PlanningForEmploymentandIndustryinMelbourne’sGrowthAreas

GrowthAreasAuthority October2011

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PlanningForEmploymentandIndustryinMelbourne’sGrowthAreas

ExecutiveSummary

Akeypartof thepreparationof strategicplans (GrowthCorridorPlans) toguidethe future development of the areas brought into Melbourne’s urban growthboundary(UGB) in2010hasbeenconsiderationof likely futurerequirementsforbusinessandemploymentdevelopmentinthegrowthareas. Ensuring adequate provision of industrial land for Melbourne is an especiallyimportantcomponentofgrowthareaplanning.Itisestimatedthatemploymentinmanufacturing, logistics and related businesses located on industrial land willaccount for forty to forty five percent of total future employment in the growthareas.InadditionthegrowthareasarethelocationofclosetohalfofMelbourne’svacantindustrial landandaccount forasimilarshareof theannual take‐upof industriallandacrossthemetropolitanarea.Asthesupplyofvacantindustriallandinmoreestablishedsuburbsdeclinesthroughthetakeupoflandandrezoningoflandforasa result of urban renewal and other processes, the growth areas contribution tomeeting Melbourne’s future industrial land requirements will progressivelyincrease. Ensuringanadequatesupplyofwelllocatedindustriallandinthegrowthareaswilltherefore be a key element of maintaining Melbourne’s competitiveness asAustralia’spremiermanufacturingandlogisticscentre. This report summarises the approach taken and conclusions reached inplanningforfutureindustriallandrequirementsinthegrowthareas. TheGrowthCorridorPlanshaveadoptedtheaspirationalobjectiveofensuringthattheGrowthCorridorsprovidesufficientareasforthefuturedevelopmentoftowncentres, mixed‐use areas, industrial estates and major community facilities toenable, over time, the provision of one additional job for every new dwellingconstructedinthegrowtharea.Ifthisobjectiveisachieveditisestimatedthatatleastfortytofortyfivepercentofallgrowthareaemploymentwillbeinbusinesseslocatedinindustrialareas. Threetechnicalreportswerecommissionedtoassistinestimatingthelikelyfuturedemandforindustriallandinthegrowthareas,andtoidentifythecriticalfactorsthatshouldguidethelocationandplanningoffutureindustrialestates,The consultants engaged to prepare these reports were Jones Lang LaSalle,EssentialEconomicsandSpatialEconomics. The three reports have differing scopes and were prepared using differingmethodologies:

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TheJonesLangLaSallereportfocussedspecificallyonthedriversoffuture

demandforindustriallandinthegrowthareas.

The Essential Economics report examined land requirements associatedwith the full range of future employment types in the growth areas if theaspirationalemploymenttargetistobeachieved.

TheSpatialEconomicsreportfocussedonthelevelofvacantindustrialland

stocksandrecenttrendsinthetake‐upofindustrialland.Unliketheothertwo reports its forecasts of the level and distribution of future industriallanddemandwereentirelytrendbased.

The engagement of three separate consultants was designed to ensure a goodunderstanding of the industrial land market, to develop robust estimates ofindustriallandrequirementsintheGrowthCorridorPlans. This report summarises themain findings of the consultants work, and outlineshowthesehavebeenappliedwithinthedraftGrowthCorridorPlans.OverrecentyearsthetotalannualconsumptionofindustriallandinMelbournehasaveraged around 280 to 300 hectares. The remaining stock of vacant zonedindustriallandwithinthepre‐2010urbangrowthboundarytotalledapproximately6,800hectaresin2009.Iffullydevelopedforindustrialpurposesthisissufficienttoprovide forabout twentyyearsdemandat recentaverage consumption levels. Howeverindustrialareascurrentlyprovideforarangeofnon‐industrialusesandnotallofthecurrentstockofvacantindustrial landmayeventuallybedevelopedforindustrialpurposes. TheGrowthCorridorPlansneedtoensurethatadequatelonger‐termprovisionismadeformetropolitanindustriallanddemandasexistinglandstockswithinmoreestablishedsuburbsareusedup(whetherforindustryorotheruses). The Growth Corridor Plans therefore include a total provision for an additional5000hectaresofindustrialland,includingaround800hectaresofcommercialandmixeduseprecinctsthataresuitable for industrialpurposes. This issufficienttoprovideforaroundfifteenyearsofadditionalmetropolitanindustriallandsupply,whichis inadditiontotheexisting25‐yearsupplyof landforindustrialpurposeswithintherestofmetropolitanMelbourne.(i.e.toensureanadequatemetropolitansupplyofindustriallandoutuntilatleast2040).Theallocationofthisadditionalstockofindustriallandinthegrowthcorridorshasbeen influenced by the expected distribution of population and employmentgrowth thegrowth corridors, analysisof thekeydriversof locationdecisionsofindustrial land users prepared by Jones Lang LaSalle, and existing locations ofvacantindustriallandsupply.Thishasresultedinapproximatelyninetypercentofthe proposed increase in industrial land supplies being in thewestern, northern

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andSunburygrowthcorridors. Theproposedallocationofadditionalindustrial,mixed‐useandcommerciallandbygrowthcorridorissummarisedbelow:Corridor Industrial

(hectares)

Commercial–gross

(hectares)

LandassumedindustrialwithinCommercialPrecinct*

(hectares)

Mixed Use–gross

(hectares

LandassumedindustrialwithinMixed UsePrecincts*

(hectares)

TotalIndustrial

(hectares)

West 2000 1000 500 200 50 2550

North 1700 70 35 40 10 1745

Sunbury 210 ‐ ‐ ‐ ‐ 210

South‐east 260 380 190 170 42.5 492

Total 4170 1450 725 410 102.5 4997

(*‐Theabovelandbudgethasassumedthataroundhalfoflandwithincommercialprecincts,andonequarteroflandwithinmixeduseprecinctswillbedevelopedforindustrialpurposes).

Thisproposeddistributionreflectsbothforecastdemandforindustriallandineachregion, with major influences being the superior access of the western andnorthern growth corridors to the Port of Melbourne, Melbourne Airport and tointerstate freeway and rail links and also the relatively greater number of yearssupplythatalreadyexistsinthesouth‐easterngrowthcorridor.

