A very interesting agenda item is coming to the FPOL committee this week. The Economic Development Strategy, developed in 2015, is coming to an end and it is an opportunity to review and reset the strategy.
Below is an interesting excerpt from the report, which outlines the wider economic climate, and the specific conditions, successes and challenges in Fremantle.
I have been thinking for some time about what new employment opportunities and economic drivers are growth opportunities for Fremantle? Hospitality and tourism are obvious. Arts, culture, education and the creative / knowledge sectors as well as the maritime industry are also a natural fit. Do you have any other ideas?
Take a look at the background information below and feel free to leave a comment with your economic development ideas for Fremantle. And while you’re at it, make sure you shop local and support our local economy during these challenging times.
Economic outlook for Western Australia
Although the Western Australian economy is showing early signs of recovery, it is widely accepted that it will take time for the local economy including small businesses to benefit from this recovery.
The recent ComSec State of the States December 2018 report ranks WA’s economy as the second weakest nationally across a range of national indicators.
Of particular concern are the low State Final Demand and Disposable Income per Capita numbers from WA Treasury that reflect lower discretionary spending on retail, food & beverage and services.
CCIWA flagged weak demand as the largest barrier to business growth in line with survey results and attributed this to dampened consumer spending. The CCIWA consumer confidence survey for the same period reported that two out of three WA consumers considered it unlikely that they would make any major household purchases next quarter. CCIWA went on to say consumers remain cautious about increasing spending with the primary reason being cost of living pressures.
In considering the broader economic outlook for WA, CCIWA reported any growth in retail being contained to increased spending on food consumption, and growth in online purchases (20-30%) causing other retail to remain soft. Retail spending results indicated spending on food retailing, cafes, restaurants and takeaway as being much higher than clothing, footwear and personal accessories.
The survey results suggest that whilst there is a level of optimism regarding WA’s economy, consumers remain cautious around spending resulting in weak demand across retail, construction and real estate.
Current Economic Context for Fremantle
At the time the City of Fremantle EDS was released (2015), the Western Australian economy was considered strong with positive growth being driven by what is now understood to be the tail end of the mining boom, and unprecedented growth in the property market.
Since 2015 Western Australia’s Gross Domestic Product (GDP) which is strongly driven by the resource sector has declined substantially given weakened global demand for iron ore, a transition from the construction phase of mining into the production phase and subsequent reduction in employment within that sector. This is coupled with a contracting WA population as a result of the post boom reduction in employment. Western Australia’s property market has suffered a similar fate with significant reductions in median house value and demand for construction.
Whilst Fremantle has experienced a level of private investment and development during this period not seen since the America’s cup, its population driven sectors such as retail, hospitality and tourism have not been immune from macroeconomic factors linked to the State’s economy. The significant development and construction experienced within Fremantle over the past 2-4 years is critical for the longer term growth of our economy, however the construction phase of this development has and will continue to deliver its own set of challenges for those population driven sectors already operating on the ground in Fremantle.
Despite the stagnant macroeconomic conditions experienced throughout the strategy period, a number of positive economic indicators have been identified that demonstrate an increasing confidence in Fremantle as a place to invest:
- Building approvals in Fremantle reached a record high with $313 million worth of residential and commercial property developments approved for construction during 2017/18. The growth in Fremantle defies the Western Australian trend which has seen building approvals fall by 9.2 % over the past year according to the WA Treasury.
- Of the current $1.3 billion development pipeline, $600 million is either built or under construction including the Kings Square Renewal project which started late 2016.
- The completion of significant high density residential developments including Heirloom by Match and DHA’s Liv Apartments continues to add to a growing inner city population. New residential development either recently built or under construction is driving a projected 68 % increase in people living within the central city by 2021.
- The $220 million Kings Square Renewal project is well and truly under way with Sirona Capital nearing completion of the office and commercial component and the City of Fremantle having now commenced construction of the new civic and administration building. This project is set to inject around $350 million into the local economy with approximately 1,500 city workers coming in and out of the central city on a daily basis.
- Although business changeover is consistent in Fremantle, particularly along main commercial strips, new businesses continue to open with an obvious trend focusing on food & beverage rather than traditional retail. Fremantle now boasts an even stronger offering of unique high quality food and beverage offerings along with a selection of high end boutique retail outlets.
Current Challenges and Considerations
Fremantle has not been immune from the poor performance of the broader state economy experienced during the strategy period and continues to face a series of challenges, particularly for those operating at street level within the retail, hospitality and tourism sectors. Whilst these challenges are not endemic to Fremantle and being faced by many other town centres, they continue to create a difficult operating environment for our business and investment community.
