Will COVID-19 be the demise of CBD commercial?

We did ours 3 years ago. 16th floor with the most stunning views over the yarra out past the Dandenongs, over the ocean.
Every staff member with dual monitors and electronic sit stand desks, awesome kitchen and a feature timber table tennis that had me questioning a career in the sport.

I imagine the process of subleasing some of the space has already begun.

 

This is true. I oft question why people would pay $5 for a coffee when you can make one at your desk for less than $1. They say its all about the 'experience' so there must be something to it.

I dare say if things do decentralise/ go low density then it would be a struggle to see how these stores that rely on foot traffic survive. Going from servicing 1000s within walking distance to 50 would either mean no store or much less rent being paid. If any those big costco drive to type malls would probably benefit as they have in America. Sad to see if that is the trend.

 

There are many large organisations that are recentralising (onshoring) after years of outsourcing call centres and the like offshore. The likes of AGL, Telstra, Banks, Foxtel have all been left crippled by a lack of functionalty and are re-engaging local workers. They were all exposed and are now finding customer engagement has vastly increased since March.

Most organisations that werent "remote" have adapted to remote technology in a first wave and will likely see a second wave when the pandemic ends to reappraise physical teams to engage with each other and management. Re-engaging teams will become a new normal once this ends. ie centralising them etc. I see at least one major bank has just engaged major sites in regional NSW VIC & QLD for this to be readied and have deliberately sought to pull ALL cloud and other IT back on shore. Many are also doing this with IT risks exposed by foreign intrusion into IT systems making them vulnerable to cyber threats if they are offshored. Many organisations now see offshore as a direct IT threat for cyber hacking. The coincidence with Covid was just luck.

I know one major HK based company that remains 100% IT based in Sydney after 25years. They planned prior to the HK handover to have no IT in HK. They refuse to have their IT in their own country. That says a lot. I am aware they are considering departing HK altogether but there is a heavy political element to it.

 

Probably more enjoy it while you can until more shut down comes again

 

a lot of it is because India, Philippines etc have been smashed by the virus and have been done out of necessity as they are just closed.. In Australia wages can only fall so much so outsourcing will become even more lucrative (until AI proves to be better value than outsourcing)

Just wait for a few more AGMs all the downgrades followed by restructures, Share prices will need to be maintained by these restructures (everyone got to run leaner)

 

Really interesting trend you've pointed, which triggered some light reading on the topic.

It certainly makes sense that some of these customer facing functions return onshore due to the recent push towards home grown services/products, even if it is a short term token gesture. But as Kaibo has alluded to this move will undoubtedly put pressure on the bottom line and one has to question how sustainable it is in the long run if cuts arent made elsewhere.

I found it interesting that Telstra's move is to push towards digital messaging (as opposed to call centres), and that this digital function will remain offshore. Also one big bank has confirmed reduced branch hours in regional centres with others likely to follow.

Are they looking to shut down branches to fund these call centres? Or will they all look to cut office space to offset? It seems to me that cutting office space will probably have the least impact on reputation/service and hence be the course of least resistance. Will be some really interesting reading come reporting season.

I also came across news that a large federal agency has been on a office space cutting spree of late. Closed down Geelong and halved Moonee Ponds due to recent lease expiries.

 

I’m getting consultants now to get a permit for 12 stories in city now. Best time to get permits through to be honest. Very comfortable with CBD holdings in Syd and Melb. Might as well do it while the tenants are shut down. Prices are still sky high.

469 Elizabeth St on 100sqm land in told has over 8 first round bids at $4m+.

 

Nice one. I am still seeing alot of interest from foreign funds/investors especially in melbourne cbd looking to cash in on the explosive rising asian middle class thematic.