Category: Business

More Adelaide office workers chose to work from home last month as South Australia’s COVID-19 cases peaked, with office occupancy in the CBD dropping to below two-thirds.

Data from the Property Council of Australia’s monthly “Office Occupancy Survey” shows Adelaide’s office occupancy rate dropped from 71 per cent in June to 64 per cent in July.

The CBD’s average monthly occupancy rate also sits at 54 per cent this year, according to the data, well below the 67 per cent average rate recorded in 2021.

The figures represent a percentage of pre-COVID occupancy levels, estimated to be around 90 per cent.

Despite Adelaide’s drop, the 64 per cent occupancy rate is still the second highest of the six capital cities measured in the Property Council’s July report. Only Perth ranked higher at 71 per cent.

Adelaide is also substantially higher than the July occupancy rates recorded in Melbourne (38 per cent) and Sydney (52 per cent), both of which endured long COVID-19 lockdowns last year.

Brisbane’s CBD also recorded an occupancy drop from 64 per cent to 53 per cent last month.

SA Property Council executive director Daniel Gannon said South Australia’s latest COVID-19 wave had impacted an otherwise “steady increase in the number of workers returning to workplaces”.

“A wave of Omicron and flu infections has caused office occupancy rates across most major cities to go backwards in July, including Adelaide,” he said.

“The latest monthly results are obviously disappointing for return-to-office momentum, but unsurprising due to the rise in case numbers.”

South Australia’s third wave of COVID-19 prompted health authorities last month to recommend businesses and universities consider work from home arrangements and mask requirements.

The wave, driven by the more transmissible BA.4 and BA.5 Omicron subvariants, peaked on July 18 at 5038 daily cases.

“Looking ahead, we are encouraged by the fact that this Omicron wave seems to have peaked and that spring is now just around the corner,” Gannon said.

“Hopefully, this means Adelaide’s workplace recovery momentum can summarize.”

A state government work from home order during South Australia’s first Omicron wave has contributed to this year’s lower office occupancy rates, which bottomed out at 11 per cent in January 2022.

The highest level of worker activity in the Adelaide CBD during the pandemic was recorded in June 2021 at 80 per cent.

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The national Property Council survey found the preference for greater working flexibility was the most common reason for the current occupancy levels, followed by health concerns about returning to work.

The survey was conducted between July 25 and August 1.

Office occupancy rate change from June to July (lowest to highest)

Melbourne: 49 per cent to 38 per cent

Sydney: 55 per cent to 52 per cent

Brisbane: 64 per cent to 53 per cent

Canberra: 53 per cent to 61 per cent

Adelaide: 71 per cent to 64 per cent

Perth: 65 per cent to 71 per cent

Extreme positions are the minority. Most workplaces already allow staff flexibility over their place of work. Only 6 per cent of people surveyed in Australia, Britain, the US, China and Singapore were required to work from home full-time and just 21 per cent had to work full-time in the office.

But the correlation between views on quitting and workplace style was unexpectedly strong, Mr Davis said.

The real sweet spot here is people that are in the office 60 per cent or 80 per cent of the time.

— Hassell researcher Daniel Davis

“It’s unusual to see such a strong relationship,” he said. “Often when you do this kind of survey, you could be up to one or two percentage [point]yes, but [to be up] something like twice, it’s a pretty strong relationship.”

The findings from Hassell’s 2022 Workplace Futures Survey into workplace attitudes and behaviors lay bare the choices for employers, as changes triggered by the pandemic have led to a questioning of previously accepted practices, particularly presentism.

The highest-profile extremes can be seen in Tesla boss Elon Musk’s insistence that staff spend at least 40 hours a week in the office and Atlassian’s approach, which allows employees to work anywhere (although co-CEO Scott Farquhar says they still need to come in four times a year to maintain social bonds).

The survey – conducted in March and April – found for the first time, after earlier versions in 2020 and 2021, that employee levels of engagement with their organizations had fallen noticeably after a two-year break from office routines.

But the highest levels of engagement, trust in their employer and sense of belonging in an organization came among workers who spent 60 to 80 per cent of their time in the office, while the levels for those full-time at home and full-time in the office were equally low.

