Working From Home is not a Free Lunch

The move to working from home, extenuated by the COVID 19 pandemic, could have a dramatic impact on both the number of office workers and retail spending in Australia’s CBDs.

Assuming, on average, workers spend one day a week working from home, this could result in close to one million fewer office workers making the daily commute each week, which would potentially see over $700 million dollars of lost annual retail spending across Australia’s six largest capital cities. This is according to a new study by the PAR Group, an independent property research collective.

The PAR Group’s analysis, undertaken by Damian Stone of Y Research and Rob Ellis of the Data App, examined the potential impact of a widespread adoption of working from home on office occupation across Australia’s six largest capital city office markets.

While the pandemic has vast swathes of Australia in lockdown, the full extent of working from home after the pandemic, is unknown. There is unlikely to be one rule of thumb as different organisations and individuals will have diverse needs and objectives. This study, is not a forecast of the likely extent of working from home which may be adopted, but an estimate of the potential impacts based on two scenarios. 

The two scenarios are:

  1. The impact of all employees working from home, on average, one day a week (which would represent a 20% working from home ratio) and;
  1. The impact of all employees working two days a week from home (which would represent a 40% working from home ratio).

It was further assumed each office worker spends $15 per day in retail; representing the cost of coffee and lunch.

Based on these assumptions, the potential reduction in the number of office employees working in the major capital cities and reduced retail spending was estimated.

The main findings were:

  • In terms of fewer office workers – the adoption of one day a week working from home for all businesses could result in 973,568 fewer office workers per week across Australia’s six largest office markets. By the same token, the adoption of two days a week working from home could lead to 2,190,528 fewer office workers.
  • In terms of lost weekly retail spending – the impact of fewer office workers spending a typical $15 dollars per day could lead to between $14.6 million (based on one day a week working from home) and $32.8 million (two days a week) lost from CBD based retailers, mainly food and beverage retailers.
  • Whilst retail spending is likely to be lost from the CBDs, non-CBD food retailers, in particular neighbourhood cafes will, in all likelihood, see increased trade.
  • Australia’s two largest capital cities – Sydney and Melbourne would bear the brunt of increased working from home, with 63% of potential fewer office workers and their spending occurring in those CBDs.

This analysis does not take into account the broader retail impact of a lower daily footfall in Australian CBDs which is also likely to translate into reduced spending on other goods and services.

The chart below outlines the differences in the estimated daily workforces across major Australian Capital Cities pre-pandemic and the two working from home scenarios.  

The shift to working from home has the potential to become a significant legacy of the COVID 19 pandemic. Across the globe, health measures (lockdowns and social distancing) have resulted in entire workforces, enabled by technology, shifting to remote working.

As vaccines become available, companies are returning to the office in some form. Across the globe working from home, either structured or through flexibility offered to employees, has become increasingly common. Standard office hours, 9-5, Monday to Friday, while clearly possible, seem unlikely to return. Media reports have wavered between the death of the office and the return to “normal”.

This analysis is predicated on what could be the impact of working from home if it becomes a fixture of global cities. Investment in/and adoption of technology, evidence of successful working from home practices, employee preference, let alone competition for staff, will probably see numerous companies adopt some form of working from home strategy. The office will evolve to foster collaboration and corporate culture more than just another room with internet access.

As outlined in the scenarios, working from home two days a week on average could see just under 2.2 million fewer office workers per week commute to Australia’s capital cities. The impact of fewer office workers on office space demand, commuting patterns/preferences, vitality and work/life balance will become more evident in the months and years ahead. If this is the case it seems likely cities will need to adjust to fewer people in CBDs than prior to the pandemic.  

CBD based retailers, which rely heavily on the daily office workforce, will bear the brunt of widespread adoption of working from home. Combined with potential impacts of fewer international visitors and less business travel, many CBD based retailers may find it problematic in adjusting to the new economic paradigm. Higher vacancy rates and lower market rents are likely, at least in the short term, in the CBD retail markets.   

Measures by Government, office owners, retailers and employers to bring people back to the CBDs will help offset the impact of lockdowns experienced over the last 18 months. However, all these stakeholders will need to adjust to the new office paradigm, and those who adjust the quickest will likely be best placed to meet future office workers’ requirements.

For further information, please contact:

Rob Ellis, Director of the Data App. Mob: 0417 195 352 or email: rob@thedataapp.com

Damian Stone, Principal and Chief Problem Solver of Y Research. M: 0433 525 414 or email: damian.stone@yresearch.com.au

Bookmark
close

Sign up to receive our FREE
Weekly Insights Newsletter.

We don’t spam! Read our privacy policy for more info.

About Warwick P

Warwick has over 25 years of property investment and management experience. Principally responsible as Managing Director for Capital Management Australia and Joint Managing Director for Chauvel Capital Partners and Editor of Australian Property Markets News.

Check Also

10 Sustainability Initiatives in Property

We are keen to support Sustainability initiatives in the property sector and with a myriad of acronyms, organisations and options, we thought it would be useful to maintain a register of go to resources for organisations to make better decisions about sustainability.

Intro: Urban Innovation & Foresight

Welcome to our Urban Innovation & Foresight series, where we will unpack a range of forces which will shape the way we use our urban areas over the next decade.

86-ha englobo development land at Eglinton up for grabs

One of the northern beaches’ largest landowners, Eglinton Estates, is moving to sell 86ha of residential englobo development land in Perth’s rapidly expanding north-west urban growth corridor.  

Leave a Reply