Port Adelaide Enfield Industrial Land Study April · PDF file2.1 Transport Storage and...

Port Adelaide Enfield Industrial Land Study

Final Report

Date: April 2013

Prepared for the

City of Port Adelaide Enfield

163 St Vincent Street

Port Adelaide SA 5015

Port Adelaide Enfield Industrial Land Study

Table of Contents

Executive Summary 1

Port Adelaide Enfield Industrial Market Overview 1

Key Opportunities 2

Employment Analysis 2

Interstate Trends 3

Key Findings and Issues 4

Recommendations 7

Introduction 10

1 Strategic Context 11

1.1 State Government Industrial Policy Context 11

1.2 Industrial Zoned Land in Port Adelaide Enfield - Overview 13

1.3 Summary – Strategic Context 16

2 Literature Review 17

2.1 Transport Storage and Logistics Industry Workforce Planning Project Report June 2005 17

2.2 Port Adelaide Enfield Corporate Plan 2011-2016 17

2.3 Manufacturing into the Future 18

2.4 Manufacturing Green Paper: Setting Directions for the Transition of Manufacturing in South Australia. 2012 19

3 Port Adelaide Enfield Industrial Market Overview 20

3.1 Supply Trends 20

3.2 Demand Trends 21

3.3 Drivers of Demand 21

3.4 Ownership Trends 25

3.5 Size of Lots Demanded 25

3.6 Vacancy Trends 26

3.7 Rents and Lease Terms 28

3.8 Land Values 28

3.9 Sales Activity 29

3.10 Conclusions and Outlook – PAE Industrial Market 31

4 Industrial Land in Port Adelaide Enfield 33

4.1 Housing and Employment Land Supply Program 33

4.2 Key Opportunities 35

5 Employment Analysis 40

5.1 Industrial Employment in Port Adelaide Enfield 40

5.2 Economic Contribution of Industry to PAE 44

Port Adelaide Enfield Industrial Land Study - Page 2

5.3 Industrial Employment: Sub-regional Analysis 44

5.4 Employment Generation by Land Use 53

5.5 Employment Outlook - Port Adelaide Enfield 55

6 Interstate Trends 58

6.1 Comparative Analysis 58

6.2 Outlook and Implications 59

7 Key Findings and Issues 62

7.1 Port Adelaide Enfield Industrial Land Stock 62

7.2 Demand Trends 63

7.3 Vacancy Trends 65

7.4 Employment Trends 66

7.5 State Government Priorities 68

7.6 Council Response 69

7.7 Implications for Industrial Land in Port Adelaide Enfield 71

8 Recommendations and Implementation Strategy 72

8.1 Recommendations 72

8.2 Implementation Strategy 74

Appendices

List of Tables

Table 1: Industrial Zoned Land in Port Adelaide Enfield LGA ...................................................... 15

Table 2: Land Sales Activity by Size Range, Port Adelaide Enfield LGA 2007 - 2012 ................ 26

Table 3: Land for Sale in Port Adelaide Enfield, Major Estates, 2012 ......................................... 26

Table 4: Major Industrial Sales in Metropolitan Adelaide, 2011-2012 .......................................... 30

Table 5: Major Industrial Sites in Port Adelaide Enfield LGA, as at 2010 .................................... 34

Table 6: Employment by SA2 Geography, Port Adelaide Enfield LGA, 2011 .............................. 41

Table 7: Employment in Major Industrial Sectors, Port Adelaide Enfield LGA, 2011 ................... 41

Table 8: Employment in Major Industrial Sectors, Port Adelaide Enfield LGA, 2001 - 2011 ....... 42

Table 9: Employment in Major Industrial Sectors, Metropolitan Adelaide, 2001 - 2011 .............. 43

Table 10: Economic Contribution of Major Industrial Sectors, Port Adelaide Enfield, 2012

Financial Year ............................................................................................................................... 44

Table 11: Employment in Major Industrial Sectors, Enfield - Blair Athol SA2 .............................. 46

Table 12: Employment in Major Industrial Sectors, Northgate-Oakden-Gilles Plains SA2 .......... 47

Table 13: Employment in Major Industrial Sectors, Windsor Gardens SA2 ................................. 47

Table 14: Employment in Major Industrial Sectors, Largs Bay - Semaphore SA2 ....................... 49

Table 15: Employment in Major Industrial Sectors, North Haven SA2 ......................................... 50

Table 16: Employment in Major Industrial Sectors, Port Adelaide SA2 ....................................... 51

Table 17: Employment in Major Industrial Sectors, The Parks SA2 ............................................ 53


Table 18: Employment Densities by Land Use ............................................................................ 54

Table 19: Comparison of the Employment Base - Adelaide, Melbourne, Sydney and Fremantle

Ports, 2011 ................................................................................................................................... 61

Table 20: Employment Forecasts by Industry Sector, 2012 - 2022 ............................................. 67

Table 21: Selected Issues Identified with Industrial Zoned Land in Port Adelaide Enfield .......... 70

List of Figures

Figure 1: Industrial Zones in the City of Port Adelaide Enfield ..................................................... 14

Figure 2: Major Industrial Supply, PAE LGA and Metropolitan Adelaide 2003-2012 ................... 20

Figure 3: Land Values in the North-West Adelaide Industrial Market .......................................... 29

Figure 4: Number of Industrial Sales per annum, Port Adelaide Enfield LGA, 2007-12 .............. 30

Figure 5: Example Development – Niche, Eastern Valley Way, Chatswood East ....................... 38

Figure 6: Statistical Area Level 2 Geographies within Port Adelaide Enfield ............................... 40

Figure 7: Employment in Selected Industrial Sectors, PAE 2001-2011 ....................................... 43

Figure 8: Location of Enfield - Blair Athol SA2 and Industrial Zones ........................................... 45

Figure 9: Location of Northgate - Oakden SA2 and Windsor Gardens Industrial Zones ............. 46

Figure 10: Location of Dry Creek - South SA2 and Industrial Zones ........................................... 48

Figure 11: Location of Largs Bay - Semaphore SA2 and Industrial Zones .................................. 48

Figure 12: Location of North Haven SA2 and Industrial Zones .................................................... 49

Figure 13: Location of Port Adelaide SA2 and Industrial Zones .................................................. 51

Figure 14: Location of The Parks SA2 and Industrial Zones ........................................................ 52

Figure 15: Cargo Throughput at Outer Harbor, 2007 - 2012 ........................................................ 59

Figure 16: Port of Adelaide and Surrounds .................................................................................. 60

Port Adelaide Enfield Industrial Land Study - Disclaimer

Disclaimer

The material contained in this report is confidential and was provided by Jones Lang LaSalle to the party to whom it is addressed strictly for the specific purpose to which it refers and no responsibility is accepted to any third party.

Neither Jones Lang LaSalle nor any of its associates have any other interests (whether pecuniary or not and whether direct or indirect) or any association or relationships with any of its associates that might reasonably be expected to be or have been capable of influencing Jones Lang LaSalle in providing this report.

Whilst the material contained in the report has been prepared in good faith and with due care by Jones Lang LaSalle, no representations or warranties are made (express or implied) as to the accuracy of the whole or any part of the report.

Jones Lang LaSalle, its officers, employees, subcontractors and agents shall not be liable (except to the extent that liability under statute or by operation of law cannot be excluded) for any loss, liability, damages or expense suffered by any party resulting from their use of this report.

If a projection has been made in respect of future demand, business trends, property prices, rentals and projected take up rates, such a projection is an estimate only and represents only one possible result therefore should at best be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections of such key elements involves assumptions about a considerable number of variables that are acutely sensitive to changing conditions and variations, and any one of which may significantly affect the resulting projections. This must be kept in mind whenever such projections are considered.

Port Adelaide Enfield Industrial Land Study – Page 1

Executive Summary

The Port Adelaide Enfield (PAE) local government area is metropolitan Adelaide‟s industrial heartland. Key industrial precincts of state and metropolitan importance are located in the LGA, including:

A defence precinct and shipbuilding at Osborne; Port-related development at Outer Harbor and Inner Harbor; Cast metals at Wingfield; Waste management and resource recovery at Gillman; and A future employment precinct at Gillman

Over recent years, improvements to road and rail connections, such as the Port River Expressway and Crossing, have greatly enhanced accessibility to the region. This will be further improved with upgrades to South Road and the development of the Northern Connector.

Port Adelaide Enfield Industrial Market Overview

Since the onset of the Global Financial Crisis (GFC), the Adelaide Industrial market has been subdued, with take-up of industrial land slowing from its high levels reported between 2002 and 2008. This slowdown has been felt across the metropolitan region, including PAE.

Demand for industrial space has primarily come from three main sectors; manufacturing, retail/wholesale trade, and transport and storage sectors

With the South Australian economy forecast to continue on a path of low to moderate growth in the short term, we do not expect a sharp rise in demand for industrial property in the next one to two years.

PAE has significant future supply of industrial land, but much of the land has major constraints, meaning it is relatively expensive to bring to market. This places land in PAE at a price disadvantage compared with land in the Outer North. Conversely, there are strong “pull” factors that will attract tenants to PAE as opposed to other industrial locations in metropolitan Adelaide. These include:

Access / proximity to the Port of Adelaide; Proximity to freight routes / arterial road network; and Centrally located in metropolitan Adelaide, compared to other major industrial precincts

The slowdown in demand for industrial land has effectively reduced the urgency of bringing land at Gillman to market, however this large employment lands precinct is well placed to provide long-term supply to PAE, including significant economic benefits such as sustainable employment growth and rates revenue.

PAE‟s main location advantages are expected to attract the following industries:

Transport / logistics companies; Business associated with shipbuilding and ASC contracts; Resource / recovery industries; and Port related business.

Older industrial suburbs in PAE will provide future redevelopment opportunities. However, this can be a slow and expensive process. It often requires a mix of the following:

An opportunity arising due to departure of a major tenant; Change of ownership to an active industrial developer / investor; Ability to subdivide land to smaller lot sizes to achieve a feasible land value.


Key Opportunities

The significant supply of under-utilised existing and future industrial land, together with the strategic location of PAE‟s industrial land adjoining the Port of Adelaide, provides numerous opportunities for future development. These include:

Gillman Employment Lands Precinct o up to 200 hectare of industrial land is expected to be delivered; o 6,000 plus jobs; o The site benefits from not being close to residential uses, therefore providing

flexibility in uses; o A key opportunity is for major companies to decant from their existing sites and

consolidate to a large, single site at Gillman, allowing redevelopment of those sites vacated to more intensive uses.

Wingfield Cast Metals Policy Area o This precinct of 44 hectares has remained under-utilised since its inception; o Work is currently underway to justify rezoning of the Cast Metals Policy Area by

the Minister, via a Ministerial Development Plan Amendment (DPA); o Opening up this land to a broader range of uses would provide some short to

medium term supply in one of PAE‟s premier industrial locations. Techport and Port Direct, Osborne

o Significant land availability exists to support the shipbuilding activities at Osborne;

o Slow initial take-up, suggesting sufficient long-term supply for suppliers to ASC as well as a broader range of industrial land uses.

Flinders Ports growth in throughput o Good long-term growth opportunities – the “Freight Task” is growing; o Benefits from availability of portside land to meet future demand and expand

their operations; o Potential to win market share from the Port of Melbourne; o Growth in port activity will likely increase demand for land near the port facilities

(e.g. Port Adelaide, Osborne, Gillman and Wingfield). Redevelopment opportunities of existing industrial land

o Dudley Business Park – similar opportunities to redevelop disused / under-utilised sites, delivering small allotments popular with small investors and owner-occupiers;

o Regency Park – future potential for more intensive industrial / commercial land use, due to ageing built form, large land holdings and prime location.

Employment Analysis

The employment outlook for many inner and middle ring industrial precincts is often quite bleak, due to:

Replacement of employment intensive manufacturing uses with less intensive uses; Obsolescence of industrial stock, leading to under-utilisation of the built form; Improved efficiencies in both manufacturing and warehousing/distribution; and Land use conflicts placing potential constraint on uses.

Parts of PAE‟s industrial sector display these characteristics, but the employment base has not shown signs of diminishing.

Employment in the major industrial sectors in PAE grew by 15.6% between 2001 and 2011 due to continued availability of land for expansion of the industrial base together with strong growth at Osborne / ASC in association with new defence contracts.


Industry sectors with strong growth between 2001 and 2011 include:

Transport, postal and warehousing - up 1,326 employees; Manufacturing – up 999 employees; Electricity, gas, water and waste services – up 983 employees; Transport, postal and warehousing – up 1,326 employees; and Construction – up 1,573 employees

Industry sectors that declined between 2001 and 2011 include:

Wholesale trade – down 927 employees.

Different land uses have different rates of employment generation, ranging from approximately 20 persons per hectare for transport and storage uses to around 400 persons per hectare for office uses.

Employment in Major Industrial Sectors Employment per Hectare

Offices 400

High Tech Industrial / advance manufacturing 160

Service Trade Premises 100

Construction 70

Manufacturing 65

Wholesaling 40

Bulky Goods Retailing 40

Transport & Storage 20

Source: Jones Lang LaSalle

Future growth is expected to be dominated by the transport, postal and warehousing sector, given the very strong strategic advantages of PAE (proximity to the Port of Adelaide, major freight routes; improved infrastructure; central location). However, this is a low employment generator on a per Hectare basis.

Encouraging land uses that incorporate some office uses, advanced manufacturing or service trade premises, is one way of increasing the potential employment base in industrial areas.

Interstate Trends

Our comparative analysis of the Port Adelaide industrial market surrounding Inner and Outer Harbor with other capital city ports revealed the following:

Industrial land uses near the Port of Adelaide are more diverse than other industrial markets adjoining port facilities, the location of key manufacturing industries along the Port River, which benefit from direct access to wharfs;

There are less land use constraints impacting on land surrounding the Port of Adelaide compared to the larger markets such as Melbourne and Sydney. Land remains relatively affordable for industrial uses that require a near port location;


Key Findings and Issues

Port Adelaide Enfield’s industrial land stock

Port Adelaide Enfield has a significant stock of industrial land to cater for medium to long term demand. However, the future stock is constrained and will be relatively expensive to bring to market.

There is considerable scope for growth of the Port of Adelaide, with portside land available for future development.

Port Adelaide industrial land values are reasonably affordable compared to locations near interstate ports.

Land use conflicts are common in close proximity to port operations. Conflicts identified relating to the Port of Adelaide‟s operations are largely noise related, including the noise from rail traffic to Outer Harbor and the move towards 24-hour operation at Ports.

Some long–term portside uses have caused environmental issues, both for existing residents and new residential development. The main concerns relate to the storage of toxic materials and airborne particles impacting nearby residents and plans for future residential development.

Key requirements for an industrial allotment

Key requirements for an industrial allotment include the following:

Level land Access to freight routes / high quality infrastructure (road; rail; sea) B double compliant roads for access / egress to sites No adjoining land use constraints, particularly residential uses Good corporate exposure Water Sewer 24-7 operation A quality environment is desirable – access to nearby amenities for staff

Land prices are a factor. Land prices in PAE suburbs such as Regency Park, Wingfield and Gillman, are considerably higher than outer northern locations. However, there are strong locational advantages drawing companies to PAE, including a relatively central location with good access to metropolitan Adelaide, designated freight routes and the Port of Adelaide.

We do not see the competition from the outer northern Adelaide industrial market as a threat to PAE‟s industrial market but rather, it provides an opportunity for future growth of the industrial market. Over time, we anticipate some industrial occupiers may move from PAE to locations in Salisbury or Playford LGAs, driven by lower land costs, improved infrastructure and increasingly a growing labour force in the outer north. No longer is the Outer North considered far removed from the rest of the metropolitan area.

Gillman Employment Lands Precinct provides for medium term demand for industrial land within PAE and is expected to be a highly desirable location.

Regency Park is considered to be extremely well located (central, South Road access, good infrastructure, proximity to Port) but the building stock is ageing and no longer meets the demand of modern industrial tenants (high clearance, clear span). It is well placed for future redevelopment into a more intensive “business park” environment, comprising a higher proportion of office accommodation.

The diversity of PAE’s industrial land supply, comprising new estates, future opportunities, well located but ageing precincts with redevelopment potential, large lots, and small lot sizes is a market strength.


Demand by Allotment Size

Up to 1,250sqm

There is considerable activity (leasing; sales) for land and buildings with allotment sizes of up to 1,250sqm, primarily from owner occupiers. Most of the supply and activity is in Wingfield.

A reasonable amount of flexibility is required in terms of minimum lot size to allow the market to determine the right mix of allotment sizes to maximise demand. Smaller lots may be most appropriate in older industrial areas with large residential populations requiring convenient access to small service industries and businesses.

Between 1,250sqm and 2,500sqm

This is a relatively popular size for allotments in recent subdivisions, including Marina Adelaide at Largs North and Dudley Business Park.

Analysis of land sales in PAE between 2006 and 2012 indicated around 18% of all land sales were for allotments between 1,250sqm and 2,500sqm and most of these sales were in Industry Zones, where the minimum preferred allotment size is 2,500sqm.

Over 2,500sqm

Current demand for larger allotments of 2,500sqm and over is weak. However, once economic growth improves, demand is expected to pick up significantly from transport and logistics groups and manufacturers.

Vacancy Trends

There are relatively few large sites in PAE that have remained vacant and in private ownership for longer than five years. Private land banking does not appear to be a major issue within PAE.

Reasons identified for sites remaining vacant for 5 years or more are:

The onset economic impact of the Global Financial Crisis; Requirement for pre-commitment prior to development (there is limited speculative

development in the Adelaide industrial market – even less so in the current economic environment);

Not considered development ready o Future employment land; o Constrained due to lack of adequate infrastructure;

Sites retained for future expansion; Strategic holdings in state government ownership;

o Future port land o Available for sale

Employment Growth – Trends and Opportunities

Most of the industrial employment growth in PAE will be attributed to new businesses, primarily in areas that still have substantial opportunities for industrial expansion such as Gillman, Osborne and to a lesser extent, Wingfield.

With new opportunities for expansion over the next 10 years (Gillman, Osborne), PAE‟s employment base across the industrial sectors has the potential to grow significantly.

Existing developed industry zones may lose employment due to the changing structure of industry towards lower employment generating uses.


PAE should aim to limit such losses in employment by considering opening up industrial zoned land to a wider range of land uses, including uses that have greater employment density. Examples include:

Office–warehouse uses where the office component is up to 50% of the total floor area; Ancillary retail and office uses that provide support services to industrial occupiers; Re-use of old industrial buildings for start-up businesses (e.g. business incubator); and Service industry demand (auto repair, trades etc.), which will be driven by residential

population growth.

State Government Priorities

PAE is clearly a focus for state government on a number of fronts, primarily:

Rezoning of the Cast Metals Policy Area; Gradual release of Gillman Employment Lands Precinct; Resource Recovery; Potentially Advanced Manufacturing (albeit the main focus is Tonsley); and Port related uses.

Discussions with state government representatives at Renewal SA and Department of Planning, Transport and Infrastructure (DPTI), and a review of state government policy and programs highlight the following key priorities:

Bringing the Gillman Employment Lands precinct to market - Gillman is the key to providing a longer term supply of industrial land within the PAE market;

Adopting a 25 year rolling supply of industrial land and ensuring a 15 year supply of industrial zoned land is available at any given time;

Potential changes to Home Industry Zone – this zone is not a separate zone in the South Australian Planning Policy Library.

State government has a significant infrastructure agenda to improve freight movement around the metropolitan region. Investment in road and rail infrastructure should benefit industrial land uses within PAE.

State government also considers a more flexible approach to land use planning is desired to allow a mix of uses within industrial zoned land. This recognises the potential demand for a range of services such as small businesses, local retailing, medical facilities, business banking and child care that may provide for the day to day the needs of the industrial workforce.

In terms of minimum lot size, the state government favours a market approach. There is a desire to not over-regulate and allow the market to determine what the market wants.

Implications for Industrial Land in Port Adelaide Enfield

Industrial land is finite. PAE is fortunate that for a location within relatively close proximity to the Adelaide CBD, there is still significant supply of development ready industrial land as well as future industrial land for delivery over the next decade.

However, it is clear that the outer northern metropolitan area will become the major location of new industrial land uses in the longer term. This should not be seen as a threat. It is part of the evolution of industrial land supply in the Greater metropolitan Adelaide region.

A key issue for PAE is the effective re-use of under-utilised industrial land, most likely for more intensive employment generating industrial uses. However, there may be some opportunities for rezoning to alternative uses that would meet other objectives of PAE. This may include rezoning to residential, thus helping to meet the 30 Year Plan‟s dwelling targets.


