Thursday, July 5, 2018

Why we need more ways to measure CBD health

Above: Brisbane in 1982 - then and now. 

The Property Council’s “Office Market Report” (OMR) has long served as a proxy for the market health of our CBDs. But the nature of CBDs has evolved and changed dramatically over time, and office markets alone are no longer the indicator of city centre economic vitality they once were. Here’s why it’s time to broaden the thinking. 

The collection of data for the Office Market Report dates back to the late 1970s or early 1980s, for what was then BOMA (the Building Owners and Managers Association) but which from 1996 became the Property Council of Australia. The OMR was central to BOMA’s industry interests then – given the focus early on was almost exclusively on the investment and management of CBD office buildings. The OMR provided a catalogue of CBD Office buildings, their lettable areas, quality grades, vacancies and future supply. This was essential for assessing the demand for space and tracking market changes. Excel macros are today vastly superior to the early pen and ink paper calculations, but the OMR methodology and metrics remain largely the same since then. 

In those days, CBDs were primarily for business (the ‘B’ in CBD) and that business was conducted almost exclusively in various office towers. People flooded into work in the mornings and vacated in the afternoons. After hours and on weekends, CBDs were ghost towns. The idea of going to the city for a weeknight restaurant meal was almost laughable. The idea of shopping or entertainment in the city was equally limited in appeal.

Consider Brisbane in 1980. There was no Queen Street Mall (its first stage opened in 1982). The Myer Centre didn’t open until 1988. There was an old McDonnel & East Department Store in George Street but that was about it for retailing. There were almost no restaurants, with a couple of notable exceptions (anyone remember Milanos?) mainly focused on the business lunch trade. They mostly did not open for dinner. The Sofitel Hotel (which opened as a Sheraton) above Central Station didn’t open until the late 1980s, as did the Hilton (opening 1987). Prior to this, we had Lennons (now Next Hotel) and the Crest (now Mercure) and that was about it. The city in this era was all about office buildings and the office workers in them. Studying demand for office space was a suitable proxy for the health of the CBD economy because there wasn’t much else to it.

Above: A lot has changed since the 1980s. Maybe our measures of CBD health need to change too? Pictured is a photo titled "At the pub, Brisbane 1982" by photographer Rennie Ellis. 

How things have changed. In addition to a raft of new office buildings which have doubled the CBD office space stock since then, there have been even more significant changes to the composition of what makes the CBD tick. The Queen Street Mall alone now counts 7 shopping centres and over 40,000 square metres of retail space. In addition, new retail precincts are springing up along spines of the CBD. There are multiple new and recent hotels, adding nearly 2,500 rooms in the 2014-16 period along, with nearly 3,000 more to 2020 and roughly the same again predicted beyond 2020. Brisbane’s CBD and inner city accommodation industry sells more room nights than the Gold Coast. There’s also been an explosion of restaurants, cafes, bistros and eateries, there have been new cinemas and entertainment venues and a raft of luxury apartments added to the CBD as well. 

By now, the CBD was only partly for office workers; it was also a hive of activity for travellers, shopping, dining and recreational pursuits. On weekends when most of the office buildings are empty, the city can still be alive with activity. 

Now think about the new projects currently proposed for the CBD – many of which will further add to the variety of economic activity taking place in the city centre. Office projects, while still important, do not dominate.  

The $3.6 billion Queens Wharf project alone will add 1,000 hotel rooms across five hotels, 2,000 new apartments, a Casino, and multiple retail and dining options. Brisbane Quarter has recently added the W Hotel and will soon add a new residential tower, an office tower and extensive retail space. AEG Ogden’s Brisbane Live is a $2 billion entertainment focused proposal for the Roma Street Railyards which includes redevelopment of the Brisbane Transit Centre. The Howard Smith Wharves redevelopment will add a new 165 room Art Series Hotel, a range of dining, retail and tourism related attractions, meeting rooms and extensive public domain space. And Dexus’ proposal for a redevelopment of the Waterfront Precinct proposes two new towers with a combined 175,000 square metres – where possible uses are hotel and residential along with office space – plus up to 10,000 square metres of new dining and retail space. 