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1.TheContext–PlanningTheExtendedGrowthAreas 1.1 Preparation of Corridor Plans for Melbourne’s Growth AreasMelbourne’s growth areas incorporate those parts of seven councils (Wyndham,Melton, Hume, Mitchell, Whittlesea, Casey and Cardinia) that are withinMelbourne’s urban growth boundary (UGB). The UGBwas extended in 2010 toincorporate an additional 43,700 hectares of which approximately 24,500 ha ispotentially able to be developed for urban purposes.At currently forecast population growth rates the expanded growth areasincorporatesufficientcapacitytoprovideforMelbourne’sgrowthforuptothenextthirtyyears Following the 2010 extension of the UGB it is necessary to prepare GrowthCorridor Plans to guide future development of the expanded growth areas.Preparation of the draft Growth Corridor Plans has involved a whole‐of‐governmentprocesscoordinatedbytheGrowthAreasAuthority. TheGrowthCorridorPlansidentify:

areas of high environmental or landscape value that should be protectedfrom development togetherwith any other constraints thatmay limit theability of areas to be developed during the life of the Corridor Plan;

areas suitable forurbandevelopment and thebroad formofdevelopment(i.e.residential,retail/commercial,mixeduse,industrial)thatisappropriateforeacharea;

locationsthataresuitabletomeetthevarietyofbusinessandemploymentneedsof thegrowtharea (towncentres, commercial andmixeduseareas,industrialareas);and

the strategic transport and other infrastructure reservation required toprovideforfutureurbandevelopment.

1.2PopulationCapacityoftheExpandedGrowthAreas The GAA has estimated that the expanded growth areas have the capacity toeventuallyaccommodateapopulationofbetween750,000and1,300,000people.Theactualpopulationcapacitywilldependuponthefinalextentoftheareaswithinthe new UGB that are able to be developed for urban purposes, the amount ofhousing incorporated into town centres, and the average development densitiesachievedinresidentialprecincts. This scale of population growth would translate into a workforce estimated atbetween280,000and460,000. Planningfortowncentres,mixed‐useprecinctsandindustrialareasintheGrowth

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CorridorPlansreflectstheseestimatesofpopulationandworkforcegrowth. 1.3BusinessandEmploymentDevelopment–AKeyFocusForCorridorPlans Akey issue inpreparationof thedraftGrowthCorridorPlanshasbeenensuringthatsufficientprovisionismadeforfuturebusinessandemploymentdevelopmenttoprovideforMelbourne’sneedsandtoprovidelocalemploymentopportunities. The development of new urban areas on Melbourne’s fringe has typically beencharacterised by housing and population outpacing employment growth and bylocal employment opportunities being substantially less diverse than thoseavailable in more established suburbs. It has often taken many years foremploymentopportunitiesinnewdevelopmentareastogrowanddiversifytothepoint that they more closely match those existing in established middle‐ringsuburbs. This has resulted in a need for residents in newly developed suburbs to travelrelatively long distances to access jobs with a consequential increase in traveltimes, congestion and associated costs. A secondary effect has been to reduceopportunities for women with young families to find local employmentopportunities. For the purpose of growth area planning the GAA has therefore adopted anaspirationalobjectiveofensuringthattheGrowthCorridorPlansprovidesufficientopportunitiestoenabledevelopmentofonenewjobforeachadditionalhouseholdaccommodatedinthegrowthareas. Theaimistoensurethat,overtime,thegrowthareasareabletoachieveabusinessand jobsmix similar to that typically found inMelbourne’smiddle suburbs. Toachievethisgoalitwillbenecessarytomakeprovisionforavarietyofemploymentopportunities ‐ including new town centres to accommodate retail, services andoffice employment, employment in local and regional community facilities, thedevelopmentofsubstantialnewindustrialestates toservemetropolitanmarkets,andmixed‐useandservicetradesareastomeetlocalisedneeds. IthastoberecognisedthatdesignatinglandforemploymentpurposeswithintheGrowthCorridorPlanwillnotinitselfensuretheprovisionofanappropriatelevelandmixofemploymentopportunities ineachgrowtharea. Theactual levelandmix of employment that develops will depend upon future decisionsmade by adiverse and large number of individual businesses and public sector agencies.However it is important that the Growth Corridor Plans facilitate land useopportunitiesforbusinessandemploymentdevelopmenttooccurovertime.Planning for the future provision of industrial land is especially significant.Employment in manufacturing, logistics and similar businesses located inindustrialareas isexpected tobe the largestcomponentof the totalemploymentmixinthegrowthareas,andindustryhasparticularlanduserequirements. The growth areas play a critical role in providing for metropolitan wide

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requirementsforlandforindustrialandlogisticsusesaccountingforabouthalfofthe take‐up of industrial land in Melbourne. With the ongoing diversion ofindustriallandininnersuburbstohighervalueusesandtheprogressivedepletionofindustriallandstocksinotherestablishedareasofMelbourne,thegrowthareaswillincreasinglybethelocationformuchofthefuturemanufacturingandlogisticsinvestmentinthemetropolitanarea. ItisthereforecriticaltoensurethattheGrowthCorridorPlanssetasidesufficientland to provide for future industrial development needs. For the whole ofmetropolitanMelbourne 1.3PlanningForIndustrialLandSuppliesInTheGrowthAreas Companies and activities locating in industrial areas (such asmanufacturing andtransportandlogisticsbusinesses)areexpectedtoaccountforbetweenfortyandfortyfivepercentoftotalemploymentinthegrowthareas.Employmentdensitiesinindustrialareasaresignificantlylowerthanthoseinmixed‐useareasandtowncentres. As a result relatively large areas will need to be set aside for futureindustrialestates. Inadditionindustrialareashaveveryparticularrequirementsintermsofsuitablelandforms,roadandrailaccessandcompatibilitywithadjacentuses.Forthemajorindustrialareasservingmetropolitanmarketsitisalsoimportantthattheyareofasufficient scale to allow for the development, over time, of clusters of relatedbusinesses. An optimal size of at least 200 hectares has therefore been set as adesirabletargetforlargerindustrialprecincts. Specialist land use requirements for industry means that providing for futuredevelopmentof industrialestateshasbeenakeyissueintermsofoverallgrowthcorridorplanning. From this point of view, preparation of the Growth Corridor Plans has involvedconsiderationof:

thefuturedemandforvariousindustrialactivities the total amount of industrial land that needs to be set aside for future

manufacturing, logistics and associated uses in order to provide for bothlocalandmetropolitanwideindustrialrequirements;

the appropriate distribution of this industrial land supply betweenindividual growth areas and between larger estates serving themetropolitan industrial land market and smaller estates serving morelocalisedservicetradesneeds;and

specific land use criteria, such as access, proximity to sea and air ports,infrastructure and other planning requirements for future industrialdevelopmentareas.

