Property Update
APRIL 2014
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AUTOMOTIVE MANUFACTURING AND PROPERTY
The decision by Holden, Ford and Toyota to stop manufacturing in Australian has generated a range of property
market opportunities.
It is estimated that over 260 Ha of land will be directly affected by the car makers’ decision. The majority of this land is
located in Victoria with sites including those currently occupied by Toyota (Port Melbourne and Altona North), Holden (Port
Melbourne) and Ford (Campbellfield and Norlane in Geelong). There will be an additional impact on the properties
currently occupied by car suppliers and other firms in the automotive manufacturing value chain.
While the exit of the three large manufacturers will present several challenges – not least to workers and policy makers in
the short and medium term – the infill locations and collective size of the land parcels present a rare opportunity for
developers and investors. This update considers some of the associated property opportunity and economic development
issues.
Economy Wide Impacts
The exit of the car manufacturers has re-ignited debate about national economic policy and the decline in Australia’s
manufacturing industry. In the long run these issues will affect all industries including the property sector.
In addition to South Australia the automotive manufacturing industry is especially important to Victoria. Victoria accounts
for around 60% of the nation’s automotive turnover and 54% of all automotive manufacturing employees. Around 70% of
automotive producers’ purchases of Australian made components are manufactured in Victoria. It is expected that around
5,000 Victorian workers will be directly affected by the plant closures. Half of these workers will be affected by the closure
of Toyota’s Altona plant while the other half will be impacted by the combined closures of the Ford and Holden
manufacturing plants.
The overall impact will be largely determined by the broader economy’s long-run response to this economic event.
A range of views have been expressed in this regard. On the one hand it is argued that Australian manufacturing, more
broadly, has undergone significant structural change and change will continue. This process of structural change will lead
to Australia having a smaller manufacturing sector but higher overall economic welfare given inputs (e.g. capital and
labour) will flow to more productive and efficient uses.
In contrast, it is suggested manufacturing is unique and provides a range of strategic and public benefits (such as an
above average level of knowledge and innovation) and that Australian manufacturers face unfair competitive practices
(from foreign firms and governments) and domestic competitive disadvantages (such as a high Australian dollar).
Victoria’s Automotive Manufacturing Urban Geography
The decision to cease domestic automotive manufacturing operations will have far-reaching implications for Melbourne’s
economic geography and various property markets.
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In the short to medium term the loss in employment could affect property demand in some regions. In particular, the Ford
(Broadmeadows and Geelong), Holden (Port Melbourne) and Toyota (Altona) plants are generally located in Melbourne’s
north
and 2013
west where the bulk of their workers also live.
JUNE
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In its recent Position Paper (Australia’s Automotive Manufacturing Industry - January 2014) the Productivity Commission
noted that the highest concentrations of Australia’s automotive manufacturing employees were concentrated in only four
regions, three regions being in Melbourne (Adelaide-North, Melbourne-West, Melbourne-South East and Melbourne-North
West).
Table 1 - Automotive Manufacturing Employment, selected regions, 2011.
Based on usual place of residence
Regions & sub-regions
Number of residents employed
in automotive manufacturing
Share of Australian
automotive manufacturing
employment (%)
Share of employed
residents that are
employed in automotive
manufacturing (%)
Adelaide
Adelaide - North
Playford
Salisbury
Gawler - Two Wells
Adelaide - South
Onkaparinga
Selected regions (Adel.) total
3,408
1,043
1,284
301
1,564
1,036
4,968
Melbourne - South East
Dandenong
Casey - North
Casey - South
Cardinia
Melbourne - West
Brimbank
Wyndham
Melton - Bacchus Marsh
Hobsons Bay
Maribyrnong
Melbourne - Outer East
Yarra Ranges
Melbourne - North East
Whittlesea - Wallan
Melbourne - North West
Tullamarine - Broadmeadows
Melbourne - Inner
Melbourne - Inner South
Mornington Peninsula
Frankston
Selected regions (Melb) total
5,329
1,638
1,392
1,067
516
5,114
1,769
1,390
930
585
440
2,702
887
2,527
1,483
2,209
1,302
1,372
1,258
1,176
831
21,689
Geelong (region)
Geelong (sub-region)
Barwon - West
1,694
1,355
119
Ballarat (region)
Ballarat (sub-region)
964
748
7
2.1
2.6
0.6
3.2
2.1
10.1
1.9
3.4
2.3
2
1
1.4
10.9
3.3
2.8
2.2
1.1
10.4
3.6
2.8
1.9
1.2
0.9
5.5
1.8
5.2
3
4.5
2.7
2.8
2.6
2.4
1.7
44.3
1.8
2.3
2.3
1.8
1.4
1.8
2.4
1.8
1.6
1.6
1.3
1.1
1.2
1.2
1.9
1.6
2.5
0.5
0.7
0.9
1.4
3.5
2.8
0.2
1.5
1.7
1.5
2
1.5
1.5
1.7
Melbourne
Geelong
Ballarat
Source: Productivity Commission estimates using ABS (TableBuilder Pro, 2011, Cat. no. 2073.0), m3property Research.
