Tuesday, November 22, 2016

Manufacturing: "not dead yet"

There’s a famous scene in Monty Python’s Holy Grail where dead bodies from the plague are being heaped onto a cart. One body, about to dumped on the cart, protests that “I’m not dead yet.”’ “I’m getting better… I might go for a walk” he protests, until the collector of dead bodies clubs him on the head and gets on with his business. The way we dismiss the future of our manufacturing sector reminds me a lot of that scene. 

Manufacturing, we are told, is largely finished in this country as the art of making things is lost to low labour cost countries against which we simply cannot compete. Disciples of the ‘new’ economy would have you believe that all the jobs worth having are now in high value professional services, which are mostly located in our inner cities. 

Only last year, Prime Minister Malcolm Turnbull called for an “ideas boom” for Australia to replace the mining boom and provide growth, prosperity and jobs. A national “Knowledge Nation” summit was held to support the Federal Government’s “National Innovation and Science Agenda” and a host of ‘rock stars’ of ‘the innovation economy’ were announced as part of “Knowledge Nation 100” – the “visionaries, intellects, founders and game changers” destined to drive our future prosperity. 

Our urbanisation agenda aligns with this future vision of work and industry, by planning for centralised economies and highly educated inner urban workforces of the professionally qualified, clustered around urban cores. The preferred urban form to make this happen, we are told, are cities like London or New York or San Francisco or Singapore – centres of global commerce, technology and finance. 

In all this, it seems there is now little room for industries like manufacturing. 

But despite the widespread predictions of manufacturing’s demise, the sector is still surprisingly resilient. The graph below plots employment by selected industry for over 30 years. (Click graph to enlarge). 

The gradual demise of manufacturing is undeniable, although it has far from collapsed and still employs some 800,000 plus Australians. By contrast, the much celebrated rise of the information, media and communication (ITC) sector looks a bit lame by comparison. There are still four times as many people employed by manufacturing as the ITC sector. 

Big growth has occurred in white collar professionals in the professional, scientific and technical sector, as well as education. Nothing however can match the growth of the health care and professional assistance sector (which includes a very high proportion of part time jobs). 

Even by 2020 (graph below), according to the Federal Department of Employment, manufacturing will still be our seventh largest employer, responsible for over 800,000 pay checks nationally. That’s more than four times the number of people directly employed in mining, to put that into context. The much-hyped tourism industry, for further context, is predicted by Tourism Research Australia to employ 656,000 people by 2030 – which is 150,000 fewer and ten years later than manufacturing is predicted to employ by 2020.

What’s the point of this? Simply that the rush to embrace new industries centred around the services sector which offers high incomes linked to technological or particular professional skills can distract attention from less glamourous sectors which continue to chug away, with limited public policy support and even official disinterest. Manufacturing has been one of those. A ‘smoke stack’ industry now generationally removed from the lives of urban elites, it has been largely written off as uncompetitive and with little future. Yet it is one of our largest employers and one which offers longer term full time jobs, as opposed to shorter term part time roles (as you might find in for example tourism, or health care and social assistance). 

It could be that public policy attention (and the industry support that accompanies it) reflects the political favourites of the day. If that is the case, the manufacturing sector might need to revisit its public advocacy and somehow demonstrate to policy makers that Australia’s economic engine cannot just rely on publicly funded ‘bed pan’ industries or high glamour tourism jobs where low wages and part time status are the norm. These industries may indeed absorb large numbers of people who would otherwise be unemployed and they have a tremendously valid role to play in our economy. But it’s always a question of balance and what seems to have been a dismissal of manufacturing’s potential or its future by a cross section of policy leaders and commentators while ‘innovation’ and almost anything to do with technology are heaped with praise is a telling sign that the economic debate needs some rebalancing. 

Note: The “information media and telecommunications industry” includes businesses involved in newspaper, magazine, book, and directory publishing; software publishing; motion picture and sound recording publishing and distribution; radio and television broadcasting; internet publishing and broadcasting; telecommunication services, internet service providers & web search portals; data processing, web hosting and electronic information storage services; and library and other information services.

