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Unlocking employment in Western Sydney

Unlocking employment in Western Sydney

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By 2026 it is where more than half of Sydney will live. By then it will have its own international airport, billions of dollars’ worth of new major road and rail links and possibly Sydney’s tallest residential tower.

But the key to Western Sydney’s success will not only be about building new transport links.

The region’s success will come down to whether there will be enough jobs for its fast growing population which will number more than 3 million within two decades.

With Sydney already suffering significant congestion issues it is becoming increasingly untenable for people living in the outer western suburbs to commute to work in inner or CBD Sydney.

Employment lands

The NSW Government’s Metropolitan Strategy for Sydney has a number of initiatives to drive employment growth in Greater Western Sydney, which by its estimations will require more than 300,000 new jobs by 2031 to achieve status quo of social progress.

The key region behind this strategy is the Western Sydney Employment Area (WSEA), an area of still mostly undeveloped industrial land which the state government hopes will be the single largest driver of employment growth in NSW in the coming decades.

A further 4573 hectares of additional land was proposed to be added by the NSW Government in 2013 to the WSEA, which included the vast area of land north of Badgerys Creek Airport.

The Department of Planning has forecast this extra parcel of land, called the Broader WSEA, will provide more than 57,000 jobs over the next three decades. And 212,000 over the longer term. But is this realistic?

Land availability and competitiveness

Most of the undeveloped land in the original parcel of WSEA land is located in Eastern Creek and Erskine Park.

Based on the average take-up of land in Greater Sydney for industrial use which has run at around 114 hectares a year over the past decade, there is around 12 years of supply within the current WSEA.

But the Broader WSEA is mostly greenfield englobo land, half of which is made up of fragmented private land holdings of less than 20 hectares. At a cost of least $100 per square metre to develop the smaller parcels of land in this area, the challenge will be to get these owners to amalgamate their parcels of land to ensure they develop the land in the most efficient way to make land competitive.

Land in western Sydney for immediate development is already scarce, with serviced land in the WSEA declining 82.5 per cent since 2010. Sydney now runs the real risk of losing businesses to rival states.

To attract the businesses that will provide jobs and keep NSW competitive, we will require land that is serviced and has the appropriate infrastructure.

If you compare the cost of land between the key logistics hubs in Sydney and Melbourne, the NSW capital is 2.75 times more expensive in terms of industrial land. It costs up to 50 per cent more in rent for businesses in Sydney than Melbourne.

Why is this so? In the west of Melbourne there is more than 2000 hectares of zoned and serviceable land with an average take-up of 120 hectares a year. That equates to 16 years of supply that can be turned on when there is demand for the land.

But in Western Sydney, only 55 hectares of the designated employment lands is zoned and serviced. Sydney clearly has a problem.

With major road projects such as the M12 and Northern Road stage 3 and 4 upgrades yet to get any financial commitment, there is the risk their timing could blow out. When land supplies dry up in the next 3-5 years, the infrastructure won’t exist to support new land releases.

So the challenge will be whether Sydney has the capacity to connect its population to employment over the next decade. On top of this is the strong growth in freight traffic, with container volumes expected to grow up to 8 per cent per annum over the next 25 years.

Demand

Demand for industrial land will come from the substantial number of occupiers of land in inner city areas, that have been lost to gentrification particularly south of the CBD, the growth of Western Sydney’s population, growth in consumer goods and high-growth sectors such as healthcare.

The onshoring of manufacturing through new technologies such as 3D printing is also expected to drive demand for industrial land.

Western Sydney has already seen the roll-out of some of Australia’s largest distribution centres – a swag of them developed by GPT – with the transition from manufacturing to consumables.

Recent figures indicate that if you live within 15 kilometres of the city centre there are 8 jobs per 10 people. Outside of that (think Western Sydney) there are only 3 jobs per 10 per people. This creates congestion, social dislocation and plays into the hands into Sydney’s interstate competitors.

If Sydney doesn’t get it right and ensures it has a strong pipeline of competitively priced and serviced land, it runs the risk of losing jobs and competitiveness to rival capital cities such as Melbourne. And the plans for the WSEA to be the city’s employment growth engine could remain just a pipe dream.

This is an abridged version of a recent speech John Thomas gave to the Developing Greater Sydney conference.