CBRE RESEARCH Developments on track in Metro Rail PrecinctsNEW TRAINS TO CATER FOR GROWING POPULATION CONTENTS WHAT IS TRANSIT ORIENTED DEVELOPMENT? ALL ABOARD: NEW RAIL PROJECTS KEY DEVELOPMENT PRECINCTS LIGHT AT THE END OF THE TUNNEL? SYDNEY CBD ROUSE HILL CASTLE HILL WATERLOO RYDALMERE AND CAMELLIA ARDEN/NORTH MELBOURNE PRECINCTS WOOLLOONGABBA, ALBERT ROAD & ROMA STREET PRECINCTS ALKIMOS, YANCHEP & EGLINTON REDCLIFFE, THORNLIE-COCKBURN LINE, & RANFORD ROAD PRECINCT SYDNEY METRO RAIL CBD TO PARRAMATTA MELBOURNE METRO TUNNEL BRISBANE CROSS RIVER RAIL PERTH METRONET 3 510 11 12 13 6 7 8 9 4 A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS3 Australian capital cities invariably rank highly in ‘most liveable cities’ lists, and their appeal, in conjunction with Australia’s high migration intake over the past 13 years, has contributed to rapid population growth within metropolitan areas. Whilst an overall benefit economically and culturally, rapid population growth and lagging public transport development continues to add to congestion in major cities. Australia’s population is forecast to grow by five million over the next decade, roughly equivalent to adding another Sydney to the nation’s existing population of twenty-five million. New transport infrastructure will be essential in catering for this population growth. Investment in public transport infrastructure, particularly rail, is necessary to maintain liveability standards for residents commuting to employment centres. This has prompted federal and state governments to combine resources to undertake a period of transport investment that is forecast to grow by 107% over the next seven years. We estimate that associated real estate development projects within railway station suburbs in the rail projects outlined herein will reach ~$28 billion over the next 10 years (Figure 1). We note, however, that our estimates are based off known proposed and committed developments; there will be many additional developments announced over coming years that will deliver upside to our estimates. For example, the Sydney Metro West project is still early days and consequently, at this stage, there are few associated real estate developments. NEW TRAINS TO CATER FOR GROWING POPULATION The rail projects outlined in this report will improve commuting conditions and in some cases decentralise Australia’s larger economic centres into an interconnected network of satellite cities as is the standard globally. With the connection of outer ring greenfield estates and the infilling of city fringe suburbs via rail transport, development and investment opportunities in most real estate sectors present themselves due to the need for commercial centres, amenities and housing. This report provides an overview of the current major rail projects in Australia’s capital cities and estimates the value of current and future development and investment opportunities in the residential, office, and retail sectors in the various precincts affected by this rail investment. A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS Figure 1 Total Development Project Cost Brisbane Cross River Rail Melbourne Metro Tunnel Parramatta to CBD Office Billions 9 8 7 6 5 4 3 2 1 Retail Residential Perth Metronet Sydney City to South West Sydney Metro North West Source: Cordells, CBRE Research4A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS Australia’s love of rail transport is dwarfed in comparison to its affinity for car-based transport, with over 6.5 million Australians commuting to work in cars as opposed to approximately 770,000 using rail transport. However, growth in the use of rail transport has increased by more than 100% over the past 25 years, in conjunction with the average commuting distance increasing to 16 kilometres. The result of this means that to be closer to employment and entertainment precincts, Australians have typically needed to be closer to the CBDs. But urban sprawl and rising dwelling prices have pushed people away from these areas, which is costly to governments through the provision of extra public services and may not have the amenities needed. WHAT IS TRANSIT ORIENTED DEVELOPMENT? A potential solution to this is Transit Oriented Development (TOD), which aims to place amenities and housing within accessible distance (800m) of transport routes (Figure 2). TOD takes into consideration the capacity of new developments, replicability, and in established precincts negotiating around resistance from existing residents. Furthermore, public transport has the power to transform regions, as demonstrated in underdeveloped areas of Europe where stations were built and gains in population growth, urbanisation and location