Cbd Property

EXPERT OBSERVER

It&rsquo;s long overdue for real estate consumers to let go of the notion that proximity to the CBD matters.

Long before the pandemic and its impact on the Central Business Districts of our major cities, the relevance of the CBD in choosing where to live or invest was diminishing year by year.

The fallacy persists that most people work in the CBD. The reality is that, in all our capital cities, the vast majority work in suburban employment nodes.

There are, for example, over 2.1 million people employed in the Greater Melbourne area, but only about 20% work in the City of Melbourne (the CBD and near-city suburbs).

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For most people, when it comes to choosing a place to live, the CBD is irrelevant.

They don&rsquo;t work there, they don&rsquo;t shop there and their kids don&rsquo;t go to school there.

The average person has little reason to ever visit a CBD, although they may occasionally go to a CBD for entertainment or leisure.

But I still have people regularly raising, as an objection to a particular location, that it&rsquo;s a long way from the CBD.

Like many myths in real estate, this one just refuses to die.

In Sydney, the suburbs closest to the CBD are greatly under-valued, with median house prices well under $2 million (which is miserable by Sydney standards), like Redfern ($1.45 million), Newtown ($1.42 million), Glebe ($1.7 million) and Camperdown ($1.6 million).

The most prestigious suburbs, the ones with median prices above $3 million, are in many cases a long way from the tall office buildings &ndash; suburbs like Cremorne, Killara, Lindfield and Manly.

The Sydney locations with the best long-term capital growth rates, those where price growth has averaged more than 8% per year over the past decade, include many which a great distance from the Sydney CBD.

They include humble suburbs a long, long way from the City, like &hellip;

<ul>
	<li>St Marys out at Penrith,</li>
	<li>Minto and Macquarie Fields in the far south-west,</li>
	<li>Parramatta and North Parramatta,</li>
	<li>Marsden Park out near Blacktown,</li>
	<li>Middleton Grange in the precinct around Liverpool,</li>
	<li>Smithfield in the Cumberland LGA,</li>
	<li>Canley Vale in the Fairfield LGA,</li>
	<li>Kogarah in the Georges River LGA</li>
</ul>

They also include Northern Beaches suburbs like Seaforth, Avalon Beach and Dee Why, as well as north-of-the-harbour locales like Cremorne, Lindfield, North Willoughby and West Ryde.

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In Melbourne, if you want to find superior capital growth over time, you need to head a long way from the City centre, in most cases.

The greatest concentration of suburbs with long-term growth averages above 7% per year in the Greater Melbourne area is the Mornington Peninsula, where Bittern, Mt Martha, Tootgarook and Sorrento all have outstanding growth records.

The distance between Sorrento and the Melbourne CBD is over 100km, around an hour and a half by car. The median house price for Sorrento has risen almost 30% in the past 12 months. Nearby Tootgarook is a lot less expensive, despite a 20% rise in the median price in the past year.

Only slightly closer to the tall buildings is the new development suburb of Clyde North in the City of Casey, with a long-term growth rate close to 9% per year.

The suburb of Williams Landing down in Wyndham City in the far south-west also has a long-term growth rate above 8% per year &ndash; as does the suburb of Mickleham in the City of Hume in the far north of the Melbourne metro area.

Middle-ring areas with great growth rates include Box Hill, Brunswick East and Derrimut.

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All those places out-perform Toorak, Elwood, Elsternwick, Glen Iris, Kew and Malvern on capital growth rates.

Upmarket near-city locations which have outstanding growth rates &ndash; these are the exceptions rather than the norms &ndash; include Hawthorn, South Yarra and South Melbourne.

The key message is that the elements that drive values higher, because they attract buyers in large numbers, include affordability, infrastructure and lifestyle. Proximity to the CBD doesn&rsquo;t feature prominently.

So, if you&rsquo;re a home buyer or investor with a budget that forces you to buy in middle or outer ring areas, don&rsquo;t worry about it. There are way bigger things it&rsquo;s good to be close to, other than the CBD.

It’s long overdue for real estate consumers to let go of the notion that proximity to the CBD matters.

terryryder

Nothing wrong with buying property away from the CBD: Hotspotting's Terry Ryder

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A detailed survey on the current state of the CBD Office markets by Jones Lang LaSalle was recently reported in the Australian Financial Review (16 July 2015). 
And as you can see from the table below, there are now significant disparities among the CBD Office markets around Australia.
<a href="/images/2015/08/06/CBD-Offices.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/08/06/CBD-Offices.jpg" alt="">
 
