0:09

Hello and welcome to CBRE's Talking

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Property podcast where our team of experts,

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our clients and industry specialists share

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insights into the way we live, work, and

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invest through the lens of commercial real estate.

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I'm Kathryn House CBRE's Australian

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Communications Director and I'm your host

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for this latest Talking Property episode. Today

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we'll be discussing the impact that major infrastructure

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projects can have on our cities to

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do so with teamed with REA group who

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are helping us to crunch the data on four sizable

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examples around Australia in the coming months.

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The first being the Metro Rail Project

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in Sydney Planned as a network of

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four metro lines 46

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stations and 113 kilometers

0:52

of new metro rail by 2030.

0:56

And for the sections already completed, there's

0:58

been early evidence that this is pushing up residential

1:01

prices and attracting a younger, more

1:03

vibrant demographic that favors

1:05

high density living and eating out.

1:08

So without further ado, I'd like to welcome

1:10

CBRE's Pacific Head of Research, Sameer

1:13

Chopra and REA group Economist

1:15

Anne Flaherty, to chat about this

1:17

first installment in this new infrastructure series

1:20

and the already considerable impact that the

1:22

Metro Project is having on Sydney and

1:24

the learnings that can be applied to other cities.

1:27

Thanks for joining me, Sameer and Anne .

1:29

Thanks Kathryn. Thanks for having us.

1:32

So Sameer, can you talk us through some of the

1:34

key findings from the report and

1:36

why you think infrastructure improvements like

1:39

rail are so critical in driving

1:41

the growth of our cities?

1:43

Yeah, Kathryn, I think, you know, fundamentally what

1:45

this project does is it cuts down

1:47

commute time and commute

1:49

is one of those big pain points for

1:52

most people. And so in

1:54

any way that you can reduce that pain

1:56

point just helps capital

1:59

values and we'll talk a little bit more

2:01

about where capital values sort of go, but

2:03

we've seen a decent improvement in outperformance

2:06

in capital values for suburbs

2:08

along the train line. The other big

2:10

thing is it's also attracting a lot of people.

2:13

So we're finding that population

2:15

growth in suburbs along the metro

2:18

line is two times faster than

2:20

suburbs further away. We find

2:22

these suburbs are much more dense.

2:25

So you know, suburbs along the

2:27

train line are denser, they have more apartments,

2:29

it's attracting younger people we

2:32

find they have a greater propensity of

2:34

of Gen Z and Gen Y. And

2:36

then in sort of a circular argument, this

2:39

is also then pulling in cafes

2:42

and restaurants, which then pulls in more Gen Zs

2:44

and Gen Ys. And so yeah look,

2:46

I think this train line has

2:48

had a very good impact. I'll make one other comment,

2:51

Kathryn, which is, we're

2:53

still in the first innings of this. The

2:55

train links have been opened between

2:58

Tullawong to Chatswood.

3:01

I don't think we have fully appreciated

3:03

what'll happen when the link opens up

3:05

all the way from Chatswood through the

3:08

city and out to Bankstown. And

3:10

then when the third stage opens up to Parramatta,

3:13

I think, you know, we're very early in this, there's

3:15

another three, five years for

3:18

people to sort of participate in this.

3:19

Yeah, it's interesting you say that. I was talking to someone in

3:22

our capital markets team and they were saying, you

3:24

know, people understand it in theory particularly

3:26

that reduction in commute times, but it's

3:28

not until they actually experience

3:30

it that then it starts to have that impact.

3:33

So with that sort of Macquarie

3:35

Park sayer city people actually

3:37

being able to experience that shortening of commute time,

3:40

it's actually really sinking in that this can have such

3:42

a huge impact.

3:44

Yeah , look, it's, you know , today if you live further out

3:46

and you've got a bus journey, a

3:48

train journey, change trains at Chatswood

3:51

and then come into the city, it

3:53

can take about an hour and 20 minutes. And

3:56

for some of these people, commute will drop

3:58

to about 13 minutes by way of example.

