Sunday, April 18, 2021

Economy thrives while CBDs dive: the argument that CBDs are the engine rooms of the Australian economy is being tested right now


Many Australian CBDs continue to languish, with major CBDs only at from one third to two thirds of their pre-pandemic occupancy levels, despite the end of lockdowns and the lifting of many restrictions. This is having collateral impacts across the spectrum of CBD businesses that rely on office workers being at their CBD offices. Retail centres, restaurants, coffee shops, newsagents – every occupation and every business that depends on CBD workers and their wallets is feeling the pinch as CBD workers continue to preference their suburban homes as workplaces.

Public transport networks are still running but only at fractions of their pre-Covid loads. A public transport network designed to ferry suburban workers to the scheduled start and stop times of centralised CBD offices is looking increasingly challenged by new work-from-home practices with flexible hours and no commute costs (or time) to central work locations. The private car is reportedly now so much more preferred as a mode of transport that used car prices have risen markedly.

The damage to CBD reliant businesses is indisputable. In an effort to revive flagging public support, some CBD interest groups have called for everything from publicly funded entertainment to free public transport and free parking to stimulate interest in luring workers back. But nothing is free – especially public transport which is an already heavily subsidised service (used mainly by CBD workers due to it CBD hub and suburban spoke structure). There needs to be a strong case for such measures.

The “save the CBD” argument relies on the notion that CBDs are central to the performance of the Australian economy. “Our CBDs have been the nation's productivity powerhouses for decades, but have been sorely challenged by COVID-19 shutdowns. It's important for everyone that CBDs are able to reclaim this economic mantle,' said The Property Council of Australia.

The negative impact of Covid on the central city economy is well illustrated by news bulletins that love nothing more than recycling footage of once busy but now near deserted CBD streets as symbols of economic distress. Therefore, the argument goes, it is responsible public policy for governments (and taxpayers) to support the revival of CBDs. “Thriving CBDs will be critical to Australia’s economic recovery,” said the PCA.

But is that true? Are they important “for everyone”? I could have written those words myself some 15 or 20 years ago, convinced as I was that cities were the “crucibles of creativity” and indispensable bastions of the new knowledge economy. But in Australia today, the evidence seems to suggest that the economy is doing just fine, despite the very real problems of the CBDs.

Employment growth is improving with unemployment falling. According to Marketwatch in March this year: “Employment has rebounded strongly in recent months, in line with a broad recovery in economic activity, the fastest in 70 years.” Unemployment has fallen to 5.6 per cent “just 0.4 of a percentage point above where it was before the mass job losses seen at the beginning of the COVID-19 pandemic.”

As recently as early April, the IMF forecast that Australian GDP would come ‘pole vaulting’ back to a very healthy 4.5% in 2021.  The Chief Economist of the Commonwealth Bank expects the economic boom to continue into 2022. They predict a higher 4.7% GDP growth rate.

Stock markets are also imbued with confidence. The All Ordinaries Australian sharemarket index hit an all time record of 7,331 in mid April.

Even the adverse impact of various politically inspired bans on Australian exports by the Chinese government has evidently failed to have the impact initially feared. This is cold comfort to our lobster, wine and beef industries who have suffered greatly but according to the Grattan Institute “Exports to China have predictably collapsed in the areas hit by sanctions, but most of this lost trade seems to have found other markets."

Meanwhile, the predicted partial collapse of the tertiary education sector – segments of which were heavily reliant on foreign student income – may not yet eventuate. A representative of one of the Universities claiming to be seriously adversely affected confided to me in late March that the adverse impact is in reality looking like being less than 10%, as full fee paying foreign students have enrolled on-line and domestic student enrolments have supported the on-campus strength.

Buoyed by all this, consumer confidence – a critical indicator of economic health – has also hit record levels. According to the latest Westpac-Melbourne Institute Index, “Consumer Sentiment lifted 6.2 per cent in April to 118.8 – the highest reading since August 2010.”  Since 2010 remember… that’s 10 years before Covid, making it a significant milestone.

Business confidence is also strong. A recent Financial Review article quoting a number of sources said: “The disruption to the vaccine rollout and the end of JobKeeper have left business confidence undented – two-thirds of employers say there are few barriers to keeping their doors open and one in four expects to increase staffing levels over the next six months.”

Reflecting much of the confidence in the economic conditions (along with access to cheap debt), house prices in Australia have surged. “Australian house prices are rising at the fastest pace in 32 years, as the Sydney and Melbourne property markets stage a full recovery from the short-lived COVID downturn” according to an ABC report in April quoting Corelogic data. “Prices in Sydney, Melbourne, Hobart, Canberra and Brisbane are all at record highs,” it said. House prices in suburban and regional areas have performed strongest while inner city apartments have not fared so well – meaning the market performance has been uneven.

And living standards nationally, according to consultants Deloitte, have come “roaring back.” So lots of good news all round.

Even the commercial property industry – allegedly beleaguered by the problems of the CBDs – is confident. The latest Property Council/ANZ survey of industry confidence was reported thus: “…property industry confidence levels are steadily bouncing back after recording near-record highs as the sector surges into economic recovery from the COVID-19 pandemic. The national industry confidence for the March quarter continued its upward trend to 142 points, rising 19 index points from the previous quarter at 123. This is the highest index score since September 2017.” 

The highest since late 2017. Meaning, the highest since long before anyone had heard of a Chinese city called Wuhan.

So how can we reconcile claims that “thriving CBDs will be critical to Australia’s economic recovery” when the economic recovery seems well and truly underway, even while CBDs languish?

