New Urban Networks and Cities? Global Services Sector Interaction with the Digital Revolution

Emerging evidence of the globalisation of Australian cities can be seen in the arrival of international retail brands (Costco, Uniqlo, Aldi), international health and retirement companies (Bupa, Ryman), international development companies (Sekisui House, Frasers), international freight and logistics companies (Schenker, TNT), major Chinese developers (Greenland, Country Garden), and major international investment houses. Australia is estimated to have the 11th-largest institutional grade real estate market in the world (Fiorilla et al. 2012). Considered in the context of South-East Asia, it is the largest real estate market (including Indonesia, Malaysia, Singapore, Thailand and Vietnam), although considerably smaller than Japan and China. Accordingly, capital flows into property are increasing strongly in Australia and this situation is likely to persist.

Globalisation is driving competition and change in Australian city building. For example, Costco (US) and Aldi (Germany) have had a considerable impact on the supermarket sector in terms of location and pricing, as has Ryman (NZ) on the pricing and location of retirement living units. New types and sizes of investment (e.g. casinos, cruise ship terminals, airport cities and ports) are driving a new scale of competition. Parts of the Australian services sector (ports, airports, aged care, retail, etc.) have world-recognised monopoly profits that are eagerly sought by international investors.

New tourism product (hotels and serviced apartments) is being driven by offshore investment and there is significant potential for offshore investment in Australia’s health industry. To date, however, the scale and type of international investment has not challenged the orthodoxy of the current Australian property paradigm. The post-war garden city approach to urban planning, land subdivision, retail competition (challenged by Harper, 2015) and indeed the entire property sector has prevailed. Accordingly, extraordinarily high house and land prices, retail prices and the high cost of living have made Australia’s services sector less competitive.

Innovation and industry disruption, in conjunction with fast demographic growth and fast Asian economic growth, is challenging the current impact of communications and information technology, the Asian consumer class (i.e. the segment that earns and provides enough to use/purchase institutional-quality real estate) (Fiorilla et al. 2012) is forecast to increase by more than 850 million persons (500%) by 2031. This means fast-growing tourism, retail and international education, with accelerated investment in Australian real estate by international corporates and households. In reverse, Australia has the potential to sell goods and services into international markets. This is especially the case given the free trade agreements (FTAs) with China, Japan, South Korea and a likely FTA with India plus online sales to the USA.

Combining the effects of globalisation and new technology in Australia suggests that with innovative spatial planning, major service industries such as tourism and international education could double in size by 2031. This would drive higher levels of international corporate and household investment in business and property. Further, it would drive growth and change in retailing, conferences and exhibitions, trade shows, gambling (e.g. casino tourism) and in the broader spectrum of business services and goods distribution.

At the corporate level, significant capital investment can be expected if city building and development opportunities are made available. Major new freight and logistics hubs, ports, airports, tourism precincts, brownfields developments, retail centres and educational hubs will emerge as well as a new wave of health-related investments. These capital investments need to be part of the creative destruction of monopoly controlled, state sponsored Australian garden cities.

There is an urgent need to combine technology with deregulation to recreate the seed beds of innovation and smaller-scale investment that was previously to be found in Australian inner cities, but which have now been gentrified. We need a new city model, not more regulation of inner and middle ring areas.

Small and micro businesses can be a key part of the services sector growth provided Australia’s capital cities are restructured to create opportunities, not new regulations. For example, new low rent/well located precincts will be required in the middle and outer suburbs for households and businesses alike. Future Australian city development is likely to result in population and employment outcomes that are 10-20% inner CBD and 80-90% metropolitan. In 2016, most proposed public infrastructure expenditure is for the benefit of inner cities (even if the infrastructure is located in suburban areas e.g., radial fixed rail). This is translating into fast growth in inner ring property prices, the destruction of local communities and limited suburban regeneration.

  • How can Australian capital cities be grown to support a vibrant and creative small and micro business sector?
  • Can we create an anti-New York type ‘megalopolis’ outcome with a more dispersed geography?
  • Can we attract an increasing market share of growing Asian wealth to our cities – what policies and infrastructure do we need to achieve this?
  • How will we deliver authentic economic and cultural clusters inside and outside CBDs?
  • Can the eastern seaboard (Melbourne/Sydney/Brisbane) deliver a new exciting international experience – a network conurbation of the future?

[This is an extract from Chapter 2 of Destructive Cities by Brian Haratsis. Click here to purchase a full copy of the book.]