4:01

So you know , if you give someone back 15 minutes

4:04

each way every day,

4:06

that's worth a lot. Anne and I were

4:08

talking about this beforehand, really makes all these suburbs

4:10

really attractive, Anne.

4:12

Yeah, absolutely. And people are willing to

4:14

pay more money as well when it comes to

4:16

living in a suburb where they can reduce

4:19

that commute time. So we've actually

4:21

seen that on average there's about a 5%

4:23

premium in the rate at which your suburb grows

4:25

when there's a metro station. But the

4:28

further out you are often the bigger this premium

4:30

is. So there are some suburbs

4:32

in the outer suburbs of Sydney. So

4:34

for example Castle Hill and Baulkham

4:37

Hills where that premium goes

4:39

up above 20%. I

4:41

think it's also good news for the Sydney CBD

4:44

itself as well because we know there

4:46

was a lot of research done during the

4:49

pandemic about why people enjoy

4:51

working from home, what their key

4:53

pain points are when it comes to that return to

4:55

the office. And overwhelmingly

4:57

the number one reason given was time

4:59

spent commuting. So anything

5:01

that can be done to reduce the pain and the

5:03

time commuting is going to help to support

5:06

more office recovery, more people coming

5:08

back into the city. So it's

5:10

not just making these suburbs

5:12

with metro stations more vibrant, it's

5:15

also helping to ensure the return

5:17

of the vitality of the Sydney CBD.

5:19

Yeah, I think one of the things I found really interesting

5:22

and in looking at the stats about the capital

5:25

value appreciation was that you had

5:27

neighboring suburbs that there was a real difference.

5:30

So if you compare , say Crow's Nest and

5:32

Cammeray or Castle Hill and

5:34

Baulkham Hills, the suburbs that were

5:36

closest to the metro line had

5:38

a really significant capital appreciation

5:40

benefit.

5:41

Yeah, that's right. It was really quite astonishing

5:44

to see such a staggering difference

5:46

in capital growth between suburbs that

5:48

do just neighbor each other. So offer

5:50

very similar lifestyle amenity. So

5:53

the addition of a train station makes

5:55

a suburb much more desirable to live

5:58

in and people are willing to pay a lot more money

6:00

to actually purchase in a suburb where

6:02

they do have access to a rail station.

6:04

Yeah, and I think we'll see that continuing to

6:07

play out as it's more established as

6:09

we get more of the metro line up and running.

6:12

I think Sameer, one of the things that you were

6:14

talking about, which would be great to

6:16

dive into a bit more where these demographic

6:19

shifts and that whole sort of Gen

6:21

Y, Gen X , you know, that more

6:23

dynamic sort of population that we're seeing around

6:25

these train lines, you've

6:27

described it as the electrification of

6:30

Sydney and I love that term. Can

6:32

you talk us through how that's playing out

6:34

and the changes that this is driving?

6:37

Yeah, look Kathryn, I think uh , part

6:39

of it is, you know, as these new metro stations

6:42

develop, there's a lot of other property

6:44

development around the stations as well.

6:47

You know , you often get good shopping centers, more

6:49

retail footprint better cafes

6:51

and restaurants and gyms, you

6:53

know, which tends to pull in these Gen

6:56

Z and Gen Y type. But the

6:58

other one that I would say is many

7:00

of the younger cohort often are

7:02

not very interested in driving. We are

7:04

seeing a lower percentage of them take

7:07

up driving licenses. Many

7:09

of them are less pro to owning

7:11

cars. And so if you

7:13

can cut your commute and be close to a very good

7:16

public transport system, then it's

7:18

kind of liberating in some ways for many of these

7:20

people.

7:21

Absolutely. And particularly with petrol

7:24

prices at the moment as well . <laugh> ,

7:26

I did get a big shock when I put petrol

7:28

in the other day.

7:30

Yes. So Anne

7:32

, you've talked to us about the shifts to date

7:34

in the capital value appreciation,

7:37

but it'd be great to get into that in a bit

7:39

more detail. So, you know, how best

7:41

can investors capitalize on

7:44

the metro and what should they be looking at,

7:46

do you think? Where should the smart capital be

7:48

looking at at the moment?