This report summarises the approach taken and conclusions reached inplanningforfutureindustriallandrequirementsinthegrowthareas.

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1.4SpecialistInvestigations As part of the process of preparing the Growth Corridor Plans a number ofspecialistconsultantstudiesiwerecommissionedduring2010inrelationtoaspectsof planning for future employment growth, town centre development andindustriallandrequirements. Thekeystudieswere:

o areportonActivityCentreandEmploymentPlanningpreparedbyEssentialEconomicsfortheGAA. AmajorfocusoftheEssentialEconomicsreportwasadetailedassessmentof requirements for future town centre development in the growth areas.The report estimated the number and size of future principal, major andneighbourhood town centres in the growth areas and the likely level ofretail,offices,etcemploymentineachcategoryoftowncentre. Essential Economics also developed a model to estimate the requireddistributionofjobsbetweenareasiftheGAA’sobjectiveofprovidingonejobforeachadditionalhouseholdinthegrowthareas.Thisincludedresidentialprecincts (home based employment and employment in local communityfacilities), town centres (primarily retail, office and service employment),employment in district and regional community facilities, mixed‐useprecincts (commercial, manufacturing and research and developmentemployment) and industrial areas (principally manufacturing, logistics,servicetradesandrelatedemployment). Basedupontheestimatedfuturehouseholdandworkforcenumbersinthegrowthareas,togetherwithanassessmentoflikelyemploymentdensitiesinindustrialareas,themodelwasusedtocalculatetheminimumtotalareaofindustrial,commercialandmixeduselandthatshouldbeprovidedineachgrowthcorridor. The Essential Economics report also introduced the concept ofdistinguishing between large (generally over 200 hectares) industrialestatesservingapredominatelymetropolitanmarketandsmaller(generally20+ hectares) industrial/service trades precincts principally servingmorelocalmarkets;

o astudyintoTheTake‐UpOf IndustrialLandAndFutureLandRequirementsIn Melbourne prepared by Jones Lang LaSalle for the Department ofInnovation,IndustryandRegionalDevelopment. TheJonesLangLaSallereportfocussedparticularlyonrecenttrendsintheuseofindustrialland,theexpected‘drivers’offuturedemandforindustrialland in the Melbourne region, and the optimal distribution of futureindustrial land between Melbourne’s growth corridors. The last of theseelements included consideration of the impact of proximity to the Port of

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Melbourneandtheairport,freewayandrailaccesstobothmetropolitanandinterstate markets, and the location of the industrial workforce ininfluencing the location of future development of industrial land.Having regard to these factors the report calculated estimated futureindustrial land requirements for the growth corridors as awhole and foreachlocalgovernmentcouncilinthegrowthareas;

o the third report was an analysis of the Use, Zoning, Distribution AndConsumptionOfIndustrialLandpreparedbySpatialEconomicsfortheGAA. The Spatial Economics report reviewed the level of existing stocks ofindustrial landand therateof take‐upofvacant industrial landacross themetropolitan region. It also analysed the demand for industrial land interms of industry category, industrial zone type and preferred lot sizes. Using this analysis Spatial Economics prepared a trend based forecast offutureindustriallandrequirementsineachgrowthcorridor.This report also examined the range of land located within industrialprecincts across metropolitan Melbourne. Notably, it found that non‐industrial uses (including bulky goods retailing, service businesses, somecommunityuses,etc)typicallyaccountforuptothirtypercentoftotallandusewithinindustrialzones.

Thisreportdrawstogetherkeyaspectsofthosereports. Itfocusesprincipallyonthose elements of the reports that relate to the issue of planning for futureindustriallandsupply.

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2.ProvidingforFutureEmploymentintheGrowthAreas BalancingPopulationandEmploymentGrowthBefore discussing in detail the provisionmade in theGrowthCorridor Plans forfuture development of industrial land, it is worth briefly summarising thedistributionofoverallemploymentopportunitiesbeingplannedforinthegrowthareas. The areas covered by the Growth Corridor Plans provide capacity for a futurepopulationofbetween750,000and1.3million.Thisequatestobetween276,000and462,000additionalhouseholds. AsnotedabovetheGAAhassetanaspirationalgoalofprovidingopportunitiesforthe development of one additional job for each new dwelling constructed in thegrowthareas.Achievingthisgoalwilltaketimeandneedstohaveregardnotonlytojobopportunitieswithinthegrowthareabutalsoopportunitieswithinthesub‐region(i.e.withinapproximately10kilometres).TheGrowthCorridorPlansthereforeprovideopportunitiesforfuturedevelopmentof between 280,000 and 460,000 additional jobs – that is sufficient to provideopportunitiestoachievetheGAA’sgoalofprovidingfordevelopmentofatleastonenewjobforeachadditionalhouseholdinthegrowthareas. The Essential Economics report suggested that in order to achieve this goalprovision should bemade in the Growth Corridor Plans for the following futureemploymentdistribution:

o homebasedemployment 5‐10%

o towncentres(principal,majorandlocal) 25‐30%employmentincludingretail,officeand servicejobs

o employmentincommunityfacilities 25‐30% [includingbothlocalandregional scalecommunityfacilitiesandservices]

o employmentinindustrialandmixeduse 40‐45%areas

Essential Economics examined existing employment patterns across establishedparts of metropolitanMelbourne, to determine the number, type and location ofjobscreated.Thiswasdoneatthreelevels:

Examination of ABS Census data to identify the typical extent to whichpeopleworkfromhome

Analysisofdetailedindustrydatatodetermineemploymenttypeandbroadlocation

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Analysisofindustrialdatabytype,landarealandusezoning,toprovideanassessmentofemploymentdensitiesbylocation.