Recommendations

Bring Gillman Employment lands to market

Gillman provides the largest single opportunity for PAE to grow its industrial employment base. Recent infrastructure investment supports the delivery of Gillman. It is also a natural extension of Regency Park and Wingfield, which have limited future opportunities. We consider demand for such well-located industrial land will be strong, particularly for companies wanting a central location between the Port of Adelaide and the CBD.

Consider promoting Regency Park as a future business park estate, allowing for more intensive, higher employment generating uses.

Regency Park is very well located, but its building stock is dated. Consideration should be given to allowing a more intensive employment precinct at Regency Park, incorporating a higher level of office accommodation and a greater mix of business uses. We note that the SA Planning Policy Library identifies an Urban Employment Zone, which is a mixed use employment zone that accommodates a range of industrial land uses together with other related employment and business activities. This may provide the appropriate zoning for such a future business park.

Remove minimum lot sizes in Light Industry and General Industry Zones – allow the market to determine what is appropriate.

A reasonable amount of flexibility is required to allow the market to determine the right mix of allotment sizes. In industrial areas that are central to a large residential base, there is expected to be demand from small service industries and businesses that serve the surrounding residential market. Many of these businesses will not require a site area greater than 1,000sqm and have limited requirement for large vehicles to access their premises. Smaller lots are considered reasonable. Care needs to be taken to ensure such subdivision does not negatively impact on larger land users.

Provide for a greater mix of land uses in the Cast Metals Policy Area

This precinct is specifically set aside for a particular use, which there has been limited demand for over the past 15 years. Consequently, the land has remained unoccupied and available for sale. It may be appropriate to reconsider the policies that guide activity in the Cast Metals Policy Area, aimed at providing a balance between the expected demand for land from foundries and associated uses with the desire to ensure the efficient use of industrial land. Any change to policy should address the following:

Trends in the foundry industry in Australia (growth / decline; location trends etc.); Drivers of demand for cast metal products (e.g. auto industry; mining sector); Future drivers; Potential demand for land in the Cast Metals Policy Area from growth in mining activity.

Encourage more intensive land uses in industrial zones, aimed at retaining and growing the industrial employment base

Most of PAE‟s industrial employment growth will be attributed to new businesses, primarily in areas that still have substantial opportunities for industrial expansion. This includes Gillman, Osborne and Wingfield. No industrial employment growth in PAE would be a very poor outcome, given the opportunities for continued industrial land releases and development in the suburbs identified above.

Loss of employment in existing industry zones can be limited or even reversed by opening up industrial zoned land to a wider range of land uses, including uses that have greater employment density. Examples include:

Office–warehouse uses where the office component is up to 50% of the total floor area;


Ancillary retail and office uses that provide support services to industrial occupiers; Re-use of old industrial buildings for start-up businesses (e.g. business incubator); and Service industry demand (auto repair, trades etc.), which will be driven by residential

population growth.

Aim to develop an Advanced Manufacturing cluster within PAE

Much of the focus in terms of advanced manufacturing has been Tonsley Park. PAE, however, has an advanced manufacturing capability centred around the ASC‟s shipbuilding activities. PAE should ensure that the potential of the advanced manufacturing sector, which will be strongly supported by state government, is realised in the local market.

Ensure planning policy recognises the need for 24-7 operation for many industrial uses, including port operations.

There is likely to be some unavoidable conflicts between land uses requiring 24-7 operation and existing residents. However, it is critical that the legitimate needs of business to operate in an increasingly competitive global environment are understood and catered for.

Consider changes to the Home Industry Zone

This zoning is considered out-dated. Few landowners have taken up the opportunity to operate a light industry business from home. Others may be able to operate a home business under existing legislation covering owners running business from home. Few local government areas have such zoning and the Home Industry Zone is not a separate zone in the Planning Policy Library (although a Home Industry Policy Area is incorporated into the Light Industry Zone). Whilst some investigations were undertaken during the Council's Industry Zones DPA process in 2008-2009, the State government may request PAE to consider further rezoning to an alternative zone.

Take advantage of the infrastructure spend occurring in PAE

State government has a significant infrastructure agenda to improve freight movement around the metropolitan region. Investment in road and rail infrastructure should benefit industrial land uses within PAE. While most prospective businesses should be well aware of the location advantages of PAE, we recommend Council consider promoting in a subtle way the strategic relevance of infrastructure improvements that are taking place and those planned for the future.

Consider potential commercial opportunities for industrial land fronting arterial roads

Land fronting main roads that are currently zoned industrial may provide an opportunity for a more intensive and attractive commercial use that takes advantage of the high level of exposure from passing trade. The rezoning of Main North Road, Gepps Cross to allow for the Home HQ bulky goods retail centre is one example where this has already occurred. Regency Park, which fronts South Road, has also been highlighted as potentially being redeveloped for a greater mix of more intensive uses.

A wider range of business uses, including trade showrooms, motor vehicle showrooms and some commercial premises serving industrial businesses have located on industrial sites with main road frontage. These uses not only take advantage of the high level of exposure, they effectively screen less attractive industrial uses from busy roads.

We note that the SA Planning Policy Library includes an Urban Employment Zone, which is a mixed use employment zone that accommodates a range of industrial land uses together with other related employment and business activities. This may provide for the mix of employment generating opportunities envisaged.


Review zone boundaries with the aim of reducing instances where zone boundaries cut across property boundaries

Council has identified these occurrences. These anomalies should be rectified at the next Development Plan Review of industry zoned land in PAE. Rezoning may provide more certainty for landowners with regard to future use.

Encourage the effective re-use of under-utilised industrial land

This will most likely be for more intensive employment generating industrial uses. However, there may be some opportunities for rezoning “non-core” industrial zoned land to alternative uses that would meet other objectives of PAE. This may include rezoning to residential, thus helping to meet the 30 Year Plan‟s dwelling targets.


Introduction

The City of Port Adelaide Enfield (PAE) is metropolitan Adelaide‟s industrial heartland, with a very large 34% of its land area zoned for industrial purposes. The local government area (LGA) is also home to the Port of Adelaide, comprising an inner and outer harbour, which continues to be the main service point for import and export activity via shipping in South Australia.

The valuable employment lands within PAE comprise a mix of existing industrial properties, new release areas such as Port Direct and Techport Australia, and future industrial land such as Gillman.

Recent metropolitan wide strategies are placing considerable focus on land use policy and strategic directions relating to industrial land within metropolitan Adelaide, and in particular PAE.

A wide range of issues impacting on industrial land use have been raised in recent years, including:

Pressure to rezone industrial land to other uses; Conflicts between residential and industrial uses; The need to provide for residential growth in the existing urban area; and The decline of the manufacturing sector.

These issues have led to Council seeking to establish a clear strategic direction on industrial land use policy, aimed at optimizing industrial land across the Council area and ensuring future demand for industrial land is met, while meeting its other land use objectives.

This study aims to inform and provide clear direction to Council on future trends in and demand for industrial land uses.

This report is divided into the following sections:

Section 1 provides provide an overview of the strategic context relating to industrial land use policy in Greater Adelaide and more specifically in PAE;

Section 2 provides a short literature review of key documents reviewed as part of the background research;

Section 3 provides a market overview of the industrial property market in Adelaide, focussing on PAE;

Section 4 provides analysis of industrial land use in PAE, including the key opportunities; Section 5 provides a detailed employment analysis of the industrial land in PAE for the

key industry sectors that locate on industrial zoned land, including an employment outlook. We also briefly analyse the economic contribution made by each key industrial sector;

Section 6 considers broad trends in interstate markets, in particular those trends that may influence industrial land use and development in PAE over the next decade;

Section 7 summarises the key findings and issues arriving from the research, including issues raised by Council for research and advice;

Section 8 provides recommendations and advice on an implementation strategy.


1 Strategic Context

1.1 State Government Industrial Policy Context

The South Australian government‟s policy position relating to industry / industrial land uses is detailed in various policy papers, strategic plans and the South Australian Planning Strategy. The three key documents highlighted below are:

30 Year Plan for Greater Adelaide; The Housing and Employment Land Program; and Manufacturing Works: A strategy for driving high-value manufacturing in South Australia

Other background documents are discussed in Section 2: Literature Review.

30 Year Plan for Greater Adelaide

The 30 Year Plan for Greater Adelaide provides a long-term vision for the future of the greater metropolitan area of Adelaide and part of the South Australian Planning Strategy

The 30-Year Plan for Greater Adelaide identifies how it is proposed to accommodate a growing population and how it is proposed to strengthen and expand the economy. It outlines where people will live, where jobs will be located and where new transport and infrastructure will be provided.

Over the next 30 years, greater Adelaide is expected to grow by 560,000 people, require an additional 258,000 houses and 282,000 jobs.

A key focus of the plan is for Adelaide to become a more compact city, with as much of the growth as possible being contained within the existing urban area.

Below, we have identified some of the key points that relate to the future provision of industrial land and the City of Port Adelaide Enfield.

Protect employment lands – the Plan highlights the importance of protecting well located jobs and ensuring employment lands are close to residential areas and transport services.

Adequate supply of new employment lands - The Plan supports a 25 year rolling supply of residential, commercial and industrial lands (p17) and a 15 year rolling supply of land zoned for industrial purposes (p65)

Competitiveness – the Plan supports the development of strategic industrial land precincts that provide access to national road and rail links and international port facilities (p29)

Manufacturing – the manufacturing sector has changed significantly but remains important to Adelaide and South Australia, with a shift towards advanced manufacturing. Significant new opportunities include:

o Renewable energy o Clean technology

A central objective to make it easier to do business The Plan flags opportunities for transit oriented developments (TODs) on remnant

industrial and brownfield sites.

Port Adelaide Enfield Council is located partly in the Northern and Western Adelaide Regions. We have reviewed specific targets and directions relating to land within PAE. Below is a summary of the key recommendations / directions outlined in the 30 Year Plan related to PAE:

Defence - Plan for 9,100 additional defence jobs in Greater Adelaide, many of which will be located in PAE;

Securing industrial land for materials recovery (e.g. Gillman / Wingfield);


Facilitate relocation of industry from constrained sites and TODs – e.g. Port Adelaide Centre;

Improve road and rail freight connections – Port Adelaide is critical to the movement of freight (road, rail and sea);

Protect key industry zones from encroachment – 34% of PAE‟s land area is zoned for industrial / future industrial uses;

Bringing Gillman land to market; Improve / expand Outer Harbour. Protect this strategic resource from encroachment; and Recognition of the importance of the LeFevre Peninsula as a key industrial location

(Defence industries; Outer Harbor).

Housing and Employment Land Program

The Housing and Employment Land Program (HELSP) aims to ensure that industrial and other employment land is delivered in a timely manner and in line with the provision of residential housing and associated infrastructure. It is a critical component of the 30 Year Plan for Greater Adelaide and the state‟s planning strategy.

The (HELSP) report supports the implementation of The 30-Year Plan for Greater Adelaide by:

Guiding the process of rezoning land to help accommodate population and economic growth;

Monitoring land supply; Deliver the housing and employment targets articulated in The 30-Year Plan for Greater

Adelaide; and Setting out a timetable for achieving and maintaining the Plan‟s target of a 15-year

supply of development-ready zoned land.

Manufacturing Works: A strategy for driving high-value manufacturing in South Australia

The state government‟s advanced manufacturing strategy recognises the importance of manufacturing to the state‟s economy and to this state‟s long term prosperity.

Professor Goran Roos, Thinker in Residence in 2010-11, highlighted the need to improve our innovation capabilities and broaden our industry base within a modern, advanced, high-value manufacturing sector. He also recommended how government should play a role in promoting the transformation of manufacturing.

One of seven primary focus areas for the state is advanced manufacturing.

Following the findings of Professor Roos, outlined in his report Manufacturing into the Future, the state government released a Manufacturing Green Paper for discussion with industry to set the future directions for manufacturing in the state.

Following feedback, the government released their strategy paper, Manufacturing Works, which embraces many of the observations and recommendations of Professor Roos. These include:

Manufacturing is evolving. Traditional manufacturing activities have succumbed to competition from low-wage countries, but successful advanced economies have found ways to transform their manufacturing sectors.

The services sector should not be seen as a replacement for manufacturing - they are complementary.

Manufacturing is under pressure from the high Australian dollar. Manufacturing is the largest provider of direct and indirect employment – there is a higher

multiplier effect with manufacturing jobs than other jobs. Clustering of complementary activities builds strong manufacturing sectors. Leveraging off our strengths (resources; food) creates new manufacturing industries. Australia‟s manufacturing performance has been weak compared to leading

manufacturing nations such as Sweden, Finland, Germany and Switzerland.


When manufacturing capabilities disappear, it is very difficult to replace due to the speed of technology development.

The state government‟s response to Professor Roos‟ recommendations is set out in Manufacturing Works. Its vision is to create an advanced manufacturing sector that competes internationally, through innovation, leadership, a skilled workforce, and cutting edge technologies. Specific focus areas are mining and resources, defence and emerging high-value industries.

The four priorities to achieve this are:

Smart decisions – where to invest; the importance of reliable data to make wise and informed decisions;

Smart opportunities – cluster strategies to accelerate regional economic growth, promote collaboration / technology transfers to emerging sectors etc.

Smart firms – Innovation as a tool to improve competitiveness. Government opportunity to stimulate innovation through government procurement process. Research leading to innovation.

Smart people – planning for and providing a skilled workforce through increasing training places (TAFE; Universities). Specific focus in science, technology, engineering and maths. Opportunities for research students. Promoting entrepreneurial skills.

The redevelopment of Tonsley Park is a key component in the state‟s plans to modernise manufacturing, by providing a springboard for capability development and new investment in advanced, high-value manufacturing in Adelaide‟s southern suburbs. Tonsley Park will also provide a new benchmark for interaction between industry and research, university and training institutes.

1.2 Industrial Zoned Land in Port Adelaide Enfield - Overview

Industrial land in the City of Port Adelaide Enfield (PAE) is contained primarily in five industrial zones, namely:

Bulk Handling Zone Home Industry Zone Industry Zone

o Cast Metals Policy Area o Coastal Resource Recovery Policy Area o Osborne Maritime Policy Area o Ports Policy Area

Industry/Business (Gepps Cross Gateway) Zone Light Industry Zone.

There is also land zoned MFP, which includes land that is proposed to be developed for the Gillman Employment Lands Precinct and will therefore be rezoned to allow industrial use.

Other zones in PAE provide some opportunities for some industrial land uses, particularly uses that benefit from a frontage to a main road such as service trade premises. These include the Commercial Zone and the Gepps Cross Gateway (GCG) Zone. The GCG Zone in particular incorporates some industrial uses and service trade premises and passenger transport services, together with leisure uses and tourist accommodation.

The Industrial zones, including the PAE boundary, are depicted in Figure 1. According to the City of Port Adelaide Enfield, industrial zoned land accounts for 34% of all land within the Council area.1 Most of the industrial land is to the west of Main North Road, in suburbs such as Wingfield, Gillman, Regency Park, Port Adelaide and Osborne.

1 City of Port Adelaide Enfield,


Figure 1: Industrial Zones in the City of Port Adelaide Enfield

Note: Non-industrial zones (MFP; Gepps Cross Gateway) have been included due to future potential (MFP) and existing desired land use mix (GCG) Source: Jones Lang LaSalle, SA Government, PBBI MapInfo

There is approximately 3,040 hectares of industrial zoned land in PAE. The vast majority of this land is in the Industry Zone, which accounts for 68% of all industrial zoned land (Table 1). The Industry (Port) Zone accounts for 11.7% of all industrial zoned land in two large precincts: one at Outer Harbour and one on the eastern side of the Port River. The Light Industry Zone comprises 9.8% of all industrial zoned land and is scattered widely throughout PAE. It often provides a transition between general industry and residential uses. Two specialised zones are present, providing precincts for cast metals and resource recovery.

The remaining zones are a mixed commercial / industrial zone at Gepps Cross, which includes the Home HQ bulky goods retail centre, and the Home Industry Zone, which provides opportunities for residential and light industrial uses to co-exist.

The vast majority of this land is in the Industry Zone. This zone has four policy areas that encourage specific industries that have metropolitan or state significance, namely port related uses, cast metals, maritime / shipbuilding, and resource recovery. The remainder of the Industry Zone is aimed at accommodating a wide range of industrial, warehouse, storage and transport land uses. Land division that creates allotments of less than 2,500sq.m is discouraged in the Industry Zone.


The Light Industry zone is spread throughout the PAE local government area and primarily aimed at “accommodating a range of light industrial, storage and warehouse uses that do not create any appreciable nuisance or generate heavy traffic within the locality.2 Land division that creates allotments of less than 1,250sq.m is discouraged in the Light Industry Zone.

The Bulk Handling Zone is occupied by Woolworths‟ South Australian head office and distribution centre. The zoning reflects the current use of the land and its proximity to metropolitan open space to the north, south and east.

The Home Industry Zone is aimed at providing opportunities for small scale service and light industries where people live and work on the same site. The zone occurs in three areas; Windsor Gardens and two areas within Wingfield. Residential dwellings are the primary land use in each of the three Home Industry Zone areas in PAE. Allotments of no greater than 1,000sq.m are encouraged.

The Industry/Business (Gepps Cross Gateway) Zone is a relatively new zone. It provides opportunities for a range of business, commercial and industrial uses. Strategically, it is centrally located between Main North Road and Port Wakefield Road. Part of the zone has been developed for Home HQ Gepps Cross, Adelaide‟s largest homemaker centre. Allotments are expected to be large enough to accommodate building envelopes of at least 3,000sq.m.

Table 1: Industrial Zoned Land in Port Adelaide Enfield LGA

Zone Gross Land Area (sqm)

% of stock

Main Industrial Land Use Zones

Industry Zone 20,656,938 67.9%

Home Industry Zone 147,541 0.5%

Industry (Cast Metals) Zone 443,026 1.5%

Industry (Port) Zone 3,607,089 11.9%

Industry (Resource Recovery) & Coastal Management Zone

1,732,729 5.7%

Industry/Business (Gepps Cross Gateway) Zone 612,216 2.0%

Light Industry Zone 2,967,018 9.8%

Bulk Handling Zone 246,402 0.8%

Total 30,412,959 100.0%

Other Zones - Potential Industrial Land Use

Gepps Cross Gateway Zone 115,535

Multi-function Polis Zone 3,652,601

Grand Total 34,181,095

Note: There is an expectation that much of the Multi-function Polis Zone will be rezoned for industrial land uses The Gepps Cross Gateway Zone provides for a mix of land uses, including service trade premises and passenger transport services Source: Jones Lang LaSalle, City of Port Adelaide Enfield

2 PAE Council, Development Plan, Consolidated 15 November 2012, p 227


1.3 Summary – Strategic Context

The above review of key strategic planning documents and Port Adelaide Enfield‟s Development Plan highlight both existing and future drivers of demand for employment land within the Council area, namely:

Defence-related shipbuilding at Osborne, which will create a significant manufacturing enterprise;

Port-related development at Outer Harbor; Cast metals at Wingfield; Waste management and resource recovery; and Employment precinct at Gillman/Dry Creek.

There is also a state-wide commitment to advanced manufacturing, and while Tonsley Park is the primary government target location for advanced manufacturing, PAE already has an advanced manufacturing capability centred on shipbuilding at Osborne.

Over recent years, improvements to road and rail connections, such as the Port River Expressway and Crossing, have greatly enhanced accessibility to the region. This will be further improved with upgrades to South Road and the interconnection with the Northern Expressway. Rail access and intermodal improvements are also important to the future of the area.

The region will come under increasing land supply constraint in the next 10 years, which will:

Reinforce the need to rejuvenate brownfield sites and existing industrial areas; Require analysis of major land parcels, particular those in the proximity of Gillman, to

ascertain if their development will be economically feasible; and Require analysis of environmental constraints, particularly contamination and sea level

rise.

The state government, through DMITRE, has indicated that during the next five years, the Gillman Eco-Industrial Precinct requires completion of its DPA, scoping of infrastructure works, and assessment of the land's economic viability.


2 Literature Review

As part of the background research to this report, Jones Lang LaSalle undertook a literature review of key state and local government policy reports, including the following:

30 Year Plan for Greater Adelaide; The Housing and Employment Land Program; and Manufacturing Works: A strategy for driving high-value manufacturing in South Australia

(These three documents are discussed in Section 1: Strategic Context).

The following documents were also reviewed and a short summary of each follows.