“I’m not dead yet” scene - Monty Python and The Holy Grail: Youtube clip here: https://www.youtube.com/watch?v=Jdf5EXo6I68


Dead Collector: Bring out yer dead!
[A large man appears with a (seemingly) dead man over his shoulder]
Large Man: Here's one.
Dead Collector: Nine pence.
"Dead" Man: I'm not dead.
Dead Collector: What?
Large Man: Nothing. [hands the collector his money] There's your nine pence.
"Dead" Man: I'm not dead!
Dead Collector: 'Ere, he says he's not dead.
Large Man: Yes he is.
"Dead" Man: I'm not.
Dead Collector: He isn't.
Large Man: Well, he will be soon, he's very ill.
"Dead" Man: I'm getting better.
Large Man: No you're not, you'll be stone dead in a moment.
Dead Collector: Well, I can't take him like that. It's against regulations.
"Dead" Man: I don't want to go on the cart.
Large Man:' Oh, don't be such a baby.
Dead Collector: I can't take him.
"Dead" Man: I feel fine.
Large Man with Dead Body: Oh, do me a favor.
Dead Collector: I can't.
Large Man: Well, can you hang around for a couple of minutes? He won't be long.
Dead Collector: I promised I'd be at the Robinsons'. They've lost nine today.
Large Man: Well, when's your next round?
Dead Collector: Thursday.
"Dead" Man: I think I'll go for a walk.
Large Man: You're not fooling anyone, you know. Isn't there anything you could do?
"Dead" Man: I feel happy. I feel happy.
[The collecter paces for an idea, then whacks the body with his club, solving the problem]
Large Man: Ah, thank you very much.
Dead Collector: Not at all. See you on Thursday.
Large Man: Right.

Tuesday, November 8, 2016

Affordable housing in plentiful supply

Australia’s ongoing (some would say interminable) debate about housing affordability was given fresh impetus last month when Federal Treasurer Scott Morrison weighed in with calls for liberated land supply and planning reform by state and local authorities. Scott’s call closely followed a less edifying observation by demographer Bernard Salt that young people simply needed to change their breakfast preferences to afford a house. 

Predictably, discussion swirled around the excessive cost of housing in the inner city markets of Sydney, Melbourne and Brisbane, the declining rate of first home buyers entering the market, the rise of a renting class and the push for higher density apartments of limited size as a means of gaining a foothold in the market. It’s a familiar conversation and one that’s been repeated for a long time now. The same arguments were being thrashed around in the lead up to the 2007 Federal Election: release more land, reduce up front development levies, and free up a notoriously dysfunctional planning system. At the time, I was National Executive Director of the Residential Development Council, and to make the point, we famously sent every Member of Parliament a rubber banana, likening housing to the price of bananas (which when in short supply, rise in price).  The debate got a lot of traction and both then Prime Minister Howard and Opposition Leader Kevin Rudd made a number of statements on the issue.

Fast forward ten years and nothing has happened on the policy front. What’s worse, the level of market analysis in the debate hasn’t improved. One of the realities which ought to get serious attention is that Australia has plenty of affordable housing. It’s just not where the jobs are.

That might sound simplistic but if we continue to push for greater concentrations of employment in the inner city areas of Sydney, Melbourne and Brisbane we will only make the affordability problem worse. And this is what we are doing. Prime Minister Turnbull’s ‘Smart Cities’ plan has been much celebrated by the inner urban cognoscenti but in reality it is mainly an inner cities plan. Infrastructure priorities by State and Local Governments continue to lavish inner city regions with transport and social infrastructure in a vain but futile attempt to keep up with the pressures of further economic centralisation.

More economic centralisation is the last thing we need. It will create an infrastructure challenge we simply cannot afford and will never win. It will add to competitive pressure for housing near city centres and lead to social and economic inequity as wealth splits into the sort of ‘haves and have nots’ more typically associated with the British aristocracy in the 19th Century.

Yet in all the debate about housing affordability and urban planning, there is a consistent implication that centralisation is the objective. Governments at all levels (with the partial exception of NSW’s Mike Baird) have centralised their considerable departmental operations in central city locations.  Business is encouraged to do the same – via a planning regime which promotes centralization in high density employment zones. Costly transport investment is focused on servicing the needs of a centralized workforce.  Housing increasingly focusses on limited land opportunities as close as you can get to centralized employment areas which often means dwellings that are both idiotically small for a country the size and population of Australia and prohibitively expensive.

Where in all this is the realization that the affordability problem is confined mainly to the inner and middle ring areas of mainly three cities. (Perth is sorting itself out via the deflation of its housing market bubble, as is Darwin. Adelaide firsts need an economy before seriously worrying about affordability and the same largely goes for Hobart).  There are dozens of larger regional towns and cities where affordability is not a problem. Jobs are.

