Long-term pandemic impact on business and residential location

iMOVE’s project The future of Australian cities and regions in a post-pandemic world, co-funded by the Department of Infrastructure, Transport, Regional Development, Communications and the Arts and conducted by the University of South Australia (UniSA), has been completed, and the final report is available for download below.

This study was driven by four questions:

1. What are the primary determinants of business and residential location patterns across Australia?
2. What are the drivers of or barriers to attracting and retaining businesses and households to regional cities, and how do they differ based on characteristics of businesses, households and regions?
3. What are the possible long-term impacts of COVID-19 on business and residential location decisions across metropolitan and regional cities?
4. How are these impacts likely to influence resulting spatial patterns of employment activity and residential settlement within and across these cities?

Methodology

UniSA obtained answers for each question through a comprehensive review of the academic and grey literature, qualitative engagement with businesses, commercial landlords, property developers and residents across Australia, and quantitative analysis of data collected from nationwide surveys of commercial landlords, property managers, business owners, senior business managers, and residents.

Addressing the research questions, the evidence obtained was split into two parallel but interrelated streams, focused specifically on business location decisions and residential settlement patterns.

Report conclusions

Based on the literature review, and collected data from business and residential respondents are the following predictions of spatial impacts, and attraction and retention in regional cities.

Predicted long-term spatial impacts of the COVID pandemic

• Business

Within capital cities: Capital city CBDs are still predicted to be the most preferred long-term locations for businesses. However, roughly 20-25 per cent of the work force is expected to be working remotely on any given workday, and this could lead to a commensurate increase in employment activity in suburban residential neighbourhoods.

Between capital cities: The pandemic has eroded the relative attractiveness of Sydney and Melbourne, Brisbane has emerged as the most attractive destination for business location, and Perth and Adelaide have held steady, when compared to pre-pandemic trends.

Regional cities: Capital and regional city markets are roughly in equilibrium, and regional cities are not predicted to attract or lose businesses in any significant numbers. However, large coastal regional cities in close proximity to a capital city are predicted to attract new residents, and increased settlement in these centres is predicted to generate new business and employment activity.

Underlying factors: The most significant long-term impacts of the pandemic are likely to be through increased adoption of remote working and changes in residential location patterns. While disruptions in supply chains, changes in activity and consumption patterns, and border closures were a source of significant short-term disruption to business activity, their long-term impacts on business location decisions are likely to be more limited.

• Residential

Within capital cities: Inner city neighbourhoods have declined in popularity, middle city neighbourhoods roughly 10 km away from the CBD have emerged as the most popular locations, and the relative popularity of outer city neighbourhoods 20-35 kilometres away from the CBD has increased as well, compared to pre-pandemic trends.

Between capital cities: Population growth is likely to accelerate in Adelaide and Perth, hold steady in Brisbane, and potentially slow down in Melbourne and Sydney, compared to pre-pandemic levels.

Regional cities: Large coastal regional cities in close proximity to a major capital city are likely to see significant growth but impacts on other regional centres are likely to be more limited.

Underlying factors: The report finds that the most significant long-term impacts of the pandemic on residential location are likely to be through increased adoption of remote working and the impacts of lockdowns on preferences for residential living.

While border closures were a source of significant short-term disruption on residential mobility, and uptake of digital services surged during the pandemic, their long-term impacts on residential location decisions are likely to be more limited.

The report estimates that post-pandemic 20-25% of the workforce is working remotely on any given day, significantly higher than comparable pre-pandemic estimates of 2-8% reported in the literature.

Increased uptake of hybrid work arrangements is likely to lead to greater suburbanisation within capital cities, while increased uptake of fully remote work arrangements could lead to both greater suburbanisation within capital cities and greater out-migration to regional cities.

Attraction and retention of businesses and households to regional cities

• Business

UniSA found that regional cities have strong retention for businesses. Businesses located in regional cities reported high levels of confidence that they will be in their current location over coming years, and low intention to relocate in the next 2-3 years.

However, regional cities have weak attraction for businesses. For example, 58 per cent of the 376 businesses surveyed by this study that are currently located in a capital city indicated being at least moderately open to relocating to a regional city within the same state under the right circumstances, but cited limited access to consumers and labour as major deterrents.

Population and proximity to the coast increase attractiveness for businesses, such that large coastal regional cities are the most attractive regional destinations. UniSA did not find proximity to a large metropolitan centre to have any direct effect on business location decisions.

However, regional cities in proximity to a large metropolitan centre are attractive destinations for residential settlement, which can indirectly help attract businesses to these cities.

• Residential

In general, capital city residents are much more open to moving to a regional city, than the other way around. Limited economic opportunities appear to be the most important deterrent to increased regional settlement.

A majority of Australians would prefer to live in a smaller regional city if they could find comparable employment. Access to urban amenities, in particular healthcare and education, appear to be additional limiting factors.

Population, proximity to the coast and proximity to a major capital city increase attractiveness, such that large coastal regional cities near a capital city are the most attractive regional destinations.

Project impact

“This study provides important insights for policymakers, businesses, and communities alike, including about possible future patterns of where employment activity and residential settlement will be across key Australian cities – given the possible long-term impacts of COVID-19,” said Sarah Nattey, Department of Infrastructure, Transport, Regional Development, Communications and the Arts  Assistant Secretary for Local Government, Regional Intelligence and Data.

“It also identifies key drivers and barriers regional cities face when it comes to attracting and retaining both people and businesses, which are critical to understand as these cities plan for the future.”

Download the final report

Download your copy of the final report, The future of Australian cities and regions in a post-pandemic world, by clicking the button below.

DOWNLOAD FINAL REPORT