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Plant closures will predominantly affect blue-collar workers. However, white-collar workers will also be affected given the
range of supporting activities in Australia (e.g. corporate, R&D, marketing and sales).
JUNE 2013
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The flow on impacts to the automotive value chain are expected to be significant given the reliance on the major
automotive manufacturers of several automotive component manufacturers and other firms. These firms are distributed
throughout Melbourne.
The greatest concentrations of these firms is in Melbourne’s South East. The region is a nationally significant automotive
manufacturing location. The South East also has nearly 11% of Australia’s automotive manufacturing employment.
This is the largest share in Australia, despite the region no longer having a major automotive manufacturing plant.
As shown by the following table two municipalities in the South East (Greater Dandenong and Kingston) accounted for
nearly a quarter of total Melbourne’s motor vehicle and parts business establishments in 2011-12.
Table 2 - Metropolitan Melbourne, top ten locations for motor vehicle and motor vehicle parts manufacturing
business establishments
LGA
Business establishments,
2011-12
Net change,
2001-02 to 2011-12
Number
Share of total
Number
Per cent
Hume
115
22%
48
72%
Greater Dandenong
81
16%
0
0%
Kingston
39
8%
-2
-5%
Knox
35
7%
-6
-15%
Whittlesea
23
4%
-4
-15%
Frankston
23
4%
1
5%
Brimbank
22
4%
2
10%
Monash
19
4%
7
58%
Casey
18
3%
0
0%
Wyndham
14
3%
7
100%
Subtotal
389
76%
53
16%
Remainder
126
24%
-32
-20%
Total
515
100%
21
4%
Source: Worksafe Victoria (unpublished data), Victorian Government, m3property Research.
Property Impacts
Before considering specific property market issues and opportunities (such as the redevelopment potential of various sites)
it is important to understand the broader impacts on regional and metropolitan property markets.
These impacts will be influenced by a range of factors including if, when and how quickly workers find new employment,
the effectiveness of government structural adjustment packages, whether other sectors can absorb workers (e.g. defence
manufacturing) and growth in the economy more broadly.
While the short term impact on broader property markets is likely to be negative (e.g. higher industrial vacancy rates
translating into limited rental growth and rising incentives) it is useful to consider some key factors which will shape the
overall long-run impact in a positive way.
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These include:
2013change is not new – While the end of Australia’s large scale automotive manufacturing
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• JUNE
Structural
capability is unique
structural change in manufacturing is not. Structural change has led to many firms becoming more efficient and globally
competitive;
• Some high-skilled employment will remain with the potential for future growth – For example, Ford and Holden
are expected to maintain a design capability in Australia. This is important as, while the global automotive industry
shifts production to regions of high demand growth and low labour costs, global car production volumes are growing.
This implies an increase in demand for a range of high-skilled workers (e.g. design, R&D etc);
• Exporting and diversification – While some component firms could shut down (or reduce their operations) others
might respond by exporting and diversifying into new product and international markets; and
• Opportunities in related sectors – Some workers will be absorbed into related sectors such as the aftermarket parts
manufacturing and the truck/bus manufacturing sectors. Nationally, it is estimated that over 230,000 workers are
employed in the repair, maintenance and retailing of motor vehicles and this sector is largely independent of domestic
automotive manufacturing.