In an era when digital technology has all but obliterated the tyranny of distance, why continue to live with this tyranny? Why don’t we have a genuine strategy to encourage employment growth and opportunities in regional cities and towns? In the US, this has been happening for years. It’s not the New York’s or San Francisco’s but the middle cities like Austin (Texas), Salt Lake City (Utah) or Denver (Colorado) that are the fastest growing economies. Here in Australia however we seem hell bent on ever greater populations and densities in a small handful of cities while we allow regional centres – many with more than adequate infrastructure, good climates, and plentiful and affordable land for housing – to languish.

Australia does have a housing affordability problem but that problem is largely confined to three or maybe four cities, and then mainly to the inner and middle areas of those cities – because that’s where we insist on putting the jobs. Rather than fretting over this dimension of the problem, perhaps instead our debate could turn to expanding and distributing the economic and employment footprint into outer urban and regional centres, where housing is affordable and land plentiful. What’s needed is a slightly larger share of the economic pie. Not only could this alleviate the affordability problem but it would reduce the impossible infrastructure burden associated with even greater concentration of economic activity in a select handful of inner urban areas.  

Footnote: the property featured in the above image is a current listing, in Orange, NSW. The median house price in Orange is $340,000 so this is representative. Orange has a population of around 50,000 within a region of around 100,000 and has quality educational and health infrastructure plus it's a very scenic city and region. (A video is here if you're curious). 

Just consider the difference between being able to earn $100,000 in the Sydney metro region but paying close to $1million for a house and enduring an irksome commute every day, to having the same income, a house for $340,000 and little congestion in Orange. All that's really missing is the job, which is overly simplistic I know, but all that extra money not going into a mortgage that feeds bank profits would find its way into either household savings or productive non-housing investment in the economy. 

Tuesday, November 1, 2016

What Utah could teach us about affordability, growth and density

Utah may not spring to mind as a region Australian developers and planners should study in more detail but I came away from speaking at an American Planning Association conference there last month wondering why it doesn’t feature more prominently in our thinking. It is more comparable and relevant to Australian conditions than say Vancouver or Portland plus its economic and housing market fundamentals present the sorts of metrics we aspire to.

Utah is one of the fastest growing economies in the USA today. A recent article by Forbes described it as the fourth fastest growing region in the country at 6.93%. And it is tech and financial services driving that growth, with companies like Goldman Sachs transplanting 2000 employees to the state and countless other tech firms doing the same. It is a strong economy and it’s attracting knowledge based industries at a rate that cities in in Australia would be jealous of.

Its population growth is broadly double the average for the USA and parts of the region are growing at close to 6% per annum. A big attractant is the state’s low unemployment and very affordable cost of living. Housing costs are said to be one tenth that of New York and a fraction of what cities like Seattle, San Francisco, Portland, or Los Angeles are commanding.

Centred around the capital Salt Lake City are numerous regions and city authorities. Much like the our metro regions, there are multiple jurisdictions each with their own planning controls and development plans. Salt Lake City itself is home to only around 200,000 people while the wider Salt Lake metro region is home to around 1.2 million people. This in turn is part of a largely contiguous area that stretches some 200 kilometres from end to end, which is home to around 2.5 million people.

These numbers are reminiscent of south east Queensland, and like south east Queensland the corridor of growth is largely contained by water (plus a desert in Utah’s case) on one side, and mountains on the other. It’s an elongated urban growth corridor for this reason. 

Given then its high growth, strong economy and low unemployment characteristics, combined with broadly similar population numbers, how is it that the region has maintained such affordable housing? The median house price across the Salt Lake County region is a multiple of only around 4.2 times median household incomes. Sydney’s housing is a multiple of 12 times median household incomes, Melbourne 9 and Brisbane is 6 times median incomes.

The typical response of some commentators in Australia is to dismiss US cities with excellent affordability as “places where no one wants to live” but Utah and the Salt Lake region is growing fast – faster than any Australian urban economy. So that excuse doesn’t cut it.

Talking to some of the Utah planners it became clear that when they speak of increasing urban density, they’re having an entirely different conversation to us in Australia. There are no urban growth boundaries as such in Utah or the Salt Lake-Provo-Ogden-Wasatch area. They are promoting higher densities of residential development but this is largely a voluntary thing negotiated between developer and city planners. Some of those cities in the region have minimum subdivision sizes of three acres. Yes, three acres. Others promote higher densities but there is a strong cultural connection to the single family (detached) house on a large(ish) block of land. It sounds much like we were once - although the quarter acre block largely disappeared in Australia in the 1970s. A quarter acre would be considered small by many in Utah.