Transport Storage and Logistics Industry Workforce Planning Project Report June 2005 Port Adelaide Enfield Corporate Plan 2011-2016 Manufacturing into the Future, Prof. Goran Roos, 2011 Manufacturing Green Paper: Setting Directions for the transition of manufacturing in

South Australia, March 2012

2.1 Transport Storage and Logistics Industry Workforce Planning Project Report June 2005

This report related to the “North West Crescent of Adelaide”, comprising the Port Adelaide Enfield, Salisbury, Playford and Gawler LGAs.

This report primarily considered the transport, storage and logistics industry (TSLI) from the perspective of the employees and planning for the future workforce / expected growth. The findings have limited relevance to industrial land use policy for Port Adelaide Enfield, being targeted more at workforce planning for industry participants.

It identified the TSLI as a major growth sector, with :

the domestic frieght task expected to double between 2005 and 2020; Strong growth in specialist logistic skills; Ageing demographics in the workforce; and Difficulties in attracting / retaining quality employees

The City of Port Adelaide Enfield is a major location for TSLI companies, given its strategic location in relation to Outer Harbour; major road and rail freight routes and recent major infrastructure investment aimed at improving the efficiency of freight movements.

While not discussed specifically in this report, it is noted that transport and logistics land uses tend to be relatively low employment generators in terms of the land or floor area occupied. Their concentration within Port Adelaide Enfield, while strategically important, does not contribute to the industrial employment base to the same degree as some other industrial land use would, such as manufacturing and service trades.

2.2 Port Adelaide Enfield Corporate Plan 2011-2016

Some key challenges for Council have become apparent through the preparation of the Corporate Plan 2011-2016. These include the conflicts between industrial and residential land uses in the City.

The plan highlights the importance of the commercial and industrial sectors to the LGA - Around 52,000 jobs are sustained in the area, representing 11% of all jobs in metropolitan Adelaide. The City has 9% of the Adelaide metropolitan population (based on 2006 data), therefore it provides a higher proportion of the metropolitan area‟s jobs than population.


Key points relevant to the industrial sector are:

Industry - Thirty per cent of Adelaide‟s industrial land is located within the City with the activity producing approximately 20% of Adelaide‟s overall industrial output;

Manufacturing - Over 27% of manufacturing jobs in metropolitan Adelaide are located in the City of Port Adelaide Enfield and over 15% of Port Adelaide Enfield residents work in the manufacturing industry; and

Transport – 70% of Adelaide‟s transport industry sites are located within the City of Port Adelaide Enfield.

The Corporate Plan highlights goals / objectives relevant to industrial land use in PAE, including the following:

Detrimental health impacts from industrial areas and transport corridors minimised through appropriate land use planning that balances the needs of industry and residents;

Seek to improve the impacts of pollution from industrial, commercial and transport related development on the environment and community through enhanced planning controls - e.g. Interface provisions;

Ensuring industrial development does not have a detrimental impact on the quality of the natural environment;

Facilitate and advocate sustainable environmental principles and practices in the City‟s industrial and commercial sector;

Supporting the North West Business Development Centre (NWBDC); and Supporting / encouraging economic diversification.

2.3 Manufacturing into the Future

This report was undertaken by Goran Roos, “Thinker in Residence in 2010-11 and provided the arguments for government support for an advanced manufacturing industry in South Australia.

In support of advanced manufacturing, the state government have undertaken the following:

It is now clearly understood that manufacturing is pivotal to our economic future, as evidenced in the State's master plan for the Tonsley Park redevelopment;

A manufacturing taskforce has been established in South Australia; The State Government has published the Manufacturing Green Paper and follow up

Manufacturing Works: A strategy for driving high-value manufacturing in South Australia; $38.3 million in funding has been allocated to establishing a new Mining and Engineering

Industry Training Centre at Regency Park (within PAE Council); and Recent Machinery of Government changes have seen the establishment of the

Department of Manufacturing, Industry, Trade, Resources and Energy.

Two of the objectives of this residency were:

Provide guidance in the development of a manufacturing industry strategy and an implementation plan that involves both government and external providers; and

Raise awareness of emerging opportunities in a globally competitive manufacturing sector and accelerate the emergence of a new manufacturing paradigm for South Australia.

Government has acted on the recommendations through releasing its Manufacturing Green Paper and Manufacturing Works Strategy.

The Manufacturing into the Future report presents a „roadmap‟ of current international practice and offers recommendations towards policy initiatives and opportunities for South Australia. The report puts forward a strong argument for high tech manufacturing in South Australia and encourages SA to grasp these new opportunities.


The report also argues for substantial government involvement in the areas of industry, innovation, research and associated policies. Manufacturing is a vital and significant contributor to the Australian economy with well understood multiplier effects on the rest of the economy that are larger than for any other sector.

Australia‟s performance in the manufacturing sector is poor compared to leading manufacturing nations like Sweden, Finland, Germany and Switzerland. This is cause for concern, as manufacturing is the primary source of technological innovation across the Australian business sector.

The Productivity Commission noted that manufacturing industries that have fared well over the long term were manufacturing activities with strong links to Australia‟s natural strengths in food, forests and minerals, and manufacturers with more differentiated products and higher skill and R&D intensities such as medicinal and pharmaceutical goods, photographic, scientific and medical equipment (Australian DIISR 2010). P16

2.4 Manufacturing Green Paper: Setting Directions for the Transition of Manufacturing in South Australia. 2012

This paper was the precursor of “Manufacturing Works”, the state government‟s advanced manufacturing strategy, and drew on the work undertaken and recommendations made by Professor Roos.

The paper highlighted that manufacturing has a crucial role to play in the transformation of the South Australian economy, but was at a crossroads, with the rapid changes occurring internationally and locally prompting the state government to consider how manufacturing can remain core to the economy and wider community. South Australia‟s capacity to create and capture high value and niche manufacturing is essential to the growth and prosperity of the State.

Following the release of the Green Paper in March 2012, the government specifically sought feedback from industry on the key questions raised in the paper. The state government‟s advanced manufacturing strategy has since been released.


3 Port Adelaide Enfield Industrial Market Overview

3.1 Supply Trends

The City of Port Adelaide Enfield has long been a focal point for industrial development, with new industrial subdivisions providing development opportunities and growth over time in the stock of industrial land uses. More recently, the market has started seeing some redevelopment of older industrial stock in locations such as Dudley Park.

As with the broader metropolitan Adelaide market, the level of new supply has been somewhat constrained since the onset of the Global Financial Crisis (GFC), with fewer projects being built.

Recent major completions in Port Adelaide Enfield include the following:

A 4,400 sqm development for Spotless at 2-32 Pedder Crescent, Dudley Park; and A 5,755 sqm warehouse and office development at 80-92 Grand Junction Road, Kilburn.

Projects in the pipeline include a 4,600 sqm warehouse at 21 Rosberg Place, Wingfield and a 6,820 sqm warehouse at 63-73 Cavan Road, Gepps Cross. Typically in the Adelaide industrial market, projects only move to construction once a tenant is secured. These projects had not secured tenants as at December 2012.

Figure 2 provides a summary of major new industrial supply monitored by Jones Lang LaSalle over the past 10 years. New supply trended upwards through to 2006 and remained very strong in 2007. Since 2009, the level of supply has declined to the point where major completions in 2012 will only be around 25% of the market peak of 2006.

New supply is typically “lumpy” due to the size of major projects. For example, the Coles Distribution Centre at Edinburgh Parks is 65,000sqm and accounted for a large proportion of total supply in 2007.

Figure 2: Major Industrial Supply, PAE LGA and Metropolitan Adelaide 2003-2012

Note: Major industrial supply includes projects with >= 3,000sqm of floor area Source: Jones Lang LaSalle

0

50,000

100,000

150,000

200,000

250,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(sqm)

Metropolitan Adelaide Port Adelaide Enfield


Outlook and Future Trends

Adelaide‟s industrial development, including development in PAE, has been low scale with relatively low site coverage. This is expected to remain the major form of industrial development.

The location of new supply is largely driven by new land releases. PAE is well positioned to continue to experience growth, with land releases at Largs North, Osborne, Wingfield and Dudley Park and future opportunities at Gillman Employment Lands Precinct.

At the same time, there are major land releases to the north of the City in the Salisbury and Playford LGAs, which may compete for tenants with land in PAE.

3.2 Demand Trends

Demand for new stock (which drives supply) has been subdued in recent years. Industrial demand is typically highly correlated to the economy with strong economic growth expected to drive demand for industrial space.

Jones Lang LaSalle monitors demand across metropolitan Adelaide for all new lease deals of 3,000 sqm and over. Tenant moves above 3,000sqm represent a relatively small portion of the total number of deals (10-15%) but are likely to account for around 50% of total volume of gross take up.

Gross take-up (tenant moves of at least 3,000sqm) in the 12 months to September 2012 was a relatively high 215,800 sqm, following 110,600 sqm in the preceding 12 months to September 2011. Major deals which attributed to the large take up include deals for Coca-Cola Amatil at 3-55 Frost Road, Salisbury South (35,000 sqm), ACI Glass Manufacturing at 15-23 Whicker Road, Gillman (32,000 sqm), GM Holden at 122 Purling Avenue, Edinburgh (28,800 sqm) and a pre-lease deal for Electrolux at 19 Pope Street, Beverley (25,500 sqm). Over the past 12 months, tenant moves (≥ 3,000 sqm) within the Adelaide industrial market have been led by the manufacturing (48%), Retail and wholesale trade (37%) and Transport and Storage (8.3%).

PAE contributed 76,600sqm to gross take-up in the 12 months to September 2012, dominated by the lease to ACI Glass. In the previous 12 months, gross take-up was 39,700sqm.

The strong result in the past 12 months appears to buck the trend of an overall subdued market. It should be noted that our research focuses on gross take-up rather than net take-up. Therefore it does not necessarily translate to growth in the size of the overall industrial market. For example, Coca-cola Amatil moved from poor quality space of similar size at Gillman to Salisbury.

General caution continues to delay progress on leasing deals, which have been in the pipeline for some time. There is often a mismatch in large tenant requirements against available existing stock in Adelaide. Criteria including minimum height clearances of at least eight metres and recessed loading docks are reasonably standard for larger users seeking modern functional space. The discrepancy between tenant requirements and the existing stock available may be the precursor for an increase in design & construct activity. However, developers are finding that the biggest hurdle for new development is access to capital and tenants who are willing to commit to a pre-lease deal; often this is at a significantly higher nominal rent and for a longer lease term, relative to existing stock. This is having an impact across all of metropolitan Adelaide‟s industrial markets, including Port Adelaide Enfield.

3.3 Drivers of Demand

While economic growth is a natural driver of demand for industrial space, there have been a number of other drivers that have and will continue to impact on the demand for industrial space and where industry chooses to locate. These are discussed below.


Structural Change and rise of the Logistics Sector

Until the onset of the GFC, both the demand for, and supply of Australian industrial property grew dramatically. The expansion was far in excess of that indicated by economic growth, a traditional driver of demand for industrial property. The reason for the sudden growth was a structural change in the property needs of industrial space occupiers.

The change in occupier needs was sparked by changes in technology. Mobile communications as well as improved data and inventory management has seen firms in the transport and storage industries as well as the wholesale and retail service industries change their business processes. Changes include outsourcing to specialist logistics companies, consolidation and centralisation of warehousing as well as the adoption of “just-in-time” inventory management.

As a result of these structural changes, the logistics sector has been a major consumer of industrial land in recent years, with the drive for greater efficiency to the supply chain process creating a need for larger, more efficient warehouses.

This trend has seen some very large warehouses constructed. Whereas 10 years ago, a 10-15,000 square metre warehouse was considered to be at the larger end of company requirements, buildings of 30-40,000 square metres are not uncommon now. For example, Coles pre-leased a 65,000 square metre distribution centre at Edinburgh Parks (completed in 2007), consolidating several facilities throughout metropolitan Adelaide at the one site. Woolworths has a similar sized facility at Gepps Cross.

For these changes to be effected, purpose built facilities need to be available at a reasonable cost. A series of land releases on the fringe of major cities have allowed for new facilities to be developed. In metropolitan Adelaide, the availability of very large sites in the traditional distribution areas within Port Adelaide Enfield (Regency Park, Wingfield, Gillman) are becoming increasingly scarce and expensive. The Outer North of Adelaide (eg. Edinburgh Parks) offers larger sized allotments at a low per unit price, which is a major drawcard for large distribution centres.

While local industrial tenants may have in the past been reluctant to shift operations to the Outer North from the more centrally positioned North-West, the increased focus on national tenants has shifted the industrial focus away from the traditional North-West. Compared to larger markets such as Sydney, Adelaide‟s outer northern suburbs such as Direk, Burton and Edinburgh are not that far from the CBD. They are also served by greatly improved infrastructure and provide a cost efficient location from which to operate. With interstate personnel having a much greater say in real estate decisions, there is a greater level of economic rationalism in real estate decision making.

From Manufacturing to Warehousing

Over the last 30 years, manufacturing output as a percentage of total output has declined from over 18% to less than 9%.3 That is, its contribution to the economy has halved as manufacturers have had to cope with increased competition from Asia and in recent years, a stronger Australian dollar (the higher dollar making exports more expensive and imports cheaper). One strategy has been to move production offshore and import products that are either already assembled or may only require light assembly. This has resulted in a shift in some manufacturers‟ property requirements from factory to warehouse space.

The South Australian economy is more highly represented in the manufacturing sector than most other states, and this is evidenced in the make-up of recent Adelaide take-up by the manufacturing sector. However, while the manufacturing sector is still an important component of Adelaide‟s recent industrial supply and demand (eg, auto component manufacturers, building industries, bottle manufacturing), warehousing and distribution facilities have become more prominent.

3 Deloitte Access Economics, Business Outlook September 2012


Infrastructure

Infrastructure improvements are one “pull factor” that can increase the appeal of a particular region. In the case of the industrial sector, good quality infrastructure can entice companies to move to outer suburban areas or even regional locations that might have been overlooked in favour of a more central location. Other “pull factors” to outer suburbs include the availability of serviced land, lower real estate costs and a growing population, providing both a workforce and a customer base.

PAE together with the Outer Northern region of Adelaide (Playford; Salisbury) is benefiting from recent and proposed improvements to infrastructure. For example, the Port River Expressway and third river crossing has increased the accessibility of land at Osborne and other locations on the Lefevre Peninsula while the South Road Superway will provide a non-stop link from Regency Road to the Port River Expressway through PAE. Likewise, the Northern Expressway (NEXY) and proposed Northern Connector will benefit the fast growing industrial areas in Playford and Salisbury and improve efficiency of the transport and distribution network into and out of Adelaide.

Clustering

Clustering of like-minded businesses facilitates the creation of business networks and has the potential to generate new market opportunities through collaboration. The state government has encouraged industry clusters, such as the Cast Metals Policy Area at Wingfield, biotechnology at Thebarton, waste resource recovery at Gillman, and both automotive component manufacturing and defence at Edinburgh Parks. Tonsley Park is a proposed advanced manufacturing cluster.

Availability of Serviced Land

A supply of affordable, well located land provides the impetus for companies to consider moving premises, particularly those companies with either poorly located properties, facilities that are outdated, or undergoing expansion / contraction.

The state government has a major role in controlling the release of industrial land in the metropolitan area. The government aims to maintain a 15 to 20 year supply of industrial land in order to satisfy longer term demand, protect land from competing higher order uses and keep land competitively priced. In terms of development ready land, the State Government‟s Metropolitan Adelaide Industrial Land Strategy identifies 500 hectares of vacant industrial land.

State government data indicates that take up of industrial land averaged to 95 Ha per annum between 2002 and 2008. With well-located industrial land in the metropolitan area diminishing, longer term supply is likely to include areas that currently lie outside the Adelaide metropolitan area. We understand that more recent monitoring has indicated that take-up has declined by around 30% since the onset of the GFC, which may ease the urgency of bringing to market new development ready land (e.g. Gillman Employment Lands Precinct).

Competing uses in Inner / Middle Suburban Areas

Inner suburban industrial areas such as Mile End are undergoing considerable structural change, primarily due to strong competition from higher order commercial and residential uses. As owners of industrial land sell up to capitalise on the higher values placed on these uses, the contraction in supply of industrial property has flown through to rental growth and priced large industrial uses out of the inner suburban market. Consequently, industry requiring large premises may need to look further afield. This also provides companies with an opportunity to reconsider their operations and either expand, contract or consolidate.

While zoning can effectively restrict the change of use from industrial to non-industrial uses, there is still expected to be strong competition from a range of businesses that have needs for a mix of commercial and warehouse space as well as service industries that need to be close to the residents and businesses they serve. This is considered a legitimate use of land within


industrial zones, but it may require Councils to re-think the type of uses and minimum site area requirements suitable for industrial zones in inner to middle ring suburbs.

In many cases, owner-occupiers have competed strongly for land and buildings, driving up prices and leading to some operators moving to lower cost locations.

On-line Retailing

On-line retailing has experienced rapid growth in the last decade to now account for an estimated 5% of total retail trade.4 The growth of this sector has seen increased demand for well-located warehouses. This emerging sector has fuelled take-up of old warehouse space in the eastern seaboard markets, while the reliance of online retailers on third party logistics providers to deliver their goods to customers has seen strong growth in their property needs.

Jones Lang LaSalle has identified the following characteristics of the typical online retailer:

Relatively large workforce compared with other distribution warehouses – due to the nature of small orders that require manual picking of goods;

Central location, accessibility – Locations central to the metropolitan market, close to major postal centres and close to major arterial roads are desired;

24-7 operation – zoning that allows 24-7 operation is important as most businesses operate 24 hours per day. This is required to meet the demands of customers that expect prompt service / delivery;

Expansion opportunities – this is a fast growing business; Extensive truck docking – to cater for the high volume of orders, albeit small orders and

small trucks; and Parking – a higher than normal workforce compared with typical distribution centres.

Conclusions and Outlook

We consider that PAE is well placed to attract a high share of future demand for industrial space, given its favourable location compared with other areas within the metropolitan area. This is particularly the case for Gillman / Wingfield, which is well located to attract warehouse / distribution centres serving the metropolitan Adelaide market.

Land values, however, are relatively high in comparison to other industrial markets further from the CBD, including the outer north.

The above trends have seen quite dramatic changes in the industrial sector in recent years, including:

A continued shift to outer metropolitan areas, where large, low cost industrial land is available;

A greater emphasis on efficiency in “the freight task”, with accessibility to quality infrastructure (road, rail, sea) and large modern distribution centres key “pull factors; and

An overall increase in the take up, or demand for industrial space, which is partly attributed to the rise of the logistics sector.

These trends are expected to continue, although it is noted that the GFC has momentarily slowed the demand for industrial land.

Infrastructure improvements have been focussed on the northern area of Adelaide and further improvements are in the pipeline. This is likely to see the northern industrial markets and in particular PAE continue to be a focus for industrial activity. New land releases for industry in PAE are expected to be in relatively strong demand, particularly land with good access to major freight corridors.

4 Jones Lang LaSalle, Online retailing: Driving a new wave of industrial business, May 2012


PAE‟s smaller industrial precincts may provide opportunities for increased diversity of land uses, still focussed primarily on industrial uses but with an emphasis on providing for small service based businesses servicing the local market. Larger industrial precincts, however, should predominantly serve the wider metropolitan area.

3.4 Ownership Trends

Owner occupiers remain an important part of the PAE industrial market, particularly in the older industrial areas and for small land parcels. Major corporates may not consider real estate to be their core business and prefer to lease their premises. Small businesses, however, often see owning property as:

An investment in their future (in lieu of superannuation); A means to secure their business location for the long term; and A safeguard against rental increases.

Owner-occupiers have been a major cause of strong land value growth in inner and middle suburban industrial precincts such as Mile End and Thebarton. We would expect land values in areas such as Windsor Gardens and Dudley Park would also be driven largely by owner-occupier activity.

Private investors have been active in the PAE market and across the metropolitan Adelaide region. Many of the major private investors also have business interests in PAE, being an owner-occupier as well as a developer / investor. They understand the local industrial market and have invested in, and developed industrial property as part of their business activities.

Prior to the GFC, there was considerable interest in the Adelaide Industrial Market from institutional investors. However, this has diminished with groups such as Goodman now consolidating their interest in the larger eastern seaboard market. We would expect institutional interest to pick up and drive some of the major long-term opportunities in Adelaide. Institutional investors often have long-term relationships with tenants and are successful in attracting major tenants to their estates.