7:50

You're right, it is something that investors take

7:52

very close consideration of. And in

7:54

fact, one of the things that often drives an increase

7:57

in investment is when a new rail

7:59

station is announced. So we've

8:01

seen this in Melbourne for example, where

8:04

a lot of our train lines have been extended. As

8:06

soon as a new suburb train station

8:08

was announced, you'd see suddenly an increase

8:11

in interest in people looking to buy

8:13

in those suburbs. Not just investors,

8:16

also people who are thinking about

8:18

what's going to change in this suburb down the line.

8:20

Affordability is a massive issue for

8:22

a lot of people looking for a

8:24

house or a unit to live in. And we've

8:26

seen people moving further and further away from

8:29

cities because of those affordability issues.

8:32

So train stations have a really

8:34

critical role to help here in enabling

8:37

people to still feel connected into

8:39

the city, to still be able to commute in but

8:42

be able to purchase somewhere that they

8:44

can actually afford.

8:45

Yeah, the affordability thing is such

8:47

a tough one. I was talking to my son about

8:50

it the other day and he's just about

8:52

to turn 22 and I'm like, you're going to have to think about

8:54

how you can afford to stay in Sydney or whether

8:56

you, you know, you need to move cities. So

8:59

I think it's a really difficult consideration

9:01

for our younger people who

9:03

are wanting to live and work in in Sydney as

9:05

to how they, where they live and how they afford to

9:08

buy an apartment here. Sameer,

9:10

it'd be really interesting to have a bit more of a

9:13

chat talking about, I think in the study, one

9:15

of the things I saw was that you've compared what

9:17

we're seeing in Sydney to other major

9:19

cities globally and there's

9:21

a couple of case studies in the report. Can

9:24

you talk us through the lessons that we can learn I guess

9:26

from other cities and you know, how this might

9:29

be able to play out in our other markets around

9:31

Australia?

9:32

Yeah, look Kathryn, so you know, we've

9:34

seen, and actually what sparked the interest here

9:37

was I was looking at some research into the Dubai

9:40

Metro. So Dubai has had a new

9:42

train line go in about a decade ago and

9:44

London has launched the Crossrail recently

9:47

as well. And our teams in both of

9:49

those markets have done some analysis in Dubai.

9:51

We found, you know , rents were about

9:53

15% higher the

9:55

closer you got to the train in

9:57

London, we found the shorter the commute,

10:00

the better the capital value was.

10:02

In round numbers, the way I describe it is

10:05

for every 10% cut in your commute,

10:08

you get about a 6% better capital value.

10:10

And that was kind of the maths that we found in

10:13

the UK in Australia. You

10:15

know, we've got a lot of metro type

10:17

projects underway. Sydney's got

10:19

the main metro and then there's a Paramatta

10:21

light rail in Sydney as well. In

10:24

Melbourne, you know, there's two particular

10:26

train lines being considered. One is

10:28

a suburban loop and then there's the airport link

10:31

and then Brisbane's got two including

10:33

the cross river rail and

10:36

then Perth's got an initiative with Metro

10:38

Net as well. So I think across Australia we

10:40

are starting to see governments invest significantly

10:43

in this and I think this will be, you

10:45

know, one or two decades worth of good

10:48

investment opportunities for people who are astute.

10:51

One other thing I'd say in here , Kathryn,

10:53

is just I don't think we are building

10:55

enough apartment stock close

10:57

to these train lines , right? Like

10:59

even, and even in Sydney it's about 5,000

11:02

apartments per annum around the

11:04

metro today that's the supply we

11:06

should be doing somewhere between 9 and 10,000

11:09

because the metro is such an attractive thing.

11:12

So I think we're, we're sort of under capitalizing

11:15

on the volume of supply that we should bring . And

11:17

that speaks to Anne's point or on affordability, right?

11:20

One way to increase affordability to actually increase

11:22

the volume of stock .

11:24

Yeah.