There is no doubt that CBD property owners and businesses are being severely challenged in the current market. But the evidence strongly suggests that this challenge is largely confined to the inner cities. To suggest that CBDs require government subsidised initiatives because CBDs are allegedly “critical to Australia’s economic recovery” is in stark contrast to what the evidence is suggesting: that Australia’s economic performance is not reliant on CBDs to anywhere near the extent once claimed.

Efforts to seize the virtuous high moral ground of centralised economic superiority are not new. The mythical powers of the inner city have been celebrated by urbanists for decades, often at the expense of suburban and regional economies which were often at the same time subject to derision.

And in fairness, calls for initiatives to support CBDs may have merit. I happen to agree. Markets in temporary stress deserve support, as we do for many industries and for some particular geographic regions - although I don’t see that extending to ongoing business welfare.

At the same time, it’s also fair to remind ourselves that CBDs typically account for just one in ten of metro wide jobs. That proportion is even less on a national basis. CBDs also tend to be home to higher paying jobs. Plus, CBDs tend to enjoy preferential capital spending priorities over high growth outer suburban or regional areas. They are privileged domains, with the best taxpayer funded amenity in terms of public transport services, recreation facilities, arts, culture and entertainment, and are surrounded by some of the country’s most expensive housing. Life inside the bubble was intoxicating before Covid. Now the bubble is in trouble and it seems to be reaching out for yet more support.

Yes, CBDs are important to the economy and important to the life of a city. But what we are seeing unfold is an economic resurgence in Australia which, if anything, has busted the myth that CBDs are central to the wider economic performance of the country. The current economic resurgence is evidence that the economic contribution of CBDs has been overstated while the importance of suburban and regional centres and their economies has been understated, if not ignored, for too long.

So, while we’re called upon for short term support initiatives to revive CBD fortunes, we need to temper that support with the realisation that the wider non-CBD economy continues to do much of the heavy economic lifting. Imagine the potential if we got ourselves more invested in that than we have in the past?

 

Tuesday, March 2, 2021

Less 'B' in the CBD?


The next Census will be conducted in August 2021, by which time you’d expect economic life has largely settled around ‘a new normal.’ It’s pretty clear that when the data is released on place of work, CBDs will probably have fewer people working in them than the previous 2016 Census, and this may last for some years. Should this be cause for alarm? Maybe not. 

The term ‘Central Business District’ has been in use for so long it’s hard to imagine a different terminology. But the nature of CBDs are certainly changing - fast. There is much more to central districts than just ‘business’ (a proxy for legions of white-collar office workers beavering away in office towers) - the CBD is in reality a highly evolved mixed-use centre with a little of everything. 

But the ‘B’ part is apparently in decline while other uses seem to be increasingly on the rise. 

Before we speculate on the future direction of CBDs it helps to understand how much “white collar business” there actually is within the central district. The 2016 Census tells us that just 122,486 people went to work in the Brisbane CBD. That includes all occupations, and part timers, casuals as well as full time workers. Of the 122,486, there were 92,118 with full time jobs. Only a portion of these would be defined as office workers. 



The Census white-collar industry classifications include things like information and media, telecommunications, finance and insurance, rental, hiring and real estate, professional, scientific and technical, administration and support, and public administration and safety. These totalled 80,832 of the 122,486 workers – or two thirds of all jobs by industry. Let’s also assume two thirds of the white collar industry workers are full timers: this leave us with around 61,000 full time white collar office workers in the CBD. That’s probably undercooked because it doesn’t include those who say they work in mining in the CBD (meaning they are probably office workers too). They add around 4,200. Same with electricity, gas and water industries, many of which would be the centralised office component. There’s another 800 or so. Ditto perhaps postal and transport, with another 4,700 or so. 

 


None of this is as exact as we might like, but let’s broadly assume around 70,000 to 80,000 full time office workers went to work in the CBD in 2016. That’s not a big number so what else is driving the activity? 

Residents added 9,460 people (maybe more like 10,500 today).  Education was a big contributor – with some 35,900 University students plus a further 6,695 vocational students. They are looked after by 6,265 education workers (already included in the 122,465 workers count). On top of this there are 7,585 hotel rooms, with another 1,000 in the works. At full occupancy, that’s a lot of people. Plus day trippers and people visiting for retail or entertainment or dining. Retail trade accounts for 4,804 of the 122, 4486 jobs, many likely part-time, as with accommodation and food service which accounts for 7,246 of 122,486 jobs. 

Before we declare death by statistics, it’s clear that office workers are not all there is to the CBD: many other industries rely on the office work function for their survival. Just ask any restauranteur or coffee shop owner what life was like during Covid when office workers fled the city office for the home office. 

Consensus predictions for life post Covid-19 are that many will ultimately return to the CBD office, but a significant proportion will not. The impact of fewer office workers and its collateral impact on other occupations is why I think the Census results for 2021 will show a decline in total workforce numbers for the CBD. 

Before we hit the panic button we need to take into account that CBD jobs growth was already some of the slowest in the region long before Covid. In the five years to 2016, for example, the Brisbane CBD added only 6,354 jobs – a growth of just 5% over five years. The Brisbane region in the same period grew by 112,517 jobs or by 12%. In fact, the further from the city centre, the faster the rate of jobs growth. Suburbia was on the move long before Covid-19 drew attention to the fragile loyalties of the CBD market. 

What seems to be happening is part of a longer-term trend, where the “B” in CBD has been changing its traditional location and operational requirements. Some traditional CBD office jobs have moved to the suburbs, and more followed with Covid. But there has also been contraction in traditional white-collar administrative functions, with more centralisation in centres like Sydney. This has taken much of the expansionary heat out of the Brisbane CBD office market. Pre-Covid, total leased space in late 2019 was still below the peak of January 2013. Where it goes next is the burning question.