desirability followed. This method of planning enables the current opportunities presented by Metro rail projects. Australian state governments have implemented principles of TOD in their station or precinct plans. Consultation has invloved local communities in order to optimise land supply through effective rezoning of surrounding areas and creating liveable areas for residents. Figure 2 Ring represents 800m from Anzac Station (completion 2025) Source: CBRE Research www.cbre.com.au/research-reports/ a-new-train-of-thought for more information on investment and statistics for individual stations5 SYDNEY METRO RAIL The Sydney Metro rail (Figure 3 - Page 6), which includes the North-West and City & South-West projects, aims to link new greenfield and urban infill communities. Major works include the upgrade of 16 stations and the creation of 15 new stations, delivering 66 kilometres of new rail across pockets of Greater Sydney, with driverless trains arriving every four minutes during peak periods. Over the next decade, $1.4 billion p.a. of suburban development is in the pipeline, although only 15% of this amount are confirmed projects. The North-West rail line has recently opened for service, with the CBD & South-West line to be delivered within the next five years. It is expected to reduce commute times, has the potential to impact median house prices through artificial price growth via development, and provide alternative options for companies to conduct business by spreading rental costs across newly commutable markets. Station areas forecast to have above-average development spending include: Sydney CBD, Macquarie Park, Rouse Hill, Marrickville, Epping, Waterloo, Kellyville, Bankstown, and Chatswood. ALL ABOARD: NEW RAIL PROJECTS KEY FACTS • Development of integrated station precincts will occur over Victoria Cross, Martin Place, Pitt Street, Crows Nest, Waterloo Stations, and Macquarie Park stations. • Mixed-use retail and additions to existing centres will be the dominant form of newly developed retail in suburbs with new stations over the next decade. • Macquarie Park’s commercial pipeline includes the proposed $750 million Macquarie Exchange, which will function as a gateway hub to the station and add 75,000sqm of commercial floor space and 5,700sqm of retail space. • Castle Hill, Chatswood, and Marrickville have a potential pipeline of nearly 85,000sqm of standalone retail gross floor area (GFA), and 19,000sqm of commercial GFA over the next 10 years. A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS6 CBD TO PARRAMATTA The proposed CBD to Paramatta link (Sydney Metro West) will provide an additional rail link between the two CBDs, as detailed in the Greater Sydney Commission’s ‘Three Cities’ strategic planning initiative. The New South Wales (NSW) government has committed to starting construction on the project by end-2020. The project is underpinned by Parramatta being one of the largest Greater Sydney employment hubs, with an expected job increase of 113,000 over 20 years. The Commission’s other key initiative is the development of the Greater Olympic Park and Parramatta Peninsula (GPOP), with new rail and light-rail infrastructure being pivotal in gaining greater access to the precincts. It is expected that links to newly zoned growth centres will be built, as well as the release of government land assets for conversion into planned communities aiding in urban renewal of the areas. Probable Metro station locations include Westmead, Parramatta, Sydney Olympic Park, North Strathfield, Burwood North, Five Dock and the Bays Precinct, with the government investigating further stations at Rydalmere and Camellia. ALL ABOARD: NEW RAIL PROJECTS KEY FACTS • The NSW Government proposed rezoning areas around the new stations as early as 2013 to increase the density of living spaces within established suburbs and greenfield areas. • Sydney will need close to 36,000 new dwellings every year up until 2036 based on population growth projections. • Sydney Olympic Park is expected to house 23,000 residents by 2030, with development targets of 575,000sqm of GFA in the precinct. • The Bays precinct will aim to redevelop 95 hectares of government-owned land which will include a mix of affordable housing and land release for development. Sydney Metro West is unlikely to be completed before 2025-26. Delivery of commercial and residential TOD will intensify as the opening date draws nearer. A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS Figure 3 Sydney Metro Stations Source: CBRE Research www.cbre.com.au/research-reports/ a-new-train-of-thought for more information on investment and statistics for individual stations7 MELBOURNE METRO TUNNEL The Melbourne