AUSTRALIA: Home is where the work is

BUSINESS DAY: SYDNEY (Sydney Morning Herald), June 14, 2008: Carolyn Cummins, Commercial Property Editor THERE is a seismic shift in work patterns happening across the globe, driven by high petrol prices, social and demographic changes and spending patterns. All are having profound impacts on office space, retail consumption and demand for a different set of investment vehicles. Housing affordability, an ageing population and the mining boom in Western Australia and Queensland are the main contributors to these imbalances nationally. It is only a matter of time before these changes sweep through the commercial property market. Office, retail, industrial, pubs and the accommodation sectors will all be affected. With fewer people at work, judging by the fall in employment figures for May, and more working from home to cut down on petrol costs, office space demand will start to contract, though the saving grace for all capital cities continues to be a lack of supply. Unemployment rose in all states except Victoria (down from 4.6 per cent to 4.3 per cent) and Queensland (stable at 3.8 per cent). Savanth Sebastian, an equities economist at CommSec, says the figures show employers are no longer hiring as strongly as they used to, and are likely to be more circumspect in coming months. "The uncertainty over future interest rates is certainly weighing on any corporate spending decisions and cost-cutting is becoming more in vogue in attempts to maintain profitability," Mr Sebastian said. "When people see jobs being lost, they are more likely to be saving for a rainy day than buying big-screen televisions. Clearly the latest job figures will make consumers even more gloomy and less willing to spend, making for tougher times for retailers." In the United States, the effect of high petrol prices is already spreading through the office market, as more staff strike deals to work from home. The Georgia House Speaker, Glenn Richardson, is letting staff members "telecommute" - work from home - one day a week during the northern summer. This could save more than $US25 ($26) a month on an average 27 kilometre journey to work. Telecommuting has gained traction year by year with advances in video conferencing, instant messaging and other communications technologies. Employers typically adopt it as a way to save money, boost morale and retain workers. Last week, the US House of Representatives approved legislation requiring the head of each federal agency to set policies allowing qualified workers to work from home or another convenient location. CommSec's chief economist, Craig James, says the dramatic changes in Australia's economy and social make-up in just the past few years will continue, including record population growth, tightening job markets, and soaring activity in mining and construction. This will affect the type of office space required by companies. Large corporations may choose to have staff in fringe areas or lease fewer floors as more employees work from home. Mr James said that Australia's population is ageing, so the proportion of young people is falling. As a result the job market will remain tight. "We will have to get used to unemployment rates of 3-4 per cent. Employers will have to devote more time, effort and money to attract and retain staff. And the ageing population has already led to a marked lift in consumer spending on health, a trend that will continue," Mr James said. "Sellers of discretionary goods and services such as electrical good retailers and department stores will continue to benefit from a richer and ageing population. However it is very clear that consumers will respond to changes in price." "More computers and digital goods are being purchased because prices are falling, but dearer petrol and doctor visits are causing people to look to alternatives." Another impact on commercial property is the shift in geographical importance. If the China-driven resources boom continues at its current rate, Queensland or Western Australia could pass NSW in a decade. CommSec's chief economist, Craig James, says the dramatic changes in Australia's economy and social make-up in just the past few years will continue, including record population growth, tightening job markets, and soaring activity in mining and construction. This will affect the type of office space required by companies. Large corporations may choose to have staff in fringe areas or lease fewer floors as more employees work from home. Mr James said that Australia's population is ageing, so the proportion of young people is falling. As a result the job market will remain tight. "We will have to get used to unemployment rates of 3-4 per cent. Employers will have to devote more time, effort and money to attract and retain staff. And the ageing population has already led to a marked lift in consumer spending on health, a trend that will continue," Mr James said. "Sellers of discretionary goods and services such as electrical good retailers and department stores will continue to benefit from a richer and ageing population. However it is very clear that consumers will respond to changes in price." "More computers and digital goods are being purchased because prices are falling, but dearer petrol and doctor visits are causing people to look to alternatives." Another impact on commercial property is the shift in geographical importance. If the China-driven resources boom continues at its current rate, Queensland or Western Australia could pass NSW in a decade. Copyright © 2008. Fairfax Digital