Working at home has developed those expectations, and then they’re taking those expectations back when they come to the office.

— Daniel Davis

“The real sweet spot here is people that are in the office 60 per cent or 80 per cent of the time,” Mr Davis said.

Arguments for and against working from home will not be settled by claims about which is more productive. Asked why they chose to work in one of the two locations, respondents cited productivity in equal measure, canceling out the topic as a driver, the survey results show.

“Productivity is no difference, because it’s even,” Mr Davis said.

“Depending on who’s yelling loudest, we think of one of those as being a more productive workplace. But the truth is that you need both of them.”

The biggest reason for working from home, according to 40 per cent of respondents, was better work-life balance, followed simply by preference and then by fears of catching COVID-19.

The main reason people said they worked from the office was that they were required to, followed by access to materials or equipment found only in the office and then by it being easier to meet people.

But when asked what features they would want in their office, once it was safe to return, the wishlist was topped by free lunch and food, followed by fresh air from outside, access to gardens and green spaces, good coffee, distraction-free space , a private gym and space to take a nap or rest.

This showed that the office had to become more like the home working experience people had become used to, Mr Davis said.

“Working at home has developed those expectations, and then they’re taking those expectations back when they come to the office,” he said.

For all the bells and whistles a landlord or employer could put in, however, the biggest determinant of a worker’s willingness to be in the office was the length of commute they faced.

Commute length was cited as a much greater consideration, nine times that of having distraction-free space, for example, in choosing where people would work. This meant landlords couldn’t put their hope in one single measure such as fresh air access, Mr Davis said.

“It’s not like one single amenity, putting in a rooftop, is going to be enough to get people to come back to the office,” he said. “To overcome that influence of the commute, it really is a stacking up of a number of these different factors.”

The commute hurdle did not automatically make the case for smaller suburban office hubs, however.

“One of the reasons that people come back to the office was to meet other people,” Mr Davis said.

“If that’s the thing that’s attracting people back, then setting people up into a bunch of smaller suburban offices reduces the chance of that happening.”

A 25-year-old McLaren Vale winery run by two brothers is the latest business to be snapped up by Dan Murphy’s operator Endeavor Group as it expands its premium wine portfolio.

Endeavor confirmed on Wednesday it was adding Shingleback Wine to its Paragon Wine Estates business for an undisclosed sum. It’s the second McLaren Vale business in the portfolio, alongside Chapel Hill, which the company bought from Switzerland’s Schmidheiny family in 2019.

Shingleback was founded in 1997 by brothers Kym and John Davey, who have overseen a 120-hectare family estate planted predominantly with cabernet sauvignon and shiraz.

Over the past two decades, the company has won a number of wine prizes, including the Jimmy Watson Memorial Trophy in 2006, and released a portfolio of brands including Shingleback, Red Knot and The Gate.

Kym Davey said the duo had mixed emotions about the sale but would stay close to the company, including farming the vineyards for the brands under Endeavor ownership.

“My brother and I had achieved what we were trying to achieve,” he said. The pair had come to the view that the best chance for ongoing growth of the brand was with new owners.

China’s wine tariffs have not had a significant effect on the business, which primarily exports to markets such as New Zealand and the UK.

Director of Endeavour’s Pinnacle Drinks arm Paul Walton said while the group’s primary focus was now to invest in growing the handful of winemakers it had recently bought, the business was still eyeing new acquisition opportunities.

“We will continue to look at options in the future if and when they come up. We certainly hope that the opportunities continue to come up,” he said.

It is a stunning reversal for Mr Joyce, 56, who won the devotion of shareholders by resurrecting Qantas twice in less than a decade through a series of ruthless job and spending cuts. He is perhaps the nearest thing in Australia to a celebrity CEO.

None of that seems to matter to passengers who have endured hours-long check-in queues, especially during peak holiday periods, or slept rough at foreign airports after flight delays. Qantas canceled 8.1 per cent of domestic services in June, the latest available government data show. Some luggage has gone missing for weeks.

Joyce’s plan to stay on now at risk

Mr Joyce has been at the helm of Qantas for so long – almost 14 years – that he is seen as the face of its current ailments. For years the industry’s golden boy, Mr Joyce is now hostage to the travel chaos that is dogging most airline CEOs. His plan to stay on until at least the end of next year is at risk of turning into a hastier exit.