Land is plentiful - for now - and planning restrictions nowhere near as objectionable as they have become in Australia. Land is taxed differently and leniently. Growth is a good thing, not an evil that must be contained and brought to submission under the regulator’s rule book. The one thing that left many of the people I spoke to in Utah speechless was the idea that in Australia, the land can be worth more than the cost of building the house. When I pointed out the average lot size was getting down to around 400 to 500 square metres, the jaws dropped further.

However, there are some pioneers of housing density in Utah that are setting high quality benchmarks and winning the homebuyers over in large numbers. The master planned community of Daybreak (first developed as an initiative of our own Rio Tinto) at South Jordan (roughly 20 minutes’ drive south of Salt Lake City) is one such project. Covering 4000 acres (1600 hectares) it will provide 20,000 dwellings for 50,000 people and extensive retail and commercial space once complete. Connected to the region’s rail (‘Trax’) network and serviced by extensive highway connections (got to love the Americans for this) the masterplanned community puts impeccable eco-credentials to work and has been widely and professionally recognized for its innovation and leadership.

Designed along new urbanist lines by the renowned Peter Calthorpe (among others) Daybreak exudes a charm that is understandably attractive to young families and seniors alike. Over a quarter of the site is devoted to open space but this is woven throughout the neighborhoods in wide foot paths, pedestrian connections, shared common area lawns and other natural features, some which serve to help retain 100% of storm water on site.

House and land combinations here are priced from around $400k to $500k (Australian), which is higher than the regional median for Utah. Typical lot sizes for entry level three bedroom homes are around 460 square metres, up to around 550 square metres for larger homes. Attached town homes or town houses obviously are on smaller lots still (an attached ‘twin home’ might be on less than 350m2). So Daybreak is proving that smaller lot sizes and higher median prices are achievable, even in a region known for its love of large housing lots and its antipathy forwards multi-family housing (even townhouses are viewed with suspicion: our approach to high density would be viewed with horror).

Daybreak are meeting a community demand for quality neighbourhood environments and open space that is delivered in a relatively high density format for detached living. They are not being told to do this by regulators nor are they being forced to comply with some arbitrary minimum number of lots to the acre. In fact, I’m told Daybreak’s ‘new urbanist’ design principles met with significant regulatory opposition in the early days and there are still doubters in public policy circles.

The point is that the light regulatory touch in Utah has not prevented innovation or world leading design in urban development. While parts of the region pursue more traditional growth patterns, others (especially in and around downtown Salt Lake City) are pursuing higher density options while others still like Daybreak are successfully pursuing high quality community building around small lots which run counter to convention. The market is free to work, and consumers are free to choose. Prices are competitive and supply is not artificially restrained. Affordability is excellent by Australian standards and the economy powering ahead at rates of growth that leave many Australian urban regions for dead.

Utah has a lot to offer as an example of a less regulated land market with a strong and modern economy, substantial population growth and affordable housing. Australian urban planners would do well to expand their horizons and have a look for themselves at what can be achieved with minimal intervention.


For a gallery of some images of Daybreak with captions, please click here.

If you are interested, I can also put you in touch with the lovely people from the American Planning Association, Utah Chapter. The people at Daybreak have also told me they are happy to show Australians around their project. Let me know and I will put you in touch with their External Relations person.

The Daybreak development’s web page is here.

There is a ULI case study (slightly dated but still good) on Daybreak here.

There are countless stories on the strong economy and growth story of Utah. You can find them all here

Tuesday, September 20, 2016

What really makes cities liveable?

So called city liveability rankings are proliferating like rabbits before Myxomatosis. And like rabbits, they can be pest. A couple of recent liveability surveys beggar belief, not just in their method but also their conclusions. Here’s what’s wrong with them, and some ideas for alternative measures of city liveability.

In August this year, that journal of inner city indulgence The Sydney Morning Herald published a front page story boldly declaring “Sydney’s ten most liveable suburbs revealed.” Attention grabbing headline? Tick. Rigorous methodology? Fail. In fairness the study wasn’t by the SMH but a research consultancy, whose approach to assessing what is liveable and what isn’t says a lot about how some in our community are becoming besotted with wealth and privilege at the expense of opportunity and equity.

