Working from home will kill CBDs. And that’s a good thing

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Robert Gottliebsen has warned that the shift to working from home (WFH) could suck the life out of Australia’s CBDs.

Gottliebsen claims the nation’s CBDs and their valuable infrastructure will stagnate if some semblance of normal working activity does not resume. He also argues that WFH leads to much less personal interaction, makes it harder for companies to identify the best people to promote, and that large companies that rely too much on remote working face the risk of losing talented younger employees to smaller rivals that can offer hands-on training:

Perhaps our greatest danger to realising this new potential that the “working from home” boom will go too far and cause decay in the central business districts…

It’s only a few decades ago that many parts of New York were a “no-go” areas. Australia has substantial investments in its cities including extensive office blocks, and a multitude of restaurants and cafes, as well as nearby theatre districts All are major employment hubs.

In addition, dwellings near capital cities carry a price premium because of their easy access to CBD employment. If large enterprises withdraw from CBDs, then we are looking at the prospect of staggering institutional and individual capital losses that will affect community prosperity for decades…

Working from home is a valuable adjunct to productivity but if overused it is also a long term trap. Central business districts must be part of our prosperity.

I take the polar opposite view: WFH will be possibly the greatest positive externality from the COVID-19 shock.

WFH has eliminated the need for hundreds of thousands of workers to waste money, fuel and time travelling into a central location to work.

WFH frees up transport infrastructure, eliminating the need for massive investments to expand capacity. It also reduces the need for companies to waste huge sums on expensive office space.

WFH is better for the environment too, given it reduces traffic, congestion and emissions on our roads.

And WFH gives parents incidental interaction with their children.

Finally, WFH offers housing affordability benefits, since it enables workers to live further away from work, including in regional areas.

With so many Australians now working behind computers in so-called ‘knowledge jobs’, there is little justification in requiring employees to travel to a central location every day on crowded roads and sardine-packed trains. This is both inefficient and archaic.

Therefore, diversifying economic activity away from CBDs should be viewed as being unambiguously positive.

The only point where I agree with Gottliebsen is that new entrants to the labour market could lose out on face-to-face mentoring. But these costs are far outweighed by the benefits of WFH.

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Leith van Onselen
Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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