Pub­li­ca­tions

Smart devel­op­ers ride the slip­stream of NSWs $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.