Business location decisions before and after COVID 19

The impact of COVID 19 in transport and urban planning will likely affect short- and long-term decisions worldwide. Most businesses have been required to shift towards working from home (WFH) which will likely have an important effect after this crisis is over. Early 2019 we conducted a survey where we asked businesses around the Greater Sydney Metropolitan Area for their location decisions (Balbontin & Hensher, 2019ab). When trying to understand possible reasons to move in the future (see Figure 1), our study found that 48% of businesses said they would probably move because their current space was too small. The figure below shows other interesting findings in terms of reasons for possible relocation, such as 2% of respondents said they might need to downsize.

When looking at these responses through the new COVID-19 lens, we might wonder how they will be affected, particularly by the new WFH business policies. For roles that have proven to be equally (or sometimes more) productive when working from home, it is likely that businesses might incorporate WFH practices on a regular basis – some might even provide “hot desks” to their employees (although there are concerns about biosecurity when desks are shared), expecting them to work from home for an important part of their week. If this is the case, the reasons to relocate might change entirely where some businesses will seek to reduce their office space; or it might reduce the importance of office space where businesses will be more likely to adapt to their current space rather than finding a new space. Our study also evaluated the importance of several physical infrastructure factors when businesses are deciding where to locate, the most relevant for the current situation are presented in Figure 2 on a scale from not at all important (1) to very important (2).

Interestingly, businesses seem to be very concerned about cleaning standards in the building, even before this health crisis, which was evaluated as one of the most important factors. We might expect this factor to continue being as – or even more – important after we overcome this pandemic. In terms of accessibility, more people ranked availability of public transport (i.e., bus and rail) as very important compared to parking facilities. We are not sure how will users’ attitudes change towards public transport after this crisis, and what sort of measures will the authorities put in place to overcome them, but it can certainly be that the importance of parking facilities will increase as people will feel a lower risk by using their private cars in terms of social distancing than when using public transport.

So, how will business location decisions change after COVID-19?

This think piece offers more questions than answers, as it is very hard to predict with certainty how businesses will behave after this pandemic. However, our business location study before COVID-19 provides some insights into where these changes might occur – particularly in terms of office space and on the physical infrastructure factors that are more important when deciding to relocate. It will be very interesting to see, after a few years, how business locations changed around the world, and if indeed there was a change in the importance of these different factors.

This work was supported by Australian Research Council and the Volvo Research and Educational Foundation through the Bus Rapid Transit Centre.

References

Balbontin, C., & Hensher, D.A. (2019a). Are respondents aware of the process strategies used in decision-making? Modelling business location decisions using multiple stated process strategies. Transportation Research Part E: Logistics and Transportation Review (under review).

Balbontin, C., & Hensher, D. A. (2019b). Firm-specific and location-specific drivers of business location and relocation decisions. Transport Reviews, 39(5), 569–588. https://doi.org/10.1080/01441647.2018.1559254