Livelihoods on the line: CBD businesses struggle with mass exodus of white-collar customers

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There was a time, not so long ago, when life in Australia’s largest cities was a bustling affair.

Midday lunch queues rubbed shoulders with trainers handing out gym trials, restaurants kept entire workforces caffeinated and public transport bulged with commuters twice daily.

But these days, the businesses once responsible for feeding, training and entertaining hordes of career commuters are humming to a very different tune. Even as COVID-19 restrictions lift, business owners are finding there’s a big difference between being allowed to trade and actually being able to do so.

Emma Seibold, founder of fitness studio Barre Body, is learning what business in Sydney looks like in the wake of coronavirus, having opened the doors on her CBD and Surry Hills studios over the weekend.

“I’ve been really surprised with how low the numbers are so far,” Seibold tells SmartCompany. “I don’t think people are going to be returning to the inner-city in droves anytime soon.”

In March, amid a government imposed shutdown of entire industries, Seibold and thousands of other business owners were forced to make drastic changes to their operating models to stay afloat. And while reopening comes as a relief for many, few expect the challenges wrought by the coronavirus crisis to abate in the near future.

“I look at it from two perspectives, on the one hand I have a global online business which is scalable, and there’s so much opportunity there. On the other, I have businesses in the CBD, and there’s real fear around that,” Seibold explains.

“These are people’s livelihoods. My husband and I are in this ourselves, we have no investors and we don’t have a whole heap of cash to fall back on.”

Barre

Barre Body founder Emma Seibold. Source: supplied.

Concrete risks as cities hibernate

Like cities around the world, Melbourne and Sydney were built on the premise of economies of scale, but the slow return of white-collar workers to Australia’s concrete jungles poses an existential risk to those businesses built to service the hustle and bustle endemic to modern metropolitan life.

Australia has never really embraced the high-density lifestyles of New York, Paris or London, but the biggest central business districts Down Under are nevertheless hotspots for economic activity; Melbourne and Sydney contributed about $830 billion to nationwide production in 2019.

Those economies are currently in full-blown retreat as financial services and technology firms continue to encourage staff to work from home — a previously slow-paced trend that coronavirus has, like so many other things, accelerated immensely.

Payroll jobs have fallen faster in Melbourne and Sydney than in any other region over the past three months, with both cities down 10.6% between March 14 and May 30, according to Australian Bureau of Statistics (ABS) data published on Tuesday.

Meanwhile, almost half (46%) of those working in late April to early May were doing so remotely as officials in Victoria and NSW continued to encourage firms to keep office staff at home.

Indications are that, so far, major employers are heeding those calls enthusiastically, displaying no rush to return to claustrophobic office towers, particularly given the need to comply with onerous workplace health and safety rules.

Mobility data published by Google (based on phone locations) reveals that a sharp drop in workplace travel coincided with a sharp uptick in residential activity amid the coronavirus outbreak. While these figures aren’t CBD specific, they indicate many Australians were avoiding city areas altogether throughout April and May.

Future of work signals services pain

On the ground, business owners like Seibold are taking things one day at a time, still unsure what the future of work, whether it’s here or not, means for them.

In the meantime, with city rent bills often topping $75,000 a month, the prospect of government support programs expiring in September weighs on the minds of business owners.

“It’s early days yet but there’s a very good chance it’s going to be more costly to be open than closed,” Seibold says.

“There’s going to be a big shift towards a more hybrid model where people go into the city a couple of times a week, as some offices will stagger their workplace.”

Seibold is somewhat insulated, as her company has a thriving online channel that’s helping her to make ends meet, despite representing just a fraction of the per-customer revenue physical patrons bring in.

But others have opted to keep their doors closed altogether, despite being technically able to trade. There isn’t much point if there are so few customers around.

Will workers return to the concrete jungle?

Only about 15% of the more than half-a-million workers usually flooding into Sydney every day actually live there, and the cold reality for many city-based businesses is that commuter numbers are unlikely to return to pre-COVID levels anytime soon, and perhaps never.

It underscores just how reliant city economies are on professional, financial and insurance services workers, who are over represented in Sydney employment figures, and together accounted for about 43% of jobs in Sydney in 2018-19, compared to just 12% nationwide.

Those relying on these workers in the retail, accommodation and food services industries employed more than 96,000 people in 2018-19. A further 16,100 were employed in arts and recreational services. Together, these businesses employ about 16% of the workforce in Sydney.

In Melbourne, the figures are similar. Professional, scientific, financial and insurances services firms employed about 150,000 workers in 2018, with higher-level services accounting for about 60% of jobs across the city.

Fortunately, there is reason to think firms will want staff back in office towers eventually. While white-collar workers are Zooming, Slacking and utilising G-Suite like never before, there are good reasons cities have been so popular with businesses large and small in the past.

Research indicates workers in larger cities are more productive.  Business still needs to be done, and for those pitching clients or trying to attract the best new talent, cityscapes are natural points of convergence.

How and when this transition takes place is still a burning question on the minds of business owners with investments in the health of Australia’s metropolises. Will it take a coronavirus vaccine? Zero cases? Government incentives?

Whatever the case, those with their livelihoods on the line will be waiting anxiously to find out.

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