CBD economy faces years on the road to recovery

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Research commissioned by the City of Melbourne shows it will take four years for the CBD’s economy to recover to pre-pandemic levels.

The report by Deloitte Access Economics was completed in May and does not account for Victoria’s circuit-breaker lockdown in June or the present NSW outbreak, which on Sunday caused the Victorian government to close the border to all of NSW and the ACT.

Crowds in Bourke Street Mall on Sunday. The CBD still faces a long road to recovery, research shows.Credit:Luis Ascui

The area of study spans parts of Melbourne’s CBD, and also analyses a cross-section of Sydney, Brisbane, Adelaide and Perth.

The report projects Melbourne will return to its pre-COVID-19 peak of about $74 billion gross regional product by the second half of 2024. GRP was slashed by more than half in 2020 due to the pandemic, dropping to almost $40 billion; the analysis forecasts this figure will climb almost 17 per cent this year.

Australian Retailers Association chief executive
Paul Zahra said the pandemic’s impact on the CBD and businesses was devastating.

“People don’t want to go into the city because they’re concerned about using public transport,” he said. “There’s some rebuilding that needs to occur … many small businesses may go out of business if they haven’t already.”

Months of lockdowns and restrictions last year forced many city-based office staff to work from home. During the height of the crisis, fewer than 100,000 Melbourne office workers ventured into the CBD, while the other 200,000 employees who would normally travel to the office logged on remotely.

Despite emerging from the lockdowns, preference for working remotely has surged. The report predicts another 24,400 workers will return to the CBD by the end of this year.

According to the analysis, Melbourne has the highest percentage of professional office-based workers compared with other cities in the country, at 76 per cent against a national average of 44 per cent.

A hesitancy to venture into tightly packed workplaces, streets and laneways means fewer cash injections to hospitality, retail, transport and entertainment, which is denting Melbourne’s economic recovery.

Analysis of Google mobility data measuring the number of people attending workplaces revealed Melbourne had plummeted the most – by about two-thirds, or 67 per cent – followed closely by Sydney at 62 per cent.

Deloitte forecasts that by 2025, more than 330,000 workers will be in offices in Melbourne’s CBD each day. Sydney is forecast to have a slower return to offices than Melbourne and is not expected to reach pre-COVID levels before 2025.

The return to office work in Melbourne has been gradual, yet the analysis indicates the reluctance to suit up and travel in is not permanent and the CBD could expect stronger traffic soon.

Mr Zahra said more needed to be done to adapt to the new normal and address the trend of flexible working, which has accelerated during the pandemic.

“There’s got to be a reality check on exactly what’s happening from an office worker perspective,” he said. “The workforce will land on a hybrid model, where people will be able to work partly from home, partly in the office.

“That’s significant, for a lot of small businesses rely heavily on foot traffic from office workers coming down to grab a coffee, to grab their lunch or to buy food to take home for dinner.

“Melbourne will absolutely bounce back. How long it takes, who can say?”

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