Metropolitan employment is growing faster, thanks in large measure to industries like health and education – which require suburban not CBD locations. So, what’s left to drive CBD growth into the future?

If the business ‘B’ in CBD flattens into the future, that may not be the case for the ‘A’ of amenity. Nowhere has so much been invested in urban amenity than the city centre. The embarrassment of riches lavished on the city centre has catapulted once third-rate inner city residential addresses to the most expensive in the state, in the space of 25 years. Recent State Budgets have been a very one-sided affair, as the relatively low growth but privileged city centre continues to receive a lion’s share of State taxpayer support, while high growth and under privileged areas are starved of capital. 


The level of inner city amenity will surely mean a changing role for the CBD as its function morphs from one where office workers would duly trudge in by day and leave by night, turning off the lights as they left, into a 24 hour central district of recreation, entertainment, learning, living and culture. A quick scan of some of the projects underway or proposed confirms that theme – Brisbane Live (a CBD live entertainment venue), Queens Wharf (Casino, shops, hotel rooms), a new CBD campus for Griffith University – these are major projects, which are not reliant on a traditional office worker model. 

There will always be office workers – centralised office functions, C-level corporate functions, seats of government administration – many of these things logically belong here. But not all of them. As the CBD evolves, its function is likely to further change from one of centralised administration to one of concentrated amenity – a district that appeals to the wider region and which services a range of appetites from recreation to dining to entertainment to shopping to learning and more. There are jobs attached to all these industries, and just because they don’t all wear business clothes, it doesn’t mean they’re not important. 

It might be time to start thinking very differently about what a ‘CBD’ really is and what will make it tick into the future. 


Friday, January 1, 2021

The age of suburbia


"Mr. Covid has been the best city and regional planner Australia has ever had. The suburbs will shine and regions will grow. Maybe we should forget about big city infrastructure projects for a while and spend it on our future resilient communities where people look out for each other.”

That’s a note from late 2020 from a good friend of mine - a highly regarded town planner in Australia, who has led both city planning for large metro cities and worked across the globe, most lately in the Middle East. He’s no dill. The irony is – and he’s right – that it’s taken a global pandemic to shake ourselves out of what now seems like having been under a spell for a long time: the idea of centralised, high density urban cores, surrounded by dormitory suburbs from which workers would commute daily, preferably on high volume public transport, to their city based offices. Our subservience called for endless amounts of public money to be thrown at inner city altars, rewarding the increasingly privileged professional clergy who enjoyed commensurately rising real estate prices, while suburban areas languished.


But the lure of the emerald city was always an illusion. In early 2013 in “The demography of employment part one: a suburban economy,” I made the observation that none of the actual evidence supported this vision:

“We have collectively developed a fixation on our CBDs and inner-city areas as economic drivers of employment. While they are very significant in size, they are not dominant relative to the spatial distribution of jobs throughout metropolitan areas. If the evidence is clearly pointing to cities with employment overwhelmingly located in suburban locations, and points to this trend continuing, it is possible that a variety of public policy settings could need resetting given the realities of our urban environment. It is equally possible that opportunities for growth and development to meet market demand for employment lands in suburban locations haven’t yet been fully captured.”

By early 2015, in “Is it time for suburban renewal?” I wrote: there seem now to be no shortage of publicly funded initiatives focused on delivering a better quality of urban existence within a five kilometre ring of the CBD, and too few focused on the hard and soft infrastructure deficits that our suburban areas are still living with.

However, no end of evidence or public debate was sufficient to wrest the planning orthodoxy from the centralised vision of the inner urban economy and its elites living, working and playing within a mystical 5 kilometre ring of a CBD temple.

Even in the face of obvious policy failure – rising congestion, chronic infrastructure lags and falling quality of life – faith in the religion of centralisation was not shaken. A 2018 ABC News investigation into overcrowding and infrastructure inadequacies in Sydney and Melbourne prompted the Planning Institute of Australia to respond with the suggestion that what was needed to fix the problems of centralisation and density was in fact more centralisation and density: “We want Tokyos, Parises, and New Yorks – and we can do that by planning well.” The fact that this policy prescription was unelectable given its electoral poison, was clearly irrelevant to PIA at the time.

But as my friend has since wryly observed, a virus has changed all of that. Property industry leaders who once worshipped at the altar of centralisation have sniffed the winds and seen hope of new salvation in the suburbs. Fund managers are predicting a significant fall in demand for CBD offices as workers adopt more amenable work-life practices – working from home or from suburban hubs. The chief of publicly listed developer Stockland – Mark Steinert – is now publicly predicting a shift of the entire metropolitan economy away from CBDs to more suburban locations. Such comments would have been heresy only just 12 months ago and no doubt been savaged by Stockland’s investors. They now reflect conventional wisdom.

The evidence globally is flooding in: high density urban cores are finding economic demand seep into suburban homes or suburban work hubs. There has been an exodus of workers and their employers from centralised, expensive cores. Once prized New York real estate is boarded up, tenants gone. Manhattan offices are being touted as possible residential conversions.

Elon Musk has declared he is moving to Texas, while Tech giants Oracle and Hewlett Packard have similarly set up shop in more affordable, more amenable, more liveable cities.  Fast growing US city economies are no longer poster-children cities like NYC or San Francisco or LA, but mid-scale cities like Austin Texas, Nashville Tennessee, or Phoenix, Arizona. The move is on. Remarkably, for the first time in 170 years, California has actually lost population.  

Even the Emerald Isle – Ireland – has seen Covid-induced changes to work lead to public policy responses in support of remote working. "COVID-19 has brought a change in terms of the way we work and remote working - or connected working, as I call it - is now a reality,” said Irish Minister Social Protection Minister Heather Humphreys.  "It was an aspiration only a year ago, and now it's a fact of a life - and it's a good thing".

