Natasha Boddy Work & Careers reporter
May 11, 2020 – 12.00am
Professionals and Baby Boomers may no longer feel the need to downsize just to be closer to the city as COVID-19 forces a rethink of the “live, work, play” property model.
Global asset manager PGIM predicts the coronavirus pandemic will lead to an “extremely deep recession” that will have major consequences for companies.
“The structural changes unleashed by the ‘great lockdown’ could transform the business landscape, creating new winners and losers around the world,” said PGIM chief operating officer Taimur Hyat.
PGIM will on Tueday release a report called After the Great Lockdown outlining how companies will need to adapt to thrive in a post-pandemic world.
One of the biggest trends forecast by the asset manager is a shift in real estate usage and footprints. But despite the pandemic accelerating the shift to remote work, PGIM believes offices will continue to survive.
“Because innovation happens in offices … ultimately offices are part of the social fabric that humans have where they connect with others, which is why you are getting a sense of people feeling isolated,” Mr Hyat said.
“We do think that offices will adapt but not disappear. New office space will become more flexible … and that means that while you may still have open designs, you will have the ability to put up plexiglass, to create more barriers, to reconfigure offices, to be prepared for a next crisis, particularly if there is another pandemic.”
The coronavirus pandemic could also have consequences for how we live in the future and the desire to live in urban centres, according to Mr Hyat.
“‘Live, work, play’ was a big trend that we saw around the world where not only the largest, most populous cities in the world … where Baby Boomers have become empty-nesters and Millennials increasingly congregated, they didn’t want a long commute and wanted to move effortlessly from the movie theatre to the restaurant,” he said.
“There’s a big debate on the power of this trend reversing this desire. Previous epidemics like SARS or previous shocks like 9-11 … predictions about people moving out didn’t quite play out.”
But the scale of the coronavirus lockdown could prove different.
“As remote working becomes more acceptable and has proven that it can happen without significant productivity declines, we do think open spaces … will grow,” Mr Hyat said.
“We do think that some Baby Boomers who might’ve been thinking of moving to the city might rethink that and be quite happy with their backyard and suburban lifestyle.”
The coronavirus pandemic could also have consequences for how we live in the future, says PGIM’s Taimur Hyat.
PGIM also predicts there will be a continued rise in what it calls “weightless” firms which are built on capital-light, technology-heavy models – and not just those in the tech sector.
“Aussie companies that are on the vanguard of that trend will be the winners and those who can’t make the transition will decline in value more rapidly,” Mr Hyat said.
Losers from the coronavirus pandemic include retail, particularly large format department stores and co-working spaces, which will continue to face further downward headwinds.
“We think retail will increasingly be an experiential good — it’ll be like going to the amusement park,” Mr Hyat said.
PGIM also predicts companies will continue to embrace globalisation and set up multiple locations for their supply chain or return it back home.
“We do think Australian firms and companies will very much be rethinking their supply chains and their dependencies on China and thinking of ways to create more resilient supply chains,” Mr Hyat said.
“Concentration in a single location creates a lot of fragility in your supply chain,” Mr Hyat said.
Mr Hyat said the Australian government’s response to COVID-19 could work in its favour when it comes to regulation.
“There might be less scepticism around government given the competence that’s been displayed in handling the lockdown and transparency in information so far,” he said.
PGIM predicts there will be a 4.5 per cent drop in GDP this year, which would be the largest decline since World War II.
“Almost certainly 2021 will be a year where things remain quite depressed as the world recovers from the demand and supply shock,” Mr Hyat said.
“It will be a pretty choppy and zig-zaggy recovery in our view. And it will take a pretty long time to recover from anything as deep as this.”