The exactmix between these employment typeswill vary between growth areasandwilltaketimetoevolve.For example, employment in community facilities and services will develop instages over many years, beginning with neighborhood scale facilities (primaryschools, local health centres, local community and recreation facilities, etc) andeventually progressing to include higher order facilities (such as health andeducation facilities serving regional catchments, district and regional scalerecreationfacilities,etc). Achievinganemploymentmix approximating that shownabovewouldmean thattherangeofemploymentopportunitiesavailableinthegrowthareaswouldcometocloselyresemblethatwhichalreadyexistsinMelbourne’smiddlesuburbs. ProvidingDiverseOpportunitiesForEmploymentGrowth As outlined above the planned employment opportunities will take a variety offorms.Theseinclude:

o homebasedemployment.Amix of activities such as peopleworking in homeoffices, tradespeopletravelling to job sites fromabase at theirhomeandpossiblyother smallscalebusinesseslocatedinresidentialareas;

o employmentinneighbourhood,majorandprincipaltowncentres. Atthelevelofindividualresidentialprecinctsanothersignificantsourceofemploymentwillbelocalsupermarkets,othershops,personalservicesandsmaller scale offices based in neighbourhood town centres. The scale ofemployment in suchcentreswillvary in linewith thesizeof theprecinctandalsohowwelllocatedtheyaretoattractsmallbusinessactivity. Major and principal town centres will accommodate a broader mix ofactivitiesandcollectivelyaccountforasignificantpercentageoftotalfutureemploymentinthegrowthareas. Major town centres will serve sub‐regional catchments incorporating anumberofresidentialprecinctsthatintotalwillvaryinsizefrom20,000to60,000people.Theywillprovideasimilarbutlesserrangeoffacilitiesandservices than the principal town centres. A number of additional majortowncentresareproposedineachoftheGrowthCorridorPlans. Principal town centres will serve a catchment in the order of 100,000people or more. They will accommodate activities that serve broaderregional needs including specialty retail facilities serving regional

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catchments,higherorderbusiness services,Theywillbe locatedon thoseparts of the public transport network that have the highest capacity andlevelofservice. OnenewprincipletowncentreisproposedineachoftheMelbourneNorthand Melbourne West Growth Corridor Plans. No new principle towncentres are proposed in the Melbourne South East and Sunbury GrowthCorridorPlans.

o employmentincommunityfacilitiesandservices. Employment in local child care centres, governmentandnon‐governmentprimaryand secondary schools, localdoctorsoffices andmedical centres,and other local community and recreation facilities will be among theearliestsourcesofemploymentinnewsuburbs. Over time, district and regional‐scale community, health education andrecreation facilities will also develop, eventually becoming an importantpartofthemixofemploymentopportunitiesinthegrowthareas.

o employmentinindustrialandmixeduseareas. The Growth Corridor Plans make provision for a variety of options fordevelopment of employment in large and smaller industrial areas andmixeduseprecincts. Mixed‐use employment areas will provide for a mix of uses that mayinclude components of office or research and development activitiesassociatedwithmanufacturingactivities.Theymayalsocontainotherusesthathaverelativelyhighemploymentdensitiesbutrequirelargersitesandare therefore are not suitable for location within town centres. Wherepossiblemixed‐useareaswillbelocatedadjacenttoPrincipletowncentresoralongmajorpublictransportroutes. Industrial estates provide for industrial, logistics and service trades usesthatrequirelargerandlessexpensivesites.Instrategicplanningforfuturedevelopmentofthegrowthareasprovisionhasbeenmadefortwotypesofindustrialprecinct. Thelarger(typicallyatleast200+hectaresandinsomecasessubstantiallymore)industrialestateshavebeenlocatedtohaveverygoodfreewayandarterial road access and are designed to provide for the industrial landrequirements of firms that serve metropolitan wide, national orinternationalmarkets. Smaller(typicallyaround20hectare)servicetradesareaswillbedesignedto provide for the needs of smaller business servingmore localmarkets.The larger industrial areas are identified in the draft Growth Corridor

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Plans. The smaller local industrial/service trades areaswill be identifiedthroughthesubsequentprecinctstructureplanningprocess.

TheAllocationOfLandForIndustrialandMixedUsePrecincts

Asoutlinedaboveemploymentinindustrialandmixed‐useareasisexpectedtobethe most significant component of total employment in the growth areas –accountingforupto45%oftotalemployment.Thisequatestoatotalofbetween110,000 and 210,000 jobs in industrial andmixed‐use areas by the time that theexpandedgrowthareasarefullydeveloped.

ThedraftGrowthCorridorPlansidentifysufficientareasfordevelopmentoffutureindustrial and mixed use employment areas to accommodate this scale ofemploymentgrowth.Inadditiontoupto4,800hectaresofindustriallandand1,700hectaresofmixed‐uselandalreadyindentifiedinareaswithinthepre‐2010UGB,theGrowthCorridorPlansprovidefordevelopmentofupto5000hectaresofindustrial land,including800hectaresof industrial landwithin commercialandmixed‐useprecincts in theareasbroughtintotheUGBin2010.