11:24

Yeah, it's probably the most important way

11:27

to increase affordability And you

11:29

know, the reality is that in Australia for many

11:31

years now, we haven't had the supply

11:33

of new homes keep up with our growing population

11:35

and those suburbs that are home to a metro

11:38

station that do have good connectivity

11:40

are really your prime locations

11:42

for focusing development. So

11:45

we know that people want to live near a

11:47

metro station. We know that those are

11:49

the kinds of areas that really benefit from

11:52

population growth. You know, Sameer

11:54

Was talking about more

11:55

Gen Y and Gen Z, your young

11:57

Worker cohort.

11:59

So increasing the

12:00

Supply of new apartment

12:01

Dwellings in these locations

12:03

around the metro line will really,

12:06

really add a lot,

12:07

Not just for the

12:08

People living in these areas, but also to

12:10

Sydney's economy as a whole.

12:12

And I suppose it's not just the affordability

12:14

for people wanting to purchase, I mean

12:16

build to rent is such a growing sector in

12:19

Australia at the moment. And Sameer, you're

12:21

saying that we're just not building enough apartments

12:23

around these metro lines. I'm assuming that this

12:25

is a really great opportunity for the BTR sector

12:28

as well to focus on opportunities

12:30

around these metro stations.

12:33

Yeah , look , BTR doesn't need to be, you

12:35

know, right in the city center. You can spread

12:38

these sorts of built to rent platforms further

12:40

out, which is what I'm hoping will

12:42

start to sort of happen in Sydney. I'd say the

12:44

Southwest is an area that's kind of ripe

12:47

for this sort of disruption. The

12:49

Northwest is seeing a lot of development but not

12:51

necessarily the Southwest. So I think there'll

12:53

be pockets that need to sort of emerge

12:55

and, and really sort of take off because

12:57

we do have this affordability and just lack

13:00

of choice. Right now , given vacancies

13:02

are low, maybe that'll help your son out too Kathryn.

13:05

I think he would love to hear that. And

13:08

you probably don't want to talk too

13:10

much about it at this stage, but I'd love

13:12

to give people a bit of a sneak peek about the

13:14

upcoming research that you're doing on infrastructure

13:17

projects in other cities. Can

13:19

you give us a bit of a really high level view

13:21

on what you're going to be looking at next?

13:23

Yeah, look Anne and

13:26

I are looking at outside of

13:28

trains, we're also looking at the healthcare

13:30

sector. So we're looking at a couple of big healthcare

13:33

precincts, 'cause healthcare can also spark

13:35

a lot of development. And then the

13:37

third option is to look at tech and

13:40

we're looking at a couple of sort of technology precincts

13:43

and how that's pulled in commercial,

13:46

residential into that area as

13:48

these developments have sort of taken fruit and there's

13:50

a big pipeline of healthcare projects

13:53

and technology projects around

13:55

Australia. And you know, Melbourne's got quite a

13:57

few healthcare projects in the hopper. So

14:00

that's kind of the thinking and

14:02

looking forward to working with Anne again.

14:05

Fantastic. Yeah, I think technology is

14:07

such a huge focus at

14:09

the moment in health with our aging population,

14:11

so it'll be really interesting to

14:13

see the next couple of reports and

14:16

the insights that come out of those. So

14:18

thank you so much for your time, Sameer

14:21

and Anne . Clearly the Sydney Metro is

14:23

having, you know, a really outsized impact

14:25

on the Sydney property market and providing

14:28

some lessons on how we can harness infrastructure

14:31

better to deliver outcomes

14:33

for cities, not just in Australia

14:35

but globally. Thanks so much for

14:37

tuning into this latest episode of Talking

14:39

Property with CBRE. If you

14:42

like the show and want to check out more, you can follow

14:44

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14:46

Podcasts, or your favorite podcast hosting

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platform. You can also find a link

14:51

to the Metro report in the show notes. And

14:53

if you have any questions in relation to this episode

14:56

or ideas for future podcasts, please

14:58

email us at talking [email protected].

15:02

Until next time.