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Peak CBD? Where the urban jobs are going

By Ross Elliott - posted Wednesday, 17 August 2016


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.

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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. 

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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.

Footnotes:

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.’

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This is a slightly modified version of an article first published on The Pulse.



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About the Author

Ross Elliott is an industry consultant and business advisor, currently working with property economists Macroplan and engineers Calibre, among others.

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