Here at home, the evidence is also piling up. Regional economic growth seems to be getting an adrenaline boost from Covid, or more correctly our policy makers’ response to it - exhausted by lockdowns, the lure of a less dense environment is proving hard to resist for many. Figures from the Regional Australia Institute show that by late 2019, capitals were shedding jobs while regions were gaining them.

Only the most fervent centralist must now acknowledge that the age of centralisation has come to end. Indeed, as much was observed to be happening pre-Covid by the respected Brookings Institute in early 2019. The virus has just accelerated what was already underway.

Where does this leave the anti-suburban elites - the likes of Elizabeth Farrelly who infamously declared: “The suburbs are about boredom, and obviously some people like being bored and plain and predictable, I'm happy for them … even if their suburbs are destroying the world”?

Hopefully, it leaves them without a worshipping congregation anymore. Hopefully it means the suburbs and regions will no longer be regarded with disdain as second or even third rate living or working choices. Hopefully it also means we will see decades long obsessions with inner cities turn to more balanced views of where policy and infrastructure priorities should fall. 

 

We are at the dawning of an age of suburbia – where regional and suburban economic needs can respectfully and rightfully claim equal status with those of the inner city. Policy makers would be wise not to resist this change but instead to embrace and support it.

 

PS: Yes, “The age of suburbia” is a nod to the flower power song of hope from 1969 by The Fifth Dimension - “The Age of Aquarius.” You can get all groovy and sing along to the lyrics “Harmony and understanding, Sympathy and trust abounding, No more falsehoods or derisions, Golden living dreams of visions” … and watch the clip here: https://www.youtube.com/watch?v=kjxSCAalsBE

 

Let the sunshine in!

Sunday, October 18, 2020

What are we doing to ourselves?


“Walk the streets of Manhattan these days and it’s hard to believe that, only months ago, this was one of a handful of “supercities” whose dense concentration of innovative businesses and highly skilled workers was meant to drive economic growth in the 21st century. Six months into the pandemic, less than 10 percent of the city’s white-collar workforce is back in the office, with less than a quarter expected back by the end of the year and only half before next summer, according to a survey by the Partnership for New York City. Broadway theaters are closed indefinitely, tourists are nowhere to be found, and the Hilton hotel in Times Square has permanently closed.”

So began a recent article in The Washington Post, surveying the impacts of Covid-19 restrictions on major US cities. It went on:

“Empty or boarded-up storefronts are common along what were once the world’s glitziest shopping districts, while nearly two-thirds of the city’s restaurants say they could be out of business by the end of the year. Just about anyone who can has fled to weekend retreats in the country, some of them permanently, while home sales in the most sought-after suburbs have doubled. Most hours of the day, Grand Central Terminal is eerily quiet while the city’s subway system, facing a $16 billion shortfall, warns of a 40 percent service cut.”

The Washington Post article suggested that the positive in all this was that falling rents and prices – be it for office buildings, department stores, or housing – would render these centres once again ‘affordable’ and stimulate a long term recovery. I can’t see that as a positive, given the scale of capital destruction in the interim will be something for which there is no historical precedent. 

In Australia, the situation – apart from Melbourne (whose policy led self-destruction will be the stuff of entire history books) – is less dire. But are we making it worse for ourselves than it need be? 

The fascination for ‘working form home’ will I suspect prove a more short-term phenomenon. Come a hot summer, those ill-equipped spaces in our homes will prove pretty uncomfortable as workplaces. There are many other WHS and related reasons why, long-term, homes are problematic but the bigger question is, in the absence of medical or government advice to the contrary, why are large corporates and much of the public sector continuing to work from home when there is no longer any need to be doing so? 

The claims that people are just as productive or more so when working from home will need some scrutiny. It may be the case for some, but for positions that require supervision, mentoring, and leadership, it’s hard to see how productivity has been enhanced. Yes, for many the absence of a commute is attractive. But let’s balance this self interest motive against the capital destruction that is taking place across our cities. Shops, food courts, restaurants are suffering. Many are closing, some for good. Theatres, entertainment venues, pubs and clubs are struggling. And with them, jobs are disappearing. Public transport services continue to operate at the same frequencies but with a fraction of the passengers, making this an even more expensive service to operate for the taxpayer.

It’s time that federal, state and local government workers returned to the workplaces that the taxpayers continue to fund. It’s also time for major corporates to do likewise. In doing so, we have some hope of letting the real benefits of private sector spending do the job of keeping the wheels in motion. The idea that we are willing to sacrifice so much private investment in the form of vulnerable businesses and employment, on the basis of unproven, untested hypotheticals about home-based worker productivity, is illogical. The scale of value destruction could total hundreds of billions if this keeps going. And that will come to bite into superannuation balances and add to tax bills for those left in jobs.

This doesn’t mean we shouldn’t plan for changes in how workplace decisions are made. There will no doubt be an appetite for a number of suburban or satellite business hubs. There will no doubt be some occupations where the long commute to the city office is no longer necessary. But to continue a wholesale abandonment of city workplaces on the basis of how we feel, is foolhardy. There is too much at stake.

In the same way that the capital city does not thrive without viable regional economies, the suburbs and regions will not thrive without a viable city centre. The economies are inter-dependent. Yes, for too long we have been pre-occupied with the mystical allure of the emerald city, and invested disproportionately in it, while denying equitable investment into suburban and regional centres. You don’t fix that by then allowing the economic life of the inner city to sucked from it, and redistributed into loungerooms or kitchen tables. On the basis of what? 

At the very least, having over capitalised the city centres, the least the very people for whom this was done could return to using them!

