North Sydney Economic Development Strategy Stage 1 Scoping study North Sydney Council January 2016 150328-stage 1 report-160623 SGS Economics and Planning Pty Ltd ACN 007 437 729 www.sgsep.com.au Canberra, Hobart, Melbourne, Sydney © SGS Economics and Planning Pty Ltd 2016 This proposal has been provided on a commercial in confidence basis. The ideas, methods and sources cited in this proposal are copyright and remain the property of SGS Economics & Planning Pty Ltd. They may not be copied or distributed beyond the requirements of the current commercial transaction without the prior written agreement of SGS. 150328-stage 1 report-160623 TABLE OF CONTENTS 1 INTRODUCTION 4 1.1 Background 4 1.2 Study objectives 4 2 LITERATURE AND TRENDS & DRIVERS REVIEW 5 2.1 Review of economic development literature 5 Summary and key findings 6 2.2 Review of economic trends and drivers 7 Agglomeration economies 7 Restructuring of the economy 8 Agglomeration economies in Sydney 11 Professional services 13 Information and Communications Technology 13 Manufacturing 13 Retail 14 Education 16 Health care 16 Summary and key findings 17 2.3 Literature and trends and drivers summary 17 Literature review 17 Trends and Drivers 18 3 STRATEGY CONTEXT 20 3.1 Review of other Local Government EDS’ 20 Summary and key findings 27 3.2 Review of NSW Government initiatives 28 A Plan for Growing Sydney, 2014 28 Draft Inner North Subregion Strategy, 2007 29 Long Term Transport Masterplan 30 State Infrastructure Strategy (2012) and Update (2014) 31 Employment Lands Development Program 31 NSW Economic Development Framework (2014) 31 Summary of State government documents 31 3.3 Review of North Sydney Council documents 32 North Sydney Community Strategic Plan (2013) 32 North Sydney Local Environmental Plan (2013) 32 North Sydney Development Control Plan (2013) 33 North Sydney Local Development Strategy (2009) 33 North Sydney Centre Review 33 North Sydney Commercial Centre Study (2015) 34 North Sydney Centre Economic Study (2013) 35 North Sydney Traffic and Pedestrian Management Study (2014) 35 North Sydney Marketing and Advertising Campaign (2014) 35 St Leonards/Crows Nest Planning Study – Precincts 1, 2 and 3 35 Public Domain Style Manual and Design Codes (2014) 36 Stage 1 Scoping study 1 Public Domain Review (2015) 36 Events Strategy (2015) 37 Affordable Housing Strategy (2015) 37 Careening Cove Masterplan (2015) 38 Education Precinct Study (2013) and Education precinct Public Domain Masterplan (2014) 39 North Sydney Childcare Review (2014) 41 State of the Community Sector (2012) 41 Arts and Cultural Strategic Plan (2012) 41 Summary 41 3.4 Strategy context summary 42 4 CURRENT POSITION: DATA ANALYSIS 44 4.1 Economic profile 44 Industry profile 44 Base case forecasts 47 4.2 Input-output analysis 50 4.3 Market analysis 53 Commercial 53 Industrial 62 4.4 Economic specialisation 63 Location quotient analysis 63 Growth Share Analysis 65 Shift-share analysis 66 4.5 Precinct/Centre profiling 68 North Sydney CBD 72 North Sydney Periphery 73 St Leonards 75 Crows Nest 76 Milsons Point 78 Neutral Bay 79 Pacific Highway 81 Cremorne 82 Royal North Shore Hospital (RNSH) 84 Artarmon Industrial Area 85 4.6 Summary 87 Market analysis key findings 87 Economic Profile key findings 88 Implications 90 Potential Directions 91 5 CONSULTATION 92 5.1 Consultation process 92 5.2 Consultation findings 93 Businesses surveyed 93 The role of North Sydney Council 95 Precinct analysis 97 Role of centres in LGA 99 Office sector 100 Retail sector 106 Stage 1 Scoping study 2 Tourism 108 Education 108 5.3 Summary 108 6 STAGE 1 – SUMMARY FINDINGS 110 6.1 Literature and trends and drivers 110 Commercial office 110 Retail 110 Education 111 Health 111 6.2 Strategy context summary 111 Role of Council in Economic development 111 Existing strategies and documents 113 6.3 Current position 114 Economic profile 114 Market dynamics 116 6.4 Key issues and next steps 118 7 STAGE 2 – ECONOMIC DEVELOPMENT STRATEGY 121 Vision and goal development 121 Strategies and actions 121 Draft strategy document 122 Incorporation of feedback and final strategy. 122 REFERENCES 123 APPENDIX 1 126 APPENDIX 2 130 Stage 1 Scoping study 3 1 INTRODUCTION 1.1 Background The North Sydney LGA plays an important role in the economic geography of Sydney, forming a part of ‘Global Sydney’ and the ‘Global Economic Corridor’ under the NSW Government’s latest metropolitan strategy A Plan for Growing Sydney. The primary objective of the Economic Development Strategy (Strategy) is to clearly define the Council’s role in economic development, articulate an economic vision and establish a coordinated plan for economic development in a comprehensive policy document. The key economic clusters in the North Sydney LGA include North Sydney CBD, St Leonards, Crows Nest and Cremorne. The St Leonards centre straddles the North Sydney, Willoughby and Lane Cove Council areas. One of the driving factors for the Council to develop an Economic Development Strategy is addressing the decline of commercial floor space in the B4 Mixed Use zone. In a report to Council in 