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3. An Overview of Trends in Industrial Land Use And LandStocksinMelbourne TheChangingNatureOfIndustrialLandUse TheindustriallandscapeofMelbourne,andindeedAustralia,haschangedmarkedlyoverthepast25years. Centraltothesechangeshasbeenachangeinthecompositionofthemanufacturingsector anda reduction in its shareofAustralia’sGDP fromapproximately20% toless than 10%. The value of output from themanufacturing sector has howevercontinuedtogrowbutataslowerratewhencomparedtotheservicesandminingsectors. The openingup of theAustralian economy to increased international competitionhas affected different sub‐sectors of manufacturing industry to differing extents.ThisisillustratedinthefollowinggraphfromtheJonesLangLaSallereport:

Typicallycompanieshaverespondedtoincreaseddomesticandforeigncompetitionbyseekingtoincreaseefficiency,operateinlessexpensivelocations,becomemorecapital intensive and shift towards higher value‐added products. They have alsooften moved to outsource non‐core functions. Often this has involved movingproduction offshore and importing products that are either already assembled orrequireonlylightassembly.

Despite these changes manufacturing still accounts for over 10% of Victoria’seconomyandwillcontinuetobeanimportantdriverofdemandforindustrialland.TheIncreasingImportanceOfLogisticsAsAUseOfIndustrialLand

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These trends have been accompanied by, and are in part responsible for, anincrease in the relative importance of the logistics and transport industry. Theinverse relationship between trends in the two sectors is illustrated in the graphbelow(againdrawnfromtheJonesLangLaSallereport):

Many companies have changed their supply‐chain strategies to cut costs andimproveoperational efficiencies, outsourcing their storageneedsor consolidatingwarehousingintolargerdistributioncentres.IntheCityofGreaterDandenong,forexample, this has seem a shift in typical warehouse sizes from 10,000‐15,000squaremetresfifteenyearsagoto40,000squaremetresormoretoday. SuchchangesincompanystrategycontributedtoboththedemandforandsupplyofAustralianindustrialpropertygrowingdramaticallyfromaroundtheyear2000upuntiltheglobalfinancialcrisis.TheexpansionwasfarinexcessofthatindicatedbyAustralia’seconomicgrowth,atraditionaldriverofdemandforindustrialproperty. The shift to larger warehouse and distribution centres has made proximity tofreeways,containerportsandairportsmoreimportantindeterminingdemandforindustrialland. InMelbourne’scasethishasseenashifttowardsthewesternandnorthernsuburbs(andincreasinglythewesternandnortherngrowthareas)asthepreferredlocationsformanufacturingaswellaslogisticsuses. Melbourne’sRoleAsALogisticsCentreAs a logistics centre,Melbournehas several key strategic competitive advantagesover other Australian cities. They include the role of the Port of Melbourne asAustralia’s largest container port, the substantial share of national airfreight thatmovesthroughTullamarineAirport,goodinfrastructureprovision(particularlyrailandfreewayaccess)andrelativelylowerindustriallandcosts. The Port of Melbourne continues to see strong growth in container traffic (see

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graph below) and has the capacity to continue to grow its container trade. Inaddition strategicplanning forMelbournehas identifiedopportunity todevelopasecondcontainerportatHastings.

Consumption of Industrial Land In Melbourne As an input to planning for the growth areas Jones Lang LaSalle estimated theaverage annual consumption and remaining supply of industrial land in theMelbourne metropolitan region. The Jones Lang LaSalle analysis breaks themetropolitan industrial land market into the five sub‐regions – inner (or cityfringe),west,north,eastandsouth–shownbelow.

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Figure 5.1: Melbourne Industrial Precincts

The JonesLangLaSalle report summarised industrial land trends ineachof theseregionsasfollows:

o The‘CityFringe’Region ThecityfringeindustriallandsupplyisprimarilylocatedinPortMelbournewith industrial land in other areashavingbeenprogressively converted tootherhighervalueuses. As land values and rents are higher than in other precincts a number ofindustriallandusershavechosentomovetolarger,moreaffordablelotsinthewestandnorth. Whatremainsisincreasinglycharacterisedbysmallerstratatitlesdevelopmentswithsignificanthightechandofficecomponents.The city fringe region is expected to make a negligible contribution toMelbourne’sfutureindustriallandsupply.

o TheWesternRegion The western region comprises both an established inner precinct anddeveloping, strategically important industrial areas in middle and outersuburbs.Recentandcommittedimprovementstothefreewaynetwork(theDeerParkBypassandtheMetropolitanRingRoadupgrade)andproximitytothePortofMelbournehaveresulted in theregionhavingahigh take‐upofavailableindustrialland.

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Thewesternregionaccounts for28%ofMelbourne’s future industrial landsupply.

o TheEasternRegion IndustriallandstocksinMelbourne’seasternsuburbsarelargelydevelopedand the region is expected to account for only 4%ofMelbourne’s forecastindustriallandsupply.

o The Southern Region Melbourne’s south‐east suburbs were a traditional location formanufacturing and warehousing. With changes in the structure of theeconomymanyofthesetraditionalsitesarebeingtransformedintoservicecentreswithahigherofficecomponent.Recentindustriallandreleaseshavebeen focused on areas further out where larger, more affordable, sitesbenefitfromaccesstotheEastlinkfreeway. There is a very substantial supply of potential industrial land in the outersouth‐east–theregionaccountsforsome43%ofthecurrentsupplyoflandalreadyidentifiedforfutureindustrialuses. JonesLangLaSalleforecastthatthissupplymaybetakenuprelativelyslowlyinfuturegiventhepreferenceofthemarketforsites inthewestandnorthwithrelativelybetteraccesstothePortofMelbourneandinterstatefreewayandraillinks.

o TheNorthernRegion The northern region is characterised by the availability of larger lots andrelatively cheaper rents. It has good rail and freeway access (withconstructionoftheCraigieburnbypass)andisalsoanattractivelocationforairportrelatedindustrialactivity. Theregionisthelocationofanumberoflargedistributioncentres. Thenorthernregioncontains25%ofthemetropolitanareascurrentsupplyofdevelopableindustrialland.

