Why property investors must pay attention to 'mini CBDs'

He explained: “At five million, you've got Sydney CBD and the inner suburbs ... There's been growth around Chatswood at a business hub, around Ryde and Epping … [and] Parramatta.”

“By 2050 there will be hubs, I think, particularly around Parramatta … and Blacktown [and] Badgerys Creek … Genuine satellite cities.

“Sydney at eight million people cannot continue to have people living on the edge, getting on the train in the morning, and commuting into the city centre. What will happen is that the city centre jobs will start to be replicated in stronger, suburban, regional centres,” the social commentator added.

Bernard gets into details about how people create “mini CBDs” within a metropolitan area, and what this could mean for property investors all over the country:

How will you compare Sydney to other capital cities in the world?

Bernard: Los Angeles doesn't really have a single CBD the way [that] Sydney does. There's something in the CBD, but there's also at Anaheim, also in Orange County, also at Irvine, also in the San Fernando Valley.

When you get to cities that are big and expansive, they're just too big to navigate, so people create little mini-me CBDs within a part of a metropolitan area … You live in Penrith, you might work in Blacktown. You might live in Campbelltown, but you work in … Liverpool, something like that.

Is this scenario happening now?

Bernard: It's hard for us to get our head around that because we live in five million-planet Sydney. But when you're living in eight million-planet Sydney, the logic of that certainly stacks up. Plus, the fact that, I think, the next generation just will not sit for an hour and a half on a train in the morning to go ... to work … [and another] hour and a half to [go] home … I think Baby Boomers might have done it but I don't think the next generation [will]. They'll say, "We've got better things to do. There's a better way, a smarter way, to actually deliver value to a business and for me to organise my life.”

When are you going to find places like Blacktown, Penrith, Liverpool, or Campbelltown exceeding the size of our traditional state capitals like Adelaide or Darwin?

Bernard: That's very interesting … I think that, certainly, Parramatta is now equal in office space. As I understand it, Adelaide [as well]. Adelaide is a city of … 1.5 million people … I think, there's probably 2.5 million west of Homebush through to Penrith, in fact.

So, I would certainly say that stronger office workplace location, then increase the number of people with a high income that live[s] around there that will not want to live in the Eastern suburbs and travel out, will [create] the equivalent created in those areas.

What other factors may affect a city’s transformation?

Bernard: The really interesting transformation might be where you get a cultural shift as well. So, not just better-paying jobs out at Parramatta, and maybe out at Badgerys, or Blacktown, but you'll actually get this … cultural cache group coming. You know, hipsters moving from Bondi to Westmead or somewhere like that.

Phil: The cafes are already there, so.

Is gentrification also playing a role in this?

Bernard: Now, it's hard for us to get our head around it, but [just] think of the way in which gentrification has transformed our cities. If … my parents’ generation have said [that], ‘We're actually going to buy a terrace house in Paddington or Woolloomooloo and do it up.’ Why would you do that? Woolloomooloo? Paddington? Why not go out to a separate house on a separate block of land out at Hornsby and drive? That was the prevailing zeitgeist at that time.

It's an understanding that the city and its culture and the way we operate will change over time.

Should people still follow the mantra “Buy within 10 km of a central business district”?

Bernard: I would say ten kilometres of the CBD of Sydney because this is the most powerful job piston on the Australian continent, and maybe ten kilometres of Melbourne CBD, the second most powerful job piston on the Australian continent. Now, if you look at number three, four, five, six, it might only be five kilometres.

What should property investors consider when looking for their next asset’s location?

Bernard: The sort of things I would be looking at is, ‘How many jobs are within the Sydney CBD?’ It might be like 270,000 … [Then ask], ‘How many were there five years ago?’ 265,000. So, it's increased by five thousand, that's okay. It hasn't dropped, still growing, probably good jobs.

But if you go to … the Northwest part of Sydney, it might have been 30,000 jobs five years ago, and there's 50,000 jobs now. That has value to an investor. Now, they're not hipster-type apartments out there, but it shows that there's another 20,000 people coming to work in that location, who have a professional income, who can take out a mortgage, and have confidence that they will have that job for years down the track … Therefore, they'll bid up property values in the local area.

I would be looking at the job-generating pistons and how fast they're growing. I'd have them ranked, 1-20, across Australia.

Tune in to Bernard Salt’s episode on The Smart Property Investment Show to know more about the realities of investing in Australian property, where you should be channeling your dollars, and how our markets will develop in the future.

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