We are making things worse than they need to be - for the city, as well as the suburbs and regions that are economically connected to it. It reminds me of that epic scene at the end of The Planet of the Apes, when Charlton Heston realises he was on earth the whole time, but in its future. “We finally really did it,” he says, surveying the Statue of Liberty in a post-apocalyptic scene. “You Maniacs! You blew it up! Ah, damn you! God damn you all to hell!”

Sunday, September 20, 2020

Is there enough diversity in regional planning?


The doyen of city planning, Jane Jacobs, was not herself a trained town planner, nor was she a University graduate. Described as a journalist, author and activist, her seminal book The Death and Life of Great American Cities (1961) nevertheless inspired generations after her to formally study town planning and to make it their chosen careers.

Today, formally trained planners dominate discussions on city planning, urban development strategy and land use. From a profession which in the 1980s was a relative minnow in the development industry landscape, planning as a profession now reigns supreme. Town planning departments across all levels of government have grown exponentially, private town planning consultancies have evolved into global concerns and even lawyers have developed specialised planning businesses of significant scale and billings.

With many regional plans now needing a comprehensive refresh to reflect changes likely coming in a very different post-Covid world (less rapid population growth, less centralised employment, more suburban hubs, changes to transit and more) it’s time to call on the planners to help map out strategies for adapting to these changes.

But are planners alone enough? Could we benefit from a wider diversity of experiences drawn from across the industry?

The urban development industry represents a very wide cross section of expertise and professional training – many of which are not invited to the decision-making table. Some – for example developers or their agents or representatives – are actually banned from some types of engagement via legislation.  In practice, their views and contributions can be treated with suspicion or outright hostility.

Even the views of the voting public – the ratepaying, taxpaying, home-owning residents who are democratically entitled to their opinions on planning decisions that impact them - run the risk of being treated with scorn.

“The community doesn’t understand the full story because they are not experts in the field of City design and planning” said one town planner last year, incensed that the wider community did not support townhouse developments in their low-density neighbourhoods (something championed by some within the planning community).

“It’s concerning that we listen to the general public for planning in our city rather than the experts who understand growth of a city,” said another (who on that basis must regard community consultation as a waste of time – something to be endured rather than informed by?)

These views, thankfully, are not representative. But perhaps before a sense of moral superiority takes root, it might be helpful to reflect on the valid contributions of all the participants in the industry?

For the ultimate diversity checklist, maybe we should start with the “untrained” public. It’s their taxes after all, and their homes or businesses. Their votes are important - and valid. With the public come their elected representatives. We are a democracy after all and politicians - elected by the people - are there to do this job. Their views matter.

I would then add to the list developers because - to be honest - nothing happens without a developer taking a risk. Things can be planned, designed, imagined, debated… but without the commercial acumen of developers, it won’t actually happen.  We may deride them and collectively pile on in social media tirades about “greedy developers” but before you do, remember the house you live in, your local shopping centre, your workplace, and very often the social infrastructure you enjoy is the result of someone being a developer - and you are a beneficiary. Developers in turn need investors, without whom they have no-one to sell developments to and without whom, development doesn’t happen. So let’s make space for them as well?

There are also engineers of course – civil, structural, water and environment, and traffic. Where would we be without them? They should absolutely be at the planning strategy table. No discussion on infrastructure is meaningful without some engineers and their slide rulers. I would also add real estate agents to the room. Yes, even them – because they bring with them the market reality serums that are antidotes to the Kool-aid that it seems is often passed around when it comes to regional planning. I would also add building contractors – civil and structural - because actually being able to build stuff is important. Architects should be there too - if only to infuriate the builders. But also (very legitimately) for their valued understanding of built form design and its influence on human behaviour. Landscape architects and designers are a variant on this who are equally important. Project managers bring a broad view of project life from inception to delivery. Let’s make a spot for them too. Valuers are essential, as are quantity surveyors. Both have unique and critical contributions to offer on cost and land use value. Surveyors need a spot at the table too. Got to put those lines in the right places! Environmental consultants are almost an essential inclusion these days. And of course let’s please not forget the urban economists, property economists, urban geographers and market researchers. The wealth of knowledge these people bring should never be excluded from the room.

Have we forgotten anyone? What about the lawyers?  OK, in for a penny in for a pound – multiples of which they’d charge to be at the table. But without these people, how would we ever draft legislation or regulations to put legal meaning to the intent of regional plans? If they aren’t part of the debate is there a risk their legislative or regulatory drafts won’t reflect the actual intent?

By now, our professionally diverse (but representative) regional planning group is going to be needing a very large room. The point being that the insights and expertise to think strategically about how to plan for a region requires a cross-section of inputs, some of them trained in specific disciplines, some of them not, but each of them equally as valid. Locking out particular groups for fears of conflict, or due to fears “they don’t understand” or for other reasons deprives us all of superior, more broadly accepted outcomes.

Otherwise, if formal qualifications in one particular discipline or another came to mean a barrier to participation, even the likes of the great Jane Jacobs would these days be locked outside the room.

Tuesday, August 18, 2020

Learning to live with less

Population growth has been a mantra of our property industry for as long as I can remember. And once again there are predictions of a surge in growth, driven (this time) by people allegedly fleeing Victoria. However, there are good reasons to think this may not happen, and that we may need to prepare for an extended period of minimal growth. This may not be a bad thing.

One of the first things to understand about our recent rates of actual and predicted future population growth is that they have been extraordinary in terms of the actual numbers and also in terms of the rate (speed) of growth. On a global scale, our forecast rates of population growth in major cities exceeded many leading world cities and was on a par with places like Shanghai and Beijing. In just 15 years, Brisbane, Sydney and Melbourne were predicted to grow by around a third – roughly three times the rate of growth of cities we often like to compare ourselves with like Copenhagen (for some reason), Los Angeles, San Francisco, London or Paris.


