The future of precinct developments NGAA Congress Nicki Hutley, Partner, Deloitte Access Economics 19 November 2018
Why do precincts matter? Context 2
Changing Australia Three big challenges Accommodating population growth and urbanisation Global economic competition Changing structure of our economy 12/11/2018 3
Rapid population growth has largely been in our cities Urbanisation and per capita GDP growth, 2000 Source: IBRD/World Bank This is a largely a good thing: but we re set to add ~380,000 people p.a. in next decade that s a new Canberra each year so we need to plan carefully 12/11/2018 4
But our cities are sprawling, at great cost Up or out? Population growth in Victoria between 1997 and 2017 has been concentrated in Melbourne s outer lying local government areas, resulting in ever increasing urban sprawl. Reimagine growth areas through placebased business cases 5
We need to divorce growth from the car 6
Multi-centric cities, built around precincts will lead to more inclusive growth 7
Globalisation Survival of the fittest 6000 World trade volumes (1913 = 100) 5000 4000 3000 2000 1000 0 Federico, Giovanni and Antonio Tena-Junguito (2016) 12/11/2018 8
Just what is a precinct? 9
Clusters What do we mean by precinct? Precinct planning typically involves the preparation of a blueprint for the area and often includes investigations into appropriate land use options, physical environment constraints, infrastructure requirements, [and] community values and expectations (Queensland Dept. of Planning) Collaboration area Innovation district 10
If Australia is to become a rising star, it will require a set of structural reforms at the federal level in areas such as education, tax regulation, and industrial policy. Yet one of Australia s first moves should be to transform its R&D-laden universities to become hyper-compact, connected, and collaborative locales of spiking innovative growth. (Brookings Institute, 2017) 11
Innovation precinct typologies NSW Innovation and Productivity Council Health and education University-centred Major asset-centred Inner city locations 12/11/2018 12
Measuring the productivity dividend of precincts is challenging But we see it anecdotally Innovation dividend Growth rate Agglomeration benefits Average rate of growth Time 13
Quantifying the precinct dividend Health-Education precinct example Measure Productivity increase from firms introducing innovation in production Productivity increase from engaging in collaborative Innovation with domestic partners 10-year ROI premium achieved by top 5 health/med tech stocks relative to ASX Health Sector performance 20-year annual ROI premium achieved by top 5 health/med tech stocks relative to ASX Health Sector performance 15-year ROI premium achieved by VC and private equity over S&P/ASX 300 Annual Innovation Dividend (percentage points) Source 2.7 Department of Industry, Innovation and Science (2017) 4.4 Department of Industry, Innovation and Science (2017) 2.9 ASX 5.2 ASX 5.6 Cambridge Associates (2017) 12/11/2018 14
Conundrum How do precincts and agglomeration benefits marry with the idea of increased remote working? 12/11/2018 15
Successful precincts What s the recipe? 16
Success factors The most successful global innovation districts, which combine anchor institutions, research companies and startups, are served by efficient transport networks underpinned by public transport connectivity in locations people naturally want to be. (Brookings Institute) Transformative place-making 12/11/2018 17
Success factors 18
Most new companies operating in global sectors, and the talent that they depend on, prefer the proximity, connectivity, profile and market access that is available near urban centres. NSW Innovation and Productivity Council 19
Case study: Macquarie Park Innovation District Life sciences and technology, pharmaceuticals, telecommunications 1. Accessibility for the workforce 2. Employment and industrial land combination of residential and commercial zoning 3. Critical mass including significant, ASX-listed companies 4. Amenity Range of facilities and recreational spaces, including the Macquarie Centre shopping district 5. Building Design The MPID plans to develop a range of urban collision spaces, incubation programs and SMART digital infrastructure 6. Telecommunications network The MPID has deep-tech incubation facilities, SMART event venues, collision spaces, a business hub and free Wi-Fi 7. Supporting infrastructure and investment It is anticipated that there will be deep-tech incubation facilities for medical and life science-related research 8. Hosted events e.g. MPID Transport Hackathon and Healthcare Hackathon 9. Overarching vision and governance Collaborate, Create, Connect, Community. 1.Macquarie Park Innovation District, key characteristics 12/11/2018 Sources: Macquarie Park Innovation District (2018); Department of Planning and Environment (2016); Macquarie University (2016); UTS Centre for Business and Social Innovation (2017). 20
Implications for Growth Areas 21
We live in some of the largest and least dense cities in the world Hong Kong Delhi Singapore Seoul Shanghai London Tokyo Paris Los Angeles Sydney New York Melbourne Perth Brisbane 0 5,000 10,000 15,000 20,000 25,000 People per square km 12/11/2018 22
Leveraging economic precincts and greater density will benefit all We could have cheaper and better infrastructure Greenfield infrastructure costs are more than 5x higher than infill infrastructure costs per dwelling We could be more productive and have higher wages We could have more small and local businesses Reduce our environmental impact An average single detached home consumes 88% more electricity than the average apartment There are social benefits too Mixed use community spaces are connected with cultural growth and social unity 12/11/2018 23
A more equitable city is within reach Economic precincts will be critical to reducing societal costs and decreasing disadvantage 12/11/2018 24
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