3.5 Size of Lots Demanded

We have analysed sales of industrial land since 2007 within PAE. Table 2 indicates that most sales activity has occurred in Wingfield, due partly to land availability and partly to its desirable location for industrial land uses.

In terms of size of land demanded, there has been strong demand for relatively small lots, particularly in Wingfield. The City of PAE has a minimum preferred allotment size for Light Industry Zones (1,250sqm) and Industry Zones (2,500sqm) but sales data suggests strong demand for lots below this minimum requirement.


Table 2: Land Sales Activity by Size Range, Port Adelaide Enfield LGA 2007 - 2012

Size Range Wingfield Other Suburbs Total % of Total

Less than 1,250 36 21 57 40.4%

1,250 - 2,499 8 18 26 18.4%

2,500 - 4,999 14 9 23 16.3%

5,000 - 9,999 9 10 19 13.5%

Over 1 Hectare 4 12 16 11.3%

Grand Total 71 70 141 100.0%

Source: RPData, Jones Lang LaSalle

In terms of available land in PAE, the major opportunities together with the range of lot sizes is provided in Table 3. There may be a need for flexibility in terms of lot sizes. Jones Lang LaSalle‟s sales and leasing agents have indicated that while large lots are necessary for major distribution centres and freight companies, a mix of lot sizes helps increase demand and provides opportunities for small complementary industrial businesses to locate near larger businesses.

Table 3: Land for Sale in Port Adelaide Enfield, Major Estates, 2012

Estate Lot Size (Range, sqm)

Average Lot Size Zoning

Port Direct (Stage 1) 5,994 - 10,820 6,980 Industry

Techport 4,731 – 9,307 6,800 Industry

Marina Adelaide 1,625 – 3,981 < 2,000 Industry

Dudley Business Park 1,269 – 2,888 1,700 Light Industry


3.6 Vacancy Trends

The Department of Planning, Transport and Infrastructure conducted land use surveys of all industrial zoned land in 2002 and 2008 (known as the Industrial Database). This provides information on vacancy levels (vacant land; vacant buildings) as at the time of the survey.

Vacant Buildings

In 2008, the Industrial Database identified six buildings in excess of 1 Hectare that were vacant. All sites have since been leased. Brief details are as follows:

142 Churchill Road North, Dry Creek – leased to a transport company (Mets Transport); 491-499 South Road, Regency Park – The former Electrolux site sold with vacant

possession to ISPT and has since been leased to CITC and Cork Supplies, as well as partially redeveloped for NAB;

591 Grand Junction Road, Gepps Cross – now leased to Toll by their commercial logistics division;

62-94 Wingfield Road, Wingfield – occupied by Northern Kope Parcel Express; 124-134 Eastern Parade, Gillman – Site together with adjoining land, redeveloped for the

Gillman Industrial Estate by owners‟ De Bruin Nominees. Some of the site is available for lease;

20-30 Crozier Street, Port Adelaide – Within the Port Adelaide Centre and not considered to be appropriate for long term industrial use.

There were numerous smaller sites also identified as vacant. Vacant buildings are taking considerable time to re-lease in the current market, with larger premises expected to take up to


12 months. It is rare that a building that is being actively marketed would remain vacant for up to five years. As at the 2008 Survey, 2.1% of developed sites were vacant buildings.

Analysis of vacant premises advertised for lease on www.realcommercial.com.au revealed 173,000sqm of available industrial space over 113 premises throughout Port Adelaide Enfield (November 2012). We estimate that this represents approximately 2.8% of total built floor space (sites with buildings is approximately 24.5 million sqm; assume 25% site coverage on average). This suggests an increase in vacancy since 2008, which is not surprising given the economic downturn since the GFC.

Furthermore, the above analysis of current vacant space does not take into account vacant space that is not being actively marketed for lease (i.e. not marketed on www.realcommercial.com.au). It is likely that the actual vacancy rate of industrial buildings is higher.

Vacant Land

Vacant land was much more prominent, including recently released subdivisions in government ownership and future industrial land in locations such as Gillman. Clearly, there are major opportunities to expand the industrial base within PAE.

Current land available includes the following estates in public ownership:

Cast Metals Policy Area, Wingfield; Techport, Osborne; Port Direct, Osborne; Marina Adelaide, Largs North

The main privately owned estate with land for sale is Dudley Business Park.

These five above mentioned estates are all being actively marketed, although in the current market, sales have been subdued.

As at 2008, the Industrial Database identified 24 vacant sites in private ownership of one Hectare or more (excluding government owned land; railway land etc.). Ten of the sites were in Wingfield and a further five in adjoining Gillman, indicating continued opportunity for industrial development in both these suburbs. These 24 sites represented 58.8 hectares of vacant land.

We have compared these vacant sites against recent development activity in PAE. Some of the well located sites have been developed over the past four years, include:

Dudley Business Park – subdivided to smaller lots and for sale; Grand Junction Road Industrial Estate, Wingfield – Tenants include RSEA; Scania – Cormack Road, Wingfield; Allied Pickfords – David Street, Wingfield; Construction Chemicals – 135-147 Cormack Road, Wingfield;

It is noted that some of the sites that were considered vacant in 2008 have most likely been held by their owners for future expansion. For example, Cavill Holdings utilise a large site for storing machinery, which may also provide for future growth.

Much of the private vacant land at Gillman is un-serviced and at the very least requires land fill before it is ready for development. This area is low lying with little to no fall and is not serviced by a sewer. The engineering costs are considered currently prohibitive for private owners to achieve a reasonable return on the land. Under these circumstances, the land is expected to remain vacant in the short-medium term.

http://www.realcommercial.com.au/

http://www.realcommercial.com.au/


The amount of large vacant sites in private ownership that are considered “development ready” is not particularly high. Most development ready vacant land is government owned and currently being marketed, while large tracts of land at Gillman remain available for future industrial growth.

3.7 Rents and Lease Terms

Jones Lang LaSalle monitors trends in rents for prime and secondary grade stock in Adelaide‟s North West industrial precinct, which includes the main industrial suburbs within PAE. It should be noted that there is considerable variation in rents due to the variation in quality of stock and location preferences. Furthermore, larger premises will typically attract a lower rent per square metre.

Existing prime rents are considerably lower than the rental levels required for pre-lease of new space, averaging $85 per sqm per annum (plus GST plus outgoings) for a medium to large warehouse (say 3,000 square metres or more). New industrial space would require rents in the order of $120 per sqm per annum net.

An example of a prime grade pre-lease is the Allied Pickfords facility at 41-45 Davis Street, Wingfield, which was leased at $123 per sqm per annum.

There is a considerable amount of lower quality secondary industrial space in PAE, which attracts rents ranging from a low $40 per sqm per annum up to $70 per sqm per annum.

Lease terms vary considerably. The standard minimum lease term for businesses trading out of industrial premises is five years. Pre-lease deals generally require a longer lease term in order to secure finance to develop the premises (between 8-12 years). Secondary grade premises would accept significantly shorter lease terms for tenants requiring warehouse space (i.e. tenants not running a business from the site), particularly in the current market where there is considerable space available in the market.

Much of the existing space is not meeting the requirements of today‟s tenants who require modern and efficient industrial space. Industrial tenants typically desire an 8 metre high clearance, ample parking for employees and clients, recessed loading docks, and good access / egress. This is reflected in the relatively low rents that secondary space attracts.

3.8 Land Values

Industrial land values experienced strong growth up until the GFC, but they have since moderated. Jones Lang LaSalle monitors land values for the North-West industrial market, focussing on land values in suburbs such as Wingfield, Regency Park, Cavan and adjoining suburbs. Land values in these areas reached $300 per sqm in mid-2008 but have since fallen to around $250 per sqm. Demand has diminished and lower cost land in the outer north of metropolitan Adelaide has been brought to market at a considerable discount to the north-west.


Figure 3: Land Values in the North-West Adelaide Industrial Market

Note: Wingfield and adjoining suburbs is used as a proxy for the North-West Industrial market- Source: Jones Lang LaSalle

Asking land values at Osborne on Lefevre Peninsula are in the vicinity of $165-170 per sqm. The asking value for industrial land on the Lefevre Peninsula is considerably more expensive than the outer north ($75 per sqm based on a 1 hectare lot), which is a similar distance from the Adelaide CBD. The “premium” for Lefevre Peninsula will primarily attract tenants with a specific need to locate either adjoining the ASC facility at Osborne or near Outer Harbor. This narrows the potential market for the large tracts of land on the Lefevre Peninsula at least in the short term. However, this could change considerably should:

A major increase in container traffic be experienced at Outer Harbor (recent years have seen solid growth in imports while export growth has been subdued); or

South Australia secures further defence contracts that utilise the shipbuilding facilities at Osborne.

3.9 Sales Activity

The four largest transactions in the Adelaide industrial market over the last 12 months reflect to a degree the structural changes occurring not only in Adelaide but across all of Australia‟s major industrial markets.

Three of the sales are manufacturing premises that have closed down or plan to close in the near future – Caroma, Electrolux and Bridgestone. The Caroma site was purchased by Renewal SA for a mixed use development in support of the directions of the 30 Year Plan for Greater Adelaide. The former Bridgestone and Electrolux premises have been purchased by investors for continued use for industrial purposes / redevelopment. Metcash Distribution Centre has been purchased by In for a Pound (Cheap as Chips) for continued use as a distribution centre.

80

100

120

140

160

180

200

220

240

260

280

300

320

340

360

380

Q1/

2003

Q3/

2003

Q1/

2004

Q3/

2004

Q1/

2005

Q3/

2005

Q1/

2006

Q3/

2006

Q1/

2007

Q3/

2007

Q1/

2008

Q3/

2008

Q1/

2009

Q3/

2009

Q1/

2010

Q3/

2010

Q1/

2011

Q3/

2011

Q1/

2012

Q3/

2012

($/sqm)


Table 4: Major Industrial Sales in Metropolitan Adelaide, 2011-2012

Building Name Address Suburb Sale Date

Price ($m) Vendor Purchaser

Metcash Distribution Centre

404-450 Findon Road

Kidman Park Jun-2012 35.11 CPT Manager Ltd In For A Pound Pty Ltd

Caroma 76 Magill Road

Norwood May-2012 15.0 Caroma Industries Ltd

Urban Renewal Authority

Former Bridgestone Manufacturing Facility

3-55 Frost Road

Salisbury South

Mar-2012 12.5 Bridgestone Australia Limited

C & G Industrial No 1 Pty Ltd

Electrolux 19 Pope Street

Beverley Nov-2011 11.5 Simpson Ltd Australand C&I Land Holding Pty Ltd


There has been some modest activity from larger institutional investors (Australand, Goodman, ISPT) but not to the same extent as in the eastern seaboard market.

Industrial sales in the PAE market have averaged around 45 sales per annum, although it is common for some sales to include more than one certificate of title.

Figure 4: Number of Industrial Sales per annum, Port Adelaide Enfield LGA, 2007-12

Note: Transactions with zero value have been excluded. These are primarily transfers between related parties Source: RPData, Jones Lang LaSalle

In terms of sales price, there is considerable variation in the sales rate (rate per square metre of building area) due to a range of factors, including:

Length of lease term; Size of site with respect to building (i.e. further development potential); Size of hardstand (bituminised external area adds value to premises); Location; Rent; and Quality of tenant.

For good quality industrial assets in PAE, a sales rate of between $900 - $1,200 per sqm can be expected.

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012

Sales per annum


We have analysed sales in 2012 within PAE to ascertain the mix of sales price and size of lots and provide the following comments:

Around half the sales of existing industrial premises were sites of less than 1,250sqm; Around one third of sales were $1m and over; one third were $500,000 and up to $1m;

and one third less than $500,000; and Similarly, more than half the land sales were for small lots of less than 1,250sqm.

3.10 Conclusions and Outlook – PAE Industrial Market

The Adelaide Industrial market remains subdued, with caution continuing to delay progress on sales and leasing deals, including land sales activity.

Demand for industrial space has primarily come from three main sectors: manufacturing, retail/wholesale trade and transport and storage sectors

The South Australian economy is forecast to continue on a path of low to moderate growth in the short term. Access to finance will remain constrained. We therefore do not expect a sharp rise in demand for industrial property in the next one to two years.

PAE has significant future supply of industrial land, but much of the land has major constraints, meaning it is more expensive to bring to market. This places land in PAE at a price disadvantage compared with land in the Outer North. Conversely, there are strong pull factors that will attract tenants to PAE as opposed to other industrial locations in metropolitan Adelaide.

The slowdown in demand has effectively reduced the urgency of bringing land at Gillman to market, however this large employment lands precinct is well placed to provide long-term supply to PAE, including significant economic benefits through employment generation, rates etc.

Of the major industrial sectors, modest growth in the transport and storage sector is forecast over 2013 (2.9%) and 2014 (2.1%)5, which should see this sector be more active in terms of tenant enquiry. Over the next 10 years, we would expect demand to be primarily from this sector.

PAE‟s main location advantages are expected to attract the following industries:

Transport / logistics companies; Business associated with shipbuilding / ACS contracts; Resource / recovery industries; and Port related business.

The fact that much of PAE‟s industrial land is centrally located will also attract a very wide range of business that benefit from good access to the metropolitan region. This includes manufacturers serving the local construction industry.

There is certainly no “one size fits all” in terms of optimum lot size to meet the needs of future business. Discussions with our industrial sales and leasing agents indicate a degree of flexibility to allow a mix of business types.

There is a need to meet the market in both price and lot size.

Precincts such as Port Direct and Techport at Osborne may require a greater mix of lot sizes (down to around 1,000sqm) to cater for small business that provide a supporting role to adjoining enterprises and serves the local market. This can be readily achieved by subdividing some existing lots;

PAE industrial land is competing with other land releases located further from the CBD. In the current market, tenants are not prepared to pay a significant premium for this location advantage.

5 Deloitte Access Economics, Business Outlook September 2012


Older industrial suburbs will provide “brownfields” opportunities. However, this can be a slow and expensive process bringing this land to market. It typically requires the following:

An opportunity arising due to departure of a major tenant; Change of ownership to an active industrial developer / investor; Ability to subdivide land to smaller lot sizes;


4 Industrial Land in Port Adelaide Enfield

4.1 Housing and Employment Land Supply Program

The Housing and Employment Land Supply Program (HELSP) report plays a key role in supporting the implementation of The 30-Year Plan for Greater Adelaide. It guides the process of rezoning land to accommodate future population and economic growth.

A key aim of the program is to maintain a target of a 15-year supply of development-ready zoned land.

As the name suggests, the HELSP report considers both housing and “employment land” supply, or industrial land supply. This overview focuses on industrial land supply within the Port Adelaide Enfield LGA, which is partly located in the Northern Adelaide Region and partly located in the Western Adelaide Region.

Industrial land in Greater Adelaide comprises industry zoned land, non-industry zoned land used for a range of industrial purposes (quarries, salt evaporation ponds; airports) and land identified for future rezoning.

The report considers the consumption rate of industrial land in metropolitan Adelaide to have been around 95 hectares per annum between 2002 and 2008. Of the 525 hectares consumed in this period, 254 hectares were consumed in Salisbury and 140 hectares in Port Adelaide Enfield (or 23 hectares per annum over the six year period). Across the larger greater Adelaide area, consumption has been between 100-110 hectares per annum.

The Department and Planning Transport and Infrastructure (DPTI) continue to monitor the consumption of industrial land by undertaking regular sample surveys of vacant land. Based on discussions with DPTI staff, we understand that industrial land consumption has declined by around 30% since 2008, due primarily to the weaker economic environment since the GFC. This downturn means that there is less current pressure on the rolling supply of industrial land and less urgency to release new industrial land. Assuming a consistent rate in the decline of consumption across metropolitan Adelaide, PAE‟s consumption would have declined to around 16 hectares per annum over the past four years. This lower level of demand for industrial land has reduced the pressure on state government to deliver development ready industrial land to the market at least in the short-term. However, we would expect demand will pick up once economic conditions improve.

The Plan estimates that industrial employment (that is, manufacturing and transport, logistics and warehousing) will increase by 77,600 jobs over the next 30 years. The HELSP report estimates that this increase in employment will require 3,329 hectares of additional industrial land. This equates to approximately 111 hectares per annum, in line with consumption across Greater Adelaide between 2002 and 2008.

The plan estimates that most of the demand for industrial land will be in the northern and western regions of metropolitan Adelaide, which is where PAE is located.

There is expected to be a shortage of industrial land within the western and northern regions over the next 30 years, based on expected demand and availability of existing and potential industry zoned land. Again, the downturn in recent consumption may prolong this timeframe by a few years.

Major industrial sites within the Port Adelaide Enfield LGA are summarised in Table 5. The table identifies 513 hectares of major industrial sites, assuming 200 hectares will be yielded from the Gillman Employment Lands Precinct.


Table 5: Major Industrial Sites in Port Adelaide Enfield LGA, as at 2010

Name Ownership Area (ha)

Structure Plan

DPA timing Infrastructure Required Other Comments

Gepps Cross (Gateway)

Private 13 Completed Completed Available Adjoining Home HQ Gepps Cross

Gillman (Eco- Industrial Precinct)

Government/ Private

49 2

Completed 2011 Upgrades required. Issues include the lack of availability of network infrastructure services; the need to upgrade the local, major and arterial road networks; distances to the SEA Gas pipeline; seawater and stormwater inundation; and actual and potential acid sulfate soils

Within a State Significant Area (Northern Economic Corridor). Potential sea level rise needs to be considered. The former LMC (now Renewal SA) has prepared a Structure Plan

Osborne (Techport Australia)

Government 33 Completed Completed Available Adjoining ASC. Primarily aimed at providing a suppliers precinct for complementary businesses servicing ASC / shipbuilding at Osborne.

Osborne (Veitch Road)

Government/ Private

26 1

Completed Completed Available. The water and wastewater systems are operating at or near their design capacity (trunk water mains will require a mixture of augmentation and duplication). The electrical distribution network and local substations will require augmentation

Much of the area is low-lying and potentially subject to flooding during a combined rainfall and high tide event. Noise attenuation measures are needed due to existing industry, and heavy vehicle and rail traffic

Outer Harbor (West Pelican Point)

Government 41 Completed Completed Available

Outer Harbor (East Pelican Point)

Government 76 Completed Completed Available Marketed as Port Direct

Regency Park Private 34 Completed Completed Available

Wingfield Government/ Private

16 8

Completed Completed Available

Wingfield (Cast Metals Policy Area)

Government/ Private

11 3

Completed Completed Available. The water and wastewater systems are nearing their design capacity

Has been slow to take up. Lack of interest from cast metals manufacturers.

Gillman Employment Lands Precinct

Government ~200 No Unknown Significant upgrades required Detailed subdivision design for 15 hectares stage one of the East Grand Trunkway industrial park. Proposal to offer for sale eight allotments, ranging in size from 8,000 sqm to more than 5 hectares in 2013 for resource recovery uses. Extension of Hanson Road proposed.

Total 513

Source: SA Government, Housing and Employment Land Supply Program Report 2010, Greater Adelaide October 2010, Jones Lang LaSalle


The HELSP report identifies the future drivers of economic development, and therefore demand for industrial land, in the western region will come from:

Defence-related shipbuilding at Osborne, which will create a significant manufacturing enterprise

Port-related development at Outer Harbor Cast metals at Wingfield Waste management and resource recovery at Wingfield / Gillman General industry at Gillman/Dry Creek.

4.2 Key Opportunities


The HELSP report highlights the need to bring the Gillman Employment Land Precinct to the market in order to meet future demand. Renewal SA indicates the total site area at approximately 450 hectares; with 230 hectares gross being developable land (say 200 hectares net). This precinct will deliver industrial land close to Port Adelaide and is expected to be developed over the next 25 years. Work to date is as follows:

In 2011-12, Renewal SA completed detailed subdivision design of the 15.4-hectare Stage One of the East Grand Trunkway industrial park development and prepared a preliminary Master Plan for the former Dean Rifle Range, to guide ongoing development within the broader precinct.

In 2012-13, Renewal SA is aiming to complete subdivision works on eight allotments, ranging in size from 8,000 sqm to more than five hectares, to be offered for sale in 2013. Renewal SA is also planning to construct the extension of Hanson Road, which will create additional opportunities for development within the former Dean Rifle Range, particularly for the resource recovery sector.6

There is additional land to the west of Grand Trunkway owned by Renewal SA, which provides further expansion opportunities, while other land in state government ownership is set aside for Port expansion.

The primary uses are expected to be warehousing / logistics, resource recovery (land off Hanson Road extension) and some manufacturing activity.

