Sydney property market - same old, same old, or… ?

Our Sydney office has been particularly busy of late. Current themes of work undertaken include:

  • Industrial rezonings – not easy, but there are plenty of landowners looking to convert disused industrial space to higher valued residential or other business (mixed use) zonings. This often stems from the fact that industrial lands are run-down and new investment hinges on a higher value outcome.
  • Retirement and health – not always hand-in-hand but the appetite for seniors accommodation services and the roll-out of new health ventures has certainly increased. Investors and developers are interested in unlocking the potential for health development at a local, district and regional scale.
  • Inner urban retail – achieving best anchor tenancies to refresh retail offerings which are generally under-performing.
  • Precinct sizing – looking at the potential population and employment capacity of designated centres, which often differs from the capacity of the infrastructure that serves them.
  • Greenfield scale – sizing up new releases and their employment/retail potential in addition to reassessing existing retail assets in established suburbs.
  • Highest and best use assessments for a range of property assets, particularly looking at the underpinning of non-residential or mixed use outcomes.

A key theme that emerges from this work is the market’s desire to better understand ‘employment’ and how they can incorporate viable jobs-generating development on their sites. This is not surprising in a Sydney market – residential stacks up but the ‘other stuff’ is proving to be a little more difficult.

The theme is repeated in recent work undertaken for several local councils who are interested in how employment evolves and what to make of dilapidated industrial lands or under-performing centres. It is overlayed by a consideration of infrastructure capacity and the frustrating art of reverse engineering a centre’s capacity to suit the carrying capacity of roads or rail.

The nature of much of our recent Sydney work has added value to the thinking about employment land.  Recent research shows that all of the growth in jobs has been in smaller businesses within the services sector.

Our outlook for Sydney points to further upswing in Sydney’s construction cycle, across transport infrastructure, apartment building and non-residential building. Jobs growth in outer Sydney is secured whereas employment growth in inner Sydney is anticipated to slow over the coming years.

The irony is that much of the land that developers have identified for a new zoning is located in inner or established Sydney, and that maybe the ideal of protecting such land is denying real employment growth. This outlook follows from the trend decline in the manufacturing sector, and the reshaping of the wholesale trade & warehouse businesses. This will be fundamental for business operations in south Sydney, as the Moorebank IMT shifts the passage of freight directly to Western Sydney.

Employment grew at a robust annual rate of 1.6% between 2004-2014 but is anticipated to slow in the five years between 2015-2020 to 1.4%. Employment growth in infill locations is expected to recede from the 2010 – 2015 rate of 427,000 jobs to just 280,000 job additions between 2015 – 2020.

Employment Growth by region - Infill Locations (2010-2015 & 2015 - 2020)

Employment Growth by Region


Employment Growth by region - Greenfield Locations (2010-2015 & 2015-2020)Employment Growth by Region_Greenfill

Source: ABS, MacroPlan (2015)

Just thinking aloud, however, maybe it is time to revisit some of Sydney’s age-old planning dogmas that govern the way that we plan for (and protect) employment growth. Maybe the old “zone it and they will come” needs to be tested. It certainly seems that the market is keen to explore new delivery options and is receptive to combining jobs and housing in a range of mixed use formats.

About MacroPlan: MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities.  Contact Wayne Gersbach, General Manager – New South Wales, today to discuss your property research requirements.