The Reserve Bank says Covid-19 has scared workers out of downtown centres, forcing a shift to the suburbs and the regions
When AMP announced plans to reduce its footprint in the Auckland and Wellington CBDs, it wasn't just a move to Covid-era home working – it also enables staff to work from collaboration and meeting-based premises outside the city centres.
Chief executive Blair Vernon says fewer staff now come into their city offices than they had ever anticipated; instead they work from home in Huntly, Hamilton, Tauranga, Hawkes Bay and further afield, or they can share space in the company's small AdviceFirst shopfronts from Albany to Invercargill.
BNZ, too, is consolidating its six Auckland and Wellington offices into two city headquarters, closing some branches but also opening new ones in Commercial Bay, Newmarket and Queenstown. "Our people have embraced flexible working and we support that with options to work from offices, home and our partners' centres around the country," says spokesperson Michael Burgess. "Branches still have a role in how we serve our customers."
The Reserve Bank says Covid-19 has scared workers and customers out of downtown centres, forcing businesses to shift to the suburbs and to the regions.
"You're seeing people far less willing to return to downtown centres," says Governor Adrian Orr. "There are low occupancy rates across previous very full office blocks.
"These are common stories globally, and anyone who's relying on foot traffic or high frequency business will not be seen. That short term impact of the virus will be a more permanent feature."
"Our people aren't turning up in the city more than sporadically, which means they're not customers of a cafe, or a hairdresser, or a dry cleaner, or a retail shop. The CBDs are under huge challenge." – Blair Vernon, AMP
That's reflected in the numbers of business premises: the fastest increases over the past two years have been outside the cities in Selwyn (6.9%), Kāpiti (4.6%) and Porirua (4.4%) and, at the risk of cherry-picking the data, more recently Waikato (1.8% in the past year), Thames-Coromandel (1.6%) and Whangārei (1.5%).
As the impact of Covid has sunk in, the numbers of business premises have dropped in Wellington (-2.1%) and Christchurch (-0.3%) in the past year, Statistics NZ data shows.
"Service sectors that can't deliver their products online are having to think about where they are going to be better located through time," says Orr. "Where is the foot traffic, where is the intersection? It's more likely that these types of services are back in the suburbs or outer regions, not necessarily in the inner cities.
"We're seeing that reflected in commercial property ... wholesale distribution units are growing rapidly, doing extremely well. Retail commercial areas are struggling and so it's these types of trends and behaviours you're seeing.
"And I've only talked about retailing, I haven't even gone near tourism or consumer behaviours around where they want to buy their products from, particularly if you overlay climate change and carbon footprint issues."
"Businesses have been telling us that they're finding it hard to find staff, and sometimes they're opting to move their own business operations, either having another satellite office in another part of the country, or providing for work-from-home activity." – Brad Olsen, Infometrics
Auckland's growth in business premises (1.0%) slowed in the past year, and the data doesn't show whether that remaining growth is in the CBD or further out.
Dunedin's business numbers are flat; some businesses are relocating to neighbouring Clutha, says mayor Bryan Cadogan. "We presently have more than 700 jobs that we just can’t fill and we still have apprenticeships on offer," he says.
Businesses follow workers and customers
Infometrics senior economist Brad Olsen says businesses' move to the suburbs and the regions is a reflection of changing populations, including this year's unprecedented fall in the population of Auckland as people moved back to other parts of New Zealand.
"Businesses have been telling us that they're finding it hard to find staff, and sometimes they're opting to move their own business operations, either having another satellite office in another part of the country, or providing for work-from-home activity. And because of that, we're hearing more regional centres trying to attract some of the bigger operators.
"And we're continuing to see that retail spending activity across the country is considerably stronger in provincial centres. Obviously Auckland is down at the moment, but even pre-Delta we saw that Auckland, Wellington and Christchurch cities had much softer spending activity, below 2019 levels."
First Retail Group managing director Chris Wilkinson describes BNZ as an example of a company allowing workers to be based outside the cities. "They've got people working in the regions, working from branches, and they've really just embraced that flexible working approach. And they may have some of these branches closed, but they've still got sort of work sites within them."
BNZ announced this year that it was cutting its corporate office space by 30 percent, after permanently shifting to a hybrid working model where its nearly 5000 staff work either two or three days from home.
"Some of this was already in train, but Covid has accelerated it," Wilkinson explains. "We've seen a lot of people move into areas such as the Wairarapa, north of Auckland, places like New Plymouth, Nelson and the Kāpiti Coast. And flexible working has allowed a lot more of that to happen."
For businesses there is a balancing act in reducing and moving office footprint, Wilkinson says. Although the numbers of staff working from home might mean fewer seats in the office, some are now spacing their desks to accommodate Covid social distancing. Many tech companies are adopting a US standard of reducing offices to 30 percent of their previous capacity.
Employment sprawl
At AMP, Blair Vernon says he can see the impact on CBDs as businesses like his move out. The AMP Wealth Management employees are expected to come into their nearest office only once a fortnight, to meet with colleagues. The 90 staff at subsidiary AdviceFirst come in more often, because they provide face-to-face services to customers.
"We're not running old-school networks, we basically just need an internet connection, and you can work from there. So, really, it's more of a physical disk and presence as opposed to a needing a network to connect," he says. "It's transformational."
He hopes that decentralisation will contribute to suburban and regional economies as services like cafes follow the dispersed office workers – but he also acknowledges the adverse impact on the big CBDs.
"It becomes circular, doesn't it? Our people aren't turning up in the city more than sporadically, which means they're not customers of a cafe, or a hairdresser, or a dry cleaner, or a retail shop.
"The CBDs are under huge challenge. Dentists and physios and dry cleaners that have relied on captive CBD audiences – we get all those services in our local communities, so I'm not sure why you'd go into town to do that.
"And equally, we've found our staff don't want to hang around for an event at a hospitality venue in town. So the CBDs have to rethink what they're about."
"The capacity to decant out of Auckland is only going to be greater – and that's a positive. Surely that must equalise some of the challenges we see around Auckland. So from my point of view, that's a good thing."
