UBS predicts that in the event of a pandemic, a “structural shift” to working from home will reduce the number of people working in Australia’s CBD workplaces by up to 15%, reducing revenue for companies like Transurban that rely on commuters.
The global investment bank has reassessed the financial prospects for Transurban and other real estate investment trusts because of the inclination of many white-collar workers to work from home a few days a week.
According to a new UBS analysis, “we believe working from home more is a structural shift because the global COVID experience has proven that organizations still function without complete productivity loss under a hybrid working model,”
There will be 15% fewer people in CBD offices each day compared to pre-pandemic days, according to the bank, which believes pandemic lockdowns proved working from home was a “viable alternative” for office staff.
White-collar professionals (including full-time and part-time) are predicted to work 3.6 days less each week in the future than they did in the past, according to an analysis.
According to UBS’s projections, the amount of people working just in the office has dropped from 47 percent to 18 percent, while the percentage of hybrid workers has jumped from 33 percent to 61 percent.
The percentage of persons who only work from home has risen from 20% to 21%. Reduced traffic on Transurban’s toll roads will reduce its proportional revenue (which reflects toll road income) by around $110 million from pre-pandemic levels, according to UBS.
It is expected that Transurban’s total proportional revenue will rise by more than $1 billion to $3.8 billion by fiscal 2024 compared to fiscal 2019, the bank says, due to the company’s ability to raise toll fares in line with inflation, increased truck traffic and new toll roads such as Sydney’s new M5 tunnels (which began taking traffic in mid-2020).
A Transurban CEO has also stated that some people who only work two or three days a week choose to drive rather than take the bus or subway. The toll road company has yet to reveal traffic figures for the most current financial quarter that concluded on June 30th, and it will report its annual results on August 18.
As a result, like-for-like traffic flows (excluding new toll roads installed during the pandemic) were still below 2019 levels in all cities except Brisbane as of March 31.
The east coast floods and high fuel prices impacted traffic in Sydney and Brisbane. People have also been delayed returning to work because of continuous COVID-19 breakouts and public transportation strikes.
While many people chose to drive to work during the pandemic rather than take the train or the bus, UBS argues that this trend is temporary and that people are likely to return to public transportation to save money due to the rising costs of groceries and energy. At the same time, fuel costs also remain high.
As of February 2020, UBS had predicted that Transurban’s fiscal 2024 traffic volumes would be around 5% lower than they are at present. In addition, the bank has reduced its fiscal 2023 office revenue expectations for property groups Mirvac and Dexus, predicting an office market with contracted vacancies of 8-13% compared to pre-COVID-19 levels.
According to the latest findings from the Property Council of Australia’s Office Occupancy Survey, the uptake of CBD desks across the country remained flat in June and considerably below pre-pandemic levels.
Inflation-protected toll roads remain in high demand as investors fear a worldwide recession. Property companies that are diversified with assets outside CBDs are projected to be less affected than those with many offices in city centers.
Additionally, Transurban has been looking into potential new road-related companies, such as road user fees. By trading at $14.67 on Monday, Transurban’s shares have gained 9 percent since January and have returned to the highs of early March 2020 before the epidemic truly hit.
Australian toll road firm Atlas Arteria has been purchased by IFM Investors, which is exploring a full takeover bid but is holding off until the market is more stable before making a move.