connected, partly thanks to the new Metro.
This level of mobility is also important to ensure that WFH in regional areas can easily interact with the CBD and it’s generally acknowledged that this is necessary. Great cities are normally big contributors to national budgets, but their role is not just economic. Cities are where people learn to live and work in a modern, open community.
They are essential for nurturing all aspects of society and invention and not just measures of economic development.
WFH has proved popular however, there are some important limits, and we cannot all move to the suburbs or regions, we need and desire the energy and variety that the CBD creates and not to overlook their economic, social and cultural importance. Post COVID cities might just surprise us – more flexible, accessible and bigger and better than ever.