If you think that’s harsh, first consider their top ten, and where they are:

Sydney's top 10 most liveable suburbs
Lavender Bay
Lower north shore
Milsons Point
Lower north shore
McMahons Point
Lower north shore
Lower north shore
Lower north shore
Lower north shore
North Sydney
Lower north shore
Millers Point
City and east
Elizabeth Bay
City and east
Darling Point
City and east

Yes, it’s a list of Sydney’s most expensive suburbs, all of them inner city.

In a remarkably narrow methodology, the researchers assessed liveability on 16 qualities which are most commonly found in inner city areas where high real estate prices prevail and where wealthier members of the community tend to live. Talk about confirmation bias.

The criteria included: access to employment (the nearby CBD employs a lot of very highly paid people); being close to light rail and trains (most concentrated in the inner city and “essential” they claim for any functional modern city); bus stops (fair enough); ferry access (limited to being close to water which is also where the high priced real estate is); culture (being close to theatres, museums and art galleries – most of which are centralised in downtowns, meaning inner city locations are bound to win); main road congestion (the further from slow moving traffic the better, but inner city residents working in the CBD have less of this problem); education (agreed - the more primary and high schools the better, and the closer the better); shopping (fair enough to a point); open space (agreed); tree cover (nothing quite like those leafy inner city suburbs with the spreading old  deciduous trees imported from the UK); topographic variation (hills are great for expansive views and also high priced real estate); cafes and restaurants (I kid you not, this is word for word: “Access to a decent short black and a sushi train should be a no-brainer.” Yep, they’ve nailed Maslow’s hierarchy of needs with that one); crime (obviously best avoided); telecommunications (“We’ve come to expect five bars and speedy broadband at all times and this has never been truer than in today’s world of Pokemon Go and Netflix”- so they obviously have life’s priorities sorted); views (“The more water views – whether it’s of the harbour, a bay or the ocean – the better”); beach access (well of course, life’s a beach in a multi-million dollar home with harbour views and beach access).

Stunning isn’t it? According to this survey, liveability equates with the lifestyles of the Sydney rich and famous. The rest of you mug punters can only watch on in envy. The higher social order has, like some twist on The Hunger Games, spoken.

Another equally vapid survey is by the Economist Intelligence Unit. Their latest world survey concluded that Melbourne was the world’s most liveable city. Their league ladder was as follows:


You can read about their criteria here but it will be obvious to many of you that, like the survey lauded in the Sydney Morning Herald, there’s a preference for cities where wealth and privilege rule (except Adelaide, whose presence on this list given its failed economy is anyone’s guess). Vancouver, for example, is among the world’s least affordable cities but that’s obviously not a liveability problem if you are in the minority for whom that isn’t an issue.  

So what’s missing from these sybaritic surveys of liveability? And what should we be thinking more about? My suggestions are follows:

Affordability. The elephant in all the rooms is housing affordability. How can a city be liveable if that definition really only applies to a minority of the population on the highest incomes or with the greatest wealth? That housing affordability, and the cost of living generally, should so easily be overlooked in measures of city liveability is an indictment on much that passes for urban policy and the thinking that goes with it.

Housing choice. Cities that offer their citizens housing choice, by type and location, surely fair better as more liveable than ones that dictate the form and location of housing by decree? This applies as much to ensuring young people have access to types of housing that suit their needs, and equally for seniors, who are too often shunted out of the areas they grew up in because housing types are locked in stone to uses and a society whose era has long since passed.

Dispersed employment. Highly centralised city economies force more of their residents into longer commutes, which tend to be more costly for those on lesser incomes than the more generous incomes earned by inner city residents. Encouraging employment centres to disperse so that opportunities for work are closer to where more people live is a liveability angle that deserves recognition.

Full or close to full employment. Immunity from unemployment or the risk of it is more likely to be found amongst residents who already enjoy a degree of economic privilege by way of education or otherwise. Lesser skilled city residents are less likely to find quick transitions into new or different jobs so a city with full or near full employment ought to be regarded as more liveable than one where strong employment and ongoing certainty is confined to a minority.

Equal access to economic opportunity. Equality of opportunity is different to equality of outcomes. Cities that offer their residents broadly equivalent opportunities for education, employment, and advancement ought in my view to be considered more liveable than those where inherited wealth or opportunity are the norm. This is different to equality of outcomes – if residents have opportunities and they don’t pursue them or squander them, that is their responsibility at the end of the day.

