Death Of The CBD

As the sun rose on the new millennium,
half of the population of Western economies was involved in so-called ?office work’. This, combined with the fact that office property comprises the largest single item in the value of nation’s asset base, dictates that any emerging trends with the potential to impact on the utilisation of offices will be of significant interest to nation’s business community.
A study I did in 1996 found:
? Telecommuting practices are on the increase in Wellington and Auckland.
? Desk sharing practices have been embraced and may dominate future work practices.
? Decentralisation is gaining some momentum with many companies opting for suburban, ?satellite’ premises in place of or supplementing their CBD offices.
? New Zealand businesses are increasingly recognising the need to support staff’s work/life balances. more flexible attitude seems prevalent in respect of where and when staff achieve their objectives.
So what are the international trends that will impact on office space utilisation practices, and how do they relate to the above findings?
The key points are:
? New Zealand’s office space utilisation trends are the world’s trends. We are following the US and the UK in particular in adopting the telecommuting suite of practices in significant and increasing numbers.
? New business needs have created new business imperatives – ways of operating that are better designed to sustain competitiveness.
? Collaboration defines the approach to business of the future.
? CBDs internationally will face increasing pressure from decentralisation drivers and trends.

The paradigm is change
Throughout the ’90s and into this new millennium New Zealand companies have increasingly felt the pressure to do more with less, to perform better with ever-reducing budgets. Winston Churchill said “to improve is to change; to be perfect is to change often”. Using this quote as our yardstick, New Zealand businesses must be approaching perfection. Internationally, businesses are facing the most traumatic changes in their history in their difficult quest to become and remain competitive. These pressures are the first driver for changes in the physical setting where we have spent so much of our lives – the office.

New rules
Companies more progressed in their forward planning and repositioning have started to put into effect the so-called 1/2-by-2-by-3 rule of corporate fitness.
They have half as many people on their payroll, paid twice as well, producing three times as much.
Telecommuting leads the way
1. study by Bell Atlantic estimated that two million USA businesses already supported some kind of telecommuting programme back in 1996.
2. 1998 study revealed that 51 percent of North American companies permitted staff to telecommute. Among high-tech firms 82 percent used technology to enable telecommuting, up from 50 percent in 1997.
3. Recent studies claim that 14 million workers or 15 percent of the US labour force operated fulltime from home in 1999.
4. Over 11 million Americans worked from virtual office in 1999, having grown 18 percent in each of the past two years.
5. Better business is being achieved in the US by attracting and retaining key staff partly through offering flexible working options.
The United Kingdom may be leading the way in the adoption of new work practices. 1997 survey of 200 UK firms found 75 percent with tele-working staff. Survey respondents predict many more part-time home workers in the future.

Hot desks
Another UK survey of 45 major firms in 1997 found over 50 percent having introduced hot-desking, with further 30 percent considering introducing it. Over 60 percent had already permitted staff to work at home for part of their time and another 20 percent were considering introducing this.

Australia is following suit
Late in 1997 the Property Council of Australia surveyed 708 tenants in Sydney, finding 46.5 percent of respondents using at least some of the new work practices of telecommuting, hotdesking, hotelling and activity settings – new office design concepts incorporating mix of lounge areas for networking, private areas for concentrated work and so on. Sharing desks was the most utilised practice with 39.6 percent of respondents involved in it.
Collaborating future
Collaboration is key feature of the new company paradigm. The team is paramount, and your team may include not only your own staff and your traditional clients, but also other service providers in your service delivery chain.
It might even include traditional competitor – introduced to the project by you to shore up knowledge/ skill you perceived was missing on this occasion.

Where to for the CBD?
To date, the measurable effect on property in CBDs internationally, including in New Zealand, is not dramatic. The percentage of firms involved in telecommuting practices worldwide is significant, suggesting revolutionary trend. But the revolution will not become blatantly apparent until more firms introduce the practice to more of their staff.
Nevertheless, the structural shifts occurring in the office space market have led many to question the viability of downtown office buildings and whether CBDs can compete with the suburbs for office-based employment in the future.
Flatter organisations, the elimination of middle management, changing skills, outsourcing, information technology and the drive to cut overhead costs, are all influencing attitudes about office space. survey of British office occupiers found that more than 60 percent stated their current buildings would not meet their needs in 10 years’ time.
This mirrors my own recent survey, where 60.5 percent (Wellington) and 70 percent (Auckland) of responding companies answered “yes” to the question “Will the CBD diminish in importance for companies as people increasingly work from home or from satellite offices?”

CBDs have battle on
their hands
In North America, some traditional sources of office employment growth have slowed greatly – ie the finance, insurance and real estate industries. Future growth is predicted mainly in business services, sector with no real need to be in the CBD.
The focus of many investors has also changed. Many who formerly invested in bricks and mortar are now investing in computers and computer-based technology. This technology, in turn, encourages the termination of some jobs and the transfer of others from CBD locations to more remote alternatives. Finally, in some countries the trend in recent times has been for most growth to occur in small businesses, with many large companies struggling to generate profit. The traditional source of CBD tenants is large companies, which are being downsized and re-engineered in droves.

Will the CBD die?
This is the $64,000 question. The current and forecasted reality is disconcerting for those who have invested heavily in CBDs and those with raft of interests in CBD property. But the challenges that CBDs face can’t be ignored.
Simply ?talking the CBD market up’ while blindly avoiding the real issues at hand will only do the CBD and its stakeholders disservice. I have identified significant trend internationally towards the adoption of telecommuting, desk sharing and home working, resulting from changing business needs and other catalysts like IT developments and commuting frustrations. Clearly the search for flexibility can result in reduced requirement for CBD office space. I have also identified some movement towards decentralisation in the Auckland and Wellington contexts, though indications are that so far, other office space occupiers have moved in where counterparts have moved out.
The conclusion I have drawn from analysing the international trends and from working in New Zealand on office space needs is that CBDs will surviv

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