Changing work and changing demography = changing cities

How much longer will cities be powered by office workers in a central location?

The history of cities is a long one, but the urban form of a mono-centric city that houses the best knowledge workers and professional minds, serviced by unrivalled inner urban amenity and metro wide transport networks, is relatively young in historic terms. It may also be short lived.

The pre-industrial city existed for several hundred years until around the early 1700s, and was largely a trade and agriculture hub, powered by people and animals. The industrial city of the late 1700s to mid 1900s was powered by mechanisation, factories and manufacturing, with workers living close to the places of industry. Think the London of Charles Dickens. This lasted maybe 250 years. The post-industrial city, powered by growth in service industries, finance, information and research, lasted roughly from the 1960s until recently – a period of maybe just 50 or 60 years. This is what drove demand for office buildings the world over. This is our world now, but it is changing fast.

Sydney of the early 1900s may seem an eternity away but this was only just over 100 years ago. 

Two recent media stories drew attention to forces which are inevitably, irresistibly reshaping cities again. Post-Covid changes to workforce dynamics, the rapid deployment of Ai, and the unrelenting march of demography (the ageing population) place us at the start of a new era of change.

The first story was by Hari Hara Priya Kannan, Data Scientist at The Demographics Group, writing in The Australian. “The story shaping commercial property markets is not the headline increase. It is the age composition beneath it,” she wrote.

“An expanding 70-plus cohort supports sustained demand for healthcare infrastructure – general practice clinics, specialist consulting suites, diagnostic facilities, rehabilitation centres and day surgeries… Suburban medical precincts, particularly in established middle-ring suburbs, are likely to benefit…

Growth in the 55-69 and 40-54 cohorts reinforces demand for professional services, financial planning, insurance, legal practices and wellness providers. As workforce participation among mature workers remains elevated, demand may shift toward flexible and decentralised office formats. At the same time, slower relative growth in the 25-39 bracket moderates expectations of rapid youth-driven expansion in inner-city hospitality and high-density retail precincts.

Office markets face a nuanced adjustment. As the share of older workers rises, demand may tilt toward accessible, flexible and decentralised formats. Commuting intensity may shift as retirement ages extend but full-time CBD attendance moderates.

Mixed-use precincts integrating residential, healthcare and essential retail may align more closely with demographic reality than single-use CBD developments.”

The second story dealt not with demography but technology, and specifically the impact of Ai. “Morgan Stanley axes thousands of jobs as AI up-ends white-collar work” was the headline, also in The Australian.

“The “great cull” is eliminating thousands of white-collar roles at major Australian companies… While jobs are also being axed, businesses are demanding a radically new AI-fluent employee, warning those who fail to adapt will become obsolete…

The mass sackings have sparked a new industrial revolution, with some executives warning of more to come as bots and algorithms consume human roles.”

Ai’s capacity to perform administrative tasks at ease and with speed, will surely take a toll on many thousands of jobs traditionally harboured in CBDs, but elsewhere also. Some estimates suggest over 40% of Australia’s administrative and support service roles could be replaced by Ai by 2030. And the Ai revolution is only beginning, with moves into medical, education, finance, even creative industries being impacted at light speed.

Office workers of the late 1960s. A little over 50 years ago but now nearly all these occupations are gone. 

Yes, Ai will create new, previously unimagined opportunities for some. For others, who relied on administrative skills, it will be a rapid and uncomfortable readjustment. The concentration of wealth and privilege in the hands of an increasingly smaller share of the population has been underway for some time. Ai may accelerate that inequity.

Today's "office worker" doesn't even need the office. They split their time between home and the office. 

The history of the evolution of cities reflects the history of work and occupations. With Ai impacting occupations in such a profound way, it is inevitable that city-wide changes will follow. Combined with our changing demography (“demography is destiny” the saying goes) a fundamental reshaping of our cities around what type of work is done where and by whom is surely underway. Already we can witness the replacement of traditional retail tenancies in suburban shopping districts with the rapid growth of health and allied health services. GPs, dental, physio, pharmacy, blood pathology, medical imaging, personal care – these are the new retail specialties, with growth driven by demography.

And in CBDs, the impact of ‘work from home’ along with rapid technological innovation appears to be equating to fewer overall CBD workers. The best and brightest will continue to drive demand for premium office space in the most amenable parts of the CBD, but the future of older style buildings in less prized locations is uncertain. Will they remain as offices, or be converted to schools, healthcare or possibly residential?

Options for unwanted CBD office space in secondary buildings could include conversion to education, health or possibly residential uses. But will they be reborn as refurbished offices? Who would fill them? What types of occupations that cannot be done by Ai?

What does seem certain is that CBDs are going to be less about the ‘business’ and increasingly more about the amenity. Inner cities are continuing to add enhancements from both public and private capital while many suburban and regional centres watch on with envy.

New apartments targeting the wealthier members of the community are viable only in inner city markets because wealthy purchasers can afford them, and because this is where many of them want to live due to the concentration of amenity in the inner city and proximity to their high end workplaces.

Meanwhile, modest new dwellings in many suburban areas struggle to be viable because development costs exceed the capacity of the local market to pay. 

In a similar vein, public capital devoted to new or improved cultural, recreational, transport, education, dining, entertainment and open space assets seems invariably to gravitate to inner city locations. This is despite the declining numerical weight of CBD/inner city jobs relative to a wider region, and despite the shifting demography which is also drifting away from centres.

The Hunger Games contrasted the excessive, indulgent wealth of monocentric The Capitol with the relative poverty of The Districts. Was this an allegory for the recent evolution of cities where wealth and privelege concentrates in urban cores which were only 100 years ago centres of industry and working class housing? 

Have we now reached a point in the history of the evolution of cities where the forces of change are now far ahead of our thinking? Are we still mentally of the monocentric mindset of the post-industrial city – despite all evidence to the contrary – and doubling down on infrastructure and private capital investment on that basis? Are we reinforcing that obsolete mindset with planning and other regulatory instruments which perpetuate that model and that period in time?

Change and evolution is impossible to resist. The new era of cities – the fourth industrial revolution – is upon us. We had better get used to it: it is time to think and act differently. There is no turning back.

Suburban centres will continue to evolve, and be home to a growing services, health and education based economy. The monocentric city will become polycentric.