A Suburban Economic Future?

The basic, often unappreciated, fact  about economic life in Australia’s  metropolitan regions are that most of the jobs are in suburban locations. Our central business districts (CBDs) – prominent though they are – account for only around 10% of all metro wide jobs. That rises to maybe 15% if you include inner city areas. But still, 85% of everyone else who calls Brisbane, Sydney, or Melbourne home works somewhere other than the CBD or inner city.

Not only that, but the share of jobs in the suburbs versus the city has been rising, at least marginally. This doesn’t mean that CBD job markets are shrinking (in the main, they’re not) just that suburban employment markets are growing faster. So CBDs are becoming, perhaps inexorably, less dominant.

The evidence also shows that suburban employment isn’t distributed evenly but in various concentrations. Some of these areas add to very large numbers – rivalling the totals found in CBDs – but they do so at much lower densities  of employment. Concentrations of 2,000 to 4,000 jobs per square kilometre are dense by suburban standards but still only a fraction of CBD concentrations, which can closer to 100,000 per square kilometre. For many suburban employment areas, concentrations are even lower at maybe 500 to 1000 jobs per square kilometre. While CBD office workers measure their space in square metres (roughly 15 to 20 per person) some suburban workers might measure theirs in acres.

The income profiles of CBD and suburban workers vary. Across the three major centres of Brisbane, Sydney and Melbourne, the research shows that suburban workers, on average, earn considerably less than CBD workers. The top ten income areas city wide are nearly all inner city areas, and these workers earn more than double the average of the bottom 10 areas (which are invariably suburban). The average CBD worker, according to the census, pockets between A$80,000 and A$90,000 per annum. The average suburban worker pockets around $50,000 per annum. Given that suburban jobs account for around 85% of all jobs, the CBD is indeed a privileged centre of income earning ability.

Having said that, there are still interesting pockets of suburban employment where above average incomes are to be found. The Brisbane airport and port region, for example, features in the top 10 income earning locations along with inner city locations, even though the majority of jobs (62% to 74% according to the Census) are blue collar.

CBDs and suburbs vary widely as well in transit choice. For suburban workers, the private car is the overwhelming mode of transport (above 80% to 90%), not by choice or because of some “love affair” with the car, but of necessity. The very nature of dispersed suburban employment makes public transport uneconomic, which is why only around 5% of suburban workers use it. For CBD workers though, public transport is more widely used because it’s more available and convenient: more than 50% (and more than 60% in Sydney’s case) of CBD workers make use of it.

The evidence also shows that the closer you live to the city, the more likely you are to use public transport to get to your CBD workplace. The proportion of people with CBD jobs falls the further you live from the CBD: meaning outer suburban residents are highly unlikely to have CBD jobs and hence only around 3% to 5% use public transport. Ironically, given CBD jobs earn the highest incomes and are also more likely to use public transport to get to work, we have a situation where those with the highest paying jobs are enjoying the biggest benefit of heavily subsidised public transport. You could argue on this evidence that those on lower suburban incomes are subsiding the train and bus fares of their higher paid CBD workforce cousins.

Now for the future

The evidence is one thing but where it all leads can provoke any number of alternative scenarios. Just for the sake of discussion, here’s one possibility: that cost and convenience factors will increasingly work against CBDs and inner cities and more and more businesses will establish, grow, or relocate to, suburban employment locations.

It’s possible this shift is already underway. The evidence shows a slow diminution of CBD prominence. Technology is increasingly reducing the person to person immediacy and co-location advantages of a highly concentrated CBD environment. We communicate more and more through electronic means, which also means physical location is less and less essential to daily business contact.

Costs are another factor. CBD offices and retail space are expensive relative to suburban locations. They are worth it in terms of prestige where this matters (leading legal or accounting firms for example), or where central location is important. But as costs via rents rise, the equation is constantly recalculated. Is it worth headquartering large numbers of staff in CBD offices when these staff have limited need for face to face business dealings outside the business? The cost/benefit analysis is an ongoing exercise and the business press contains plenty of evidence of companies who increasingly decide the suburban alternative is attractive. Rising car parking costs – for business visitors and clients along with staff – are just another factor in the falling competitive advantage for CBDs.

Employee costs could also be a factor. Even basic administrative roles in CBD locations command higher pay packets than similar roles in suburban locations, for whatever reason. If it is possible for administrative functions to be located in a suburban location where total employee costs are less, will this become a factor in the trade-off between CBD and alternative suburban locations?

Congestion may be another. As urban densities rise, especially around CBDs and inner city areas, congestion of all forms (private and public transport) will increase. Density is after all almost a synonym for congestion. Will businesses in increasingly congested CBD or inner city environments opt for suburban alternatives where congestion is less of an issue?  We can not yet say.

On the other hand, because CBDs and inner cities feature such a concentration of social amenities through public infrastructure (entertainment, cultural and recreational facilities) they may continue to appeal as residential addresses. Is it possible that as CBDs and inner cities develop their residential stock, we may find significant numbers of people who live in CBD locations for the inner city amenity, but who work in suburban locations? Time will tell.

Planning schemes would have to adapt to any of the above scenarios. Existing suburban economic areas may need their development density  under city plans increased to meet demand. TODs may become places where people travel to a suburban workplace centred on a train station or bus interchange, as opposed the current thinking which is that people will live near suburban transit nodes in order to work in inner city locations.

Any number of other scenarios are possible. My research has attempted to present the statistical evidence on the suburban nature of employment in our metropolitan regions, and make some observations about the public policy and future development implications. Given the extent of commentary, research and public policy concentration around the CBDs and inner city, the research suggests that some equally intense efforts to improve our suburban economic environment would yield significant community wide results.

Ross Elliott has more than 20 years experience in property and public policy. His past roles have included stints in urban economics, national and state roles with the Property Council, and in destination marketing. He has written extensively on a range of public policy issues centering around urban issues, and continues to maintain his recreational interest in public policy through ongoing contributions such as this or via his monthly blog The Pulse.