Why Sydney’s CBD is turning into a ghost town
Australia’s city centres are filled with ghost office towers as people continue to work from home, devastating the small businesses left behind in the abandoned central business districts.
Hectares of city centre office space now lies vacant, with commercial office vacancy rates in double-digit figures two years after the pandemic first broke out.
And even those offices still operating are on vastly reduced capacity, with many staff only coming in two or three times a week.
Hectares of city centre office space now lie vacant with commercial office space vacancy rates in double-digit figures two years after the pandemic first broke out
Australia’s city centres are filled with ghost office towers as people continue to work from home, devastating the small businesses left behind in the abandoned CBDs
But the shift in work from the CBD to the suburbs and bush has wrecked the cafes, restaurants and other mum and dad businesses set up to support city workers.
Their businesses survived through Covid on JobKeeper wage subsidies – but eight months after most Covid restrictions ended, they are now in turmoil.
‘We thought it would pick up after Christmas – but that never happened,’ said Sonya Gee of Martini Dry Cleaning in Sydney’s glitzy Barangaroo business strip.
‘Then we thought it would be after the summer holidays, but nope – then Easter, but no. Now we just accept this is how it is.’
She’s had to shed her five staff in the wake of the WFH revolution, leaving just her and her husband to handle all the work.
‘Our turnover has gone – it’s dropped 60 to 70 per cent,’ she said. ‘People are only coming into the office sporadically.
‘And because people aren’t meeting face-to-face anymore, many of them aren’t even wearing suits and shirts now – so don’t need them cleaned.
‘I’m not sure how much longer we can go on. We’d move to a new location if we could, but we’ve got a long lease.’
Sonya Gee of Martini Dry Cleaning in Sydney’s glitzy Barangaroo business strip has had to shed all their staff and now just runs the business with her husband
Even those offices still operating are on vastly reduced capacity, with many staff only coming in two or three times a week.
Cafes and restaurants are also living in fear of the ghost town central business districts.
Vicky Vardis of Barangaroo’s Vessel restaurant has had to axe three-quarters of her staff since the pandemic broke out, down from 11 to just four, with no hope of recovery.
She’s also facing a double-whammy of rocketing food costs along with the dwindling customer base.
‘We had to pay $240 for 10 kilos of green beans at the market this week,’ she revealed. ‘We used to pay $1 a kilo.
‘I’m having to get the chefs to change all the recipes, so we don’t actually lose money.’
Shorter working weeks in the city are hurting revenue.
‘People are only in the office from Tuesday to Thursday now – Mondays and Fridays are dead. It’s hard. Really hard. Business is down 70 per cent,’ she said.
The long lockdowns in Sydney and Melbourne unchained staff from their desks and demonstrated they can still work efficiently from home.
Barangaroo’s Vessel restaurant has had to axe three-quarters of their staff since the pandemic broke out, down from 11 to just 4, with no hope of recovery
Vessel’s Vicky Vardis says cafes and restaurants are facing a double-whammy of rocketing food costs as well as the dwindling customer base, with some prices soaring 24-fold
In the wake of the pandemic, many offices are now virtually empty on a Friday as companies adapt to the new reality and allow professionals to work a hybrid system.
In one part of Sydney, one in five central business district offices are still vacant.
Social researcher Mark McCrindle said city centre offices in particular were more likely to stay empty as more professionals could continue working from home several days a week.
‘It’s the central CBDs of our cities where it’s been harder to get the numbers back,’ he told Daily Mail Australia.
‘Even at best, we’ll end up with 80 per cent of the pre-Covid occupancy in our CBD offices.’
UK’S LEAD GIVES HOPE FOR SOME
Barber shop boss Stephen Parker is pinning his hopes on Australia following the UK’s lead of dropping Covid isolation rules will spark a return to office life.
His men’s hair studio in Sydney’s Barangaroo has also been smashed by the WFH epidemic which has seen their turnover slashed by around two-thirds.
They’ve had to let all their assistants go in a bid to survive but are still holding on to the dream of a return to normality within a few months.
Barber shop boss Stephen Parker is pinning his hopes on Australia following the UK’s lead of dropping Covid isolation rules will spark a return to office life
‘The UK is completely back to normal now since they dropped the rules about having to isolate if you catch Covid,’ said Mr Parker.
‘I’m hoping that once the weather warms up a bit, that will also be adopted here and things will change for the better. That would be a game-changer.
‘I think we’ve been through the hardest time – now it’s just a case of getting used to the hard times.’
Mr McCrindle said double-digit vacancies in major cities centres were rare before the pandemic, at least in the prime real estate market.