2014, research indicated that there has been a loss of around 80,000 square metres (as approved) of commercial floor space in the B4 Mixed Use zone since 2007. These losses have predominantly occurred in St Leonards/ Crows Nest, Milsons Point and the periphery of North Sydney CBD. The losses are the result of there being little interest in the provision of employment floor space in recent mixed use developments, with developers seeking to maximise the amount of residential floor space. The Economic Development Strategy should develop recommendations to encourage greater commercial floor space within the new developments in the B4 Mixed Use zone. While the focus of the economic development strategy will be to plan to ensure the vitality and sustainability of local economic activities it will be important to recognise the economic context of the North Sydney LGA. LGAs form an important part of a broader network of economic activity and hence economic development strategies need to account for the economic context and the role the North Sydney LGA plays in the surrounding subregion. 1.2 Study objectives The primary objective of the Economic Development Strategy is to outline Council’s vision for economic development in a consolidated policy document. The document will also clearly define Council’s role in economic development. The Economic Development Strategy will set a coordinated plan and function as a comprehensive policy document which facilitates the continued economic growth of North Sydney. Stage 1 Scoping study 4 2 LITERATURE AND TRENDS & DRIVERS REVIEW Overview This section provides an overview of economic development literature, as well as broader macroeconomic trends and drivers across different industries. The purpose of this task is to ‘set the scene’ and provide a backdrop, against which analysis and future economic development actions can be sense-checked. 2.1 Review of economic development literature Literature related to agglomeration can generally be traced back to Marshall’s Principles of Economics in 1890. Marshall described the conceptual benefit which firms can gain by locating in a particular location. There have been a number of recent contributions on cities and economic geography which seek to understand the concepts identified by Marshall in a contemporary context and provide some intelligence about the underlying contributors to a successful urban economy. The literature generally argues that density and diversity are the hallmarks of successful urban economies based on knowledge and creative industry jobs. According to Moretti (2012, p.6), old manufacturing centres are disappearing as ‘new innovation hubs’ become the ‘new engines of prosperity’. Technological advances have reduced the value of physical goods but increased the value of human capital and innovation (Moretti 2012, p. 10), with job growth in developed economies now highest in knowledge-based industries. These include research and development, design, engineering, marketing, advertising, writers, composers as well as more traditional jobs such as lawyers, bankers, financiers, doctors and management consultants (Reich 2003). These jobs are involved in analysing, manipulating and communicating (Reich 2003). The second category of growing employment is personal services such as restaurant workers, taxi drivers, security guards and hospital attendants (Reich 2003). Growth in employment within these jobs are generated by the growth of the knowledge jobs as the knowledge workers are the main consumers of these services. According to Moretti (2012), each knowledge job generates five indirect jobs which comprise these service jobs. According to Sassen (2005), globalisation has dramatically shifted the flow of economic processes (capital, labour, goods, raw materials, etc.) from being cross-border inter-state flows, whereby the key articulators were nation states, to ones whereby other spatial units, notably cities are the principle actor. As a result cities world over are attracting people in large numbers by offering improved economic (and often social) opportunities when compared to neighbouring or far-flung rural areas. Filion (2001, p. 66) maintains that unlike ‘mono or less diversified industrial settings’, economically diverse centres have been recognised as offering more opportunities and being more resilient within the broader economy. However, in order for diverse, mixed-use centres to be successful, there needs to be ‘a diversity of activities, with a strong office employment and retail component, and development at a density that is much higher than the suburban norm’ (Filion 2001, p.142). These ideas are similarly reiterated by Florida (2003) who writes that vibrant, diverse, mixed-use centres characterised by high density residential, office employment and retail are attractive to creative workers because they foster interaction and knowledge sharing (p. 249). He notes that ‘economic growth is powered by creative people, who prefer places that are diverse, tolerant and open to new ideas’, and thus cluster in vibrant and active centres.