Business Daily Media

The great suburban shift: what might it mean for property values

  • Written by Scott Willson, CEO of Forbury

Taken a wander through one of Australia’s capital city CBDs in the last couple of months? Although business as usual continues to resume erratically, it’s impossible not to notice that they’re not the bustling frenetic places they were in the pre-COVID era.

Many organisations are persisting with work from home and hybrid working models, which means fewer bodies in offices, streets and coffee shops each day.

Some companies which, once upon a time, would have sought to base themselves at the heart of the action, in corporate central, are now hunkering down in low rise buildings and co-working spaces, in less prestigious, near city precincts and the suburbs proper.

Among their number are new and expanding businesses which, pre-COVID, would have regarded a move into the city as a key milestone on their growth journeys.
If and when they’ll ever take that step is now anyone’s guess.

 

The Christchurch experience

 

As a long-time observer of the property sector in Australia and New Zealand, I’d posit that it will be quite a while. Why do I think so?

In my home city of Christchurch, we experienced a similar phenomenon 10 years ago, when the 2011 earthquake caused massive devastation to the central city and eastern suburbs. Around 70 per cent of CBD buildings were compromised or destroyed, along with critical infrastructure, including roads, bridges, powerlines and sewerage systems.

City-based businesses were forced to find ‘long-term temporary’ perches in the burbs, while our city heart was razed and rebuilt. Many organisations swapped tenancies in modern, high rise towers for decidedly less swanky two and three storey walk-ups a few kilometres out, or cobbled together home-based working arrangements. With office space of any description at a premium, beggars were unable to be choosers and, thus, many organisations found themselves occupying real estate that wouldn’t have made their shortlist before 22 February, 2011.

Surprise, surprise, many found they liked the lower key vibe of the middle ring and outer suburbs. Consequently, they were in no rush to return to the CBD’s rebuilt office accommodation when the time came, which meant owners and landlords were compelled to offer favourable terms to boost occupancy rates.

 

Weighing the options post-Covid

 

I think we’ll see similar attitudes and behaviours from Australian businesses and business owners in the wake of the COVID crisis, as they assess their positions and bed down hybrid working models.

We’ve all learnt from experience that location is all but irrelevant in the Zoom era. So, if employees are happy to swap a long commute to the city for a drive to the burbs (and free or cheap parking when they get there) a couple of times a week, employers will likely be happy to accommodate them.

Reluctance to lock into the long leases regarded as de rigueur by CBD landlords pre-COVID may deter some businesses from basing themselves in town too. At Forbury, we’ve heard of a number of enterprises which intend to stay fetched up in co-working spaces while they wait to see which way the rest of the business world jumps.

 

Adjusting to the new normal

 

What might all this mean for the owners of office real estate? Those with CBD space to let could find themselves forced to sharpen their pencils and sweeten their terms, if they’re to maintain occupancy levels on par with those they achieved in the 2010s. Remodelling and repurposing may make its way onto the agenda, as it has elsewhere in the world, although the challenges and costs associated with doing so are not to be underestimated.

Conversely, suburban offices, shops and cafes may enjoy some uplift, in value and earnings, if the influx of weekday activity continues long term.

One thing remains certain: the only constant in life is change. It’s my prediction we’ll be seeing plenty of it over the next 24 months, as Aussie and Kiwi companies do some hard thinking about where they want to be based.


http://www.forbury.com/

Business Reports

TEN13 doubles investor network to 550 syndicate members

TEN13, Australia's fastest growing venture syndicate, today announced it has reached a new milestone with 550 experienced and sophisticated investors joining the new syndicate. In spite of a challenging macroeconomic environm...

EOFY explainer: Everything your business needs to know about the instant asset write-off

Australia has long been renowned as a rich and vibrant small business nation, where entrepreneurialism is encouraged and celebrated. It has, however, been a challenging period for small business owners, and the transition from o...

Brand Expert Shines in Business Awards

Sydney multipreneur Zahrina Robertson, who is known for producing world-class visual assets, has been named a finalist in the North Shore Local Business Awards. The founder of Zahrina Photography & Video[zahrinaphotograph...

New Image acquires Nutrimetics from Tupperware Brands

New Image Group has acquired skincare and cosmetics brand Nutrimetics from Tupperware Brands Corporation (NYSE: TUP) for an undisclosed sum. Nutrimetics is a natural fit with New Image’s portfolio of health and nutrition prod...

Save, spend or invest? New offering allows Aussies to maximise their savings

With the turn of a new financial year, Australians are at a loss of how to make the most of their tax refunds this year with rising costs of living and low return on savings. The Australian Investor Sentiment Report 2022 reve...

Commercial Painting Revitalised Shop Fronts and The Economy – Why Did the Funding Dry Up?

State governments provided retailers with grants to revitalise their shop fronts in a bid to help the ailing industry. The $2000 - $10000 grant aims to ‘add a lick of paint” and some street appeal to retail outlets not onl...

Web Busters - Break into local search

WebBusters.com.au