The site has the benefit of not being close to any residential uses, and therefore provides flexibility in uses. On the other hand, the lack of nearby residents means that it is some distance from the resident workforce. We consider the benefits of flexibility in land use for the Gillman Employment Lands Precinct outweighs any potential benefits from a nearby resident workforce.

A key opportunity is for major companies to decant from their existing site(s) and consolidate to a large, single site at Gillman. This would then provide the opportunity for more labour intensive industrial uses on the land vacated, particularly if this land is well located in relation to residential areas that provide the future workforce. Regency Park, for example, is very well located for a range of industrial uses and has excellent access to the labour force. It could provide a long term opportunity for more intensive industrial uses.

Wingfield Cast Metals Policy Area

This precinct of 44 hectares has remained under-utilised since its inception. Renewal SA has five lots totalling 11 hectares for sale with access from Schumacher Road. Smaller sites on the western side of Johansson Road also remain vacant.

It is our understanding that work is currently underway to justify rezoning of the Cast Metals Policy Area by the Minister, via a Ministerial Development Plan Amendment (DPA). Should

6 www.southaustralia.biz, Major Developments Directory, 2011/12

http://www.southaustralia.biz/


rezoning proceed, it is expected a broader range of industrial uses would be allowed within the precinct.

PAE Council has expressed concern that such proposals by the State Government to broaden the range of industries in the Cast Metals Policy Area would be contrary to both their long standing position and the State Government‟s strategic direction, as outlined in the 30 Year Plan and HELSP Report, which is supportive of the retention of the Cast Metals Policy Area. Council also considers there is scope for the State Government to more actively promote the precinct to help stimulate interest from industry.

Wingfield has proven to be a popular location for transport and logistics industries and has limited further opportunities. Opening up this land to a broader range of uses would provide some short to medium term supply in one of PAE‟s premier locations. Future uses would need to be compatible with cast metals uses in terms of urban planning / interface.

Techport and Port Direct, Osborne

Techport‟s Suppliers Precinct remains largely vacant.

Demand for land in the supplier precinct at Techport is expected to increase as the construction of the Air Warfare Destroyers ramps up. However, Jones Lang LaSalle agents have indicated that to date suppliers have been content to continue their operations from existing locations rather than move to Osborne.

Ongoing demand from suppliers for industrial land from defence related shipbuilding at Osborne will also be driven by winning further Defence contracts, with the largest identified contract being the proposed requirement to purchase / build 12 submarines at an estimated cost of $36 billion. Land has already been set aside adjacent to Techport Australia‟s Common User Facility to accommodate this submarine project.

Port Direct comprises three stages with a total of 31 lots. The three stages are as follows:

Stage 1: 90,712sqm in 13 lots; Stage 2: 80,646sqm in 8 lots; Stage 3: 99,336sqm in 10 lots.

The average sized lot is 8,700sqm (median 7,700sqm).

Given the lack of recent take-up and the large quantity of land available, there is expected to be sufficient supply at Osborne to cater for what is considered relatively specialised demand over the long term (in excess of 10 years).

Flinders Ports - Increasing Throughput at the Port of Adelaide

Increased activity at the Port of Adelaide in the form of import and export volumes can drive demand for industrial land. Companies importing and exporting goods require storage space in close proximity to the Port of Adelaide for the efficient distribution of goods. Cargo throughput at Flinders Ports has grown steadily over the past five years (refer to Figure 15), particularly import volumes. This trend is expected to continue in line with demand for imported goods (imports have increased as Australia‟s manufacturing sector has decreased).

Improved infrastructure at Flinders Ports should also improve its overall capacity, efficiency and costs. Recent improvements have included a bulk loading facility at Outer Harbor, which for mineral exports provides a virtual one step “mine to port” transport system, minimising duplication in handling. It is noted that a review of Australia‟s five major container ports in Australia by the Bureau of Transport and Regional Affairs in 2007 was positive with regard to the


operation of the Port of Adelaide, highlighting its efficiency, excellent industrial relations record and un-congested nature.7

Our discussions with Flinders Ports indicate that one of its advantages is the availability of portside land for future growth and development.

There is strong competition between the ports of Melbourne and Adelaide for containerised exports, with industry estimating that up to 40% of SA origin containerised trade exits through Melbourne.8 This loss of potential port traffic suggests an opportunity for Adelaide to increase its market share, by increasing the share of its local exports exiting through Adelaide.

Containerised cargo has shown quite consistent growth over time and is expected to continue (organic growth as the population of Adelaide / SA grows; increased imports required as a result of a decline in local manufacturing). It is the containerised cargo that is most likely to drive demand for industrial land in and around the Port.

Unlocking Potential within Specific Zones

An unpublished report undertaken by the City of PAE has provided a detailed overview of all industrial zones in PAE. The report identifies activity that has occurred between 1995 and 2010. In some cases, there has virtually been no investment over the 15 year period. Jones Lang LaSalle considers that some development potential may be unlocked through changes to the zoning. The following broad comments are made for consideration:

Light Industry Zone – Osborne / Outer Harbor. This zone has remained largely vacant. To the west and south are residential uses while to the east is Techport / ACS. There may be future demand for further industrial land but recent take-up has been slow. Given nearby residential development, rezoning to residential use may also be a consideration. While we acknowledge the desire to use LIN Zones as a transition between GIN and Residential land, this site may attract more industrial interest if rezoned to GIN.

Zoning not following the Cadastre. We note that quite a few LIN zones run through properties, meaning part of the property is in GIN and part in LIN, for example. Again the reason for this appears to be the desire to use LIN as a transition between residential and GIN, but it may act as a deterrent to investment in the industrial land. Dry Creek South appears to have the rear of sites with limited activity due to this transition. Perhaps the buffer between the zones could better be dealt with via Principles of Development Control within the GIN Zone.

Light Industry Zone versus the need to provide for local service industries. We note that some LIN zones comprise of one or two large occupiers, with no local opportunities for small local service industries (mechanic, crash repairer etc.). These requirements may be reasonably catered for in other zones.

Former rail infrastructure. This land appears to provide potential for re-use, although it is often long, narrow strips of land. It is understood to remain in government / rail corporation ownership with in many cases, the rights of way remaining. Decisions on its future use could result in additional industrial opportunities.

Home Industry Zones. The intent of these zones is unclear. They typically are small enclaves of residential dwellings surrounded by industry, and therefore “one foot is in each camp”. PAE Council reviewed the relevance of this Zone during its Industry Zones DPA in 2008-2009 investigations resulting in the rezoning of some areas to light industry. It is worth further investigating the benefits achieved through this zoning, and whether rezoning to LIN or Residential would be more appropriate.

Industry Zone - Cast Metals Policy Area. We note that the land price for land in the Industry Zone at Wingfield is around $250 per sqm (2,000-5,000sqm allotment) while land in the Cast Metals Policy Area is not selling at less than half this price.9 Less restrictive policy would certainly attract increased interest in the vacant land. However,

7 DTEI (2008) Review of Significant Ports in South Australia, p13 8 DTEI (2008) Review of Significant Ports in South Australia, p13 9 Jones Lang LaSalle, “Real Estate Intelligence Service” and advice from industrial sales agents


PAE Council has indicated its continued support of the Cast Metals Policy Area for its original purpose.

Land fronting Arterial Roads. Interstate markets have seen a blurring of the lines between industrial land uses and commercial land uses, with some industrial uses incorporating up to 50% office space. There have also been some multi-storey industrial developments. An example is Nexus on Eastern Valley Way, Chatswood East. While PAE may not yet be ready to support this form of development, it provides an insight into the future for main road development where a high quality corporate feel is desired. Example locations may include Regency Road, South Road, and North East Road.

Case Study: Interstate Trends in Industrial Zones

In considering the future potential of industrial land in PAE, we have observed some of the interstate trends that may be followed in Adelaide. They include the following:

A blurring of the lines between commercial and industrial development - Office space often accounts for a significant proportion of total space in industrial developments (e.g. in excess of 25% of the total space).

Large projects comprising multiple units for either sale or lease are becoming popular. Where early multi-unit developments were marketed as industrial estates, the new projects are more likely to be marketed as a business park.

Higher quality finishes / design, particularly projects fronting arterial roads.

Multi-storey projects increasing development density and further blurring the lines between industrial and office development.

Demand for traditional industrial uses moving to outer suburban markets, with inner and middle suburban markets either losing employment or changing focus to a more mixed business format.

Niche on Eastern Valley Way, Chatswood, is one example of the changing face of industrial development (pictured below). Niche is a strata titled development that not only contributes to local employment growth within the industrial precinct to the east of Chatswood CBD but attracts local business owners that want to reside close to home and serve the local region. Such strata titled developments are an important element of the local industrial investment market, with strata units providing the opportunity for small businesses to own rather than rent premises.

Figure 5: Example Development – Niche, Eastern Valley Way, Chatswood East

Source: http://www.myniche.com.au/, Jones Lang LaSalle


Other Opportunities

There are numerous opportunities to develop either existing under-utilised land or land for alternative uses, should it become available. Some of the major opportunities are listed below:

Snapper Point - A site owned by Renewal SA and targeted as a long term strategic land holding for waterfront industry uses on the eastern side of Mersey Road.

Coghlan Road, Outer Harbor - Renewal SA own two sites at this strategic location. These sites are expected to be reserved specifically for port related uses.

Grand Trunkway (western side) – This large area of land is primarily zoned for port related uses and is owned by Flinders Ports and Renewal SA. It is strategically located for port related activities.

Gepps Cross Trade Centre – Gepps Cross Trade Centre has been master planned over 7 hectares of land which sits adjacent to the Home HQ Gepps X. The site has frontage to Port Wakefield Road and Matthews Road, which connects Main North Road and Port Wakefield Road. The Trade Centre is being marketed to light industrial and hardware users and will house approximately 30,000 sqm of built form. The developer is Axiom.

Regency Park – A significant parcel of land on the eastern side of Gallipoli Drive at Regency Park, identified as 34 hectares in the HELSP Report, is vacant and considered prime industrial land. The land is owned by Asciano (parent company of Pacific National and Patrick) and provides for future transport / logistics uses. A large portion of the land was acquired to construct Gallipoli Drive.


5 Employment Analysis

5.1 Industrial Employment in Port Adelaide Enfield

We have analysed the make-up of the employment base in PAE LGA by looking at the working population profiles for the smallest statistical area for which the ABS publishes “place of work” data (Statistical Area Level 2, or SA2). PAE comprises eight such SA2 areas, namely:

Enfield - Blair Athol Northgate - Oakden - Gilles Plains Windsor Gardens Dry Creek - South Largs Bay - Semaphore North Haven Port Adelaide The Parks

These areas are shown on the Map below.

Figure 6: Statistical Area Level 2 Geographies within Port Adelaide Enfield

Note: The boundaries of the SA2 geographies do not always match local government boundaries Source: Jones Lang LaSalle


Employment data is provided by “Industry of Employment” using the Australian and New Zealand Standard Industrial Classification (ANZSIC). As there is no specific breakdown of employment within land zoned industrial and other parts of PAE, we have focussed on those ANZSIC codes that best represent the businesses found in industry zones. These comprise the following:

Agriculture forestry and fishing Mining Manufacturing Electricity gas water and waste services Construction Wholesale trade Transport postal and warehousing

Table 6 summarises the employment in each SA2 in the Port Adelaide Enfield LGA.

Table 6: Employment by SA2 Geography, Port Adelaide Enfield LGA, 2011

Geographic Regions

Employment in Industrial

Type Sectors

% of Total PAE

Employment Total

Employment

% of Employment in Industrial

Type Sectors

The Parks 12,658 42.6% 18,322 69.1%

Enfield - Blair Athol 7,009 23.6% 11,918 58.8%

Port Adelaide 4,679 15.7% 9,457 49.5%

North Haven 2,824 9.5% 4,691 60.2%

Windsor Gardens 1,406 4.7% 4,177 33.7%

Largs Bay - Semaphore 774 2.6% 2,805 27.6%

Northgate - Oakden - Gilles Plains 435 1.5% 4,498 9.7%

Dry Creek - South 12 0.0% 15 80.0%

Port Adelaide Enfield (C) 29,732 100.0% 55,932 53.2%

Source: Australian Bureau of Statistics Census 2011, Jones Lang LaSalle

In terms of the industrial type sectors, almost half the employment was in manufacturing, while nearly 5,500 employees or 18.4% was in transport, postal and warehousing. Construction and wholesale trade were also important sectors, each accounting for over 4,000 employees.

Table 7: Employment in Major Industrial Sectors, Port Adelaide Enfield LGA, 2011

Employment in Major Industrial Sectors

Port Adelaide

Enfield (C)

% of Total "Industry"

Employment

Agriculture forestry and fishing 130 0.4%

Mining 167 0.6%

Manufacturing 14,393 48.4%

Electricity gas water and waste services 1,296 4.4%

Construction 4,044 13.6%

Wholesale trade 4,239 14.3%

Transport postal and warehousing 5,463 18.4%

Total 29,732 100.0%



Employment in the major industrial sectors in PAE has grown by 15.6% between 2001 and 2011. The overall workforce has experienced similar growth (16.9%). The main reasons for this growth in major industrial sectors have been the continued availability of land within PAE for expansion of the industrial base together with strong growth at Osborne / ASC in association with new defence contracts.

Transport, postal and warehousing grew by a strong 1,326 employees between 2001 and 2011, or 32.1%. PAE benefits from its strategic location close to major freight routes and the Port of Adelaide, and its relatively central position in metropolitan Adelaide. It is, however, a relatively low employment generator in terms of employees per hectare of land compared to some other land uses. This is further discussed in Section 4.3.

Wholesale trade lost considerable employment between 2001 and 2006, but stabilised between 2006 and 2011. Over the 10 years to 2011, this sector shed 927 jobs, or 17.9% of its workforce. A similar loss in employment was observed across metropolitan Adelaide.

There has been solid growth in manufacturing, bucking the Australia wide trend of a decline in this sector. It is expected that employment growth would have been experienced at ASC, the major shipbuilding operation in South Australia. Advanced manufacturing, or high value add manufacturing would encompass the defence industries such as ASC. Most of the other manufacturing within PAE would not be considered advanced manufacturing (e.g. Adelaide Brighton Cement, Penrice, Incitec Pivot).

Table 8: Employment in Major Industrial Sectors, Port Adelaide Enfield LGA, 2001 - 2011

Employment in Major Industrial Sectors 2001 2006 2011 Change 2001-2011 % Change,

2001-11

Agriculture forestry and fishing 175 107 130 -45 -25.7%

Mining 64 183 167 103 160.9%

Manufacturing 13,394 13,852 14,393 999 7.5%

Electricity gas water and waste services 313 907 1,296 983 314.1%

Construction 2,471 3,142 4,044 1,573 63.7%

Wholesale trade 5,166 4,420 4,239 -927 -17.9%

Transport postal and warehousing 4,137 5,229 5,463 1,326 32.1%

Industrial Sectors Employment 25,720 27,840 29,732 4,012 15.6%

Total 47,834 52,118 55,932 8,098 16.9%



Figure 7: Employment in Selected Industrial Sectors, PAE 2001-2011

Source: Australian Bureau of Statistics, Jones Lang LaSalle

This recent growth is not mirrored across the metropolitan Adelaide region, with a significant loss in manufacturing employment between 2001 and 2011 and no employment growth across all industrial sectors. The loss in manufacturing employment was particularly high between 2006 and 2011, when over 8,400 jobs were lost.

Over the same 10-year period, total employment increased by 16.0%. Growth was in non-industry sectors; including health, education, public administration, a range of business services (primarily office based employment), and accommodation / food services (e.g. cafes, restaurants, hotels etc.).

Table 9: Employment in Major Industrial Sectors, Metropolitan Adelaide, 2001 - 2011

Employment in Major Industrial Sectors 2001 2006 2011 Change 2001-2011

% Change, 2001-11

Agriculture forestry and fishing 4,353 3,428 3,609 -744 -17.1%

Mining 1,314 2,132 2,855 1,541 117.3%

Manufacturing 69,373 63,002 54,387 -14,986 -21.6%

Electricity gas water and waste services 3,339 5,286 7,445 4,106 123.0%

Construction 18,545 22,781 28,524 9,979 53.8%

Wholesale trade 23,128 19,602 19,318 -3,810 -16.5%

Transport postal and warehousing 16,404 19,286 20,332 3,928 23.9%

Industrial Sectors Employment 136,456 135,517 136,470 14 0.0%

Total 439,305 471,599 509,503 70,198 16.0%

Note: Adelaide Statistical Division, as defined by Australian Bureau of Statistics, is use to reflect Metropolitan Adelaide Source: Australian Bureau of Statistics Census 2011, Jones Lang LaSalle

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2001 2006 2011

Number of Workers

Manufacturing Electricity gas water and waste services

Construction Wholesale trade

Transport postal and warehousing


5.2 Economic Contribution of Industry to PAE

Table 10 estimates the economic contribution from PAE‟s industrial base. We have identified the proportion of the state‟s employment that works in PAE for each of the major industrial sectors and used this proportion to estimate the economic output for each industrial sector.

PAE accounts for 18.8% of the state‟s manufacturing employment base. Assuming a consistent per employee contribution across the state, manufacturing in PAE contributes an estimated $1.455 billion to the state‟s economy, the highest of any industrial sector. This is derived from the Australian Bureau of Statistics‟ state accounts for the 2011-12 financial year.

Overall, the major industrial sectors in PAE contribute an estimated $4.241 billion to the state‟s economy in the 2012 financial year.

Table 10: Economic Contribution of Major Industrial Sectors, Port Adelaide Enfield, 2012 Financial Year

Employment: Major Industrial Sectors PAE 2011

SA 2011 % in PAE

2012 State Output Millions($m)

Est. Output – PAE Millions($m)

Industry of Employment

Agriculture forestry and fishing 130 27,674 0.5% 4,823 23

Mining 167 9,205 1.8% 3,934 71

Manufacturing 14,393 76,385 18.8% 7,722 1,455

Electricity gas water and waste services 1,296 9,831 13.2% 2,592 342

Construction 4,044 53,574 7.5% 5,908 446

Wholesale trade 4,239 25,426 16.7% 4,052 676

Transport postal and warehousing 5,463 29,763 18.4% 4,042 742

Total - Major Industrial Sectors 29,732 231,858 12.8% 33,073 4,241

Source: Australian Bureau of Statistics (National Accounts: State Accounts; Census 2011), Jones Lang LaSalle

5.3 Industrial Employment: Sub-regional Analysis

This section provides a brief overview of each sub-region, or SA2 within the PAE LGA.

Enfield - Blair Athol

The Enfield-Blair Athol SA2 includes large tracts of industrial land in the north and west of the SA2. The main suburbs with industrial zoned land include Kilburn (between the rail-line and Churchill Road), Gepps Cross (north of Grand Junction Road and east of Cavan Road) and Dry Creek (north of Cavan Road).


Figure 8: Location of Enfield - Blair Athol SA2 and Industrial Zones

Source: Australian Bureau of Statistics, DPTI, Jones Lang LaSalle

The sub-region comprises the following industry zones:

Industry Zone – majority of the industrial zoned land; Industry/Business (Gepps Cross Gateway) Zone; Light Industry Zone – transition zone between Gin and residential areas; and Bulk Handling Zone – Woolworths Distribution Centre at Gepps Cross

In terms of industry based employment, approximately 54% are employed in manufacturing businesses. Other major employers are:

Construction; Wholesale trade; and Transport postal and warehousing

It is noted that the Industry/Business (Gepps Cross Gateway Zone) comprises the Gepps Cross Home HQ, which is a retail centre within a mixed industry / business zone. Table 11 only includes those sectors typically associated with industry zones.

Just over 7,000 employees were identified in the selected industry sectors within the Enfield-Blair Athol sub-region.


Table 11: Employment in Major Industrial Sectors, Enfield - Blair Athol SA2

Employment in Major Industrial Sectors Enfield - Blair Athol


Employment


Mining 37 0.5%


Electricity gas water and waste services 401 5.7%

Construction 787 11.2%


Transport postal and warehousing 898 12.8%

Total 7,009 100.0%


Northgate - Oakden - Gilles Plains

This SA2 has limited industrial zoned land. A small area between Briens Road and Grand Junction Road in Northfield and a small area fronting North East Road at Gilles Plains are the only two industrial zoned areas in this SA2. It is noted that industrial uses on the southern side of North East Road in the suburb of Holden Hill are not included in the Northgate-Oakden-Gilles Plains SA2, with these boundaries not matching up the PAE LGA boundary.