While airlines all over the world are struggling with the post-pandemic recovery, Qantas is in a somewhat unique position. The intensity of the revival in travel demand seems to have taken it by surprise. Australians barred by the government from traveling overseas for almost two years are now lining up to leave, and pandemic restrictions on traveling within the vast continent have also been scrapped.

Qantas’ dominance of the Australian market – it carries about 65 per cent of domestic passengers – and Australians’ affinity for their national carrier, which calls itself “The Spirit of Australia”, have made the cancellations and delays all the harder to stomach for disgruntled customers. They expect their loyalty to be rewarded with reliable service.

The antagonism aimed at Mr Joyce also has a uniquely Australian flavour. He is wealthy, openly gay and Irish, all attributes that make him a target to certain elements of the population. On Twitter these days, his surname of him is a byword for a journey that has gone awry.

‘Alan Joyce should move on’

“The reputational damage is enormous,” said Natalie McKenna, a lecturer in strategic communication at La Trobe University in Melbourne. “Many Australians are of the opinion that Alan Joyce should move on.”

Qantas survived the pandemic thanks in part to the elimination of more than 8,000 jobs and a multibillion-dollar cost-slashing program. Those cuts provide ammunition to critics who say Mr Joyce has gutted Qantas so comprehensively it cannot function now that demand has returned.

In a note to staff on Wednesday, Mr Joyce said Qantas would return to pre-COVID standards “over the next couple of months”. The airline has hired more than 1500 workers since April, most of them in operational roles. With sick leave 50 per cent higher than normal, Qantas was also cutting its domestic schedule, he said.

A spokesman for the airline said Mr Joyce would not comment on the criticism, and pointed to the backing of Qantas chairman Richard Goyder. “Alan is a superb CEO,” Mr Goyder said last month. “To come through the way we have financially is quite remarkable and a credit to his leadership from him.”

Whatever Mr Goyder’s assessment, the airline’s outsourcing of about 2000 ground handlers in 2020 has come back to bite Mr Joyce in particular. A court subsequently found the move was illegal, making it easy for opponents to blame the current operational dysfunction on the unlawful sackings.

Head office staff are having to lug suitcases

While Qantas is appealing the ruling, a ground-crew shortage persists. The airline is so desperate for baggage handlers, it is sending head office staff to lug suitcases full time at Sydney and Melbourne airports for the next three months, according to an internal appeal to managers.

Tony Sheldon, a former Transport Workers’ Union head who is now an Australian government senator, said Qantas’ performance had become a drag on the economy and Mr Joyce should step down immediately. “Things have to change and someone has to be held to account,” Mr Sheldon said in an interview. “Qantas’ reputation has been Joyced.”

In a rare snub from the financial community, Citigroup analyst Samuel Seow last week cut his rating on Qantas to sell, citing the cost of fixing the continuing labor and flight issues.

Mr Seow estimated Qantas is canceling 8 per cent of its flights, quadruple the rate of US airlines and higher than the 6 per cent at Australian peers. About 46 per cent of Qantas flights are also delayed, more than double the figure in the US and worse than the 38 per cent among Australian airlines, he said. Qantas would need to spend more on staffing and stop back schedules, Mr Seow said.

Still, for now, Mr Joyce has a key constituency on side: Qantas’ investors. Shares in the airline – known globally for its stellar safety record – have more than doubled from lows reached at the start of the pandemic, when air travel was in effect paralyzed. The stock should deliver a further 32 per cent return in the next 12 months, based on the forecasts of analysts tracked by Bloomberg.

Joyce not known for bowing to criticism

“Shareholders are probably happier than customers at the moment,” said Sean Fenton, founder and managing director at Sage Capital in Sydney, which oversees more than $US700 million ($989 million) of assets including Qantas stock. “If Alan suddenly left you’d get a pretty negative reaction in the share price. He’s added a lot of value over the years.”

As long as Mr Joyce is delivering profits, he is unlikely to come under pressure to quit, Mr Fenton said. Qantas has said it expects to return to an underlying profit in the year ending June 2023.

