Australia is in the middle of a transport infrastructure boom. More than AU$70 billion in projects are either already under construction across the country or awaiting planning approval, with most designed to improve travel times and business productivity.
And, the knock on effect of these increased transport links is providing an opportunity for real estate investors and developers.
Sydney has the lion’s share of the biggest transport projects, with the Westconnex Motorway, a new inter-modal terminal at Moorebank and a second airport at Badgery’s Creek all underway or on the cards while other significant projects are also destined for Melbourne (the Western Distributor), Brisbane (the Gateway Motorway upgrade) and Perth (Forrestfield Airport Link).
Population growth is the critical driver behind the surge in transport infrastructure, but not just for passenger transport – both industrial occupiers and industrial investors, have been affected, too.
JLL’s Head of Industrial for Australia, Michael Fenton, explains the crucial knock-on effect impacting Australia’s cities, transport infrastructure and industrial markets.
“To cater for population growth, a number of precincts in Australia’s major capitals have been rezoned from industrial to residential use, resulting in additional stress on transport infrastructure,” he explains. “As a result of the additional congestion and increased property values, industrial occupiers have been forced to relocate to areas further away from the inner metropolitan areas. This has been particularly evident in South Sydney and Port Melbourne.”
While relocating to outer ring suburbs has resulted in cheaper rent for many industrial occupiers, the additional transport costs and carbon emissions of moving product greater distances can often impact the bottom line, furthering the need for more efficient transport links.
The power of connections
The phenomenon is likely to be particularly acute in Sydney. JLL’s Director of Strategic Consulting, Tim Brown, points out that the Greater Sydney Commission (GSC) has identified that sustained population growth over the coming decades will require a minimum of 36,250 new homes every year.
“As Sydney becomes more constrained, there will be a growing importance in allowing development near rail and metro transport nodes, leaving locations with poor transport amenity behind,” Brown says.
“This also marries with the GSC’s intention to provide ‘more housing in liveable neighbourhoods close to employment opportunities, public transport, walking and cycling options for diverse, inclusive multi-generational and cohesive communities’.”
Importantly, these new transport networks won’t operate in isolation, they will be ‘multi-modal’, joining together to reduce congestion.
“Australia has, until recently, lagged many of the world’s developed markets when it comes to transport infrastructure,” Fenton says. “The lack of connectivity between the different transport modes of road, rail, sea and air has created blockages and inefficiencies in supply chain networks. This has extended to capacity issues for many transport modes, further exacerbating the problem of moving people and goods through the metropolitan areas of our major capital cities.”
“Now that this is being addressed through a record period of infrastructure investment, we can expect to see Australia emerge as a contender for best-in-class in transport. This is particularly evident in Sydney, where there are projects underway or planned such as the Westconnex Motorway, Moorebank Intermodal and Badgery’s Creek Airport will all seamlessly link with existing transport infrastructure to provide greater flexibility and efficiency when moving around the Sydney transport network.”
Developers are taking note
The anticipated boost in transport infrastructure has not gone unnoticed by developers.
“We have witnessed a spike in demand from developers and occupiers seeking to take a position in and around these transport nodes to take advantage of the huge cost savings from a reduction in transport times,” Fenton says.
Brown agrees, adding: “The opportunity to shape product and commuter transport connectivity arrangements is clearly superior in a development conceived as a ‘Transit Oriented Development’. The cost and time for delivery are materially lower where new transport infrastructure is aligned with commercial development.”
However, while the market has begun to shift towards transport nexuses, they need not necessarily be all things to all developers, nor all occupiers.
“Not having access to multi-modal options isn’t the end of the world for property owners and occupiers, particularly in smaller, more concentrated cities where single-mode transport may be a perfectly viable and cost effective option,” Fenton says.
“For multi-modal transport to be truly cost-effective for a business, it requires a high volume of product movement through the supply chain network. Therefore, smaller to medium-sized assets – those under 10,000sqm – are still viable and will have a broad appeal to a number of users, even with single-modal access, such as roads.”
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