Figure 9: Location of Northgate - Oakden SA2 and Windsor Gardens Industrial Zones


The sub-region comprises two small Light Industry Zones. Employment in the selected industry sectors was a low 435 employees, primarily in construction, manufacturing and wholesale trade industries.


Table 12: Employment in Major Industrial Sectors, Northgate-Oakden-Gilles Plains SA2

Employment in Major Industrial Sectors Northgate - Oakden - Gilles Plains


Employment

Agriculture forestry and fishing - 0.0%

Mining 3 0.7%

Manufacturing 87 20.0%



Wholesale trade 96 22.1%


Total 435 100.0%


Windsor Gardens

The Windsor Gardens SA2 comprises relatively small industrial precincts at Hampstead Gardens / Greenacres (fronting Muller Road, Poole Street and North East Road), Klemzig (O.G. Road), and Windsor Gardens (south side of North East Road).


Industry Zone; Home Industry Zone; and Light Industry Zone (the predominant zone in Windsor Gardens).

Employment in the selected industry sectors was concentrated in manufacturing and construction. Total employment in the selected industry sectors was 1,406.

Table 13: Employment in Major Industrial Sectors, Windsor Gardens SA2

Employment in Major Industrial Sectors Windsor Gardens


Employment


Mining - 0.0%






Total 1,406 100.0%



Dry Creek – South

Dry Creek – South comprises land to the north of Port River Expressway, including low lying land and wetlands.

The area has negligible employment. The sub-region comprises the Industry (Resource Recovery) & Coastal Management Zone.

Figure 10: Location of Dry Creek - South SA2 and Industrial Zones


Largs Bay – Semaphore

The Largs Bay–Semaphore SA2 comprises industrial land on the eastern side of Victoria Road and south of Willochra Street in the suburbs of Peterhead, Largs Bay and Largs Bay North. It includes the Marina Park precinct, adjoining Marina Adelaide at Largs North.

Figure 11: Location of Largs Bay - Semaphore SA2 and Industrial Zones




Industry Zone – the vast majority of the sub-region; and Light Industry Zone.

Employment in the selected industry sectors was concentrated in manufacturing, construction and transport, postal and warehousing. Total employment in the selected industry sectors was 774.

Table 14: Employment in Major Industrial Sectors, Largs Bay - Semaphore SA2

Employment in Major Industrial Sectors Largs Bay - Semaphore % of Total

"Industry" Employment


Mining 9 1.2%






Total 774 100.0%


North Haven

The North Haven SA2 comprises the industrial lands on the Lefevre Peninsula north of Willochra Street. This incorporates the recently released estates of Techport, Port Direct and Marina Adelaide.

Figure 12: Location of North Haven SA2 and Industrial Zones




Industry Zone; o Osborne Maritime Policy Area; o Ports Policy Area; and

Light Industry Zone.

Manufacturing industries dominated the employment across the selected industry sectors, accounting for nearly 70% of employment. ASC is a major employer on the Peninsula. Transport, postal and warehousing accounted for a further 16.7%, or 471 employees out of a total 2,824 employees.

Table 15: Employment in Major Industrial Sectors, North Haven SA2

Employment in Major Industrial Sectors North Haven % of Total



Mining - 0.0%






Total 2,824 100.0%


Port Adelaide

The Port Adelaide SA2 comprises the industrial lands within the suburb of Port Adelaide, part of Gillman and Alberton on the eastern side of the Port River. Most of the industrial zoned land is north of Grand Junction Road, although there are two smaller industrial areas fronting the southern side of Grand Junction Road within the suburbs of Port Adelaide and Alberton.


Figure 13: Location of Port Adelaide SA2 and Industrial Zones



Industry Zone, including Ports Policy Area; Home Industry Zone; and Light Industry Zone.

Employment is evenly split between manufacturing and transport, postal and warehousing, both with over 30% of the total employment in the selected industry sectors. Construction and wholesale trade are also well represented.

Table 16: Employment in Major Industrial Sectors, Port Adelaide SA2

Employment in Major Industrial Sectors Port Adelaide % of Total "Industry" Employment


Mining 44 0.9%






Total 4,679 100.0%



The Parks

The Parks SA2 is an extensive industrial area comprising key industrial suburbs of Wingfield and Regency Park as well as industrial zoned land in Angle Park (cnr South Road and Grand Junction Road), Ferryden Park / Croydon Park (western side of Days Road and either side of Regency Road) and Dudley Park on the western side of the rail line. There is also a small Light Industry zone in Devon Park

Figure 14: Location of The Parks SA2 and Industrial Zones



Industry Zone; o Including Cast Metals Policy Area; o Including Ports Policy Area;

Home Industry Zone; and Light Industry Zone.

The Parks sub-region accounts for a very large share of PAE‟s total employment in the selected industry sectors, with 12,658 employees, or 42.6% of the total. Manufacturing is the dominant use, accounting for 47.2% of the total employment across selected sectors, while transport, postal and warehousing (18.0%) and wholesale trade (17.1%) are also important.


Table 17: Employment in Major Industrial Sectors, The Parks SA2

Employment in Major Industrial Sectors The Parks % of Total



Mining 77 0.6%



Construction 1,580 12.5%



Total 12,658 100.0%


5.4 Employment Generation by Land Use

In this section, we consider a range of land uses in terms of the level of employment generated. Many industry zones across Australia have lost significant employment, and this can partly be attributed to the changing nature of industrial uses and the employment characteristics of these uses. In particular, the decline in manufacturing and increase in warehousing and storage uses has seen employment intensive uses replaced by low employment generating uses.

Research by Hudson Howells10 suggests the average employees per Hectare for key land uses are as follows:

Warehousing/transport: (12 employees per Ha) Manufacturing: (120 employees per Ha) Offices: (500 employees per Ha)

Office densities will vary considerably, depending on the floor space ratios (FSR) employed.

Similar research by SGS Economics and Planning11 in Sydney suggests the following employment densities:

Manufacturing (62 employees per Ha) Transport/Storage (14 employees per Ha) Service Trade (109 employees per Ha) Bulky Goods Retailing (69 employees per Ha)

These figures assumed relatively low site coverage for some industrial uses (30% for transport and storage), which is reasonably in line with what would be achieved across PAE.

Jones Lang LaSalle has undertaken similar research based on sample surveys of industrial land uses that confirm the general thrust of the above research – warehousing / storage, which is a key growth area in Australia‟s industrial markets, is a very low generator of employment compared to other land uses. Industrial areas where warehousing becomes the dominant use over time, replacing more intensive manufacturing uses, can expect to experience a significant decline in employment.

10 Hudson Howells, Industrial Land – An Economic Analysis of Alternative Uses, prepared for Department of Trade and Economic Development (SA), June 2006. Data extrapolated from research undertaken by Access Economics. 11 SGSEP, Hornsby & Ku-ring-gai Subregional Employment Study/ Final Report, 2008


For the purposes of this study, we have assumed the following employment densities for a range of land uses (Table 18).

Table 18: Employment Densities by Land Use

Employment in Major Industrial Sectors Employment per Hectare

Offices 400

High Tech Industrial / advance manufacturing 160

Service Trade Premises 100

Construction 70

Manufacturing 65

Wholesaling 40

Bulky Goods Retailing 40

Transport & Storage 20


Clearly, office space is a much more intensive employment generator than traditional industrial uses. Office uses are likely to generate employment densities 20 times greater than transport and storage uses, 10 times greater than bulky goods retail uses and six times greater than manufacturing uses. Replacing some traditional industrial uses with mixed uses that combined a reasonably high proportion of office accommodation is therefore likely to help maintain the employment base within PAE‟s industrial zones.

Businesses that comprise 100% office uses, however, can be located in a range of other zones, are actively encouraged in centres such as Port Adelaide Town Centre and may not be considered an appropriate use if competing directly with more traditional industrial uses. However, the business model for many companies is to co-locate their “head office” functions (which are likely to be office based) with their warehouse or manufacturing function. Furthermore, there is likely to be some predominantly office based businesses that primarily service industrial businesses. An example is a bank branch providing a range of business banking services to industrial companies. Other services may desire a location next to their industrial clients.

High tech or advanced manufacturing is another use that typically is a more intensive employment generator. Apart from the direct employment benefit from various land uses, there is also the value added in terms of contribution to the regional or state economy. High Tech manufacturing is generally regarded as contributing more to the local economy on a per person employed basis than traditional manufacturing or retail uses.12 For this reason, local regions will place greater emphasis on attracting industries that have high value added contribution. Attracting advanced manufacturing companies to South Australia is a key policy of the state government, through DMITRE. PAE should be well placed to benefit from this policy direction, particularly at Techport, building on the established shipbuilding industry. New advanced manufacturing industries may be attracted to Gillman, but the state government is committed to Tonsley Park, where the benefits of co-locating with research and higher education institutions (TAFE; Flinders University; Flinders Medical Centre) provide a good environment for collaboration and innovation.

12 Hudson Howells, Industrial Land – An Economic Analysis of Alternative Uses, Prepared of the Department of Trade & Economic Development, June 2006.


5.5 Employment Outlook - Port Adelaide Enfield

The employment outlook for many inner and middle ring industrial precincts is often quite bleak, due to:

Replacement of employment intensive manufacturing uses with less intensive uses; Obsolescence of industrial stock, leading to under-utilisation of the built form; Improved efficiencies / automation in both manufacturing and warehousing / distribution;

and Land use conflicts placing potential constraint on uses.

Parts of PAE‟s industrial sector display these characteristics, but the employment base has not shown signs of diminishing.

The growth in the manufacturing sector within PAE appears to be an anomaly, given the overall decline in manufacturing across metropolitan Adelaide. PAE accounted for 26.5% of all employment within the manufacturing sector in metropolitan Adelaide, based on Industry of Employment data from the 2011 Census.

The focus of PAE‟s manufacturing base appears to be in areas that are less likely to move offshore, although there is the possibility of some manufacturers relocating. This would potentially open up land to a range of other industrial uses so may not be considered a negative in the long term.

Future growth is expected to be dominated by the transport, postal and warehousing sector, given the very strong strategic advantages of PAE (proximity to the Port of Adelaide, major freight routes; improved infrastructure; central location).

In terms of employment opportunities we have focussed on four broad areas:

Gillman Employment Lands Precinct; Port of Adelaide; Shipbuilding / Defence; and Brownfields opportunities.


Gillman is one of two major future industrial employment precincts identified in the HELSP report 2010 (Tonsley Park is the other). Given the 230 hectares (gross) of developable industrial land, there is expected to be long term employment growth in PAE‟s industrial sector.

An advantage of Gillman is there are no expected land use conflicts with nearby residential uses – it is relatively isolated from residential areas.

Gillman is the key to PAE providing ongoing supply of industrial land stock to meet demand, as per the 30 Year Plan.

450 hectares total land; 230 hectares of developable land; Up to 200 hectares of market ready land (Assuming around 30 hectares allowance for

roads / infrastructure); 10 years supply, assuming ~ 20 hectares take-up per annum across PAE;

Assuming 200 hectares of industrial land yielding a low 20 employees per Hectare would create 4,000 jobs. It is understood that approximately 8,000 jobs are being targeted, which would require a yield of 40 employees per Hectare. This would require a mix of low yielding warehouse and resource recovery uses with more intensive wholesaling and manufacturing uses.


Research by the Property Council of Australia has estimated that Council rate revenue in the vicinity of $4.2 million per annum would flow from a completed Gillman Employment Lands Precinct.13 This figure assumes 183 hectares of land is delivered to the market, that its total capital value on completion would be in the vicinity of $770 million, and all properties would attract Council rates at the current rate in the dollar for non-residential property in the City of Port Adelaide Enfield (0.00545 cents in the dollar). In order to achieve this level of rate revenue, all land in Gillman would need to be developed to an average 35% site coverage (resulting in approximately 640,500sqm of industrial floor space) and the average capital value for industrial premises would be in the vicinity of $1,200 per square metre. These figures reflect current sales rates for industrial property and a realistic site coverage. However, we note that this level of rates revenue based on the current rate in the dollar would only be achieved if all land in Gillman was to be fully developed.

Advanced manufacturing uses would provide greater employment generation but we note that Tonsley Park will be the primary government target location for advanced manufacturing.

Port of Adelaide

Anticipated growth in cargo imports and exports is likely to drive demand for port related services. Increased automation, however, counter the need for additional employment.

Overall, we do not expect the Port of Adelaide to be a significant employer or display strong employment growth. Between the 2001 and 2011 Census, the number of employees recorded in the transport, postal and warehousing industry sector has been stable, despite solid growth in throughput

Shipbuilding / Defence

Employment in this sector is centred around ASC‟s existing contracts to maintain the Collins Class submarines and build the Air Warfare Destroyers. Future and ongoing employment relies on winning future shipbuilding contracts. The major opportunity on the horizon is the potential purchase, design and build of 12 conventional submarines at an estimated cost of $36 billion to replace the Collins class submarines.

In terms of potential, there are:

27 hectares of industrial land at Port Direct; 5.4 hectares of industrial land in the supplier precinct at Techport; Future opportunities in the Commercial Precinct and Educational Precinct (approx.

10ha); Land specifically set aside for expansion of shipbuilding and the Common User facility

(west side of Mersey Road, including part of the original supplier precinct); 27 hectares south of Veitch Road for potential expansion

There is approximately 70 hectares of land available for development. Given that the aim is for advanced manufacturing, which employs more people per hectare, a relatively high employment density is possible. At an average 50 employees per Hectare (low for manufacturing; high for warehousing), an additional 3,500 employees could be accommodated at Osborne.

ASC has experienced strong employment growth itself over the past few years as it moves into production of the Air Warfare Destroyers. This is likely to be maintained over the next four years as construction continues.

13 Property Council of Australia, “Gillman: The Missing Link… The vital piece of Adelaide‟s industrial land puzzle”, 2012


Brownfields Opportunities

We consider PAE has some major brownfields opportunities that will arise over the next 10 years. As previously stated, this may well be triggered by the departure of a major land user. In recent years we have seen companies close their Adelaide manufacturing operations (Bridgestone, Electrolux, Clipsal) and in each case this has triggered regeneration. Other major companies may decant out of their existing premises to new opportunities at Gillman, for example.

Regency Park is an example of a former prime quality industrial location with much of its industrial buildings now over 30 years old. Should some of the large land users move to alternative sites, there is a significant opportunity for redevelopment for more intensive employment generating uses. This may include a business park style development with a higher proportion of office / administration uses and businesses co-locating their headquarters and warehousing / manufacturing operations on the one site. Such developments are common in Sydney and Melbourne, where large estates have attracted major corporations and significant employment.

Opportunities such as the recent release of Dudley Business Park provide new industrial lots in a central location with a significant residential population in close proximity. These small business parks may provide an ideal location for a range of services that rely on close proximity to its customers (e.g. service trade premises, mechanical repair etc.). As the residential base grows, demand for such uses is expected to also grow.


6 Interstate Trends

6.1 Comparative Analysis

This section provides a brief comparative analysis of industrial land in Port Adelaide Enfield with other locations with major port facilities.

Table 19 provides comparison of the employment base at Port Adelaide with land within close proximity of Port Melbourne, Port Botany in Sydney and Fremantle. For this comparison, we have included land surrounding the Port of Adelaide‟s outer and inner harbours.

Each location has obviously considerable land set aside for, and employment within, the Transport, Postal and Warehousing sector, which would include employees working directly for the Port Authorities as well as for groups such as Patricks etc. However, there are significant differences in the make-up of the local employment base, which is often due to historic development of land in close proximity to the port operations. Brief comments are made in relation to each port‟s employment.

This analysis relies on working population data from the 2011 Census of Population and Housing, conducted by the Australian Bureau of Statistics.

Port Adelaide / Lefevre Peninsula

Large Manufacturing sector accounting for 47.4% of jobs in the identified major industrial employment sectors – ASC (Australian Submarine Corporation), Adelaide Brighton Cement, Incitec Pivot, Penrice and steel fabricating to name a few);

Only half the total employment is in the industrial employment sectors. Significant employment within Health Care, Retail Trade and Public Administration, primarily due to the presence of the historic Port Centre;

Only modest employment (8.9% of industrial sector jobs) in the Wholesale Trade sector; The Transport, Postal and Warehousing sector accounts for only 26.5% of industrial jobs,

or 2,193 employees.

Port Melbourne and Industrial Areas

Large overall employment base (over 33,000); High proportion of jobs (61.2%) in the identified major industrial employment sectors; Large Manufacturing sector; Very high number (5,461) of jobs in the Transport, Postal and Warehousing sector; Wholesaling and Construction are other key industrial employment sectors; Outside of industrial jobs, there are concentrations of Retail Trade, Public Administration,

Health Care and Professional Services.

Port Botany and Environs

Very high proportion of jobs (74.7%) in the identified major industrial employment sectors;

Transport, Postal and Warehousing is the dominant employer, including employers such as Patrick, DP World Sydney and Sydney International Container Terminals;

Wholesale Trade and Manufacturing are important sectors; Very limited employment outside that directly associated with the port facilities.

Fremantle

Employment reflects the mixed use development of this historic port city over the past few decades and the fact that port activities in Perth are now split between Fremantle and Kwinana;


There is strong “non-industrial” employment in sectors such as Retail Trade, Professional Services, Public Administration and Health Care;

The main identified major industrial employment sectors are Transport, Postal and Warehousing (46.9% of all industrial employment) and Manufacturing (25.4%). These are the only two industrial employment sectors with over 1,000 employees.

6.2 Outlook and Implications

The Port Adelaide industrial market surrounding the Port of Adelaide is more diverse than other industrial markets adjoining port facilities. This is a reflection of the historic nature of the Port Adelaide settlement and the location of key manufacturing industries along the Port River, which benefit from direct access to wharfs. These uses do not appear to directly compete with the efficient function of the Inner and Outer Harbor (refer to Figure 15 below). Rather they have specifically located along the Port River to take advantage of this direct access to wharfs.

The importance of an efficient port operation is paramount to the state‟s economy. We understand that there are opportunities for growth in port activities, via Flinders Ports own land holdings (under a 99 year lease) while Renewal SA owns strategic sites fronting the Port River and Outer Harbor that could accommodate future expansion.

Growth in throughput has been strong at the Port of Adelaide and is expected to continue to grow, due to a combination of the following factors:

The continued decline in manufactured goods in Australia and strong growth in demand for imported goods is expected to see imports grow at a solid rate in the future.

The potential for continued growth in exports, predominantly from the agricultural and mining sectors. This may be buoyed by increased mining activity, although other SA based ports or even Darwin may partly serve this demand.

Future growth in port related warehousing and storage should be well catered for from the following existing sources:

Existing precincts at Osborne (Port Direct; Techport); Strategic land holdings at Outer Harbor, controlled by Renewal SA; Future release areas at Gillman.

Figure 15: Cargo Throughput at Outer Harbor, 2007 - 2012

Note: TEUs refers to Twenty Foot Equivalent Unit. This is the general term used for a 20ft container Source: Jones Lang LaSalle

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2007 2008 2009 2010 2011 2012

TEUs

Import (TEUs) Export (TEUs)


Figure 16: Port of Adelaide and Surrounds

Source: Flinders Ports Website (sourced to Mapland)


Table 19: Comparison of the Employment Base - Adelaide, Melbourne, Sydney and Fremantle Ports, 2011

Selected Industry Sectors

Port Adelaide / LeFevre

Peninsula

% of Industry Sectors

Port Melbourne

and Industrial areas


Port Botany and

Environs

% of Industry Sectors Fremantle


Agriculture forestry and fishing 51 0.6% 88 0.4% 6 0.1% 70 1.7%

Mining 53 0.6% 52 0.3% - 0.0% 98 2.4%

Manufacturing 3,924 47.4% 8,308 40.3% 3,029 26.0% 1,048 25.4%

Electricity gas water and waste services

361 4.4% 171 0.8% 118 1.0% 44 1.1%

Construction 956 11.6% 2,777 13.5% 1,075 9.2% 508 12.3%

Wholesale trade 739 8.9% 3,757 18.2% 2,447 21.0% 421 10.2%

Transport postal and warehousing 2,193 26.5% 5,461 26.5% 4,992 42.8% 1,934 46.9%

Total - Industrial Sectors 8,277 100.0% 20,614 100.0% 11,667 100.0% 4,123 100.0%

Total Employment 16,952 33,666 15,614 17,572

Percentage Industrial type employment sectors

48.8% 61.2% 74.7% 23.5%



7 Key Findings and Issues

This section addresses key issues raised by the City of Port Adelaide Enfield as part of Council‟s internal analysis of industrial land within PAE. Below we have provided responses to seven questions raised by Council.