Tolerant and rational. Free speech and a tolerant, rational approach to social issues is a precursor to liveability, surely? The antithesis of this is residents fearing to speak their mind or venture their opinions. There seems an increasing tendency for self-appointed and unelected urban cognoscenti to dismiss or talk down to others, which is disappointing. The next step on that path is censorship – something no liveable city should tolerate.

Clean and unpolluted. This should go without saying but a city that pollutes its own waterways, skies, or open space isn’t as liveable as one that doesn’t.

Shared benefits. Cities which spread the benefits of their urban infrastructure improvements throughout the metropolitan area are logically more equitable than those that focus all their energies on inner urban domains. If residents in outer metropolitan areas are denied access to transport improvements, open space, schools or other forms of infrastructure because the budget’s been spent downtown, that’s not what I call a formula for liveability.

Innovative and enterprising. Not sure how you could measure this, but I suspect the answer lies somewhere in the support for new ideas as opposed to old established formulas and traditions. Starts ups are the KPI of an innovative economy but how to encourage and facilitate more of this is something we are yet to learn. Unless the answer lies somewhere in the suggestions above?

There are many more suggestions I could add but none would promote the idea that liveability is best measured by some connection to high priced real estate in a limited number of areas enjoyed by a limited number of people. Cities are as much suburban as inner urban and measures of liveability need to recognise the broader measures of what makes life in cities most enjoyable, wherever you live and whatever your income or lifestyle.

Saturday, August 13, 2016

Peak CBD part II: more on where the urban jobs are going…

A number of readers have corrected me on the analysis provided in the original of this post. As they have rightly pointed out, the ABS labour force data surveys place of residence not place of work. My mistake. It’s also been suggested to me that what this means is that the growth in employment showing up in suburban areas really means that people live there but are commuting to work in the inner 5 klm ring of our cities. I’ll agree with the correction but not with that conclusion. Here’s why:

The chart that shows growth in the labour force by metro region was this one:

The statistical likelihood of people living in middle or outer areas commuting to the inner city for work is remote and isn’t supported by independent data. The Census is the most reliable source of information on where we work and I went into analysis of where we work, based on the 2011 Census, back in early 2013. You can find it here: "The demography of employment part one: a suburban economy" and also part 2 "Where we work.”

For outer urban regions in this chart like the Gold Coast, Brisbane south, Parramatta, Melbourne north east, Moreton Bay north and south and so on, this means that the proportion of residents commuting to jobs inside the 5 klm ring of the capital is low. Less than, in most cases, 10%.

It’s also been suggested to me that the last census (being the 2011 one, which went off without a hitch unlike our latest attempt) is quite dated and that it is probable that this balance of place of residence and place of work has somehow changed dramatically.

So what’s available evidence since the last Census say about any suggested drift of jobs to the CBD and fringe? In the case of Brisbane, based on analysis of Property Council office market data, it’s not looking good:

Occupied CBD floorspace rose since the 2011 Census, but from 2013 onward took a dive. The latest data for mid 2016 shows we are now back to where we were in mid 2011. Given the state of the office market now, it is also probable that some of what is technically occupied now is in fact underutilised and not worth trying to lease. Lots of empty workstations. So at least as far as this indicator is concerned, no evidence of jobs growth well over and above the 2011 picture.

The city fringe market (above) has been more resilient over the same period, possibly picking up some relocations from the CBD but this market is still basically where it was in 2011. So no evidence here either of rising employment in the city fringe office markets.

What about business count information as an indicator? The map below is from Macroplan and shows the change (growth and declines) of business with more than 20 employees in the 2011 to 2015 period. The orange dots are declines and the green dots growth. The bigger the circle, the larger the change.

That big orange dot in the middle is the Brisbane CBD, which also aligns with the PCA data. There is evidence of drift from the CBD to city fringe (see the same map zoomed in below) but the general picture here seems to be one of more growth in middle and outer areas than declines. If anything, it suggests inner city business have suffered more losses than gains in this period, while the middle and outer suburbs have seen the opposite.

Another set of numbers, this time for the 2013 to 2015 period, again showing business data from the ABS and taking in only the growth side of the equation (ie it doesn’t map the losses) for all ‘knowledge worker’ industry classifications of more than 5 employees. First the Sydney picture to hammer home the incredible recent performance of this economy, and for the tendency in this city at least to be driven by a concentration of high end professional service businesses, many in the inner city:

Sydney, I maintain, is atypical. It is becoming ‘HQ Australia’ and our primary international dealing desk. There is a lot of suburban business growth but equally there is a hot bed of action in the CBD, particularly of large firms (green or red in these maps).

