Although a few trends are becoming obvious, the post-pandemic world is still pretty uncertain. Nevertheless, we all have a new appreciation of how much better it is to work from home.
Before the pandemic, a Leadership IQ study found that remote employees are 87% more likely to love their jobs than people that work in offices. Optus has already made it clear that their call centre staff can work from home permanently.
While not suited to everyone, working from home has a few strong productivity advantages. Personally, it means I get back 2 hours per day of commuting time. If there is an issue with the school or with my kids, I can deal with it in 15 minutes instead of losing half a day over it. Equally, I can deal with errands in a timely manner rather than take time off. In fact, my productivity is higher than it has been for a long time.
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Work from home needs less office space
The largest impact here is on office space. With more people working at home, office space can reduce. Australian real estate investment trusts (A-REITs) with a focus on commercial buildings will be most exposed.
One of the A-REITs I will be watching over the next few months is DEXUS Property Group (ASX: DXS). Dexus is the largest of the "pure play" office funds. It has around $15 billion invested in office real estate in central Sydney, Melbourne, Brisbane and Perth. The Dexus share price sold off heavily during the crash and is down 35% from its 2020 peak.
Another A-REIT I will be watching carefully is the GPT Group (ASX: GPT). GPT is a diversified A-REIT with 41% of its funds invested in premium office space. The GPT share price has been sold down by 39% from its 2020 high point.
Reduced commuting
Transurban Group (ASX: TCL) has seen its average daily traffic (ADT) percentage drop by 44% across all Transurban assets in the final week of April compared to the same period last year. In North America, this was a reduction of 61% with the largest Australian reduction in Melbourne of 53%. Given the current status in Australia, it is likely this will start to pick up within (say) 2 months. However, the damage to ADT % in North America is likely to extend for several months to come.
If stay at home work was to become a permanent fixture then we could see a permanent drop in ADT %, placing the company's business model under threat. This has implications far beyond Transurban. In a capital intensive business, it impacts the level of available funds for sustaining capital and growth capital.
