he COVID-19 crisis is expected to hit Sydney’s central business district with a $10 billion blow as workers continue to stay home, causing significant downturn in the hospitality, arts and retail industries.
The CBD’s sputtering economic hub was on track to generate more than $142 billion in 2020 but the pandemic will slash that to $132 billion, a new forecast shows.
This has led to calls for mandatory masks to be worn on public transport to encourage workers to return to their offices and breathe new life into the city’s businesses.
SGS Economics and Planning economist Terry Rawnsley predicted the direct cost of pandemic restrictions, which forced employees to work from home, will cost the CBD $7 billion. Much of that will be felt by hospitality services, the arts and retail.
In addition, the lack of interaction between the thousands of “knowledge workers” — such as finance, professional services, IT, marketing and media — who gathered in the CBD on a daily basis before the pandemic will take an additional $3 billion toll on productivity.
Research shows there are major economic gains for these knowledge industries from the “agglomeration effect” that comes when many workers come together in one location.
“There is a real benefit from incidental conversations over the partition, in the tea room or when you bump into a client in the café line and meet a collaborator on the train and have a chat,” Mr Rawnsley said.
“Those kinds of interactions don’t happen as often in the virtual world. While businesses can still operate using things like Zoom, Teams and Skype, they will miss out on the benefits of having everyone clustered together.”
Sydney’s CBD workers are among the most productive in Australia. Mr Rawnsley estimated labour productivity of employees in the City of Sydney council area is $109 per hour worked, compared with $96 across Greater Sydney.
Last year Sydney’s CBD generated $140 billion which is around 7 per cent of Australia’s gross domestic product and 20 per cent of the state’s output.
Committee for Sydney think tank chief executive Gabriel Metcalf said Sydney’s CBD would be crucial to Australia’s post-pandemic economic recovery.
“For the Australian economy to come back the Sydney CBD needs to come back,” he said.
“In the short run there are only so many things we can do to make that happen but we definitely need to make sure we are taking steps to bring it back in the long run.”
Mr Metcalf said mandating face masks on public transport, while encouraging the use of buses, trains, light rail and ferries would bring more people to the city.
“Instead of asking people to avoid public transport if they can, ask them to return to public transport but with a requirement to wear masks,” he said.
The large share of employees working from home has shifted economic activity from the CBD to other parts of the city.
But Mr Rawnsley said the net effect has been an overall loss in economic activity, especially the decline in working hours for retail, hospitality and personal services workers.
“Many suburbs simply don’t have substitutable retail outlets and services that are available in the CBD so a lot of purchases have been foregone,” he said.
Mr Rawnsley’s analysis showed the CBD sectors hardest hit by pandemic disruptions would be accommodation and food services (down 68 per cent compared with 2019) and arts and recreation services (down 65 per cent).
NAB chief economist Alan Oster warned of ongoing economic disruption to the central business districts of big Australian cities.
“I feel sorry for anyone who’s got a small business who basically is in the CBD waiting for people to return, because they’re not going to return,” he told a Committee for Economic Development of Australia seminar on Wednesday.
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