Connected, growing and liveable – that’s how I’d describe my ideal future city. Actually, that’s the minimum!
When I consider how we might future-proof cities – how we might make them today what they should be tomorrow – and how we can cater for upwards and outwards expansion, I see big challenges in preserving the special and distinctive character of individual cities. In Melbourne, for example, the challenge is how to maintain its fabulous quality of life and still keep its open spaces and historic laneways.
At JLL, we are constantly investing in new technology that enables us to present data in the most informative and illustrative way possible. Our research capability is extensive and, when set alongside technological analysis, we really can add valuable insights to enhance our clients’ understanding of potential investments.
Consider this: JLL research shows the state of Victoria is leading Australia in population growth. Victoria’s population is growing by over 130,000 people each year, and the city is being forced to adapt to the swelling population. That has had a really interesting impact on CBD prospects.
For the past decade or so, centralisation was a key theme of the Melbourne CBD office market. Businesses saw the multiple and varied amenities of the city as enormously attractive; the offering of the city centre helped to draw and retain talented staff.
Now, though, more people are moving to live in the central business district – and businesses are starting to look elsewhere. As the demand for residential projects continues to grow, the sites available for potential office developments in the CBD decline. Indeed, they will become increasingly rare.
Melbourne is entering a new phase. While the city’s relative affordability and convenience will continue to support strong population growth – and, as a result, residential development – some CBD precincts will begin to change in character. Docklands, on the western edge of the CBD, is already close to being built out.
If Melbourne is to retain its liveability credentials (and they are considerable credentials), new infrastructure in areas such as transport, roads and telecommunications, is vital. Helping residents get around this expanding city, and getting them from their homes in outer regions to business areas, or simply across the central CBD swiftly, is key to ensuring Melbourne’s position as a leading city.
Melbourne is widely recognised as Australia’s cultural capital. It’s also a vibrant centre for education and innovation – just think of the research work being done in medical research, science, engineering and telecommunications. All this is creating a cosmopolitan community of well-educated professionals, hard-working small-business owners and tradies, plus students (especially many thousands of international tertiary students) and, of course, tourists.
The City of Melbourne and the state government are very much thinking about the future structure of Melbourne. The redevelopment of the Docklands area has extended the commercial heart of the city, and the new office blocks there are filled with major federal and state government agencies, banks, financial institutions, media companies and other enterprises that want state-of-the-art office amenities and services.
At the same time, ambitious multi-billion-dollar infrastructure developments are well under way to strengthen and extend the city’s road and rail networks. Regional opportunities are also being pursued vigorously.
When it comes to investment, office assets in Melbourne are attractive compared to office markets elsewhere. They remain a strong focus for foreign investors. Strong demand from investors have kept prices high, driving down yields.
That’s partly because there is only limited opportunity to buy sizeable, prime-grade assets. In reality, only 54 prime-grade assets of more than 25,000 sqm exist in the Melbourne CBD office market – and only 19 of these were built in the past decade.
Melbourne continues to perform strongly as a global city. Vigorous population growth and business expansion is fuelling residential development and commercial projects led by pre-commitments. With so much construction activity on foot, developers are increasingly finding they are unable to secure sites that are suitably big enough for their next office project.
The current pipeline for development is likely to be finished by 2021 – just two years from now – and the lack of available sites of significant size means it will be that much harder to start the next wave of office development. Melbourne has been characterised by centralisation for a long time, but I suggest that the next wave of development will have to come from the fringe areas.
Melbourne is forecast to have the biggest workforce in Australia by 2046 and, with declining options for office development in the CBD, the fringe office markets around the edges of the city will surely assume a more important role in providing large-scale worksites for the future.