How our CBDs are likely to evolve after COVID

Pre-pandemic, David Makin’s business model was ideal for staff and customers.

He has 10 cafes in Melbourne’s CBD, all under office towers.

“[They’re] Monday through Friday businesses in the city, so no weekends, no nights, “he said.

All 10 have been closed during the lockdown.

“We are heavily dependent on pedestrian traffic into the building. So without that pedestrian traffic, of course, we do not sell coffee,” he said.

Australia’s CBDs have borne most of the restrictions during the pandemic, and companies such as Mr Makin’s – Axil Coffee Roasters – have felt the shortage of office workers sharply.

Early in the pandemic, he had to let some employees go, and revenue in this fiscal year is about 10 percent of what it was in 2019.

Lockdowns are over, but as Australia’s two largest cities begin to open up, there are concerns about when – and if – their CBDs can recover.

A man sitting in an empty cafe.
David Makin believes his cafe business in Melbourne will take six years to return to its turnover in 2019.(ABC News: Andrew Altree-Williams)

Teleworking has become an attractive option for many people who want more time and less commuting, with the Productivity Commission finding that the number of Australians working from home has remained high even after previous shutdowns have been completed.

Makin is reopening its CBD cafes this week, but is realistic about what the business will look like.

He has based his revenue forecasts on the first three weeks of May 2021, when Melbourne was not closed and there was no requirement for a face mask.

During that period, Mr Makin said that some workers returned to the office fairly quickly and that his cafes under private buildings reached around 80 per cent turnover again.

“The problem was the public sector,” he said.

“We saw 10 percent of revenue – only 10 percent of public sector staff return to their office.”

He expects it will take six years for his business to return to 2019 revenue.

Goes the remote first

A woman standing next to a window through which tall city buildings can be seen.
Katherine McConnell says most of her employees want to work in the office two days a week or less.(ABC News: Michael Nudl)

Katherine McConnell’s business is about as central as it gets – on Margaret Street in the Sydney CBD, right next to Wynyard Station and a few hundred meters from Harbor Bridge.

She is the CEO of Brighte, which helps people fund solar energy and housing improvement projects.

Brighte went from 80 employees to about 190 employees earlier in the year, renting additional office space to accommodate the growing team.

Ms McConnell said she was considering expanding even more, but then the shutdown happened in Sydney.

They recently conducted a return-to-work survey among staff.

A female jogger is silhouetted as she runs past a backdrop of Sydney's CBD on a gray cloudy morning
In October, Sydney came out of 107 days in lockdown.(AAP: Dean Lewins)

“The most interesting result of this survey for me was that 61 percent of our people told us they wanted to return to the office two days or less,” Ms. McConnell said.

“I think one of the big reasons is that people feel they can be more productive with their time by working from home.

“One of the other reasons … is that they are able to better balance their lives.”

The company is now reassessing how much office space it needs as it moves towards a “remote-first” work model.

“We will continue to have a presence in the city and we will continue to grow our footprint,” Ms McConnell said.

“I think [the office will] be very much for collaborative teamwork. “

‘That doesn’t mean CBDs are dead’

A person wearing a face mask crosses a quiet Bourke Street Mall in Melbourne.
Melbourne endured a total of 262 days during a series of lockdowns during the pandemic.(AAP: Daniel Pockett)

While Brighte is thinking about telecommuting into the future, Ms. Connell said the company would likely offer a medium-term hybrid model that allows staff to split their time between the office and the home.

The Productivity Commission expects that most workplaces will resort to such hybrid models after closure.

Ken Morrison of the Property Council of Australia said it did not mean Australian CBDs would become ghost towns.

“Yes, more people will work from home in the future than they did in the past. But that does not mean CBDs are dead – far from it.”

Figures from the Real Estate Council show that Hobart and Darwin, which were largely unaffected by shutdowns, returned to about 90 percent of their office occupancy levels before COVID in September.

Perth office occupancy was 76 percent, Adelaide was 64 percent and Brisbane was 51 percent.

Empty shopping mall and closed shops during Sydney's COVID lockdown.
Westfield Sydney Mall in the middle of the CBD during lockdown in August.(ABC News: John Gunn)

Sir. Morrison said some of these cities were still affected by large international companies taking a general approach to working from home.

“I think Sydney and Melbourne will get over these shutdowns and back up to the 80 or 90 percent occupancy,” he said.

“The challenge is how fast we do it.”

After Sydney’s first shutdown, the office occupancy rate took almost a year to reach 70 percent. Melbourne never got above 50 per cent.

Morrison said there was not enough pressure on public sector employees to return to office last year.

“This is a very important thing that federal and state and local governments can do – they can lead by example.”

The Victorian public service will return to a flexible labor policy when the state hits 90 percent vaccination, starting with the expectation that workers will be in the office three days a week.

The government of New South Wales says teleworking will vary between its public authorities.

Opportunity for CBDs to develop

Engineer Steve Burgess on a street in Hobart
Steven Burgess believes CBDs will be less business-focused.(ABC News)

City strategist and engineer Steven Burgess says CBDs would not die, but they would change.

“And certainly for a little bit, they’ll probably fight,” he said.

“But it is an opportunity for cities to become more as they should have been – less business-focused … but more a central activity center where one lives, works and plays.

“They’re not just about bending over a desk – it’s about meeting people, it’s about going to lunch, it’s going to the pub, going to the theater.”

Burgess said some cities, including Portland in the United States and Wellington, New Zealand, were already successful with this model.

Some city councils are already working on liveability and entertainment.

Sydney is creating more pedestrian zones and public spaces.

Melbourne is running a campaign to attract more young people to its empty flats, focusing on events and public art.

Burgess said there would still be an impact for CBD companies like cafes and barbers if workers only came back to the office a few days a week.

The path along Princes Bridge is empty in the winter morning sun, seen from the Southbank end.
Melbourne’s normally busy Princes Bridge during the city’s sixth lockdown in August.(ABC News: Peter Healy)

“And that’s the difference between economics and finance,” he said.

“Economically, we will survive and those cities will change. Financially, there will be some people in the short term who suffer.”

Katherine McConnell said that even if people were not in the office every day, they would probably get the most out of their CBD when they entered.

“I think it will be used more intensively; I think the cafes will be used, I think people after work will have a drink with friends,” she said.

David Makin is looking forward to his CBD cafes reopening, ready to serve workers returning to the CBD.

“All business owners out there, we need to be optimistic,” he said.

“And that’s the attitude we’ve probably had to have for the last two years – we’ll survive.”

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