ACT LIGHT RAIL SURVEY
ABOUT THE ACT LIGHT RAIL SURVEY Welcome to the findings of the Colliers International ACT Light Rail Survey. The Canberra light rail is one of the largest infrastructure projects in the ACT since self-managed Government was announced. With this in mind Colliers International set out to identify and measure the opinions of commercial property owners along the Stage 1 route CBD to Gungahlin and capture their thoughts on the likely impacts. In early 2017 it was noted there had been limited interaction or reporting from a commercial owners perspective, and given the vital role that private owners (particularly of standalone assets) will play in the long-term success of the Northbourne corridor, Colliers International has engaged with these groups. In early 2017 it was noted there had been limited interaction or reporting from a commercial owner s perspective
WHO PARTICIPATED IN THE SURVEY? Local developers THE PRIMARY OBJECTIVES OF THE SURVEY WERE TO UNDERSTAND THE FOLLOWING: Do property owners believe that the light rail project will ultimately benefit Canberra? Whether the major infrastructure project would benefit commercial property values and tenant retention along the corridor. Strata owners COMMERCIAL PROPERTY OWNERS Building owners Have owners of properties along the Stage 1 route considered repurposing or disposing of their properties given the ACT Government s land release program along the corridor? Is there cause for concern of an oversupply of dwellings given the significant number of mixed-use developments forecast along the corridor? What are the major concerns for commercial property owners along Stage 1? Interstate owners As identified by Colliers International s research, there are approximately 105 commercial properties (including strata) along the Northbourne Avenue corridor and Flemington Road, owned by an estimated 93 groups. In order to complete a widespread review of commercial property owner s opinions, a short 10 question survey including commentary provisions was developed and sent to 90 of these owners. Participation rate in the online survey was 36% and further telephone interviews were also conducted. Local and interstate based developers, building owners and strata owners participated in the survey.
ACT LIGHT RAIL OVERVIEW In February 2016 the ACT Labor Government announced the successful bidder for the ACT light rail project, Canberra Metro, to deliver an initial 12km public transport line that will link the CBD to Gungahlin, the ACT s fastest growing region. Canberra Metro delivered what was described as an innovative and costeffective tender that would deliver world-class infrastructure and design. In May 2016, prior to the ACT election the ACT Government formally announced the signing of the contract at an anticipated cost of $783 million. The Government cited commissioned studies that the project would generate an expected 500 jobs throughout the construction period and a cost benefit analysis of 1.2 to the Territory as a result of the project. ACT LIGHT RAIL IS EXPECTED TO GENERATE 500 JOBS Stage 1 Route Map: Gungahlin City Light Rail Line Stops GUNGAHLIN Manning Clark North Gungahlin Pl Manning Clark Cr Nullarbor Ave FRANKLIN HARRISON Well Station Dr Well Station Dr Well Station Drive MITCHELL Sandford St Barton Hwy Flemington Rd Randwick Rd Federal Hwy Mapleton Avenue Mapleton Ave Nullarbor Avenue Morisset Rd EPIC and Racecourse WATSON Phillip Avenue Phillip Ave DOWNER Swinden Street Swinden St Following the re-election of Labor in late 2016, works are now well advanced along Stage 1 of the corridor, with an expected operating date of early 2019. As a result of the Canberra Metro project, Northbourne Avenue has been identified as an area for significant growth through redevelopment of number of residential and commercial properties along the corridor. The Government plans to fund the project through the strategic release of land, with the most recent Government release - a 2.5ha site with 450m of frontage to Northbourne Avenue and development rights to construct 500+ dwellings - achieving $45 million via Tender in March 2017. NORTH Mouat St LYNEHAM Macarthur Ave Condamine St TURNER Northbourne Ave Gould St Rudd St Alinga St CITY Antill St DICKSON Macarthur Avenue Wakefield Ave Ipima Street Ipima St BRADDON Elouera Street Elouera St Bunda St