Finally, the property industry will play an important role in the economy’s adjustment through the redevelopment and
conversion of sites to a range of uses. These include economic/employment and residential/mixed uses. In addition, it is
likely that Ford, Holden and Toyota firms will reconsider their property requirements which may involve a move of head
offices and other facilities.
By creating the spaces and conditions for industries to grow and expand the property industry has to date played an
important role in facilitating the process of structural change. For example, transport, logistics and distribution has become
an increasingly important sector, as manufacturing has declined, helping to absorb a growing number of workers.
This is illustrated by trends in warehouse approvals, which have remained relatively robust over the last decade, while that
of factories has declined. Looking forward it is expected that, as automotive firms move to an import-driven business
model, the importance of the transport, logistics and distribution (and therefore demand for storage space and pre-delivery
services) will also grow.
Victorian Annual Building Approvals - Warehouses
& Factories, (Building Jobs Valued $50,000+)
1,000
No.
800
600
400
Factories
200
Warehouses
0
Source: ABS and m3property Research. Factories include other secondary production buildings.
Although difficult to generalise, changing patterns in Melbourne’s economic geography in recent decades suggests those
manufacturing sites which are relatively close to the CBD or key activity centres (e.g. the Port Melbourne Holden and
Toyota sites) could be partly or completely redeveloped into higher value-added employment uses (e.g. with a commercial
and high-technology focus).
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This would also reflect changes in the Central City’s employment and industrial base towards higher value-added activities
and uses while capitalising on these sites’ various advantages. These advantages include an inner city location, proximity
to the Port of Melbourne and the redevelopment of the Fishermans Bend precinct.
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There is a unique opportunity for developers, policy makers and other stakeholders to think creatively about what current
and emerging industries could be located on these sites (including those displaced due to the redevelopment of
Fishermans Bend) while also ensuring other important policy goals are met.
Other sites which are currently used for manufacturing, especially those which are in close proximity to strategic transport
infrastructure (and/or in locations facing strong demand from industrial occupiers) could find new uses as modern
employment and mixed use formats (e.g. business and industrial parks). Toyota’s Altona North site and Ford’s sites in
Campbellfield and Geelong are potential candidates in this regard.
Although the level of current and future industrial land supplies may present some challenges to less centrally located sites
these locations have other advantages. In particular Ford’s Campbellfield site adjoins the Upfield rail line and offers highvisibility (given the Hume Highway frontage).
Ford’s Geelong site faces robust competition from the industrial land markets in both Geelong and Melbourne. However,
again, there is an opportunity for stakeholders to think creatively about how the site could capitalise on its advantages and
current and future conditions.
For example, the Geelong site has good infrastructure access (e.g. to the Geelong Port and major road/rail connections to
Melbourne and Victoria’s western regions) and could facilitate growth in a range of important industries in Geelong (e.g.
construction, health, education, retail, advanced manufacturing and transport, logistics and distribution).
The previous redevelopment of other automotive manufacturing sites provides a good first step in assessing what might be
possible.
One example of a former automotive manufacturing site undergoing transformation and redevelopment is the Estate One
business park. The business park is located on the corner of the Princes Highway and South Gippsland Freeway in
Dandenong and was formerly the GMH Dandenong car plant. The site is being developed by Cbus Property and has
access to strategic transport infrastructure including arterial road links and transport nodes. Upon completion Estate One is
expected to function as a major employment hub providing space for commercial, retail, industrial and other uses.
Another example is Nissan’s Clayton site which hosted the company’s manufacturing operations until the early 1990s. The
site now includes a business park and both older and more modern spaces (e.g. warehouses and offices).
Finally, although the question of what to do with the large automotive manufacturing sites is challenging – and will receive
considerable attention – so too is the issue of what to do with the many smaller sites that might become candidates for
conversion and redevelopment.
The task will be made more challenging by these sites’ dispersion (although mainly in the South East) and will face a range
of complex site-specific issues (e.g. environmental).
If you would like to discuss opportunities arising from the Property Update please do not hesitate to contact your existing
m3property contact or George Bougias (+613 9605 1075 or george.bougias@m3property.com.au).
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Property Update April 2014 | P5