‘In some of what they call the B-grade and the C-grade, you had that but not in our capital city CBDs, some of the secondary CBDs had that because they didn’t have quite the allure, I’m talking from a Sydney perspective,’ he said.
A lot has changed in 2022.
Figures from JLL, a commercial real estate company, showed the national CBD vacancy rate stood at 13.5 per cent in the March quarter of this year.
That is above the 10-year average of 11.2 per cent.
But in Melbourne, it sits at 14.8 per cent.
In the wake of the pandemic, many offices are now virtually empty on a Friday as companies adapt to the new reality and allow professionals to work a hybrid system
Australia’s highest vacancy rates
WEST PERTH: 21.4 per cent
ST LEONARDS, Sydney lower north shore: 21.2 per cent
SYDNEY OLYMPIC PARK, RHODES, Sydney inner west: 20.5 per cent
PERTH CBD: 19.7 per cent
NORTH SYDNEY: 19.4 per cent
CHATSWOOD, Sydney lower north shore: 17.4 per cent
BRISBANE CBD: 14.9
MELBOURNE CBD: 14.8 per cent
ADELAIDE CBD: 14.6 per cent
SYDNEY CBD: 12.3 per cent
Source: JLL Office Market Overview report for the March quarter
Sydney’s city centre had a lower vacancy rate of 12.3 per cent.
At St Leonards, on the city’s lower north shore, the vacancy rate was 21.2 per cent – the highest since it began compiling data in 1990.
But at Norwest, in Sydney’s northwest, the vacancy rate is just 5.4 per cent.
‘It’s interesting how it’s all turned around, and those suburban CBDs have actually been where there’s been quite a return,’ Mr McCrindle said.
‘It’s true of those outer-suburban business parks and CBDs as well, that’s where we’re getting a lot of activity.
‘The business of the cafes in the outer-ring suburbs and the regions is busier than the CBDs.’
Jones Lang LaSalle’s NSW leasing manager Will Hamilton said the popularity of working from home meant corporations were relocating from outdated offices.
‘Some businesses are taking less space and being more efficient,’ he told Daily Mail Australia.
‘A lot of companies have come out of a 10-year-old fit out which might not be fit for purpose as what you’d build today.
‘There is definitely a lot of hybrid working and work from home.
‘People are working on a more flexible schedule.’
Mr Hamilton said corporations on average signed five-year leases for office space.
The property sector has a two-tiered system of classifying office space, with large spaces in newer buildings referred to as ‘prime’ grade and less glamorous spaces described as ‘secondary’.
‘Prime grade is benefiting from a lot more demand, and that comes back to the quality of the workspace, the amenity, the health and wellness components,’ Mr Hamilton said.
‘If we look at where the new leasing deals are being struck, and where that demand is, it’s predominately in the prime-grade end of the market, that’s what we are seeing the evidence showing.
In one part of Sydney, one in five central business district offices are still vacant
The seachange shift in work life has wrecked the cafes, restaurants and other mum and dad businesses set up to support city workers
‘A lot of corporate Australia has been quite vocal about a return to work in many ways, and we’re seeing businesses respond to their employees’ needs.’
Mr Hamilton was reluctant to draw a link between the rising of working from home and higher office vacancy rates.
‘I don’t think I can draw that correlation,’ he said.
Mr McCrindle said two-thirds to three-quarters of staff would still be heading into an office as employers reconfigured the spaces for more collaborative working, featuring better internet and Zoom connections.
With unemployment in May remaining at a 48-year low of 3.9 per cent, bosses need to make workspaces more attractive to retain talent and convince them of the need to occasionally commute to an office.
‘For the businesses in the CBD to “win the commute”, you’ve got to earn the commute because people can do the work from home,’ Mr McCrindle said.
Businesses were put into cold storage during lockdown – but eight months after most Covid restrictions ended, they are still in turmoil
The CBDs turned into ghost towns after the long lockdowns in Sydney and Melbourne unchained staff from their desks and revealed they can still work efficiently from home
‘That’s why they are making this investment in their office space, they’re providing better meals, and condiments in the kitchen.
‘They’re refitting to make it really an exciting space that can’t be replicated at home.’
A McCrindle Research study found Australians still made their friendships in the workplace.
‘That’s what makes the workplace, the people: 70 per cent of Australian workers say that the workplace is their key point of regular and meaningful social connection and community,’ Mr McCrindle said.
‘In modern Australia, one of the few, social bottlenecks in our life is work that is not achieved when we are all working remotely.
‘That’s the opportunity for businesses to create an opportunity for people to connect.’