Smart developers ride the slipstream of NSW’s $73 billion infrastructure investment
I work near Wynyard, in the heart of Sydney’s CBD. Like everyone else in the city I rarely need reminding that the State Government is investing heavily in infrastructure — though I do sometimes need reminding how to get across George Street while it’s being dug up for light rail.
There are frustrations for all of us while the redevelopments take place, but the sheer scale of the investment is singularly impressive. The NSW Government is spending $73 billion on infrastructure in the years to 2020 – that’s almost $10,000 per person currently living in the State.
The impact is going to be immense — not just for us as individuals, but for the State’s economy and future as well.
We are promised better roads, more public transport, reduced congestion and improved essential services. Already NSW is reaping the rewards of the recently opened International Convention Centre which is attracting conferences and summits from around the world, and private development in Barangaroo has revitalised an important segment of the city.
Other urban renewal projects are in train – projects such as The Bays Precinct and the Central to Eveleigh Corridor promising significant commercial, residential, education and retail development. There are further development opportunities to emerge from the masterplan for the revamp of Sydney Olympic Park by 2030.
Add to all that the impact of a second airport for the city at Badgerys Creek 50 km west of the CBD and it’s clear that Sydney is a city on the move. Literally.
While the infrastructure investment itself is promoting development, there have been somewhat unexpected benefits for property investors and landlords.
There have for example been unprecedented levels of stock withdrawal to make way for roads and public transport. That has come at a time when business, and particularly innovative fast growth companies, are looking to expand or establish a foothold in Sydney.
There are historically low vacancy rates in some parts of the city, and as a result rents have risen substantially. Colliers International says that even on Sydney’s CBD fringe the effective rents have risen 30 per cent in the year to March.
In the background there are murmurs about a potentially cooling housing market, and one of the leading analysts, CoreLogic, has forecast a correction of up to 10 per cent over the coming year.
The trick now is for developers to carefully analyse what is going on, investigate the investment pipeline and property cycle, and use those insights to plan the next move.
Already it is clear that large industry has moved to the west. The second airport and improved road and rail connections create opportunity for development — residential, commercial and industrial – right along that corridor to the foot of the Blue Mountains.
The unprecedented degree of stock withdrawal that has taken place in the city meanwhile is prompting developers to recalibrate – should they invest in residential, which has previously delivered a high return but where the future may involve a correction, or capitalise on surging commercial stock demand and historically low vacancy rates?
These are important issues to weigh.
For smart developers there has never been an opportunity like this in Sydney before; the opportunity to ride the slipstream of NSW’s infrastructure investment and play a critical role in the reimagining of one of the planet’s great cities- delivering economic and societal benefits in spades.