Nor is Mr Joyce known for bowing to criticism. In 2011, he grounded Qantas’ entire fleet worldwide to tackle a labor dispute at home, a decision that left 80,000 passengers stranded and one that still ranked union opponents. In 2017, Mr Joyce had a foot thrust in his face during a speech in Perth because of his support for Australia’s campaign to legalize same-sex marriage.

Mr Joyce’s record means there is a line of people who might have a motive to vandalize his house, but a police investigation has failed to find the culprit. “The case will remain closed unless further information is provided,” the police said in a statement.

At Mr Joyce’s waterside residence, from where the Sydney Harbor Bridge peeks over the horizon, there’s now little evidence of the night-time egg and toilet paper attack.

But even the Australian Shareholders’ Association, a retail investors group not known for pushy activism, wants Qantas directors to start talking about life after Mr Joyce at the airline’s annual meeting on November 4.

Rachel Waterhouse, the association’s CEO, said in an interview: “We would be asking those questions: What is your succession plan? That’s a challenge when the CEO has been there for a long time.”

Bloomberg

ABB country human resources manager Beverly Stacey said despite the surge in cases last month, staff were keen to get back to the office on their nominated days.

“Within those teams, about 90 per cent of them would come in, there were only a few who were a bit nervous being in the same space with all the germs around,” she said.

“Seriously, they’re a very social bunch, and they just wanted to be together.”

Employers in some cities were urged to reconsider work-from-home arrangements amid last month’s surge in COVID-19 cases.

ABB ordinarily requires employees to attend the office twice a week for in-person team meetings, but day-to-day decisions around office attendance are usually up to staff members.

“It’s a bit hectic keeping up with government guidelines,” said Ms Stacey, who works in Melbourne.

“I feel sorry for our safety people – it’s a full-time job in itself, but we’ve reached a point though where it’s in the hands of our employees. We do everything safely and if somebody doesn’t feel safe coming to work or if they’re unwell, they don’t.

“We’re all in this together.”

Lucy Carruthers from ARM Architecture said staff stayed away from the office as COVID-19 cases rose, but generally not for long periods.

“The gravitational pull back into the office has been quite strong,” she said.

“My observation is that the occasions in which people get most nervous about being in the office is when they have an event that depends on staying well, such as upcoming travel, or a major personal event such as getting married. In that instance, we find that people will stay away or are just more diligent about wearing masks.

“Our profession really benefits from working together in the same place – whether that’s being on-site, physical drawing or model building, reviewing samples and meeting together.”

hybrid expectations

Danny Lessem, chief executive of human resources software company ELMO, said employees increasingly wanted hybrid work conditions.

“It would be too reductionist to say ‘well it’s just an upsurge in COVID, people are staying away’, employers have to recognize that there’s a new expectation from office workers to have further flexibility,” he said.

“This move to hybrid is just not a COVID thing, it’s becoming a standard expectation.”

Mr Morrison said low office occupancy rates should be considered an important factor for authorities in their pandemic management strategies.

“The good news is the mandates of 2020 and 2021 are well behind us and I think governments are unlikely to go back to directing people to work from home,” he said.

“I think what’s important for governments is to recognize that when they’re considering how best to manage these pandemic surges that they recognize that work from home is not a zero cost exercise.

“There is a cost – it’s not the office landlords, and it’s not the office tenants, it’s the retailers, and cafe owners and restaurants and their employees who are reliant on the office workers for their customers.”

Mr Morrison was hopeful the office recovery could resume amid indications the winter omicron wave had peaked and with spring approaching.

“Better weather is not only good for the pandemic, but generally puts a spring in people’s step as well and is likely to mean that people will be looking to come back to the office in greater numbers,” he said.

“I would hope from August and September onwards, we get back on the momentum train, and we start seeing occupancy build again across our key capitals.”

Despite the effects of the pandemic and a drop in occupancy, the Property Council’s latest office market report reveals businesses have leased more space across the country’s CBDs over the past six months, with demand increasing by 0.5 per cent.

Communications Collective founder Genevieve Brannigan said the agency was seeing a strong desire from predominantly Gen Y and Gen Z teams to work from the office.

“They have a thirst for connection and seem unknown by the current wave of COVID,” she said.