In Australia’s land is ready for a revolution – Part 1, I discussed the opportunities for industrial transformation in Australian regional centres and how these changes could take shape. In Part 2, I look more closely at key considerations for the redevelopment of land.
Pressure on the government to lower carbon emissions has inevitably impacted the Australian resources sector, traditionally one of the drivers of jobs and economic activity in regional towns. As regional centres swing from drought to flood and back to drought again, this has put significant pressure on agriculture, leaving them with more available land than ever before. There is land which potentially has higher and better economic uses than the value of its existing use (i.e. mining and agriculture) but has been diminished as a result of climate change – both in terms of direct effects relating to drought and bushfire and indirect effects such as increasing pressure to reduce carbon emissions (such as closure of coal fired power stations) and the cause of carbon emissions (such as the approval of coal mines).
A helpful concept for development in regional Australia is agglomeration, which basically refers to the clustering of business activities. For example, a university may be built along with a few start-ups, and then a few relevant firms may follow to create a business ecosystem. When an environment is created that fosters natural collaboration, the sum of the parts come together to make a considerable footprint on the community.
Newcastle in New South Wales is a good example of reinventing what was once a heavy steel manufacturing town. A reinvigorated waterfront precinct has brought more tourism and while many thought it was the end once the steel industry collapsed, it’s managed to buoy itself.
Gippsland in Victoria is also making strides and it’s not just in dairy production and coal. Tourism, agribusiness and paddock-to-plate enterprises have helped Gippsland develop a new identity. The recent catastrophic bushfires in the region have no doubt had an impact and recovery will take some time for impacted communities.
However, there are two key considerations for successful industrial transformation:
1. Government plays a key role
Agglomeration and diversification may be the fundamentals of sound economics, but they can’t happen without collaboration and leadership from all levels of government. You need three levels of administration to work together, and not just on policy. There are a lot of grand plans that are discussed in boardrooms, however government alignment, as well as goodwill to provide incentives and policies to stimulate the market, are required to get these ideas off the ground.
Governments also need to think bigger and challenge what has always been done. An incredible amount of effort and funds go into infrastructure to bring people from the suburbs to metropolitan cities for work, yet by decentralising jobs, employees can remain in the suburbs close to where they live. This is where you see otherwise stagnant areas come alive, bringing more business and investment.
2. Is it economically viable?
The most important question to ask – is the new land purpose economically viable? I’ve spoken with companies that want to develop a master plan for the future of their site but admit they aren’t property developers. There is no difference if it’s urban land or regional land, industrial or residential; property development is a specialised game which is not without risks. If it’s not your core business, you would benefit from development advice given it’s a complex game to play and a risky one at that.
Potential projects need solid market research to determine the viability of development. It’s no good taking into consideration current demand; you must look three years and beyond once the area has been rezoned, the Development Approval sought, and finance is in place. This is well before the first sod is turned. This is more difficult if the intent is to attract an emerging industry which is not yet proven and well established.
So, what does this all mean for land developers and owners? It means they need to be aware of the change in Australia’s economic landscape and keep ahead of the technological and environmental shifts on the horizon that will create new industry growth areas. Strong opportunities will arise in regional areas, but any investment requires government leadership and collaboration, market research and careful economic analysis.