The point is that increasingly our CBDs are diversifying. Relying on an office market index now provides insight into only one aspect of the market. What is potentially needed is a new dashboard of indices to help shed light on the overall vitality and economic performance of a city centre. 

That dashboard would continue to include office market metrics, but in addition it would be good to measure other increasingly important parts of the city centre economy. Logically, such a dashboard would also include measures of hotel performance (occupancies, room rates and future supply), retail performance (vacancies, rents and turnovers), commuter traffic numbers (which should be readily available in real time via key transport corridors and public transport stations), performance of restaurant and catering establishments, and performance of the residential apartment market (vacancies, rentals and sales prices along with new supply). 

Not only do these uses contribute substantially to CBD employment and economic activity, they are also increasingly the focus of considerable public and private investment. There are compelling public policy and private industry reasons why a broader assessment of CBD performance is now timely. Those founding members of BOMA who were once focused on investment in CBD office buildings have evolved over time into institutions and private developers/investors with interests across the spectrum of built form uses now increasingly evident in our CBDs. 

The OMR served us well for 40 years and while an ongoing focus on office markets will remain important, the extent of changes to our CBDs means it alone is no longer sufficient as a measure of city centre economic performance or future prospects. 


  1. Ross

    Good yarn

    The same can be said for also all Property Industry 'public' intel.

    What gets measured/shared is the easy stuff to count, but it isn't the stuff that should be monitored.

    Also when you measure the right things, and correctly, the picture/outlook is more often than not much bleaker than the promoted real estate 'spruik/strut'

    Sadly very few - in my experience - will pay the appropriate fees to get the real measures.

    The general MO is don't question the industry 'fake news', fingers crossed and hope for the best...

    ...and I think Australia's luck is running close to empty.

    PS And for mine - the list of new shinny things proposed for the Brisbane CBD will just hollow out other buildings/uses in the CBD/inner city - Brisbane hasn't got the economic grunt to support this stuff - all just 'bread and circuses' - fix the pot holes first, pay key workers better, we really don't need a new casino etc...well not until we fix the vital stuff

    1. Not wrong, Michael. But hasn't this always been the case of'self serving' property research. I did my masters research 20 years ago on one of the major reasons for the 'hollowing out' of the CBD, workplace functional change. The outcomes are visible today.

    2. Antony - I'd be interested in seeing that research if you still have it?

    3. I might have a hardcopy, Ross. I'll see what I can find.

  2. As usual, Ross, to the bone ! ;-)

  3. Excellent piece Ross. How could we make this type of measure happen? Is it something that the should stand alone from the PCA, say an annual health check presented at the BDA and possibly funded from BCC, the government architects office, Brisbane Marketing & interested corporate players. I would love to help if you thought it worth pursuing? Matt Miller

    1. Hi Matt - many of the indices are already available... it would take some collation but not as big a task as it might seem (I suspect). Will drop you a note...

  4. Ross Elliott's line of argument starts with what is called a "genetic fallacy". Specifically, Mr Elliott suggests that a little known report called the Office Market Report "has long served as a proxy for the market health of our CBDs". That the paper provides no material evidence to support this claim and that it attributes to the report the mysterious ability to diagnose the "market health" of a geographical area is a little puzzling . According to Almosawwi, 2014 [in An Illustrated Book of Bad Arguments] the use of genetic fallacy is often used by someone when that person is emotionally attached to an idea's origins. In any event I am only speculating why Mr Elliott would now be suggesting such a spaghetti bowl of unbalanced and narrow measures as is proposed for a new and improved "Market health" indicator for the CBD [e.g. hotel performance, retail performance,commuter traffic numbers, performance of restaurant and catering establishments, and performance of the residential apartment market]. Mr Elliott proposes that the new report could present "a new dashboard of indices to help shed light on the overall vitality and economic performance of a city centre". A dashboard works most effectively when you measure all the primary inputs and outputs and the operator is trained to know the optimal conditions for operating the system under review. Maybe some effort would be well placed to build a more balanced perspective of a city health. Otherwise, observers may think that the proposed dashboard was primarily designed to serve a narrow vested interest. Which is my recollection of one of the reasons the OMR was a little used report by those seriously interested in the market health of our city.