Given we started this forecast period with widely acknowledged urban infrastructure deficits (failing to keep up with population growth in the past), how we were supposed to not make the problem worse with these rates of growth is something smarter people than me might like to explain. Let’s just say the Chinese do things very differently so we can’t use Shanghai or Beijing as comparisons.

These predicted rates of growth were driven by three components: international migration (net overseas migration or ‘NOM’); interstate growth (net interstate migration or ‘NIM’) and natural growth (more births over deaths). And all three now look severely compromised by the policy responses intended to manage Covid.


In Queensland’s case, NOM has grown in importance in recent years, now accounting for more than a third of our population growth. However, with the closure of international borders, there’s been a virtual halt to 457 work visas, along with foreign student visas. Net overseas migration to Australia – Queensland included – will slow from record numbers to a trickle. This is likely to recover but unlikely to recover to pre-covid levels for some years: rising unemployment in Australia would not be helped by importing more labour on work visas. I cannot see a Federal Government supporting NOM at the same levels as we have seen in recent years when so many Australians themselves are out of work – something sadly that’s unlikely to change for a few years yet.

The rate of natural population increase is also significant, and typically stable. It has sat at around 30,000 per annum since 2016. There are two schools of thought here: lockdowns and work-from-home will lead to a post Covid baby boom (for obvious reasons) or that the post Covid recession will see fewer people plan on starting families until their financial futures are more certain. I can see a bit of both – an initial baby bump possible at year end after the March-April lockdowns, followed by a slowdown in births as the full implications of the recession sink in. In short, less growth from natural increases is my punt, for the foreseeable future.

The final source of population growth has been net interstate migration and this is where some are seeing hope of significant growth. The numbers of net interstate migrants to Queensland has been increasing since the 40 year lows recorded from 2010 to 2014, but will this continue?


There are a few things to keep in mind here. First, when NIM reached levels of 1,000 a week (around 50,000 per annum) in the late 1980s and early 1990s, Queensland’s total population was around 2.4 million. Today it is around 5 million. To have the same proportional impact, we would need to see NIM rise to around 80,000 per annum – and we are a very long way from that.

Second, there has been a close correlation between periods of high net interstate migration and periods of economic prosperity in Queensland. People did not come just for the weather or the lifestyle (attractive as these were) but they came in numbers when Queensland’s full-time jobs growth was strong, even stronger than NSW or Victoria.

There have been recent media reports speculating about Victorians (in particular) seeking refuge from Covid impacts in their home state and moving to Queensland. I don’t believe the media reports will reflect significant real numbers for the reason that Queensland’s full-time jobs growth has actually been negative in the last five years and anaemic in the last ten.



It’s important to look at full time jobs because these are the things people need to secure mortgages and to provide family security. Much has been made of the Gig economy, but part time and casual jobs are particularly vulnerable in recessions and especially to downturns in Covid-sensitive industries like hospitality, travel and tourism. Which happen to be synonymous with Queensland.

Would Victorians (for example) logically leave a state that has produced more full-time jobs than any other in the last five years for a state that now has fewer full-time jobs than five years ago? I have heard some in the property industry argue that if you had to be unemployed, where better than in Queensland. Which is true, but is this what we want? Migrants arriving without jobs to go to or limited prospects of getting any in the near term isn’t helpful. This won’t stimulate our economy but will add to the drain on services in costly areas for governments (meaning taxpayers) like health and education. Fewer full time employed taxpayers and a rising population of dependent unemployed is not a recipe for economic growth. Property professionals spouting this line need to take a long, cold shower. All population growth is not alike.

So each of three sources of population growth looks challenged in a post Covid Queensland, for the next few years at least. Less NOM, fewer NIM and less breeding.

Is this such a bad thing though? Provided we continue with infrastructure projects, it could allow the State to begin to close the infrastructure gap which has widened significantly in recent decades. The pressure is everywhere to see – rising congestion, hospital waiting lists, rising school class numbers, and hostility to development generally. If Covid forces a breather on the rapid rates of population growth we’ve been used to, perhaps it will mean we can actually enhance our quality of life and standards of amenity in the process?

It’s also worth keeping in mind that there are many global examples of low growth cities and regions which remain highly attractive and economically prosperous. The surplus of demand by people wanting to live and work there, relative to supply (deliberate limits on housing supply and population caps) invariably makes these very expensive real estate markets, completely unaffordable for many. But from a selfish property market point of view, they are still viable markets for development and redevelopment. Locally, think Noosa. Being horrendously expensive for residential or commercial property hasn’t stopped some of our other property markets before?

 

Thursday, August 6, 2020

So many levers, why don’t we use them?

In the pursuit of suburban and regional renewal, have we fallen into the trap of thinking this is a responsibility for local governments? Have we become too reliant on local government powers to provide incentives to attract and stimulate development – things like density bonuses, rates relief, infrastructure charges relief – without lifting our thinking to wider opportunities to support targeted geographic areas? Are we relying on too few of the levers actually at our disposal?

Local government development incentives can be highly effective, as Brisbane City Council showed when it targeted the limited supply of 5 star hotel rooms across the city some years back, along with student housing and seniors housing. Each sector was offered specific incentives designed to bring forward proposals for adding to supply in that sector, in support of city-wide economic development objectives. It worked, although it wasn’t intended to support specific geographic areas within the city.

On a wider geographic level, these can become more problematic: some local governments lack the resources to provide sufficient stimulus options to make much difference to a project’s viability. And some location-specific initiatives within one local government boundary might offer region-wide benefits, but neighbouring local governments are unlikely to chip in out of a sense of noblesse oblige. There are many other valid reasons why the task of economic attraction shouldn’t be delegated entirely to local governments.

