According to the people who specialise in these fields the future of the NSW economy is not in the CBDs. It’s in the industrial and light industrial zones that can generate technology centred innovation such as bio tech, med tech, robotics and so on.
Perhaps like Professor Veena Sahjwalla’s green ceramic micro factory that’s supplied tiles and fittings for a Mirvac apartment and has a hope of scaling up.
At the launch of the project on Wednesday, NSW energy minister Matt Kean said these types of industries and the circular economy in particular were priorities for the NSW economy.
But these exciting new economic opportunities are under constant threat of losing the industrial and light industrial land they depend on to pressures from residential and retail developers, especially big box. And no one is making any more industrial zones, especially in well-located areas.
The latest missive in this direction is The NSW Productivity Commission green paper on planning.
And just two weeks ago the same thinking was evident in new planning controls that threatening commercial zones in Sydney’s city and suburban CBDs, announced by NSW planning minister Rob Stokes.
These allow build-to-rent apartments to be in Sydney CBD’s B8 zone and in the B3 commercial centres of other suburban CBDs such as Waverley, St Leonards and Parramatta.
Most councils are not impressed.
The move they say threatens their carefully conceived commercial zones and allows the stronger residential sector, which can pay a lot more for sites, to squeeze out job creating activities that rely on cheap rent and therefore cheaper land. Which, by the way, they say will threaten economic recovery.
Australia is on the cusp of an innovation and manufacturing led revival
With the threats to industrial land, it’s not just about manufacturing, says Jeremy Gill, senior associate and partner, SGS Economics and Planning.
“It’s what’s going to drive the economy as we go into recovery, things like medical technology, bio tech, robotics. These don’t happen in offices, they happen in more flexible floor space.”
What we’re looking at, he says, is “an economic innovation eco-system in Sydney. It’s a huge opportunity.
“The future of the NSW economy is not in the CBD, it lies in these enterprise corridors.”
There’s a big reason to encourage diversity through mixed use and it’s a good one. It increases vibrancy, which is perhaps a word that can be swapped for resilience.
Gill says industrial zones do this well because they tend to be far more diverse in their activity uses than deemed “mix use precincts” that you get in commercial/resi zones.
“We looked at industry precincts and compared them to the Parramatta CBD and southern Sydney industrial precincts around Alexandria, Rosebery and Marrickville.”
“That zone creates as much value as the Adelaide CBD. And no one is saying rezone the Adelaide CBD to increase land value.”
Ask the Goodmans, Frasers and Charter Halls, who are doing a lot in that Sydney airport related-space, Gill says.
Some of them have plans to build multi-storey logistics centres.
“What we’re seeing is the move to vertical warehousing, which is a clear demonstration of value.
“The argument of everything moving westward is torn apart by business investing in expensive infrastructure to stay in the east,” Gill says.
“We’ll be seeing multi storey warehouses in the next couple of years. The City of Sydney knows where the planning proposals are.
“And the land around the airport at Rosebery is twice as valuable as the next most expensive industrial land in Australia, which is in Melbourne.
“So the market is saying this land is really, really valuable.”
New pressures on industrial
In recent times, there’s now a move to review industrial zones of which Sydney has 16 to lower number of zones with greater variety of permissible uses.
Planners say the momentum to make zoning more flexible for industrial and commercial land is a response to the developer lobby groups failing to make headway with the Greater Sydney Commission and taking its case to the Productivity Commission, which is understood to be staffed by a group from Treasury.
A kind of “stuff you” attitude, “let’s go to Treasury”.
Chief executive of the NSW Urban Taskforce Tom Forrest says more flexibility is welcome, pointing out that Melbourne has just a handful of industrial zones.
Others see this as way through to alternative uses such as big box retailing.
Forrest points to big industrial sites at places like Turella and Camelia that have languished for 30 years, near the railway.
Perhaps waiting for rezoning to residential? We suggest.
Sydney City Council’s director of city planning, development and transport Graham Jahn says the City has had to fight hard to keep industrial zones in its greater Sydney area industrial from falling to residential development.
“We protected that, and the old factory that doesn’t produce springs for cars because they’re not made in Australia any more for instance, might be now used for artisan bakeries or microbreweries.”
Developers tried very hard to get that land, he says, mounting “stupendous advocacy.”
What’s driving the bureaucrats?
Pressures typically come from developers but now these lobby groups look like they’ve nabbed the ears of the most influential bureaucrats in the country.
NSW Treasury through their influence (if not direct staffing) of the NSW Productivity Commission, the federal PC and in recent times even the Reserve Bank of Australia have all advanced the case for liberalised zoning.
What they’re saying is let the market decide what use land should be put to and rely on the old principle of “highest and best use.”
Jeremy Gill says the premise of the policy to deregulate zoning “perpetuates the myth” that residential and even retail construction increase the number of jobs and creates value because “you’re creating a higher value form of use”.
“Value is often described in planning terms as the land value. Or by the GVA [gross value added], that is, how much economic productivity an individual use creates in that precinct.
“Therefore, if you increase more jobs from low density to retail you are automatically creating more value.”
This thinking is bad enough in the city’s CBDs but with industrial areas this is especially problematic.
“Jobs that operate in non-CBD markets actually create a huge amount of value downstream… you need to conceive the value of the full spectrum of the value chain.”
So why do the PCs ignore this and advocate for more liberal zoning?
“Understanding and measuring of downstream value is hard to do. It’s very easy to measure land.”
For instance, $2000 a square metre for residential land versus $1000 a sqm for industrial.
More pressure – now for spot rezoning
When NSW Planning Minister Rob Stokes addressed a major lunch time property crowd a few years ago as he stepped into his role, we were surprised at the mutterings about him after what we thought was an excellent speech. It was what a planning minister should be saying: putting the needs of the entire state up front, and balancing competing interests as best as possible to achieve the overall best results.
Key to those tenets would be no spot rezoning. Because otherwise, what would be the point of any plan? Developers would simply buy what they like and then set about changing the laws to suit their outcome.
Now a mere few years after, his department looks like it’s caving in and has started carving out ways to change this “NO means NO” rule around spot rezoning. A pathway to review is being created and we hear they’ve already started to recruit for roles around this.
What the review process will do is open the door to legal challenge.
Before long it will be the barristers of the world who will decide who will use our land and the manner in which it will be used.
We asked the minster last week to respond to the above and other issues dealt with in this article and our editorial, but we’ve not yet received a reply.