The Brisbane story by contrast is different:

The conclusion is that I’m still unconvinced by the supremacy theory of the 5 klm ring which holds that in the new economy, all the action’s in the inner city. This, we are assured, is where all the high end jobs are going and “where everyone want to live.’’  The suburbs are viewed with a tinge of disdain as places of lesser economic opportunity and lower quality living.

To me, the evidence is pointing to a suburbanisation of employment, aided by advances in technology and also because the nature of work in the economy is changing. The biggest driver of jobs growth is health care and related jobs. This does not just mean surgeons practising in inner city hospitals but also includes the many more professionals, semi-professional and even low skilled workers occupied in everything from aged care to medical centres to skin clinics or podiatrists. These new jobs are not centralised and gain little to no benefit from large scale clustering. They will look for places to work from in suburban locations – near to where their clients are.

The evidence continues to point to changes in the patterns of employment in our cities. We can either choose to consider all the available evidence and ask “what is this telling us’’ or we can rely on confirmation bias and refer to  evidence that supports our pre-existing theories while largely  discounting the rest.

What is surprising about this discussion are the sensitivities that surround it. I suppose it’s because this evidence challenges many of the presumptions about inner urban supremacy which are the foundation of much of our planning and urban management and infrastructure allocation.

The debate won’t be settled until the 2016 Census data is released but my bet is that the ratios of inner city employment to metropolitan wide employment will not have grown strongly in favour of the inner city. They may even have contracted. We only have nine or ten months to wait and find out. Anyone up for a $5 scratchie on the outcome?

Tuesday, August 9, 2016

Peak CBD? Where the urban jobs are going.

The changing economy is an irresistible force, the impacts of which are being played out on many fronts. As jobs and the nature of work change under the relentless advance of technology, so too are decisions about where workplaces should be located. Central business districts – long the glamourous headquarter preference for leading professional service firms – are under increasing pressure from competing centres. Contrary to popular belief - and no doubt to the disappointment of inner urban boosters utterly fixated on the virtues of a downtown live/work/play lifestyle to the exclusion of all else - the non-central parts of our major metropolitan regions are the ones that are growing jobs at the fastest rate.

The reality of suburban dominance on housing and economic fronts is something I’ve been writing about for some years now and every time I consult fresh data, that reality is confirmed. In our major metropolitan areas, it is the suburban domain where more than 80% of jobs are and where nine out of ten people choose to live. This isn’t to deny the CBDs their premier role as the seats of government or as a central focus for community-wide cultural facilities, executive business offices and places for social interaction.  But it does point to a possible imbalance in infrastructure priorities or policy attention – the bulk of which seems now to favour privileged inner city domains to the exclusion of economically larger suburban locations.

The latest labour force data from the Australian Bureau of Statistics paints the evidentiary picture. Taking in our three largest metropolitan areas, employment growth in the inner city areas over the last five years is not the dominant story some might have you believe. 

The labour force data is by SA4 level, which broadly means for metro areas something much larger than a suburb but smaller than a city. It typically combines multiple suburbs into a population group of 300,000 to 400,000. 

The chart below shows jobs growth of non-central parts of our metro regions in blue, while the CBD and inner city regions are highlighted in red. (click on the image to expand)

What’s immediately apparent is how many blue non-central locations are outperforming the inner city regions. Cities may well be the engine rooms of the economy but it’s evident from this data that those engines, in job terms at least, are producing more output in the suburbs. 

In fact, of the total 468,300 new jobs created in these three large urban areas in this five year period, 91% of them were created in non-central locations. 

Keep in mind that this definition of inner city is much broader than just a CBD and fringe, as popular opinion and industry convention might define the inner city. For Brisbane, its boundary stretches from Toowong to Bardon, The Grange, Clayfield and south to Seven Hills and Norman Park. 

For Sydney, the ‘City and inner south’ stretches from the CBD south to the Airport, and as far west as Marrickville. 

And in Melbourne’s case, the “Melbourne inner” area follows the Maribyrnong River in the west, north to Essendon North, across to Coburg, Fairfield and south as far as Malvern and Ripponlea.

The point being that these are very generous boundaries for inner city areas. They are large enough to include dozens of inner city suburbs and some that are considered middle ring. And yet despite these large boundaries, it was the areas that lie beyond these inner city areas that have been powering the jobs growth performance of our major cities. This economic reality may not sit well with the true believers of inner urban supremacy, but it is statistically undeniable. 