Metro Tunnel (Figure 4) will establish five new stations across the Melbourne CBD, St Kilda Road, North Melbourne and Parkville precincts, with the intention to reduce traffic and rail congestion and release a major land parcel for urban renewal. The project will be fully delivered by end-2025 and includes a surrounding development pipeline of $707 million p.a. over the next 10 years, with 15% of these developments already confirmed. Restricted land supply due to the stations being in established city-fringe/CBD locations will limit directly associated development. Only the Arden precinct is earmarked to gain substantial commercial and retail development, as well as proposed mixed-use developments in Parkville. Development in Metro station suburbs will be delivered throughout 2021-2023. Within proximity to the CBD stations there are currently 49 projects for high-density residential, 38 of which are mixed-use developments. Some 23 projects are in North Melbourne and six projects are near the Anzac station precinct. KEY FACTS • The proposed Melbourne Suburban Loop will be Australia’s first concentric rail loop, creating excellent linkages throughout the suburbs and providing greater access to major universities, employment hubs and Tullamarine Airport. • The Metro Tunnel will increase foot traffic to retail areas within the CBD and upon (or close to) completion should drive higher retail and office rents within proximity to new stations. ALL ABOARD: NEW RAIL PROJECTS A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS Figure 4 Melbourne Metro Tunnel Source: CBRE Research www.cbre.com.au/research-reports/ a-new-train-of-thought for more information on investment and statistics for individual stations8 BRISBANE CROSS RIVER RAIL Brisbane’s Cross River Rail (Figure 5) will be delivered in conjunction with its extensive Metro bus system, creating five new stations at major commercial, retail and entertainment precincts. This will ensure greater capacity and access to high- density residential and commercial zones around the Brisbane CBD. It will also ease congestion and reduce travel times across major business and entertainment hubs. Cross River Rail is under construction and expected to be operational in 2024. Corresponding property development will be delivered over the next decade with an estimated cost of $268 million annually. KEY FACTS • Brisbane’s Cross River Rail system will travel through the suburbs of Woolloongabba, Dutton Park, and Bowen Hills. • Woolloongabba and Bowen Hills have a proposed pipeline of 41,000sqm of residential GFA over the next seven years, with most of the projects being medium to high-density townhouses, units, and apartments. Investment surrounding the Cross-River Rail is expected to be extensive with mixed-use the dominant form of residential development, and commercial and retail opportunities especially within the CBD locations. Bowen Hills has above average infrastructure spending, the majority of which is due to the proposed redevelopment of a News Corp site into a transit-oriented mixed-use development called Millennium Square. ALL ABOARD: NEW RAIL PROJECTS A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS Figure 5 Brisbane Cross River Rail Source: CBRE Research www.cbre.com.au/research-reports/ a-new-train-of-thought for more information on investment and statistics for individual stations9 PERTH METRONET Perth’s Metronet (Figure 6) is a nine-stage rail extension project earmarked to connect outer ring suburbs undergoing greenfield development to the CBD. The state government has positioned the project as a five-year priority, with budget funding allocated up to mid-2025. Corresponding property development will be delivered over the next decade with an estimated cost of $66 million annually. Current construction on the Forrestfield-Airport Link will connect the CBD to Perth Airport by 2020. The $4 billion project is set to increase Perth residents’ use of public transport after patronage declined by 6.5% since 2012. • Perth’s potential developments are to be delivered over the next two years, with many previously announced projects having been deferred. • Uniquely, Perth has planned its rail network in anticipation of population growth rather than reacting to the needs of an established region. • New stations in growing population centres present opportunities to establish planned residential communities and mixed-use developments. ALL ABOARD: NEW RAIL PROJECTS A NEW TRAIN OF THOUGHT // DEVELOPMENTS ON TRACK IN METRO RAIL PRECINCTS Figure 6 Perth Metronet Source: CBRE Research www.cbre.com.au/research-reports/ a-new-train-of-thought for more information on investment and statistics for individual stationsNext >