IS THE LIGHT RAIL GOOD FOR CANBERRA AND WHAT IS THE BEST TIMING? Whilst an often divisive topic in Canberra and acknowledged as a key factor in determining the most recent local election, 67% of commercial owners felt that the introduction of the light rail project would ultimately benefit Canberra. Commercial owners acknowledged that the establishment of a major infrastructure project will likely provide a significant economic boost to local businesses and employment during the construction phase, and that the wider light rail network will encourage further investment into the CBD and ACT region from interstate and offshore groups. Owners were optimistic that the project will lead to better connectivity along the Northbourne Avenue corridor and Flemington Road, and that Stage 1 will stimulate further re-development of arguably the most important gateway in the ACT. Whilst acknowledging a strong consensus of the benefits, owners did note concerns regarding the long-term viability of the project given that newer technologies may supersede light rail once construction of the entire network has been finalised. Owners remained sceptical that new technologies are likely to be available in the next decade, and that a major proportion of the Government s budget could be directed elsewhere, particularly as the projected is anticipated to take 20+ years. As evidenced by responses, 47% of owners felt that the light rail will have little to no impact on congestion along the Stage 1 route - a fundamental objective of the project. Timing of the project has been heavily debated, with varying opinions on when to introduce the next stages and which town centres should be prioritised. Fifty percent of owners were of the view that if the light rail were to be implemented, now is the correct timing for this occur. This view is shared by many owners of commercial assets who believe that the project will serve as the catalyst to reinvigorate tired gateways, despite not necessarily supporting the proposed technology. When delivered, what impact do you think light rail will have on traffic congestion along Northbourne Avenue and through Gungahlin? 17% Increased traffic congestion 36% Reduced traffic congestion Never 30% What would be the best timing for the light rail project? Now 50% 2-5 years 10% 6-10 years 10% 47% Have little or no impact 67% OF RESPONDENTS BELIEVE LIGHT RAIL WILL BENEFIT CANBERRA
WHICH AREA SHOULD LIGHT RAIL EXPAND TO NEXT AND WILL CANBERRANS USE IT TO COMMUTE TO AND FROM WORK? Owners demonstrated varying opinions on the proposed Stage 2 route, with preferences for CBD to Airport (30%), CBD to Woden (33%), Other (20%) and CBD to Tuggeranong (10%) being the most popular responses, suggesting that the ACT Government may need to expedite the timing of alternative routes. Overwhelmingly commercial property owners believe that Canberrans will use the Stage 1 route to commute to and from work, assuming that stops were within close proximity to office locations and viable Park and Ride solutions were provided by the ACT Government. Eighty seven percent of owners responded with a positive view suggesting that owner-occupiers and tenants along the Northbourne Avenue and Flemington Road corridor are likely to utilise the light rail, an outcome which would imply flow-on effects for commercial owners. IF THE LIGHT RAIL NETWORK EXPANDS ACROSS THE CANBERRA REGION, WHICH AREA SHOULD BE THE NEXT LIGHT RAIL ROUTE COVER? 7% CBD to Belconnen 10% CBD to Tuggeranong 20% Other 30% CBD to Canberra Airport 33% CBD to Woden
ACT LIGHT RAIL MASTER PLAN & 25 YEAR GROWTH FORECASTS +33% +63% +47% +58% BELCONNEN +159% +108% Barton Highway Drive STAGE 1 GUNGAHLIN Federal NORTH CANBERRA Hi ghway Parkway +44% NORTH +90% +67% Whilst owners suggested it could take many years for Canberrans to fully adopt to the light rail mode of transport, they felt businesses along Stage 1 will ultimately benefit from higher volumes of workers and traffic passing along the corridor. Additionally, owners were optimistic that accessibility to current office and retail locations will be substantially improved, particularly given the lack of existing parking and transport infrastructure at present. Respondents felt this improved accessibility could encourage long-term retention of tenants and increase property values through higher demand. MOLONGLO VALLEY Gun g ahlin Parkes Adelaide Avenue Way Majura PARLIAMENTARY TRIANGLE AIRPORT +51% +98% +0% +26% +46% +19% Cotter Road PROPOSED STAGE 2 WODEN VALLEY SOUTH CANBERRA Canberra +24% +34% +8% Tuggeranong Parkway Hindm a TUGGERANONG Tharw a Drive rsh Drive +26% +44% +43% Monaro Highway Avenue Legend Future Light Rail Corridors Major road Arterial road Jobs Retail m 2 Dwellings Owners were optimistic that accessibility to current office and retail locations will be substantially improved
As anticipated, however, owners noted that given the dispersed nature of office locations in Canberra, Stage 1 will only benefit a small portion of the population in a door-to-door service. Owners expressed concerns that a slow service and the possibility of interchanging to other travel modes in order to reach final destinations may also become impractical for most, again undermining the ACT Government s strategy to minimise car dependency. Furthermore, the lack of details surrounding transit times and fares has been a concern of owners who note that tenants may ultimately find driving to be a cheaper and more direct alternative despite traffic congestion. 2013 POPULATION Current: 390,000 Future: 553,000 +45% 2041 CARS Current: 225,000 Future: 367,000 Owners expressed concerns that a slow service and the possibility of interchanging to other travel modes in order to reach final destinations may also become impractical for most 2013 +45% 2041