The strongest performance of all was Melbourne West, which added over 60,000 jobs in the five year period. The Gold Coast, bouncing out of one its many cyclical downturns into an upswing, was second, followed by Brisbane Southside, followed by Parramatta. All are what we would generally define as middle to outer urban areas (the Gold Coast being either its own distinct city or part of the south east Queensland conurbation, depending on your point of view). 

If we look at the numbers in percentage terms, there are a significant number of SA4 regions that have grown by more than 10% in the period. 

Of the three inner city markets, only Sydney just crept into this league. Inner Melbourne’s 3.8% growth is anemic by comparison with the suburban performance of many of its metro areas, and Brisbane’s inner city growth of 7% over the five years looks weak compared to its Southside, or Moreton Bay regions which grew by double that in the same period. 

What’s driving this suburban growth? 

Looking at the four fastest growing regions of our largest metro areas, the answer is mostly ‘health care and social assistance.’ This type of industry, which is Australia’s fastest growing at present, has little need for centralised locations but requires access to the communities it serves, which are largely to be found in suburban locations. In the case of the Gold Coast, having a new major hospital open in this period obviously helps. Health and social assistance is broadly followed by education and training (another non-centralised type of industry) and then there’s also retail trade (non-centralised by nature) followed by various other more localised strengths.

The so called ‘knowledge workers’ are represented by the ‘professional, scientific and technical services’ category which also made significant contribution to the four fastest growing areas. This is an interesting feature of the changing economy because it was a long held article of faith that knowledge workers (white collar service industries from engineers to architects to bankers and lawyers) would always instinctively gravitate to CBDs. This remains mostly so for larger firms but increasingly we are seeing these functions also select suburban centres which offer lower cost structures and a more village scale amenity that rivals the large scale and anonymity of a large bustling CBD.

So what’s this telling us?

There is a growing orthodoxy which claims that it will be the professional services industry that drives our growth as a nation. No argument there. But the orthodoxy then seems to go on to suggest that workers in the professional services industry will all (mainly) be working in our CBDs and inner city areas, and that the sensible strategy for supporting that growth in the future is to funnel greater concentrations of infrastructure into servicing this demand, and to support further rapid escalations in inner urban density so that more people can live closer to their inner city jobs. This, we are told, is where all the action is and where it’s going to continue. 

The evidence, however, keeps resolutely pointing another way. Rapid changes in business and personal mobility thanks to digital technology are paving the way for businesses to be more flexible in their location choices. Plus, the fastest growing industries at present are not the types of industries that need the highly centralised and densified work and living arrangements found in our CBDs. 

Our CBDs will continue to maintain their headquarter function for many businesses, and will continue to the seats of government, but it may well be that their role as a central business district will begin to morph into more of a central amenity district – providing cultural, entertainment and recreational opportunities for the wider metropolitan community that cannot (due to cost or other factors) be replicated many times in suburban areas. 

If this is true and we are living through a period of fundamental economic change in business location decisions, the role and importance of suburban business districts will only continue to increase. This should mean that – along with identifying infrastructure priorities for inner urban areas – we need to turn our attention to the equally valid claims of growing suburban centres for improved economic and social infrastructure.  
The evidence is that some 90% of new jobs in our largest urban areas over the last five years were created outside the magical inner city ‘rings’. Recognising this statistical reality will be the first step toward a more balanced approach to urban growth and the setting of urban economic priorities.


These SA4 statistical boundaries are very large areas, useful for general analysis like this but the larger the area, the more complexity hides behind the numbers. For example, within some of the inner city SA4 areas, it is entirely possible that within the SA4 boundary actual CBDs are shrinking while near city areas are growing, or the opposite. You need to drill down to a smaller area to answer that question. Let me know if you are interested to find out.

Nor can I explain the abnormally strong performance of West Melbourne in this data, nor the weak performance of Logan-Beaudesert (south of Brisbane). I am looking further into both. It could be due to a small boundary change (although the ABS makes no mention of it that I could find) or due to mixed industry areas jumping boundaries as brownfields close down in favour of newer development areas next door. 

The very strong performance of many Sydney regions, including those near the inner city, is also worth comment. Six out of the top ten fastest growing SA4s are in Sydney. The story of Sydney’s increasing national economic muscle is something I wrote about here. Sydney is at present dragging the rest of the Australian economy along behind it. Without this one city, the technical word for our national economic condition would be is ‘rooted.’