Although Brisbane, Perth and the Canberra each have (total) vacancy rates of 15% or more … there was a healthy 205,000 sqm of space taken up by Business  and Government nationally, during the past 12 months.
<h3>Rental Movements</h3>
Even so, you will notice rentals only rose in Sydney (+2.3%) and Melbourne (+5.2%) — where momentum and confidence have clearly now started to return.
Whereas, the other states have all shown a decline in their office rentals, as space requirements have contracted.
Sydney has been experiencing strong demand for A-grade space — where that vacancy rate has now fallen to 5.2%.
Likewise, Melbourne has seen a solid take-up. Although its vacancy rate rose marginally, to reflect the availability of some backfill space.
 Interestingly, there has been strong demand by smaller tenants seeking space under 1000 sqm.
The general consensus is that conditions will continue to improve through 2015-16; and the vacancy rates in the underperforming capital cities will hopefully stabilise.
CHRIS LANG is an advisor to commercial property investors, sell-out author and regular speaker on how to invest in commercial property. You can contact Chris <a href="https://commercialpropertymadeeasy.com/" target="_blank">here</a>.
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chrislang-EQKojcgJPV

Significant disparities among the CBD office markets: Chris Lang

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A total of 313,700 sqm of Premium and A-Grade projects in the past six months has given Melbourne’s CBD a new milestone of the largest CBD office market in Australia, according to JLL Research.
In Q2 2020, JLL Research found that the Melbourne CBD’s total office stock was 4,953,033 sqm. Now, with the practical completions of three new major developments this month, the Melbourne CBD reaches a new stock total of 5,107,840 sqm. Sydney’s total office stock for Q2 2020 was 5,024,240 sqm.
The three office completions crowning Melbourne as the largest office CBD in Australia include the following developments:
1. Cbus Property and Keppel REIT’s Victoria Police Centre at 311 Spencer Street, including 65,000 sqm of office space.
2. The Lendlease Two Melbourne Quarter at 697 Collins Street, including 46,350 sqm of office space.
3. Dexus 80 Collins Street, including 42,960 sqm of office space.
JLL’s Managing Director (Victoria) - Craig Shute said, “The completion of these three projects marks a real inflection point in the dynamics of Australian CBD’s.'
Melbourne is now the largest Australian city in terms of commercial office space and this status is unlikely to change. This rapid rise is testament to Melbourne’s balanced economic drivers and will result in an increase of national and global investment capital seeking a foothold or looking to expand their portfolios in the city."
"We are confident Melbourne will rebound relatively strongly as we recover from the current COVID-19 restrictions and re-open for business,” He added.
Other projects completed in the Melbourne CBD earlier this year include Mirvac and Suntec REIT’s Olderfleet building at 477 Collins Street (56,584 sqm), Charter Hall’s Wesley Place at 130 Lonsdale Street (55,000 sqm) and Cbus Property and ISPT’s Collins Arch at 447 Collins Street (47,517sqm).
Whilst a large amount of supply is being delivered to the market, there is very little vacancy, with 94% of the 313,700 sqm office stock being delivered in 2020 already pre-committed, according to JLL Research.
JLL’s Senior Research Director (Victoria) - Annabel McFarlane said, “JLL has been tracking office stock in Melbourne’s CBD office market since 1970, when the size of the market was just 1.45 million sqm."
"The most significant contribution to this growth has been Docklands as a new CBD precinct, delivering just over 1 million sqm of new, high quality office stock and pushing Melbourne to now Australia’s largest CBD office market, just larger than Sydney’s CBD office market,” she said.
Ms McFarlane continued, “Significant momentum and strong demand throughout the last 20 years has supported office market development. Melbourne’s CBD office market has accounted for 40% of all CBD net absorption (1.7 million sqm) in the six CBD markets we track. This compares to Sydney (739,900 sqm), Canberra (647,600 sqm), Brisbane (542,850 sqm), Perth (293,700 sqm) and Adelaide (291,300 sqm).”
Melbourne and Sydney’s CBD office markets are comparable in size to several major international CBD office markets including Madrid which stands at 6.5 million sqm, Barcelona at 4.9 million sqm and Berlin at 4.5 million sqm.
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j.ballantyne1990-6AQqhLzZaK