WHAT ARE IMPLICATIONS FOR PROPERTY OWNERS? 53% believe the Light Rail Project would ultimately improve the value of their commercial property A critical component of the Light Rail Survey was to understand owners views on whether the light rail would likely provide a positive impact on commercial property values. Fifty-three percent of owners surveyed believed that the project would ultimately improve the value of their asset, with 37% saying it would have little to no impact and only 10% indicated that it would be detrimental to values. These responses seemingly support the notion that further amenity and infrastructure along the corridor will have a positive benefit for owners along Flemington Road and Northbourne Avenue through improved tenant retention, increased accessibility for owners and tenants and provide a solution to the current parking issues, particularly in areas such as Braddon.
Additionally, owners of standalone properties were optimistic the strong focus on urban renewal along the corridor and development of mixed-use buildings would lead to stronger demand from developers looking to acquire redevelopment opportunities. Respondents that indicated Stage 1 would have little to no impact on pricing (37%) generally felt that there may be short price growth due to the project, however property values would quickly return to current market levels once numerous developments are completed. Whilst mostly positive, after reviewing detailed feedback of respondents Colliers International noted that there are some strong concerns relating to improved land values along the corridor and the subsequently higher rates charges that will likely ensue for property owners. Participants expressed apprehension that the ACT Government s plan to raise rates in the latest budget will lead to proportionally higher outgoings charges, and that their net position could be negatively impacted, given a lack of movement in leasing rates. It was conveyed by a portion of owners along the Stage 1 route that the proposed increased outgoings to fund the project could potentially leave owners with artificial price growth and ultimately lower returns. Do you think light rail will have an impact on your property s overall value? 10% Yes it will have a negative impact 37% It will have little to no impact 53% Yes it will have a positive impact There are some strong concerns about land value along the corridor
ARE BUILDING OWNERS EXPLORING ALTERNATIVE USES FOR THEIR BUILDINGS? Whilst not applicable to all property owners along Northbourne Avenue and Flemington Road, an unexpected 50% of owners had considered developing or selling their building for residential redevelopment purposes. Given the strategic land release programme of the ACT Government along Northbourne Avenue and Flemington Road, many private owners noted the likely demand from developers for these opportunities and had investigated possible options. However despite this, numerous owners are of the opinion that there are many obstacles that affected the viability of residential redevelopment including heritage and planning restrictions, parking requirements and most notably the recently revised Lease Variation Charge (LVC) which incorporates a vastly greater development tax for residential land being redeveloped for unit and townhouse purposes. A host of standalone owners cited LVC as the major deterrent for redevelopment of privately owned buildings/land along Stage 1 and somewhat contradictory and inconsistent with the ACT Government s aim to stimulate the redevelopment of the Northbourne Avenue corridor into a highly densified world class gateway. 50% Of owners have considered developing or selling their building for residential redevelopment purposes
WILL NORTHBOURNE AVENUE EXPERIENCE AN OVERSUPPLY OF RESIDENTIAL DWELLINGS? As outlined by the ACT Government, the Territory is currently growing at approximately 1.5% annually, suggesting growth rates of approximately 6,500 residents per year. Initial research by Colliers International indicates there is an estimated 2,000+ residential dwellings to be constructed directly along the Stage 1 route over the next five years. Impending projects and recent land releases such as Midnight, Midtown, Dickson on Northbourne, Lyneham on Northbourne and the Dickson Motor registry are examples of major urban renewal projects slated for the Stage 1 corridor. Further, the ACT Government has recently released a revised land release programme to coincide with the 2017 budget that identifies further sites such as Macarthur House and Northbourne Flats in Turner to be sold for redevelopment purposes both of which will lead to further residential infill. The ACT Government has recently released a revised land release programme to coincide with the 2017 budget