The Jones Lang LaSalle analysis showed that consumption of industrial land overthepastdecadehadbeenconcentratedinthewestandsouthregions–broadlyinlinewiththedistributionofindustrial landstocksacrossmetropolitanMelbourne.Take‐uprateshaveremainedbroadlyunchangedwiththenorththeonlyregiontoseeaconsistentriseinconsumption. Consumptiontrendsbyregionaresummarizedinthetablebelow:

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CurrentIndustrialLandStocks

JonesLangLasalleestimatethecurrentnetsupplyofvacantdevelopableindustriallandacrossmetropolitanMelbourneas close to6,800hectares. Thedefinitionof‘netsupply’excludes local roads,openspace, landrequired for infrastructureandland constrainedbyenvironmental orother factors. It thereforeprovides a goodmeasureoftheestimatedareaactuallyavailableforindustrialdevelopment. The distribution of this land supply betweenwhat Jones Lang LaSalle defines asMelbourne’s‘cityfringe’suburbsandthewest,north,southandeasternregionsisshowninthegraphsbelow:

On a local government area basis the distribution of the bulk of the remaining industrial land supply is as shown in the graph below:

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IntermsofindustriallandstocksbyzonetypeJonesLangLaSalleestimatedcurrentstocklevelsasfollows:

Just over 70% of the total stock of vacant developable industrial land is within industrial zones (Industrial 1, 2 or 3) with a further 14% in Comprehensive Development Zones and smaller amounts in Business 3 Zones and the Airport Business Park Zone. It will be important in planning for future industrial development in the growth areas to provide for a mix of zone types so that there are suitable options available to meet the needs of all types of business investors. In terms of supply by lot size, lots of under 0.5 hectares dominates the current supply across the metropolitan area. This is shown in the graph below:

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4 The Role Of Growth Areas In Melbourne’s Future IndustrialLandSupply GrowthAreasIncreasingRoleInIndustrialLandSupply Asnotedearlier in this report thegrowthareasalreadyplayan importantrole inMelbourne’sindustriallandsupply. Wyndham,Melton,Hume,WhittlseaandCardiniaCouncilsallincludelargestocksofzoned industrial land. In2009 thegrowthareacouncils in total includedalmost4,500hectaresofoccupiedindustriallandwhichmadeupoveraquarterofthetotaloccupiedindustriallandinmetropolitanMelbourne. .In 2008/2009 the growth area councils accounted for close to half (47%) of thetotalconsumptionofindustriallandacrossmetropolitanMelbourne.Evenwithoutthe 2010 UGB changes the growth areas comprised over 46% of Melbourne’sremainingsupplyofindustrialland(totalingalmost3,150hectares). During2010and2011thecompletionofprecinctstructureplans in thewestandsouth‐eastofMelbourneaddedanadditional1330hectaresof landtothestockofzonedindustriallandinthegrowthareas. TheroleofthegrowthareasinMelbourne’sindustriallandsupplywillcontinuetogrowinfuture. Asexisting industrial landuses in innerandmiddlesuburbsaredisplaced by higher value uses, and remaining areas of vacant industrial land inestablished suburbs are progressively taken‐up, the growth areas will provideMelbourne’s primary supply of land for manufacturing and logistics investment.ItisthereforecriticalthattheGrowthCorridorPlansidentifysufficientlandtomeetfuture needs forMelbourne’s industrial andmixed use development. By ensuringthatMelbourne continues tohave an ample supplyof industrial land, theGrowthCorridor Plans will play an important role in reinforcing Melbourne’scompetitivenessasAustralia’sprincipalmanufacturingandlogisticscentre. In thiscontext it is important to takea longtermperspective indetermininghowmuch land should be set aside for future industrial use. As there are no viablealternativestothegrowthareasinprovidingforMelbourne’sfutureindustriallandrequirements,andfurthermajorchangestotheUrbanGrowthBoundarycannotbeassumed, theGrowthCorridorPlanshavebeenpreparedon thebasisofensuringthatMelbournewill have sufficient industrial land stocks to last for at least fortyand that the areas put aside for future industrial uses are sufficiently large toprovideforusesthatrequirebigsites,substantialbufferzones,etc.

With the growing importance of the freight and logistics industry as a user ofindustrial landtheGrowthCorridorPlansalsoensurethatthereisanappropriatesupply of industrial land in the western and northern growth corridors that arefavoredbythelogisticsindustrybecauseoftheirgoodfreewayandrailaccesstothePort of Melbourne, Melbourne Airport and the main interstate freight corridors.

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InvestigationsofFutureIndustrialLandRequirements

AsoutlinedearlierinthisreportthreereportswerecommissionedfromspecialistconsultantsasinputstopreparationoftheGrowthCorridorPlans. Thethreereportswere:

a broadly based analysis of growth area employment trends and theemployment mix and distribution required to achieve the GAA’s target ofprovingforoneadditional jobforeachnewhouseholdinthegrowthareas.ThiswideranalysiswaspreparedbyEssentialEconomics. Based upon a range of forecasts of the rate of population increase in thegrowthareastheEssentialEconomicsreportestimatedthenumberandsizeof activity centres that would be required to provide for retail and officeemployment in the growth areas. It also estimated the scale of industrialland development that could be anticipated based upon the growth areaswell established role as a location for industrial and logistics employment. TheEssentialEconomicsreportidentifiedtheneedtoprovideforbothlargerestatesservingametropolitanwidemarketandsmallerestatesservingmorelocalized (sub‐regionalordistrict)markets. Making separateprovision forthesemorelocalisedrequirementswillbothenablesmallerscalebusinessesto be located closer to the markets they serve and also help ensure thatlocalizedandperipheralusesdonotneedtotakeuptheavailablecapacityinthelargerindustrialestates(itisestimatedthatsuchusestypicallyaccountfor about one third of total land use in industrial estates in establishedsuburbs). Asaresultof thisanalysis theGrowthCorridorPlans includeprovision forthe larger industrial and mixed‐use estates. These large estates willgenerallyprovideforinexcessof200hectaresofnetdevelopableindustrialland and will sometimes be significantly larger. This is sufficient both toprovideforindustrialusesthatrequiresubstantialbufferzonesandalsotoallow, over time, for the emergence of significant clusters of relatedindustrieswithinsomeofthemajorestates. Therequirementforsmallerlocalindustrialareas(typicallyofabouttwentytotwentyfivehectares)willbeaddressedinthesubsequentdevelopmentofprecinct structure plans and is not included in the estimate of the futuresupplyofindustriallandidentifiedintheCorridorPlans.