7.1 Port Adelaide Enfield Industrial Land Stock

Question 1: In what ways is the industrial land stock of Port Adelaide Enfield similar to and different to industrial land stocks of other industrial port locations in Australia and elsewhere?

Port Adelaide Enfield has a significant stock of industrial land to cater for medium to long term demand. This is quite unusual in what is an old, well established industrial region, but the future stock is constrained and will be relatively expensive to bring to market.

The Housing and Employment Lands Supply Program Report in 2010 (HELSP) indicated approximately 30 years of identified supply was available within the northern and western regions of Adelaide.

In terms of land available to Flinders Ports, there is considerable scope for growth, with portside land available for future development. This is quite unusual compared to other ports serving metropolitan areas.

The Port of Adelaide caters for containerised, specialised and bulk cargo, which is quite unusual compared to Port Botany and Port Melbourne, which are predominantly container terminals. Major ports in metropolitan areas are typically dominated by containerised traffic with bulk cargo dominating regional ports outside of the capital city markets.

Jones Lang LaSalle compared the industrial land stock near the Port of Adelaide with other Australian capital city sea ports in Sydney (Port Botany), Melbourne (Port Melbourne) and Perth (Fremantle). This was largely based on the profile of workers within close proximity of the port facilities, relying on data from the Australian Bureau of Statistics‟ 2011 Census of Population and Housing.

Key similarities and differences are:

Both Port Melbourne and Port Adelaide have large manufacturing sectors compared with Port Botany and Fremantle. These manufacturers are quite large and in many cases, have been located at their current sites for a long time. The manufacturers located on the Lefevre Peninsula do benefit from a port location, with key manufacturers‟ Adelaide Brighton Cement; Penrice and ASC all having direct access to port facilities.

Port Botany is heavily represented in the transport, postal and warehousing industry sector. This sector is obviously critical to all ports.

The Port of Melbourne is under considerable pressure from conflicting land uses and the desire to redevelop land at Fishermen‟s Bend. Likewise higher density residential and commercial uses near Port Botany have increased land values to well beyond affordable levels for industrial uses associated with Port operations. Both Port Authorities own considerable land holdings, but their ability to expand is constrained.

Port Adelaide industrial land values are reasonably affordable, although certainly higher than outer north Adelaide industrial land prices (e.g. Edinburgh Parks and Direk are around $75 per square metre based on a 1 hectare lot). Land values at Wingfield are around $250 per square metre while the asking price for land at Osborne is around $165-170 per square metre.

Land values at Alexandria, which is adjacent to Port Botany, average $1,200 per square metre as at December 2012. This is partly zoning driven as the zoning allows for mixed use development including multi-story residential apartments and office buildings.


Land use conflicts are common in close proximity to port operations. While the Port of Adelaide is not immune to such conflicts, there is not the same level of impact as in Melbourne and Sydney where the demand from competing interests for finite land has led to strong growth in land values, forced industrial uses and potentially brought a range of incompatible uses into the Port environment.

Conflicts identified relating to the Port of Adelaide‟s operations are largely noise related, including the noise from rail traffic to Outer Harbor and the move towards 24-hour operation at Ports.

Some long–term portside uses have caused environmental issues, both for existing residents and new residential development. The main concerns relate to the storage of toxic materials at fertiliser warehouses owned by Incitec, fuel storage at Birkenhead and the Adelaide Brighton Cement Factory. This has impacted on plans for residential development on redevelopment sites nearby.

7.2 Demand Trends

Question 2: What is the industrial development market currently demanding in an industrial allotment? To what extent does Port Adelaide Enfield’s industrial land stock cater for this demand?

Key requirements for an industrial allotment include the following:

Level land Access to freight routes / high quality infrastructure (road; rail; sea) B double compliant roads for access / egress to sites No adjoining land use constraints, particularly residential uses Good corporate exposure Water Sewer 24-7 operation A quality environment is desirable – access to nearby amenities for staff

There is no one size fits all in terms of the requirements of the industrial development market. Most of the industrial land in the key industrial suburbs of Port Adelaide, Wingfield and Gillman together with land on Lefevre Peninsula is relatively large land holdings suited to a wide range of end users, including logistics companies, large warehouses and manufacturers.

Land prices are a factor. Land prices in the popular north western sector of metropolitan Adelaide, including Regency Park, Wingfield and Gillman, is considerably higher than outer northern locations. New areas that have opened up in the outer north of metropolitan Adelaide (often referred to as greater Edinburgh Parks but including suburbs such as Direk), have provided industrial occupiers with opportunities to consolidate on large well serviced lots. Land is cheaper and the improved infrastructure (e.g. Northern Expressway) has been a “pull” factor.

For large companies without a strong reason to locate in PAE, the high land price will more than likely influence their decision making, with the outer north expected to be preferred. However, PAE remains well placed for logistics companies requiring a relatively central location with good access to metropolitan Adelaide, designated freight routes and the Port of Adelaide.

We do not see the competition from the outer northern Adelaide industrial market as a threat to PAE‟s industrial market but rather, it provides an opportunity for future growth of the industrial market. Over time, we anticipate some industrial occupiers may move from PAE to locations in Salisbury or Playford LGAs, driven by lower land costs, improved infrastructure and increasingly a growing labour force in the outer north – no longer is this area considered far removed from the rest of the metropolitan area.

PAE is unique in that Gillman and parts of the suburb of Port Adelaide are under-developed, despite their relative proximity to the CBD. Much of this land is low lying and requires fill and


servicing before it is development ready. And the costs associated with this is likely to be high, meaning that land prices will need to be higher than outer northern locations in order for the industrial land to be commercially viable.

Regency Park is an interesting case study. It is considered to be extremely well located (central, South Road access, good infrastructure, proximity to Port) but the building stock is ageing and no longer meets the requirement of modern industrial tenants (high clearance, clear span). We consider it is well placed for future redevelopment into a more intensive “business park” environment, comprising a higher proportion of office accommodation. Such developments are very common on the eastern seaboard but less common in Adelaide.

The diversity of PAE‟s industrial land supply, comprising new estates, future opportunities, well located but ageing precincts with redevelopment potential, large lots, and small lot sizes is a market strength.

Question 3: What is the nature of demand for industrial allotments?

Up to 1,250sqm (1,250sqm is the preferred minimum allotment size in the Light Industry Zone)

Up to 2500sqm (2,500sqm is the preferred minimum allotment size in the Industry Zone)

Over 2,500sqm.

In section 3 of this report, we provide a summary of land sales activity between 2007 and 2012 by land sales range. The data is reproduced below.

Land Sales Activity by Size Range, Port Adelaide Enfield LGA 2007 - 2012

Size Range Wingfield Other Suburbs Total % of Total

Less than 1,250 36 21 57 40.4%

1,250 - 2,499 8 18 26 18.4%

2,500 - 4,999 14 9 23 16.3%

5,000 - 9,999 9 10 19 13.5%

Over 1 Hectare 4 12 16 11.3%

Grand Total 71 70 141 100.0%

Source: RP Data, Jones Lang LaSalle

We have identified a range of opportunities in PAE for a range of industrial occupiers, from small to large. This is a feature of the PAE industrial market.

Up to 1,250sqm (1,250sqm is the preferred minimum allotment size in the Light Industry Zone)

There is considerable activity (leasing; sales) for land and buildings with allotment sizes of up to 1,250sqm. This is often coming from small business looking to purchase for owner occupation. Our analysis of land sales in PAE between 2006 and 2012 indicates around 40% of all land sales, the majority in Wingfield, were for allotments up to 1,250sqm. In other words, 40% of land sales in this time period have been lots smaller than PAE‟s preferred minimum allotment size.

In locations where minimum lot sizes dictate a larger allotment, the alternative for small businesses is to lease a unit in a multi-unit development. Interestingly, the market for multi-unit industrial development is not as strong in Adelaide as it is interstate. Tenants tend to have a preference for purchasing small Torrens Titled lots rather than leasing or purchasing a unit within a development.


We consider that a reasonable amount of flexibility is required to allow the market to determine the right mix of allotment sizes and that smaller allotments should be allowed. In industrial areas that are central to a large residential base, there is expected to be demand from small service industries and businesses that serve the surrounding residential market. Many of these businesses will not require a site area greater than 1,000sqm and have limited requirement for large vehicles to access their premises. Smaller lots are considered reasonable.

Up to 2,500sqm (2,500sqm is the preferred minimum allotment size in the Industry Zone)

This is a relatively popular size for allotments in recent subdivisions, including the Marina Park Precinct (Marina Adelaide) subdivision at Largs North and Dudley Business Park at Dudley Park. Sales in both have been slow, although the market in general has been slow and we do not consider this is due to the size of land parcels.

Our analysis of land sales in PAE between 2006 and 2012 indicates around 18% of all land sales were for allotments between 1,250sqm and 2,500sqm. Nearly 60% of land sales were of allotments of less than 2,500sqm although the vast majority of land is within the Industry Zone, where the preferred minimum allotment size is 2,500sqm.

Over 2,500sqm

Current demand for large allotments of 2,500sqm and over is weak, in line with the weak economic growth across experienced in South Australia.

The market for larger allotments comes primarily from local developers. Developers require a prospective tenant interested in leasing a new building. They are not inclined to speculatively build an industrial building in the hope of finding a tenant, particularly in the current economic environment. While developers may consider purchasing well located sites for future development projects, there is a limit to the amount of land most developers will want to secure for future projects.

We expect demand for land at Gillman will be relatively strong for larger allotments (1 Hectare and above) although the current market is constraining take-up of land. This will be driven by ongoing growth in transport and logistics uses wanting a reasonably central location with good access to the Port of Adelaide and freight routes.

7.3 Vacancy Trends

Question 4: Identify the industrially-zoned land that has remained vacant for longer than five years. Are there obvious reasons as to why the land has remained vacant for this time? To what extent is this caused by landowners (who have not sought to sell/develop the land) as against investors (who may be constrained in the current economic climate)?

There are relatively few large sites identified that have remained vacant for longer than five years within Port Adelaide Enfield LGA.

We identified the following major vacant land holdings:

Cast Metals Policy Area, Wingfield; Techport, Osborne; Port Direct, Osborne; Marina Adelaide, Largs North Dudley Business Park, Dudley Park.

The Cast Metals Policy Area is the only one that has been available to the market for more than five years. This precinct is specifically set aside for a particular use, for which there has been limited demand. Consequently, the land has remained available for sale.


Of 24 identified vacant sites of 1 Hectare and over in private ownership in 2008 (from the Industrial Database), 15 sites were in Wingfield and Gillman. These locations have been popular development areas and many of the sites have since been developed, particularly in Wingfield.

Reasons identified for sites remaining vacant for 5 years or more are:

The onset economic impact of the Global Financial Crisis; Requirement for pre-commitment prior to development (there is limited speculative

development in the Adelaide industrial market – even less so in the current economic environment;

Not considered development ready o Future employment land (e.g. Gillman, which is currently zone MFP) o Constrained due to lack of adequate infrastructure (drainage; sewer), low lying etc.

Sites retained for future expansion (e.g. land adjoining Cavill Holdings); Strategic holdings in state government ownership

o Future port land o Available for sale

Our assessment of the vacant land is that very few significant sites are being held by long-term landowners with limited appetite for industrial development. Rather, the current economic climate has slowed the potential development of industrial land and is likely to continue to do so at least for the next 12 months.

There may be some private land banking; however this does not seem to be overly significant. Some private investors in Adelaide are considered to be passive investors and may hold land for a long period without it generating significant income. Furthermore, it is difficult to secure pre-leases in the current market.

7.4 Employment Trends

In terms of industrial employment growth, to what extent will the growth be accommodated by existing business (in existing buildings and land) in comparison to new businesses requiring new allotments/land?

We expect most of the industrial employment growth will be attributed to new businesses, primarily in areas that still have substantial opportunities for industrial expansion. This includes Gillman, Osborne and to a lesser extent, Wingfield. No industrial employment growth in PAE would be a very poor outcome, given the opportunities for continued industrial development in the suburbs identified above.

PAE has actually increased its employment in key ”industrial” categories based on Census data for 2001, 2006 and 2011. This is due to continued development of its industrial land and growth of specific industries such as ASC, driven by the production of the AWD.

For example, ACS employed around 1,300 people across its SA and WA bases in June 2009. This had grown to around 2,270 employees by June 2012, with most of the employment and growth attributed to the Osborne facilities.

Existing industry may lose employment due to the changing structure of industry. As discussed earlier, changes such as the decline of manufacturing and increase in warehousing, and greater automation / efficiencies will work to reduce the likely industrial employment in industry zones.

DEEWR provide national employment outlooks for various employment sectors in Australia. The outlooks that are relevant to this study are summarised in Appendix A. Their research provides the following key points on various sectors:

Manufacturing is the fourth largest employing industry in Australia, but is declining in terms of employment, and forecast to decline over the next five years. It is the only industry sector forecast to experience decline nationally over the next five years. Areas most under pressure include car, furniture and clothing manufacturing. Growth is


expected in sub-sectors that focus on Australia‟s strengths in mining and resources, food and beverages.

Construction is the third largest employing industry in Australia. Growth is expected to be driven by a growing population and infrastructure projects.

Wholesale Trade employment has been reasonably stable, with low to modest growth forecast.

The Transport, Postal and Warehousing industry has shown strong long-term growth and is expected to grow at a faster rate than overall employment growth.

Electricity, Gas, Water and Waste Services is a small sector, but growth is expected to outpace the all industries average. The main growth areas are expected to be waste treatment, disposal and remediation, and electricity generation.

Deloitte Access Economics provide forecasts of employment for metropolitan Adelaide and the Adelaide CBD. Over the next decade, employment in key industrial sectors in suburban Adelaide (metropolitan Adelaide minus the CBD) is expected to decline by an average 0.7% per annum.

Table 20: Employment Forecasts by Industry Sector, 2012 - 2022

Forecasts, Adelaide Statistical Division % Change per annum 2012-2022

Agriculture & Mining -1.3%

Manufacturing -2.2%

Electricity gas water and waste services -0.3%

Construction -0.2%

Wholesale trade -1.6%

Transport postal and warehousing 1.6%

Industrial Sectors Employment -0.7%

Forecasts as at December 2012 Source: Deloitte Access Economics, Jones Lang LaSalle

With the exception of the transport, postal and warehousing sector, all of the other key industrial sectors are expected to decline over the 10 years to June 2022. Agriculture and mining is not a major employment sector within PAE and much of the employment base across metropolitan Adelaide in this sector would be head office employment in the CBD (e.g. companies such as BHP Billiton). Much of the employment in construction is quite transient rather than being located at industrial sites. The key sectors for PAE industrial zones are considered to be:

Manufacturing; Wholesale Trade; and Transport, postal and warehousing

If we simply assumed that PAE followed the same path as forecast across metropolitan Adelaide, then both manufacturing employment and wholesale trade employment would be expected to decline over the next decade. This has certainly been the trend in the previous 10 years for wholesale trade, but manufacturing has been quite resilient, fuelled by growth in the defence sector and general expansion in the industrial sector via take-up of previously vacant land.

With new opportunities for expansion over the next 10 years (Gillman, Osborne), we are much more positive that PAE‟s employment base across the industrial sectors can be maintained. However, we consider much of the demand for new industrial space will be in the relatively low employment generating warehousing sector. Therefore, the growth in industrial employment may not be as strong as the growth in industrial floor space.


If Port Adelaide Enfield were to experience a similar decline, the industrial employment based could decline from 29,732 employees in 2011 to 27,000 by 2022. We do not see this occurring due to the opportunities for growth in new release industrial areas. But the forecasts by Deloitte Access Economics do paint a relatively bleak picture for employment in the traditional industrial sectors, particularly manufacturing, wholesaling and construction. Conversely, warehousing is expected to grow and this favours PAE, which is geographically well placed to benefit from growth in this sector.

These trends, however, can be limited or even reversed by opening up industrial zoned land to a wider range of land uses, including uses that have greater employment density. Examples include:


population growth.

There may also be growth in the defence sector however this is very much dependent on the ASC and state government being successful in winning federal government contracts. Employment in this sector has grown significantly in the last few years as the AWD production program ramps up.

7.5 State Government Priorities

What are the priorities for the Department for Manufacturing, Innovation, Trade, Resources and Energy in terms of Port Adelaide Enfield? What is the expected timing for Precincts 2 and 3 of the Cast Metals Policy Area?

PAE is clearly a focus for state government on a number of fronts, primarily:

Rezoning of the Cast Metals Policy Area; Gradual release of Gillman Employment Lands Precinct; Resource Recovery; Potentially Advanced Manufacturing (albeit the main focus is Tonsley); and Port related uses.

The priorities for state government in terms of industrial development are outlined in the 30 Year Plan for Greater Adelaide and the HELSP Report. Discussions with state government and a review of the above mentioned documents highlight the following key priorities:

Bringing the Gillman Employment Lands precinct to market - Gillman is the key to providing a longer term supply of industrial land within the PAE market;

Adopting a 25 year rolling supply of industrial land and ensuring a 15 year supply of industrial zoned land is available at any given time - this is aimed at avoiding market volatility and creating greater certainty. It is also aimed at reducing holding costs by ensuring developers have ready access to industrial land;

Reviewing the zoning of the Cast Metals Policy Area – there has been limited interest in land within this precinct from operators that meet the relatively tight land use criteria. A more flexible zoning policy is likely to be sought via a Ministerial Development Plan Amendment. It is noted, however, that the State Government‟s stated strategic direction outlined in the 30 Year Plan and HELSP Report is supportive of the retention of the Cast Metals Policy Area. Therefore, we would expect that any review would need to ensure that future demand for foundries and associated land uses would still be accommodated;

Potential changes to Home Industry Zone – This zoning is considered out-dated. Few Councils have such zoning and there is no separate Home Industry Zone within the Planning Policy Library (now a policy area within the Light Industry Zone). We also note that the objective of such a policy area is for home industries to operate on the same allotment on which there is an occupied detached dwelling. State government may request PAE to consider rezoning to an alternative zone;


State government has a significant infrastructure agenda to improve freight movement around the metropolitan region. Investment in road and rail infrastructure should benefit industrial land uses within PAE. This investment includes the South Road Superway and the proposed Northern Connector.

We also note that state government considers a more flexible approach to land use planning is desired to allow a mix of uses within industrial zoned land. This recognises the potential demand for a range of services such as small businesses, local retailing, medical facilities, business banking and child care that may provide for the day to day needs of the industrial workforce. This is particularly important in large industrial markets that may not have easy access to such facilities.

In terms of minimum lot size, the state government favours a market approach. There is a desire to not over-regulate and allow the market to determine what the market wants.

7.6 Council Response

What is the potential effect on Council’s industrial land stock in 5-10 years if Council was to do nothing (i.e. keep all existing zoning and policies unchanged)?

The supply of and demand for industrial land will primarily be driven by factors outside of Council‟s control.

Supply will be driven by state government delivering industrial land to the market, primarily the Gillman Employment Lands precinct. Furthermore, additional industrial land could be made available for general industrial use through rezoning excess land within the Industry (Cast Metals) Zone.

Demand will largely be driven by economic factors. We have noted that take-up of industrial land has been subdued since the onset of the GFC. With low to moderate economic growth forecast over the next 1-2 years, we expect demand for industrial land will remain subdued over this period. In the medium to longer term, demand should pick up as the economy improves and industrial occupiers commit to new industrial premises

When occupiers decide to commit to a new site, it is generally a long term commitment of at least 10 years. Having available land to meet the needs of occupiers is critical. Otherwise, potential tenants may be lost to competing markets, such as the Outer North. Delivering the Gillman Employment Lands precinct will provide a key opportunity to meet ongoing demand for 10 years or more.

It is critical to ensure that existing zoning and policies encourage appropriate development for appropriate land uses. However, there are known areas within Council where landowners have not been forthcoming with development that reflects the desired future character statements of the relevant zones. The Home Industry zone is a case in point. At the very least, Council should review its policies and determine whether the current zoning and policies are warranted.

Council‟s internal review of industrial zoned land, Industry Land Profile 2011-12, highlighted a range of issues that may be related to the current industry zoning. Table 21 summarises key issues raised in this report for consideration, with our comments alongside.


Table 21: Selected Issues Identified with Industrial Zoned Land in Port Adelaide Enfield

Issue Identified JLL Comment

There is a significant amount of underutilised land in the Industry zone in suburbs such as Dry Creek, Gillman, Osborne and Outer Harbor.