Despite the significant pipeline of residential projects, including neighbouring areas such as Braddon and Dickson commercial property owners were generally optimistic (57%) that the ACT Government s land release programme would not lead to an over-supply of residential dwellings nor a negative impact on their commercial property values long-term. Feedback suggested that an oversupply, if any, is likely to occur in outlying locations rather than along the rejuvenated Northbourne Avenue corridor, particularly given the major infrastructure to support these new dwellings and higher residential volume. Whilst some owners did express views that the rushed land release may create an initial oversupply (43% agreeing), the ongoing population growth of the Territory and high-profile location would ultimately ensure long-term viability of these developments. Therefore commercial property owners seemingly believe that there will be continued demand from owner occupiers, investors and developers for opportunities along the corridor, particularly for assets showing future redevelopment potential. Despite high levels of upcoming supply, this is not expected to impact commercial property owners, and in fact may prove to be a positive outcome, as increased dwellings, population and activity at street level will arguably support tenant retention and amenity for businesses making Northbourne a more desirable location. Do you think the re-purposing of land on the Northbourne Corridor will lead to an over supply of residential dwellings? Yes 43% No 57%
SURVEY INSIGHTS The ACT Light Rail Survey has revealed a number of contrasting views by commercial property owners regarding the viability, timing and impact of the ACT s largest infrastructure project. Overall, commercial owners appear to hold a marginally positive view that the introduction of the light rail will create increased activity, better amenity and ultimately lead to better tenant retention in the long-term. Commercial owners are somewhat undecided whether congestion traffic will be alleviated and whether the rapid infill of the corridor will lead to a long-term oversupply of residential dwellings. Whilst opinions suggest that there are a number of associated benefits to commercial owners, many have also noted policies which they believe contradict the vision of light rail and adaptive reuse, namely the revised Lease Variation Charge (LVC), increased commercial rates charges and timing of land releases. With Stage 1 currently under construction and the proposed Stage 2 route to Woden currently open for public consultation there will be continued debate surrounding the wider Canberra Metro project and the long-term success of the infrastructure. The overwhelming consensus from owners is that it will take many years for Canberrans to adopt light rail technology and realise the ACT Government s vision for an integrated transport network that delivers economic and social benefits. Colliers International will continue to monitor the progress of light rail in Canberra and ascertain whether the current forecasts and predictions of owners have materialised and convey the impacts on commercial property owners. The overwhelming consensus from owners is that it will take many years for Canberrans to adopt light rail technology
TOP 7 TAKEAWAYS 01 02 03 04 Whilst divided on the technology, project timing and future routes, 67% of commercial owners felt that the light rail would ultimately provide wider benefits to the Territory and act as a catalyst for the renewal of one of Canberra s key gateways. The majority of commercial property owners were of the opinion that light rail would lead to price growth for their asset, however noted concerns their net position may be negatively impacted by increasing annual charges. Following the announcement of Stage 1, 50% of owners along the Northbourne Avenue and Flemington Road corridor have investigated alternative options for their commercial asset. Commercial owners were generally optimistic that there will not be an oversupply of residential dwellings along the Northbourne Avenue corridor despite significant recent land releases and a forecast 2,000+ units over the next five years. Light rail will act as a catalyst for the renewal of one of Canberra s key gateways 05 Owners anticipate that further densification and increased amenity as a result of Stage 1 will have a positive impact on tenant retention. 06 47% of commercial owners felt the light rail would have little to no impact on traffic congestion, a fundamental objective of the infrastructure. 07 Overwhelmingly, commercial property owners believe that Canberrans will use the Stage 1 project to commute to and from work, assuming that stops were within close proximity to office locations and viable park and ride solutions were provided by the ACT Government.
FOR MORE INFORMATION ABOUT THE ACT LIGHT RAIL SURVEY, OR TO PARTICIPATE IN FUTURE SURVEYS PLEASE CONTACT: Matthew Winter Manager, Investment Services +61 432 344 684 Matthew.Winter@colliers.com Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. COPYRIGHT 2017.