Let’s take a hypothetical example of an outer suburban or regional business district which has seen better days. Picture plenty of ‘For lease’ and ‘For sale’ signs – some of the signs old enough to warrant a heritage listing in their own right. Regional plans may identify it as a centre of wider employment potential but without strategic policy support beyond the reach of local government those sentiments are unlikely to be realised. Somehow the ‘planning’ and the ‘doing’ never quite align. Our business district continues to promise potential but nothing much changes.

If asked what’s needed to turn that around, I suspect many of us would think the first order priorities are physical – infrastructure and placemaking upgrades being top of the pops. These things are unquestionably important in business attraction and centre renewal but, for the sake of argument, what other levers could be applied? What other things could we do to make a particular suburban or regional business district more appealing as a place to base jobs?

For starters, we often overlook the impact of utilities providers on the costs of both doing business and developing new assets. Many years back, these were public utilities and some – such as water and sewerage – were local government owned. Today many utilities providers work to a set of objectives which do not include business attraction or incentivising development. Nor do they respond to the economic development wishes of their former owners. But their cost structures for new or upgraded infrastructure can add significantly to local project costs and hence detract from the ability of getting our hypothetical run-down centre up to speed. A new project in our renewal centre will be competing with other existing centres where services are already in-ground, and not as fully priced into the location costs; which puts us at an immediate cost disadvantage. If we are serious about making outer suburban and regional centres competitive, is it valid that we leave utilities off the team?

Another lever we usually don’t engage in incentivising regional or suburban renewal is the tax lever. Payroll tax for example is levied at the same rate whether you are major accounting or law firm in a CBD tower, or a mid-size business in a suburban or regional location. Same payroll value, different locations, same tax bill. (Payroll tax in Queensland kicks in at $1.3million per annum in wages and is 4.75% for up to $6.5m per annum and 4.95% for over $6.5m per annum. The Queensland Government introduced a regional discount in 2019 - of 1%. It's a start but unlikely to to be deal maker. It also doesn't apply to outer suburban or regional areas within South East Queensland). If our aim was to make our run down outer suburban centre or regional centre more attractive to a cross section of businesses, is there any valid reason we couldn’t offer payroll tax exemptions based on place of business? (Sure, there’s a risk that some will set up “post box” locations to exploit initiatives like this – there always are. But consider that the opportunity cost of the lost revenue is relatively small if confined to specific locations, plus the specific geographic location ought to make validity checks relatively easy? This could actually be an easier tax measure to police than many already on the statute books).

And if a “horses for courses” approach with payroll tax to favour specific places of work is a potential lever, why not a similar approach to things like land taxes, depreciation rates or the big one – income and company taxes?

Let’s imagine our run down regional or outer suburban centre given the collective support of Federal, State and Local Governments, along with utility providers. Bring your business here and pay a concessional rate of company tax, your workers will receive extra income tax rebates based on location, your payroll taxes are zero, you are offered accelerated depreciation on built assets and fixed equipment, land tax is half what you would pay elsewhere, while energy, water and other utilities are less than what you’d pay in a major centre. Plus the housing for your workers is plentiful and affordable. I’m writing the economic development pitch already!

It’s only a crazy idea because we’ve never really been fair dinkum about supporting the efforts of suburban or regional business districts wanting to refresh their appeal. We have tended to assume that the inner cities are where it’s at and directed the bulk of our infrastructure investment there for that reason. We’ve also benchmarked and tuned our statewide and nationwide tax and regulatory settings to the economic environments of major centres. Little wonder that they have thrived while many suburban and regional centres have struggled.

It isn’t enough to be able to offer cheap land as the prime location incentive for regional or outer suburban areas – a tactic we often see resorted to. It’s cheap for a reason, and land cost itself is rarely the deciding factor. The cost of building in an outer suburban or regional area is either no different or (often) more expensive than building in a major centre – so you are effectively at a disadvantage from the outset. If the tax and regulatory framework is also designed on a ‘one size fits all’ basis, whether you are regionally or city based, then the odds start to become well and truly stacked against you.

We might stand a chance if we factored in the very high costs of inner urban infrastructure needed to support a highly centralised economy. For example, mass transit projects designed to ferry people to inner city workplaces are eye-wateringly expensive, but those costs are borne by taxpayers, usually without much dissent. Providing a similar ‘leg up’ to regional or outer suburban centres, in the name of a more resilient and dispersed economy that shares benefits more widely across the country, shouldn’t prove as problematic as it seems.

Nothing in this is new of course. The notion of a ‘Northern enterprise zone’ to develop the economy across the north of Australia gets a regular airing, but rarely any traction. It’s an idea that has now been floated so many times that it almost invites ridicule when it gets aired again. But surely the idea can be no less ridiculous than the notion that the tax rates and other government costs ought to be the same for businesses located in the CBDs of major cities - where they are surrounded by taxpayer funded amenity - as it is for outer suburban or regional business centres?

We need to begin to think more broadly about ways to support a more geographically diversified economy. Continued concentration of our economic fortunes into a handful of cities is a strategy fraught with risk, as we are watching play out now in Melbourne thanks to Covid-19. Geographic diversification is no longer an economic or planning pipe dream – it’s a matter of national economic security.

Saturday, June 13, 2020

Learning from Levittown


Attend any number of presentations on the subject of “sprawl” or read any number of articles denouncing it, and very often you’ll find the example of Levittown USA being used as a case study in what not to do. The 1950s era mass-produced housing development has been pilloried by designers, new urbanists, smart growthers and creative classists from the US to Europe to Australia. Admittedly, its design when first completed was far from inspiring. But the critics omit to mention some very important and enduring features of Levittown, some of which we could use more of today.