ThesecondspecialistreportwaspreparedbyJonesLangLasalleandfocusedspecifically on estimating core industrial land requirements in the growthareas. Itmade use of a combination ofmethodologies that included bothconsideration of the size of the future industrial workforce in the growthareasandthelikelyspill‐overofindustriallanddemandfromotherpartsofthemetropolitanarea.

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The Jones Lang Lasalle report also looked in detail at the changingcompositionof industrial landuses inMelbourne and at thedrivers of thelocationaldecisionsofindustriallandusers.Onthebasisofthisanalysistheconsultantsrankedthegrowthareamunicipalitiesintermsoftheirrelativeattractiveness to manufacturing and logistics business and preparedindividual industrial land demand forecasts for each growth area council. The JonesLangLasalleanalysisof futurecore industrial landrequirementsutilised themost detailedmethodology of the three consultants. Themainelements of the approach adopted are summarized in the diagram below.

thelastofthethreereportswascommissionedfromSpatialEconomics.Itanalysedrecenttrendsinthetake‐upofindustriallandacrossthemetropolitanareaandthelevelofremaininglandstocksineachofMelbourne’smajorindustrialnodes.ThereportutilizeddatacollectedonindustriallandusesaspartofpreparationoftheDepartmentofPlanningandCommunityDevelopment’sannualurbandevelopmentprogramreport BaseduponthisdataSpatialEconomicspreparedtrendbasedforecastsoffuturetake‐upofindustriallandacrossthemetropolitanareaasawholeandineachofthegrowthcorridors. TheSpatialEconomicsestimateoffuturegrowthareaindustrialland

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requirementsweretowardstheupperendoftherangeofestimatesproducedbythethreeconsultants.Thisreflectsthefactoring‐upofdemandtotakeaccountofnon‐industrialuses(includingbulkygoodsretailing,somecommunityuses,etc)thattypicallyaccountforuptothirtypercentoftotallandusewithinindustrialzones,andalsotherelativelyhighleveloftake‐upofindustriallandoverrecentyearsassociatedwiththerestructuringofmanufacturingandlogisticsindustriesinMelbourne. Thereportsrelianceonprojectionofpasttrendsinindustriallandtake‐upalsomeantthatSpatialEconomicsprojectedasignificantlyhigherlevelofdemandforindustriallandinMelbourne’ssouth‐east.Bycomparisontheothertwoconsultantsreportswerebasedmoreonanalysisofthechangingdistributionofpopulationandworkforcegrowthbetweenthegrowthcorridors,togetherwiththelikelydriversoffuturelocationdecisionsbyindustriallandbuyers.Thesereportspointedtoamuchhighershare(upto90%)ofprojectedindustriallanddemandbeinginthewestandnortherngrowthcorridors.

IntegratingEstimatesofFutureIndustrialLandRequirements

As already noted the reports prepared by the three specialist consultants hadsomewhatdifferingscopesandeachusedadifferingmethodologytoassessfutureindustriallandrequirementsinthegrowthareas.Theuseofanumberofseparatemethodologieswas deliberate and provides a check on the reasonableness of theconsolidated estimates of future industrial requirements adopted in the GrowthCorridorPlans. Theestimatesproducedbythethreeconsultantspointtoalikelyfuturedemandforindustriallandthegrowthareasasawholeofbetween3,600and6,800hectares.1 InpreparingtheGrowthCorridorPlansthedecisionwasmadetouseanindustrialland supply figure of 5,000ha which falls within the mid‐point of these demandestimates.

Thisisconsideredtobeareasonablebasistoplanfrom–itwillprovideMelbournewithagoodlong‐termsupplyofindustriallandunderarangeofgrowthscenarios.

Itwill also account for any possible underestimation of loss of industrial land inMelbourne’sestablishedareastoother,aswellastakingaccountofthefatthatupto 30% of total industrial land within industrial areas is typically made of non‐industrialactivities.ItwillalsohelpensurethatashortageofsuitablelanddoesnotdriveupIndustriallandpricesoractasaconstraintoffuturebusinessinvestment. As noted above, at the level of individual growth corridors there was greater

1ThisisessentiallybasedontheupperendofthelowerrangeandthelowerendoftheupperrangeofforecastsproducedbyEssentialEconomics.TheforecastsfromJonesLandLasalleandSpatialEconomicsbroadlysatwithinthisrange.Itshouldbenotedthatthewiderangebetweentheupperandlowerestimatesisattributabletothediffereingassumptionsmadebyconsultantsonrangeofvariables,includingdifferentpopulationandeconomicgrowthscenarios,differenttakeupratesandusesofindustrialland,etc.

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variability between the demand forecasts prepared by the three consultants. Inparticular the Spatial Economics report suggested that, based upon past trends,approximately 28% of the total future supply should be provided in the south‐eastern growth corridor. By contrast both Jones Lang Lasalle and EssentialEconomics recommended that, based upon both the levels of current vacantindustrial land stocks and the likely drivers of the future location decisions ofbusiness, close to 90% of the total addition to the metropolitan industrial landsupplyshouldbeprovidedinthewestandnorth.The Growth Corridor Plans have adopted a distribution of future industrial landsuppliesbroadlyinlinewiththerecommendationsmadebyJonesLangLasalleandEssential Economics. The proposed distribution of the additional industrial landsuppliesprovidedintheCorridorplansissummarizedinthetablebelow:

Corridor Industrial

(hectares)

Commercial–gross

(hectares)

LandassumedindustrialwithinCommercialPrecinct*

(hectares)

Mixed Use–gross

(hectares

LandassumedindustrialwithinMixed UsePrecincts*

(hectares)

TotalIndustrial

(hectares)

West 2000 1000 500 200 50 2550

North 1700 70 35 40 10 1745

Sunbury 210 ‐ ‐ ‐ ‐ 210

South‐east 260 380 190 170 42.5 492

Total 4170 1450 725 410 102.5 4997

(* - The above land budget has assumed that around half of land within commercial precincts, and one quarter of land within mixed use precincts will be developed for industrial purposes).

