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New report a stark warning for jobs in Melbourne CBD’s future

Without an urgent rethink of recently introduced development controls, Melbourne’s CBD risks running out of the office space needed to house the jobs being created in a burgeoning workforce that is powering the state’s economy.

In less than two decades, by 2036, the CBD will need at least a 50% increase in CBD floorspace of 9.1 million sqm – including an additional 4.4 million sqm of office floorspace - to accommodate future workforce projections.

But recent changes to planning regulations have put a handbrake on new office development that could undermine Melbourne’s future as a vibrant, liveable city and international business hub.

The new report by Urbis, commissioned by the Property Council of Australia’s Victorian Division, found that without changes to the C270 regime, the annual economic output of the State could be reduced by as much as $7 billion per annum.

Executive Director Cressida Wall said the report clearly demonstrates that in the two years since the C270 controls have come into effect CBD office development had “ground to a halt” with only two new commercial office buildings approved.

“We now have a solid evidence base showing the dangers of not properly planning the future development of Melbourne CBD, which is home to the highest concentration of jobs and economic activity in the state,” Ms Wall said.

“This report is a warning to policymakers that an immediate review of C270 planning controls is needed, with the impacts of this policy plain to see and cause for serious concern.

“Melbourne already has the lowest amount of office space available of any capital city in Australia, having dropped from 4.5% to 3.6% over the six months to July 2018, and the city simply can’t afford to see that diminish further.

“Melbourne’s CBD desperately needs more office floorspace growth to support the high-value jobs that are so vital to our economy, and for this to occur commercial development must be supported.

“New residential supply is essential for affordability but so are jobs, and it is imperative that governments get the balance right in critical commercial precincts like the Hoddle Grid, Docklands and Southbank if we are to preserve Melbourne’s status as one of the world’s great cities.”

Between 2001 and 2016, employment within Melbourne’s CBD grew 83% from just over 173,000 jobs to more than 317,000 jobs. With Greater Melbourne’s employment level growing at a slower 52%, the CBD’s share of metropolitan-wide employment has grown from 13% in 2001 to 16% in 2016.

Meanwhile, the increase in commercial space in the Hoddle Grid over the 10 years to 2016 was just 6% (239,000 sqm) growth while residential floorspace increased by 96% (817,000 sqm).

Urbis analysed other leading international cities, finding that residential and commercial properties competing for space, especially in city centres where amenity, services and existing employment concentrations are highest, was a common challenge. They warned that this competition threatens the economic success of cities.

Whereas cities like Sydney had supported the delivery of major new A Grade office stock with precinct-wide transport connectivity and world-leading sustainability features, like Barangaroo (280,000 sqm), many of Melbourne’s most iconic new office blocks would not have received approval under the current C270 system.

Completed buildings

Buildings under construction

120 Collins Street

80 Collins Street

CBW – 181 William and 550 Bourke Streets

Wesley Place, 130 Lonsdale Street

Mercer Building – 11 Exhibition Street

Olderfleet Building – 477 Collins Street

Ernst and Young – 8 Exhibition Street

Collins Arch – 447 Collins Street

SX1 Building – 121 Exhibition Street

 

SX2 Building – 111-129 Bourke Street

 

Note: In many cases the floorplates of the buildings would need to be significantly redesigned and reduced in size to achieve compliance with the current controls. It is possible that in some of these circumstances the usability and viability of the building would be significantly compromised.

These well-designed buildings add to the fabric of Melbourne’s CBD and have a combined value of approximately $5.8 billion, accommodating approximately 34,500 Victorian jobs.

“Large-scale commercial developments need to be able to attract sizeable tenants to get off the ground – tenants who are increasingly discerning with an established flight towards quality that also demands access to public transport and workplace efficiencies,” Ms Wall said.

“Strong supply of commercial office space is crucial in supporting our growing population, which will exceed Sydney by 2051, and maintaining the world-leading calibre of our smart, 24/7 economy.

“The report sums the situation well in its observation that, while Melbourne is the key to Victoria’s economy, it is the CBD that powers it.”

The report makes five key recommendations:

  1. Immediately introduce interim CBD planning controls to increase flexibility and support employment growth.
  2. Prepare an economic strategy for the CBD to ensure it remains a key economic hub.
  3. Conduct a comprehensive review of current CBD planning controls to support the economic strategy.
  4. Improve the efficiency and certainty of the current CBD planning approval processes.
  5. Promote and enhance transport infrastructure in line with anticipated CBD employment growth.

Media contact: Cressida Wall | M 0415 831603 | E cwall@propertycouncil.com.au