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Unlocking investment and development potential: the role of planning schemes in supporting development viability

Are planning schemes a limitation for markets or an enabler of markets? In their most effective form, many schemes are powerful enablers of sound and sustainable development, driving economic growth and enhancing the urban environment. The opportunity for such schemes to act as a potent tool for employment and investment generation is significant - with urban development responsible for approximately 7.3% of Australian GDP and employing almost one in every 10 Australians. According to the UDIA, for every $1million in turnover generated, over 11 full time equivalent jobs are created and sustained . In order to maintain and grow these figures it is imperative that local governments implement measures which support development opportunities and reduce development risk.

Ben Koop, JLL’s Strategic Consulting Director in Queensland notes that while governments at all levels are aware of the development industry’s contribution to the economy, there are still many examples where a local authority’s aims to boost employment, support housing affordability or increase revenues are thwarted by the sometimes unintended consequences of its planning scheme. The Property Council of Australia’s 2015 Development Assessment Report Card supports this, citing ineffective planning as a key factor driving up the price of housing and commercial projects. This is echoed in a recent article in The Economist  which highlighted the ‘staggering costs’ of planning regulations which keep urban land productivity low. The article cited a recent London School of Economics study which found that land-use regulations inflated the price of office space by 800% in the London West End and 300% in Milan and Paris. The lion’s share of the value of commercial real estate in Europe’s most economically important cities is thus attributable to rules that ration land and make building difficult.

The same is undoubtedly true in Australia. Whilst much of this regulation is necessary and desirable, Koop notes that the impact of planning regulations is not always fully understood and can be counter to overall state or local government objectives. He says a sound understanding of local market drivers and the impact that zoning, code criteria and planning controls have on investment sentiment and property values is a key factor in achieving the desired outcomes.  Best practice examples where JLL has worked with local governments to harness this insight have demonstrated that when integrated effectively in planning schemes, such schemes become powerful agents of development viability, job growth and investment attraction. In an increasingly competitive market he points out that this can be a major differentiator between local government areas in attracting a larger share of investment. It can also make a significant impact in creating the environments where businesses want to locate and people want to work or live.

JLL has a long history of successfully partnering with leading planning consultants, councils and associations such as the South East Queensland Council of Mayors and the Planning Institute of Australia. Over the last five years in particular, it has provided advice and viability testing of new planning schemes to deliver best practice outcomes and support development viability.  Through in-depth industry knowledge, design expertise and targeted market engagement, key insights into specific local factors have been provided in areas such as:

  • Investment and development trends that influence supply and demand fundamentals
  • The relationship between land value, zoning and development viability
  • The impacts of density and built-form controls on construction costs and development feasibility
  • The financial impacts of extended assessment timeframes
  • The effects of code criteria and design requirements on project outcomes
  • The innovation benefits of controls based on outcomes and performance rather than on regulations and formulas
  • The factors which influence location decisions by local business
  • How scheme changes and regulatory measures can enhance the investment appeal of locations

Through such assessments it has been able to demonstrate that design parameters and trigger points between levels of assessment can have a significant impact on development viability, particularly in relation to car parking provision, car parking design, permissible building heights and maximum densities.

Based on these findings, JLL has reviewed and helped tailor planning responses which maximise investment attraction and development viability within local council areas.  These have included ensuring that:

  1. There is an informed and in depth understanding of the local market trends and drivers and that the planning scheme responds to these in an appropriate way.
  2. There will be sufficient demand for the desired form of development at a viable price point.
  3. The intent of the planning scheme, through zones, overlays, levels of assessment and intent statements encourages the desired forms of development.
  4. The planning codes facilitate high quality development without over prescriptive development controls.

It is clear when these four factors are understood and in balance with each other, planning risk is reduced, the approval process is streamlined, market certainty is improved and viable outcomes are supported.

As land values continue to increase and the development market becomes increasingly competitive, Koop says that governments who position themselves to respond proactively to market dynamics will have a clear advantage over other regions. He notes this advantage he notes will be created by authorities responding to market trends and supporting innovative design initiatives to reduce construction costs.  Such strategies will provide a major support to development viability, enabling them to attract a greater share of investment and drive economic development for their region.

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