AreasIdentifiedforIndustrialDevelopmentintheCorridorPlansAs a result of the detailed analysis of future industrial land requirementsundertakeninpreparingthedraftGrowthCorridorPlansthePlansmakestrategicprovisionformajornewindustrialestatesthatwillensurethatMelbourneretainsits competitive advantage in industrial land supply and as a location formanufacturingandlogisticsinvestment. TherelevantelementsofeachoftheCorridorPlansissummarisedbelow:

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TheMelbourneWestGrowthCorridorPlan

ThedraftMelbourneWestGrowthCorridorPlanmakesprovision forover2,000gross hectares of industrial land. The principal components of this additionalsupplywillcomprise:

o a large (approximately 1,500 hectares) extension of Melbourne’s existingwestern industrialnode(which incorporatestheLavertonNorth,LavertonandAltonaindustrialareas). Thisprecinctincludesprovisionforthepossiblefutureprovisionofamajornewinter‐modalfreightterminalthatwouldenablefreightcomingfromtheportsofMelbourneandGeelongandbyrailfrominterstatetobetransferredbetween rail and road. It will have excellent access both from a newfreeway link between the Western Ring Road and the future OuterMetropolitanRingTransportroute. Thedevelopmentoftheproposedindustrialprecinctwillbecomplementedby the provision of a new commercial precinct of approximately 400hectares along the southern side of Boundary Road. This precinct willprovide for commercial activities serving thewestern industrial node andadjacentresidentialareasandwillalsoserveasabufferbetweenthefutureinter‐modalfreightterminalandresidentialareasfurthersouth.

o a 390 gross hectare new industrial area at Toolern with access from theWestern Freeway. This precinct also includes 130 gross hectares of landproposedforfuturemixed‐usedevelopmentadjacenttothefutureToolern

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principaltowncentre.

o anew600grosshectareindustrialprecinctadjacenttothereservationforthe Outer metropolitan Ring route and with access from the MeltonHighway.

InadditiontheMelbourneWestGrowthCorridorPlanincludesprovisionfor:

o a600grosshectarecommercialprecinct to thewestofHopkinsRoadandsouth of the Western Freeway. This precinct is intended to provide forhigher density employment uses such as a potential research anddevelopmentareasandofficepark. TheHopkinsRoadprecinctwillhaveexceptionalaccessfromboththeOMRand thewesternFreeway and, beingadjacent to thewestern rail line, hasthepotentialforfutureprovisionofarailstationshouldthisbejustifiedbyfutureemploymentgrowth. It iswellplaced tocontribute to thestrategicgoal of achieving increased employment diversity in the western GrowthCorridor.

o the Werribee Employment Precinct which is currently the location of anumberofresearchanddevelopmentactivitiesandwhichhasthepotentialtobean important futuremixed‐useprecinct. TheWeribbeeemploymentprecincttotals925heatares.

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TheMelbourneNorthGrowthCorridorPlan

ThedraftMelbourneNorthGrowthCorridorPlanprovidesfor1,700grosshectaresof industrial land in addition to just over 100 hectares of mixed‐use andcommercialland. The principal components of the proposed provision for future industrialdevelopmentare:

o anextensionoftheexistingCraigieburnindustrialcorridornorthalongtheHume Freeway to the junction between the Hume Freeway and theproposed Outer Metropolitan Ring Transport route. This extension willprovideandadditional310grosshectaresofindustriallandwithexceptionaccesstoboththeinterstaterailandfreewaynetworks.

o an area of approximately 220 gross hectares of adjacent to the E6reservationinWollert.Thisproposedindustrialareawillprovideforboth

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local and regional employment development as well as buffering theexistingHansonquarryandlandfillsiteatWoolert. TheWoolertindustrialprecinctwouldbenefitfromthefuturedevelopmentof the E6 which would provide good road freight access both tometropolitanandinterstatefreightroutes.

o some80grosshectaresof landsouthofDonnybrookRoadandeastof theHumeFreeway.Dependinguponfuturerequirementsforlocationofpublicutilities this proposed industrial area could be extended east of theMelbourne‐Sydney rail line and total some 140 gross hectares. It isproposedthatDonnybrookRoadwouldbedesignedtocarryfreighttrafficandby linkingtheHumeFreewayandE6routeswouldprovideverygoodroadaccessforroadfreight.

o longer tem provision for the potential development of a major newindustrial area adjacent to the planned Beveridge Interstate FreightTerminal. Almost1,100grosshectaresof landhasbeen identified for thisfuture industrial area east of theMelbourne‐Sydney rail line and north oftheE6reservation.

InadditiontheMelbourneNorthGrowthCorridorPlanprovidesfor:

o developmentof50grosshectaresofcommerciallandassociatedwithanewtowncentreatMickleham;and

o approximately 40 hectares of mixed‐use development adjacent to theproposednewprincipaltowncentreatDonnybrookNorth.

TheMelbourneSouthEastGrowthCorridorPlanThe Melbourne South East Corridor Plan provides for some 300 hectares ofadditional industrial land. This provision supplements the approximately 2,700hectares of employment land (principally in the Officer‐Pakenham employmentcorridor)alreadyidentifiedwithinthepre‐2010UGBinthesoutheastgrowtharea.Themainproposedadditionstotheareasavailableforemploymentdevelopmentinthesoutheastare:

o 260 gross hectares of industrial land formanufacturing and logistics usesalongtheSouthGippslandHighway.

o some 380 gross hectares of commercial land and 170 gross hectares ofmixed‐useandcommercial areasalongThompsonsRoad thatwillprovideforamixofbusinessservices,servicetradesandothersimilaruses.

Theseproposedemploymentareasareshownontheplanbelow:

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TheSunburyGrowthCorridorPlanThe draft Sunbury Growth Corridor Plan provides for 210 gross hectares ofadditional industrial land in the south east of the growth area and adjacent toDiggersRest. Itisexpectedthatthislandwillprimarilyprovidefortheservicesindustryneedsofthe growth corridor although portion of the area may also be used formanufacturingandlogisticsusesservingawidermetropolitanmarket.The location of the proposed Sunbury employment areas is shown on the planbelow:

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i