How motorways drive commercial property values
With infrastructure proposals featuring in the federal election campaign, Paul Thornhill takes a look at the impact of new motorways on commercial property prices.
Across Australia’s cities, congestion is forcing many commuters and trucks to sit idle. That’s why come election time; new motorways are enthusiastically promoted as the solution to freeing up traffic and boosting productivity.
This year is no exception, with WestConnex promoted by the NSW government as the missing link in Sydney’s orbital road network and East-West Link in Melbourne attracting federal funding from one political side, but not the other.
But how do express-roads impact prices in the commercial property market? The answer, according to Paul Ford, Fund Manager of Charter Hall’s Core Plus Industrial Fund, depends very much on where you are and what your property is designed for.
“Sitting next to a new motorway doesn’t necessarily do much for your asset value; the key is your building’s proximity to on and off ramps. It also depends on the type of business your property is designed for and the specifics of each project.”
WestConnex and the widening of the M5 will link Sydney Airport and nearby port areas to Parramatta and the industrial estates in Sydney’s’ west. Ford tells RealCommercial: “The benefits of this project flow very much to logistics-focused properties which are dependent on the movement of freight. There may be some flow on to manufacturing, even a little to the office sector in Sydney’s south, but it’s the freight factor which is crucial.”
That’s quite a different story to East-West Link in Melbourne. Promoted as the solution for the 140,000 cars spilling daily from the Eastern Freeway’s approach to the CBD, this proposal is controversial, but Ford sees a bright side for some property owners.
“I think we will find that office parks in areas like Mount Waverley in Melbourne’s east will be opened up to employees from the west who currently wouldn’t make this commute,” he said.
Charles Cini, CEO of CVA Property Consultants, also sees positives downtown. “Moving cross metro traffic underground is a good thing, as far as inner city office assets are concerned. Freeing up roads from heavy transport and tradies, who are happy to pay the toll, improves access and is a positive for inner office owners.
“Time is expensive and with much of industry moving to the outer fringe, this project will prove a long-term plus for the transport industry and take large vehicles off city streets, a real bonus for inner city living.”
Motorways impact on the property market typically moves in two distinct stages. Prices jump suddenly at the time of the announcement only to crawl ahead during construction.
Once a new road is up and functioning, it takes up to two years for the benefits of reduced travelling times to become apparent. Ford tells realestate.com.au “I expect we will see that happen with WestConnex, with the winners located in the industrial areas around Padstow, Milperra and Revesby. But we could also see some demand drift away from estates located further away from the orbital road network.”
“The East-West Link will similarly help properties in Melbourne’s industrial heart, particularly in areas like Brooklyn and Tottenham. But these benefits will be muted until we see the completion of the western section of this link, which is scheduled well into the future.”