Melbourne takes crown as the largest CBD office market in Australia: JLL

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GUEST OBSERVER
Globally, there is intense discussion about the future of urban life through the World Urban Campaign.
The central proposition is that the battle for a more sustainable future will be won or lost in cities.
Presumably, this is predicated on the fact that 54% of the world’s people live in cities, where 70% of global GDP is generated. By 2050 the urban population will have risen to 66%.
In parallel, following the Paris climate agreemen<a href="https://theconversation.com/the-paris-climate-agreement-at-a-glance-50465">t</a>, major cities are committing to measures designed to significantly reduce greenhouse gas emissions. The poster for this campaign should read “Coming to your city soon".
It is clear 2016 will be the “urban year” as the global community prepares for the Habitat III summit in Quito, Ecuador, this October.
At Habitat III, governments will agree an urban agenda to guide global urban development over the next 20 years. The agenda is taking shape through preparatory meetings (the next one is in Indonesia in July), as well as regional and thematic meetings.
A series of 28 urban thinkers campuses has been organised across the globe, running until February 2016. One of the last of these is in Melbourne, Australia.
<h2>A world of challenges</h2>
We are all too familiar with the problems cities commonly face. These include rising house prices putting ownership beyond the reach of many, suburban sprawl, long commutes, traffic congestion, social problems, isolation and polarisation.
<div class="enlarge_hint">At the same time, Australian cities have real strengths. This is reflected in their performance in various rankings on liveability and quality of urban life. But we ought not assume that this situation is sustainable, or that we can lock in liveability.</div>
Globally, cities face even greater challenges. In the global south, if you live in a city there is a one-in-three chance that you live in a slum.
Also, despite progress on the Millennium Development Goals, poverty is still our greatest urban concern. It is not limited to the south and has been growing across cities globally since the global financial crisis. Limited financial resources constrain the capacity of city administrations to respond to these challenges, especially in the face of austerity measures.
While that may seem like a pretty glum picture, there are reasons to be hopeful.
In a survey of 20 cities last year for the UN Global Compact Cities Program we identified many examples of civic leadership and urban innovations.
Related to this, in the US, Bruce Katz and Jennifer Bradley at Brookings have described these innovations as a “metropolitan revolution”. They argue that local leaders are doing the hard work of growing the job market and making their communities more prosperous. They cite examples in New York, Portland, Houston and Miami.
In Europe, the Norwegian city of Oslo plans to be fossil-fuel-free by 2030. Utrecht is the first of several cities in the Netherlands planning trials in which they pay citizens a universal basic income.
<h4> </h4>
<div class="enlarge_hint">Across the English Channel, Bristol is seeking to transform the economy by introducing a local currency. The Bristol pound is designed to strengthen business relationships within the city and to build trust.</div>
What these cities and their leaders have recognised is that “business as usual” will not get us to where we need to be.
Technological innovation, institutional reform, financial investment and regulatory change are all part of the answer, especially as we seek to achieve development goals while ensuring we do not undermine our environmental sustainability. However, we may need to dig deeper. Something that we neglect is the need for changes in values at both the societal and individual levels.
Twisting Einstein’s famous quote somewhat, it is possible to assert that “we can’t solve problems by using the same value system that created them".
Here is where the notion of the ethical city comes in.
<h2>What is the ethical city?</h2>
Ethics is concerned with what is “right, fair, just or good”, not necessarily what is most accepted as normal or expedient.
Most people will have heard of the term ethical corporation. It suggests that such businesses place certain key values and practices at the centre of their operations. This could include fairness, integrity, respect for the environment, elimination of discrimination, and so on.
Internationally, some of these key values are elaborated in the ten principles of the UN Global Compact. Thousands of companies have signed up. Mayors of cities and governors of regions can also sign up to these principles by sending a letter to the UN secretary-general.
Yet the term ethical city is rarely used, even though ethical considerations underpin how we plan and manage our cities. And the ethical values underpinning the vast majority of our decisions about city life are rarely made explicit.
Even so, in most cities we already see various measures designed to support ethical governance. These range from internal commissions to audit and check on performance through to measures to promote transparency and community participation in decision-making.
Urban leaders, administrators, planners, engineers and others are aware of the ethical ramifications of their work, have guidance to refer to and training when needed. Although sometimes people fall foul, the vast majority do not because they are seen to be doing the right thing.
But we must recognise that there is a dominant view of “business as usual” based on an embedded set of values. Good examples include how most cities are designed primarily to accommodate the car, how we work in the CBD and live in the suburbs, or how homelessness is seen as a fact of life in many cities.
<h2>How do we create a more ethical city?</h2>
Thought leaders like Peter Singer have done a lot to elaborate the importance of ethics in everyday life, especially with his book Practical Ethics. However, we live in utilitarian times.
More than ever, our cities need ethical leadership – good governance, transparency, public trust building and fairness. They need ethically based planning to deal with the complex challenges facing our communities. This depends on our willingness to tackle the tough questions around sustainability, resilience, economic vibrancy and inclusiveness.
There is also our role as citizens. What are our expectations of ourselves as ethical, engaged citizens? What do we expect and deserve, and what are we prepared to commit to each other in the ethical city? What kind of citizens do we need to be?
Most of all, if we end up agreeing that we need a city that cares, how do we navigate to this end in a world where private profit and consumption are kings and where the tenets of the ethical city – social inclusion, climate action, gender equity, rights of children and youth, and myriad other rights and needs – are lacking?
If this sounds like a new year dose of utopianism, think of cases that you could envisage in your city – from participatory budgeting, to crowd-funded social enterprises, to any number of people who decided “what should we do?”, then acted on it.
 
Brendan Barrett is research fellow, RMIT University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/brendan-barrett-179124" target="_blank">here</a>.
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