In most cases, this land is not development ready, or reserved for future port related purposes.

Under-utilised land in the Industry zone is often constrained by the current lack of services.

Provision of services is critical to delivering the Gillman Employment Lands Precinct

The majority of allotments in PAE’s three Home Industry zones are used either solely for residential use or solely for non-residential use.

Home Industry is not a separate zone in the South Australian Planning Policy Library (Although a Home Industry Policy Area exists). Lack of take-up of land for the intended purpose of conducting an industrial business from home suggests limited appeal for this zoning.

The original intent of the Industry (Cast Metals) zone to relocate existing foundries has not eventuated, particularly with regard to the Bradken and McKechnie Foundries. Large allotments within the zone remain vacant.

Prime industrial location with land under-utilised. Opening up the zoning to a broader range of uses should be considered.

There is a relatively low instance of industrial zoned land east of Main North Road.

It is unlikely that further land for industrial purposes will become available. Demand for service industries serving the local population may grow in line with population growth.

Residential uses are the main recorded land use within the Light Industry zone (14.5% of all sites).

This historical situation is unlikely to change quickly. The residential uses may provide affordable housing options for residents.

There are a number of instances where zone boundaries cut through allotment boundaries.

Such situations should be avoided and reviewed within the next five years.

Light Industry zones at Largs North/Taperoo and Osborne remaining largely vacant.

The lack of take-up of this land for light industry uses warrants further consideration.

The Light Industry zone at Birkenhead, primarily owned by Adelaide Brighton Cement, cuts though allotment boundaries. Its use (ABC) does not belong in a Light Industry zone.

Consideration should be given to boundary realignment.

A 3 Hectare site in the Light Industry zone at Croydon Park has been vacant for a long time, and the owner appears to have limited interest in developing the land.

There are existing industrial uses to the north and south, with residential uses to the east and west. There may be an argument for rezoning but only in association with the relocation of industrial uses to the south.

Source: Jones Lang LaSalle, City of Port Adelaide Enfield

We have also raised a number of measures that may encourage appropriate activity in industrial zones:

Removal of the Principles of Development Control relating to minimum allotment size. There is strong demand for small allotments in industrial areas. Allowing subdivision for small lots, and a mix of allotment sizes is considered appropriate.

Allowing flexibility in terms of land uses in industrial zones, to promote employment diversity, employment growth and the provision of ancillary uses that support existing employment generating uses.


7.7 Implications for Industrial Land in Port Adelaide Enfield

Industrial land is finite. PAE is fortunate that for a location within relatively close proximity to the Adelaide CBD, there is still significant supply of development ready industrial land as well as future industrial land for delivery over the next decade. There is also land set aside for growth of port activities, including portside land.

However, it is clear that the outer northern metropolitan area will become the major location of new industrial land uses in the longer term. This should not be seen as a threat, although we have noted the cost advantage that this area will have over industrial land in PAE.

PAE has strategic locational advantages that we have highlighted throughout this report. The Port of Adelaide will continue to be a key driver of demand, with occupiers wanting to locate near the port facilities.

A key issue for PAE is the effective re-use of under-utilised industrial land, most likely for more intensive employment generating industrial uses. However, there may be some opportunities for rezoning to alternative uses that would meet other objectives of PAE. This may include rezoning to residential, thus helping to meet the 30 Year Plan‟s dwelling targets.


8 Recommendations and Implementation Strategy

The following recommendations are a response to the questions raised by the City of Port Adelaide Enfield in the brief to this study, to trends in industrial activity noted over the past decade in PAE, metropolitan Adelaide and further afield, and to the state government strategies highlighted in the 30 Year Plan for Greater Adelaide and Manufacturing Works. The recommendations also aim to provide opportunities for continued investment in PAE‟s industrial land, ensuring that these important employment lands provide for sustainable growth in business and employment in the future.

8.1 Recommendations

1. Bring Gillman Employment lands to market

Gillman provides the largest single opportunity for PAE to grow its industrial employment base. Recent infrastructure investment supports the delivery of Gillman. It is also a natural extension of Regency Park and Wingfield, which have limited future opportunities. We consider demand for such well-located industrial land will be strong, particularly for companies wanting a central location between the Port of Adelaide and the CBD.

2. Consider promoting Regency Park as a future business park estate, allowing for more intensive, higher employment generating uses.

Regency Park is very well located, but its building stock is dated. Consideration should be given to allowing a more intensive employment precinct at Regency Park, incorporating a higher level of office accommodation and a greater mix of business uses.

We note that the SA Planning Policy Library identifies an Urban Employment Zone, which is a mixed use employment zone that accommodates a range of industrial land uses together with other related employment and business activities. This may provide the appropriate zoning for such a future business park.

3. Remove minimum lot sizes in Light Industry and General Industry Zones – allows flexibility for market changes

A reasonable amount of flexibility is required to allow the market to determine the right mix of allotment sizes. In industrial areas that are central to a large residential base, there is expected to be demand from small service industries and businesses that serve the surrounding residential market. Many of these businesses will not require a site area greater than 1,000sqm and have limited requirement for large vehicles to access their premises. Smaller lots are considered reasonable. Care needs to be taken to ensure such subdivision does not negatively impact on larger land users.

4. Future of Cast Metals Policy Area

This precinct is specifically set aside for a particular use, which there has been limited demand for over the past 15 years. Consequently, the land has remained unoccupied and available for sale. It may be appropriate to reconsider the policies that guide activity in the Cast Metals Policy Area, aimed at providing a balance between the expected demand for land from foundries and associated uses with the desire to ensure the efficient use of industrial land. Any change to policy should address the following:

Trends in the foundry industry in Australia (growth / decline; location trends etc.); Drivers of demand for cast metal products (e.g. auto industry; mining sector); Future drivers; Potential demand for land in the Cast Metals Policy Area from growth in mining activity.


5. Encourage more intensive land uses in industrial zones, aimed at retaining and growing the industrial employment base

Most of PAE‟s industrial employment growth will be attributed to new businesses, primarily in areas that still have substantial opportunities for industrial expansion. This includes Gillman, Osborne and Wingfield. No industrial employment growth in PAE would be a very poor outcome, given the opportunities for continued industrial land releases and development in the suburbs identified above.

Loss of employment in existing industry zones can be limited or even reversed by opening up industrial zoned land to a wider range of land uses, including uses that have greater employment density. Examples include:


population growth.

6. Encourage an Advanced Manufacturing cluster within PAE

Much of the focus in terms of advanced manufacturing has been Tonsley Park. PAE, however, has an advanced manufacturing capability centred around the ASC‟s shipbuilding activities. PAE should ensure that the potential of the advanced manufacturing sector, which will be strongly supported by state government, is realised in the local market.

7. Ensure planning policy recognises the need for 24-7 operation for many industrial uses, including port operations

There is likely to be some unavoidable conflicts between land uses requiring 24-7 operation and existing residents. However, it is critical that the legitimate needs of business to operate in an increasingly competitive global environment are understood and catered for.

8. Consider changes to the Home Industry Zone

This zoning is considered out-dated. Few landowners have taken up the opportunity to operate a light industry business from home. Others may be able to operate a home business under existing legislation covering owners running business from home. Few local government areas have such zoning and the Home Industry Zone is not a separate zone in the Planning Policy Library (although a Home Industry Policy Area is incorporated into the Light Industry Zone). Whilst some investigations were undertaken during the Council's Industry Zones DPA process in 2008-2009, the State government may request PAE to consider further rezoning to an alternative zone.

9. Take advantage of the infrastructure spend occurring in PAE

State government has a significant infrastructure agenda to improve freight movement around the metropolitan region. Investment in road and rail infrastructure should benefit industrial land uses within PAE. While most prospective businesses should be well aware of the location advantages of PAE, we recommend Council consider promoting in a subtle way the strategic relevance of infrastructure improvements that are taking place and those planned for the future.

10. Consider potential commercial opportunities for industrial land fronting arterial roads

Land fronting main roads that are currently zoned industrial may provide an opportunity for a more intensive and attractive commercial use that takes advantage of the high level of exposure from passing trade. The rezoning of Main North Road, Gepps Cross to allow for the Home HQ bulky goods retail centre is one example where this has already occurred. Regency Park, which


fronts South Road, has also been highlighted as potentially being redeveloped for a greater mix of more intensive uses.

A wider range of business uses, including trade showrooms, motor vehicle showrooms and some commercial premises serving industrial businesses have located on industrial sites with main road frontage. These uses not only take advantage of the high level of exposure, they effectively screen less attractive industrial uses from busy roads.

We note that the SA Planning Policy Library includes an Urban Employment Zone, which is a mixed use employment zone that accommodates a range of industrial land uses together with other related employment and business activities. This may provide for the mix of employment generating opportunities envisaged.

11. Review zone boundaries with the aim of reducing instances where zone boundaries cut across property boundaries

Council has identified these occurrences. These anomalies should be rectified at the next Development Plan Review of industry zoned land in PAE. Rezoning may provide more certainty for landowners with regard to future use.

12. Encourage the effective re-use of under-utilised industrial land

This will most likely be for more intensive employment generating industrial uses. However, there may be some opportunities for rezoning “non-core” industrial zoned land to alternative uses that would meet other objectives of PAE. This may include rezoning to residential, thus helping to meet the 30 Year Plan‟s dwelling targets.

8.2 Implementation Strategy

The implementation of the majority of the above recommendations requires a review of the existing Development Plan. However, a future Development Plan Amendment will not by itself achieve all the recommendations. We highlight below the need for consultation, research and promotion to realise the potential of PAE‟s industrial land supply.

Consultation

The recommendations highlight a need for consultation with industry, landowners, state government and the community to determine the best way forward.

There is a need to liaise with state government with regard to a range of factors, including:

Delivery of Gillman; Wingfield Cast Metals Policy Area; Development Plan inconsistencies with South Australian Planning Policy Library; Appropriate rezoning for industrial land with arterial road frontage; South Australia‟s manufacturing strategy – Opportunities for high-value manufacturing in

PAE; Future opportunities for more intensive employment generating uses in existing industrial

precincts (e.g. Regency Park).

Consultation with major landowners and developers may uncover long-term plans for major industries in PAE. For example, companies that plan to relocate may provide an opportunity to reconsider the appropriateness of existing zoning. Is existing zoning more a reflection of the existing use or the desired future use of the land?

Monitoring and Review of Industrial Land

We consider it is beneficial to monitor industrial development activity on a regular basis against the objectives of the particular zone. This will identify those locations where the zone objectives are not being met and provide a basis to review existing zones.


For example, the following could provide an insight into the success or otherwise of a particular zone / precinct:

Development applications – approvals, refusals, reasons for refusals Vacancies – who moved and why? Sales and leasing activity – interest in location

Marketing and Economic Development

We consider there is a benefit in promoting the strengths of PAE as a prime location for business. The strengths have been highlighted throughout this report and provide a compelling set of reasons to locate in PAE. As highlighted in the recommendations, the proximity to key infrastructure and the ongoing investment in infrastructure provide PAE with a competitive advantage in attracting and retaining businesses.

We note that Council‟s ongoing costs in terms of Council rates are competitive compared with other Councils with significant industrial land in the northern metropolitan area. Information compiled by the City of Salisbury found that the expected ongoing annual cost for a $2 million property was marginally lower in PAE than in Salisbury and significantly lower in both LGAs compared with Charles Sturt and Playford LGAs.14 This cost advantage is used by the City of Salisbury under the Banner “Makes good business sense”. In terms of rates payable, PAE makes equally good business sense. These benefits should be promoted.

14 http://www.makesgoodbusinesssense.com.au/wp-content/uploads/Rate-Comparison-for-Industrial-and-Commercial-Property-2012-13.pdf

http://www.makesgoodbusinesssense.com.au/wp-content/uploads/Rate-Comparison-for-Industrial-and-Commercial-Property-2012-13.pdf

http://www.makesgoodbusinesssense.com.au/wp-content/uploads/Rate-Comparison-for-Industrial-and-Commercial-Property-2012-13.pdf


Appendix A: Sectors Overview

Manufacturing

Manufacturing is the fourth largest employing industry in Australia, employing 962 000 people (or 8.4 per cent of total employment) as at May 2012. However, the manufacturing industry is declining in terms of employment, with a drop of 9.1% or 96,100 jobs in the past decade.15 Issues affecting the manufacturing sector in Australia are well known, and include the high Australian dollar, and high relative cost of labour in Australia compared to most Asia Pacific countries. This has seen manufacturing move offshore to lower cost countries. The strength of the mining sector has also been a factor, as strong mining exports increases the value of the Australian dollar and makes Australian manufacturing less competitive on a global scale.

Of the 19 broad industry groups (ANZSIC groups), manufacturing is the only one forecasted to contract in overall employment over the next five years. Areas considered to be most under pressure include car, furniture and clothing manufacturing. Areas expected to grow are manufacturing sectors that build on Australia‟s strengths in mining and resources (metals; petroleum and coal), food and to a modest degree, beverages (wine). These are sectors that could offer opportunities to Port Adelaide Enfield Council and more broadly to South Australia.

Construction

Construction is the third largest employing industry in Australia, employing 996, 800 people, or 8.7 percent of the total workforce, as at May 2012.16 The growth in the sector is in line with the growth in Australia‟s population, a key driver of demand for housing construction and commercial construction. Residential construction is the major component of the construction sector, employing considerably more workers than commercial or engineering construction.

The construction industry is a major employer of trades such as carpenters, electricians and plumbers. Building trades is critical to the success of a strong, high quality construction sector. While trades were in short supply up until 2008, this is no longer the case. The one exception has been electricians – electricians have been in strong demand by the mining sector while the increase in solar installations has probably placed upwards pressure on demand.

A growing population has also placed pressure on the needs for major infrastructure projects. The housing industry has been reasonably subdued since the onset of the GFC, and this is reflected in the growth trends within the sector. There was strong growth in the construction sector between 2001 and 2008. Since 2008, there was more modest growth in the construction sector while 2012 has seen a reasonably sharp fall. This is expected to recover – there is underlying demand for housing construction with the general view being that new residential construction has not kept up with population growth.

Wholesale Trade

Wholesale trade employs 3.9% of Australia‟s total workforce (February 2010). Employment in the sector has been reasonably stable, with modest growth of 2.5% per annum per annum over the last five years.

Typical jobs in this sector include sales representatives, store-persons and advertising / sales managers. Many of these employees are expected to be on the road rather than located on-site.

The wholesale sector grew by a strong 9.1% in the year to February 2010. In the five years to 2014-15, employment in Wholesale Trade is expected to increase at an average rate of 0.5 per cent per annum.

15 DEEWR, Manufacturing Employment Outlook, July 2012 16 DEEWR, Construction Employment Outlook, 2012


Transport, Postal and Warehousing

The Transport, Postal and Warehousing industry is the ninth largest employing industry in Australia, employing just over half a million workers (or 5.1 per cent of the total workforce) as at February 2010.

Key sub-sectors of relevance to PAE include road freight transport, postal / courier pick-up and delivery services, water freight transport, and warehousing and storage services.

Over the last decade, employment in the Transport, Postal and Warehousing industry has shown strong long-term growth. In the 10 years to February 2010, employment in the industry rose by 111 400 (or 25.0 per cent) to 556 800. This represents an average annual growth rate of 2.3 per cent.17

The main contributors to employment are Road Freight Transport sector (31.4%) and Postal, Courier Pick-up and Delivery Services or 19.7 per cent).

In the five years to 2014-15, employment in the Transport, Postal and Warehousing industry is expected to grow at an average rate of 2.3 per cent, compared with an expected growth rate across all sectors of 1.8%. Strong growth sectors include Postal, Courier Pick-up and Delivery Services and Road Freight Transport. It is considered that the rise of on-line retailing will be a driver of solid growth in demand for courier / postal services. Interestingly, road freight transport is expected to grow at a much greater rate than rail freight transport, despite government policy aimed at increasing the proportion of freight carried by rail.

Clearly the main employment opportunities are as drivers – particularly truck drivers and courier delivery drivers. Store-persons within warehouses are a relatively small portion of the total workforce. Warehouses do not employ a very large workforce on-site.

Electricity, Gas, Water and Waste Services

Electricity, Gas, Water and Waste Services is the smallest employing industry in Australia (of a total of 19 industries), employing 126 700 people (or 1.2 % of the total workforce) as at February 2010.18

Growth trends in the sector have been variable and generally related to the economic cycle. In terms of outlook for the sector, the main areas that are expected to experience positive growth are waste treatment, disposal and remediation, and electricity generation. Both are expected to grow at least 3%, well above the “all industries” average of 1.8%.

17 DEEWR, Employment Outlook for Transport, Postal and Warehousing, 2010 18 DEEWR, Employment Outlook for Electricity, Gas, Water and Waste Services, 2010


Appendix B: Australian and New Zealand Standard Industrial Classification (ANZSIC)

The Australian and New Zealand Standard Industrial Classification (ANZSIC) is the standard classification used in Australia and New Zealand for the collection, compilation and publication of statistics by industry. It was jointly development by the Australian Bureau of Statistics and Statistics New Zealand.

As the name suggests, ANZSIC is an industry classification. It is used to classify businesses in a standardised manner, allowing statistical interpretation over time.

ANZSIC “…provides a standard framework under which units carrying out similar productive activities can be grouped together, with each resultant group being referred to as an industry.”19

Businesses are grouped into 19 divisions as per below:

Code Division

A Agriculture forestry and fishing

B Mining

C Manufacturing

D Electricity gas water and waste services

E Construction

F Wholesale trade

G Retail trade

H Accommodation and food services

I Transport postal and warehousing

J Information media and telecommunications

K Financial and insurance services

L Rental hiring and real estate services

M Professional scientific and technical services

N Administrative and support services

O Public administration and safety

P Education and training

Q Health care and social assistance

R Arts and recreation services

S Other services

It should be noted that ANZSIC is not a land use classification. However, certain industry divisions are highly represented in various land uses (e.g. retail trade businesses in retail shops; administrative and support services in offices; wholesale trade in industrial warehouses).

19 Australian Bureau of Statistics, ANZSIC 2006 Development Information Paper, Catalogue 1294.0, 2004


The ABS provides employment data for PAE by ANZSIC Division. The land zoned for industrial uses in PAE is expected to be primarily businesses from the following ANZSIC Divisions listed below. Analysis throughout this report regarding changes to employment within PAE‟s industrial zones is based on employment within these ANZSIC divisions.

ANZSIC Divisions Businesses most likely to locate with “industry zones”

Agriculture forestry and fishing

Mining

Manufacturing

Electricity gas water and waste services

Construction

Wholesale trade

Transport postal and warehousing


Appendix C: Bibliography

City of Port Adelaide Enfield, Industry Land Profile, 2011-12

City of Port Adelaide Enfield, Strategic Directions Report 2011: Zone, Policies, People, Draft for Public Consultation, 2011

City of Port Adelaide Enfield, Corporate Plan 2011-2016

Department of Education, Employment and Workplace Relations (DEEWR), Employment Outlooks for Manufacturing; Wholesale Trade, Transport, Postal & Warehousing; Electricity, Gas, Water & Waste Services; and Construction, 2010-2012.

Government of South Australia, DMITRE, Manufacturing Works: A strategy for driving high-value manufacturing in South Australia, Oct 2012

Government of South Australia, DMITRE, Manufacturing Green Paper: Setting Directions for the transition of manufacturing in South Australia, March 2012

Government of South Australia, Department of Planning and Local Government, 30 Year Plan for Greater Adelaide: A Volume of the South Australian Planning Strategy, 2010

Government of South Australia, Department of Planning, Transport and Infrastructure, Development Plan Port Adelaide Enfield Council, Consolidated 15 November 2012

Government of South Australia, Department of Planning and Local Government, Housing and Employment Land Program (HELSP) Report 2010, Greater Adelaide, October 2010

Jones Lang LaSalle, Online Retailing: Driving a New Wave of Industrial Business, May 2012

Roos, Goran (Prof), Manufacturing into the Future, 2011

Transport, Storage & Logistics Industry, North West Crescent of Adelaide, May 2005

David Snoswell

Director, Research & Consulting

L22, 25 Grenfell Street

Adelaide SA 5000

+ 61 (8) 8233 8843

[email protected]

COPYRIGHT © JONES LANG LASALLE IP, INC. 2013.

This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in

part, without the prior written consent of Jones Lang LaSalle IP, Inc.

The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in

respect of the accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them.

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