Remote work is here to stay, the Productivity Commission says. But it won’t kill Australia’s CBDs.

Remote work is here to stay, the Productivity Commission says. But it won’t kill Australia’s CBDs.
(Photo by Brook Mitchell, Getty Images)
  • Australian cities will likely remain business hubs despite the long-term adoption of remote work, says a new Productivity Commission report.
  • Central business districts will adapt to the disruption of the pandemic, which has seen a spike in working from home.
  • The economic benefits of workers “clustering together” are expected to remain, it says.
  • Visit Business Insider Australia’s homepage for more stories.

The death of Australia’s central business districts has been greatly exaggerated, according the Productivity Commission, which suggests inner-city offices will remain desirable through the work-from-home revolution.

In a report released Thursday, the Commission said “the central workplace will remain the dominant model for the foreseeable future.”

Cities will adapt to the workplace disruption caused by the coronavirus pandemic, despite the pandemic proving that “many people could do their jobs at home just as well as in the office.”

The proportion of workers who conducted their duties from home shot from 8 per cent pre-pandemic to as high as 40%, the Commission notes.

The immediate impacts of this “forced experiment” on Australia’s CBDs are obvious.

Office occupancy rates plummeted during the extended lockdowns of 2020, and have taken another battering through the current restrictions facing NSW, Victoria, and the ACT.

While the long-term ramifications are hard to predict, the Commission suggests working from home, at least some of the time, will stabilise above pre-pandemic levels even when restrictions are finally eased.

The rapid maturation of communication software and new management practices means “new business opportunities are opening up in the suburbs and regional areas” for those capable of working from home.

Some businesses, which rely on foot traffic to operate, may eventually consider relocating to suburbs and the regions — which have faced significant growth in the past 18 months, thanks to some workers seeking a ‘treechange’ through lockdowns.

And productivity, oft cited by managers as a mark against remote work arrangements, is likely to lift overall.

“So while the impact on productivity of working from home for an individual worker is ambiguous, it is plausible that at the economy-wide level, productivity will not be adversely affected to any material degree by a sustained increase in working from home, and could generally rise,” the report states.

Australian tech giants including Canva and Atlassian have already embraced this form of hybrid work.

Even so, Australia’s CBDs are unlikely to be rendered obsolete by remote work arrangements, the Commission says.

Hybrid working models, which prioritise in-person meetings for collaborative tasks and remote work for individual ones, will bolster demand for centralised office spaces.

The benefits of “agglomeration” — the secondary economic benefits gained by close-knit, inner-city work — will also convince some firms to stay close to traditional business districts.

The ability for businesses to share infrastructure, the efficient sorting of human resources through “matching labour” to appropriate positions, and the benefits of “serendipitous” encounters are all present in the city, it states.

And office rents, which have fallen through the pandemic as some firms moved exclusively to remote work, may entice other businesses to snap up a deal.

“While increased working from home may change how cities work to some extent, the economic benefits of
people clustering together are expected to remain,” the report states.

Although Australia’s cities are unlikely to crumble because of changing office habits, the report also suggests further work must be done to ensure working from home is equitable across pay grades, education levels, and for those with caring duties.

Further tweaks to how working from home may shift work-life balances must also be taken into account, the report notes.