Figure 1 Levittown USA in the 1950s

What is Levittown? It’s the name given to a number of post World War II housing developments in New York and Pennsylvania. Developers the Levitt family sought to provide low cost detached housing, especially for servicemen returning from WWII and their families. Houses were manufactured using a Henry Ford assembly line approach, with construction teams devoted to particular components, allowing for an entire house to be built in as little as a single day. Houses with land came with appliances installed, lawns and of course a white picket fence. They sold like hotcakes.

Largely uniform designs on low cost land with efficient building techniques were the keys to making these homes affordable. Keep in mind, many residents were escaping cramped, unhealthy and relatively expensive rented accommodation in New York urban tenements. For them, the hope offered by a new home they could afford to own, with space around them, was a no contest compared with the lifestyles they and their parents’ generations had known.


Figure 2 Urban living was a dystopian nightmare for residents of New York in the 1920s and 1930s. Cramped housing, disease, crime - all were rampant.


Figure 3 The opportunity to own their own home, with internal room and external space, free from the conditions they and their parents had experienced, made Levittown an obvious and logical choice.


But for urban design critics at the time, Levittown represented everything they detested. The writer and urban critic Lewis Mumford had this to say in his 1961 booked “The City in History”:

“…a multitude of uniform and unidentifiable houses, lined up inflexibly, at uniform distances, on uniform roads, in a treeless communal waste, inhabited by people of the same class, the same income, the same age group, witnessing the same television performances, eating the same tasteless prefabricated foods, from the same freezers, conforming in every respect to a common mould.”

That set in train a repeating pattern of criticism over the decades that followed, all of which seems to have two things in common: first, the criticism is based on initial design (making next to no mention of the improved housing conditions it provided, liberating a generation of families, nor the affordable prices at which it could be purchased). Second, the criticism reflects mainly the early days of Levittown. Indeed, the opening photo in this article is the one I have seen used most in articles and at conferences where scorn is freely piled upon Levittown. The image is 70 years old people! Why not use a recent image to show what Levittown looks like today? Here’s one below for example -  which looks very much like any middle-class suburban environment anywhere. Criticising projects like Levittown in their very early days is a bit like criticising a 2 year old for their lack of literacy and numeracy skills. Give it a rest.  



Figure 4 Levittown today looks more like a bucolic scene of middle class suburban life.

Below is another image. Over time, owners have planted trees, the area has matured, schools filled, community facilities established, and transit connections improved. In fact, the demographic profile of Levittown today is that of a healthy middle class, middle income, well educated community with very high levels of home ownership (much higher than the Australian average).


Figure 5 A matured Levittown community that the suburb bashers never talk about

Levittown on opening day may not have been the most visually appealing landscape imaginable, but to the people who bought and settled there, they could no doubt see beyond the narrow view of wealthy urban critics like Mumford. They could see a future for their families and a lifestyle free from cramped and run-down housing, disease and urban crime.

Have we learned anything from Levittown? It doesn’t look that way. The prevailing view of new suburban master planned communities today has changed little from the ill-informed, jaundiced and smug denunciations levelled at Levittown. New suburban communities are regarded by the inner urban cognoscenti as some form of social aberration. This, they claim, is a condition that needs curing. This can’t possibly be what people want. It can’t possibly be good for them.

There are many modern-day versions of Lewis Mumford in Australia, generating a steady torrent of suburban disdain like this from Sydney Morning Herald urbanist and university professor Elizabeth Farrelly:

“The suburbs are about boredom, and obviously some people like being bored and plain and predictable, I’m happy for them … even if their suburbs are destroying the world.”

New suburban communities are wrongly accused of generating city bound congestion (though fewer than 10% of residents work in the inner city); they are accused of being environmentally irresponsible (yet they provide public open space and parkland at many times the levels available in inner cities); they are accused of being wasteful energy guzzlers (yet they are more likely to generate their own rooftop solar and dry their clothes without the aid of an electric dryer using instead the common clothesline); they are accused of consuming valuable farmland (though it is often marginal and the accusers have little understanding of farming realities); they are accused of catering for poorly educated, low income, fast food guzzling masses (though the demographic picture provided by the Census shows this to be entirely untrue); and they are accused of creating social isolation, loneliness and ill health (which even the most tortured methodology in the hands of the most ardent suburb hater couldn’t come close to proving).

Unattributed, unscientific, hearsay is accepted “wisdom” in so many circles that it is easy to despair. Evidence is out the window and in its place are unchallenged but fashionable belief systems. Faith over facts. It’s as if we are sick with urban prejudice but are only being able to choose between the witchdoctor, the anti-vaccer or the Chinese herbalist for remedies.

New suburban communities have much to offer Australia. If we simply sought to understand them better, we might begin to support them better too. Affordable housing in new suburban communities is surely an option people are entitled to aspire to? How many really aspire to a permanent life of renting in cramped conditions?

Levittown was popular with working and middle class Americans in post war America. It provided low cost homes and a better future for its residents, who busily went about planting trees and building their own community over time. It provided a start. 

New suburban developments deserve the same opportunity to provide these things to a generation of Australians. They can do without the moral guidance, partisan bias or professional snobbery of “experts” or the opinions of the inner urban cabal who wax lyrical on the need for affordable or social housing yet in the next breath reject models which could provide it.

The Suburban Alliance has commissioned some indepedent research into what mature masterplanned communities are really like, compared with the inner city. The report and two minute video summaries can be found here: https://suburbanalliance.com.au/causes/a-new-suburbia-case-studies-of-successful-suburban-expansion/