- Vacancy rates in the CBD have been increasing in line with the wider metropolitan area, however it is apparent that the increasing vacancy in Fremantle is most commonly associated with clustering of vacancies in and around current redevelopment and construction zones.
- High commercial rents have also been flagged as a contributor to vacancy however several factors influence the cost of rent including a normal lag between changes in market conditions and reaction to those changes by property landlords. Encouragingly current market conditions are prompting some property owners and leasing agents to re-evaluate their properties, reduce rents and offer incentives to secure and retain tenants.
- Despite the City tripling its investment into addressing antisocial behaviour and substantially increasing the reach of the CCTV network, businesses continue to raise concerns with regards to antisocial behaviour and vagrancy and the impact this is having on public safety, trade and broader perceptions of Fremantle.
- Anecdotal feedback from businesses and broader market data from CCIWA suggests that retail is experiencing some of the most challenging conditions seen in recent times, most commonly citing the changing nature of retail via online shopping. It is now widely accepted that the retail sector has undergone a paradigm shift in the way consumers engage with the sector and this is likely to remain unchanged in to the future.
- Current challenges associated with financing of major construction projects being faced nationally as a result of the Banking Royal Commission and a cooling property market have contributed to some delay in delivery of major projects in the broader Perth metropolitan area, particularly residential projects.
- As a result of the downscaling of Fremantle hospital, the CBD has now been without the estimated 1,900 jobs moved outside of Fremantle for more than 4 years, correlating with a significant reduction in pedestrian footfall over that period. It is hoped the estimated 1,500 new workers coming to Fremantle as part of the more centrally located Kings Square development will go some way in increasing pedestrian footfall and subsequent business trade throughout the CBD.
- As with the loss of hospital jobs, the loss of comparative advantage due to the departure of Myer and the change in retail trading hours has only been exacerbated by the continuing expansion of major suburban shopping centres. This expansion has remained consistent throughout the entire term of the strategy, notwithstanding some of those expansion projects recently appear to have been put on hold due to current market conditions.
- Fremantle’s smaller than usual retail catchment remains a disadvantage from an investment attraction perspective given the geographic constraints created by the ocean, however the proximity to the ocean also provides a significant comparative advantage by providing an experiential outcome (access to the ocean) that other metropolitan town centres such as Mt. Lawley, Leederville and Subiaco cannot provide.
Key Observations and Assumptions
A series of high level observations have been made in line with the current economic outlook for the State and the status of outcomes listed within the strategy. The observations are also based on consideration around changes in Fremantle’s local economic context since the commencement of the strategy term.
- Given major construction and infrastructure projects such as kings square are now reaching completion, Fremantle is now well positioned to capitalise on the next phase of more balanced sustainable economic growth (more so than it was able to during the mining boom period). To leverage this next wave of growth and maximise opportunities surrounding the Kings Square project, the development and delivery of a strong place management and activation program will be critical in attracting visitors, workers and residents back to the city centre after an extensive period of construction.
- A large number of projects that form part of the $1.3 Billion investment pipeline are now completed, which has resulted in a shift in focus by developers towards ensuring new commercial space is leased and inner city residential dwellings are sold or occupied. As such marketing and promotion of Fremantle as a place to live and work should now form a substantial part of investment attraction activities (as opposed to solely focusing on attracting and enabling new development).
- Given challenges associated with current economic conditions, provision of support to existing businesses may deliver greater outcomes in the short term than a focus on attracting new businesses. It is critical that existing businesses possess the capacity to adequately leverage and add value to the outcomes associated with the completion of Kings Square and the City’s increased investment into destination marketing.
- Tourism is becoming increasingly important as a driver of economic growth and diversification across the State, and remains one of Fremantle’s genuine comparative advantages as the second most visited destination in WA. Development and growth of tourism should be considered as a priority when determining a Local Government led approach to growing our economy.
- The development and growth of the film sector and global demand for content has peaked interest in Australia as a location for content production, particularly for major international markets such as China. Based on an assessment of opportunities within this sector and initial engagement with production companies, Fremantle is strongly positioned to capitalise on this demand, more so than other locations throughout Perth.
- Fremantle remains an attractive location for the pursuit of creative and knowledge based activities (whether informal or professional), particularly given the presence of a major university and technical college within our West End. To better leverage this comparative advantage, any future investment attraction initiatives delivered by the City may be bolstered by a more direct collaboration with the University of Notre Dame and South West Metro Tafe (and other relevant industry partners), particularly given both organisations are actively engaged in research & innovation across a variety of creative and knowledge based sectors.
- Given the challenges being faced by the retail sector and competitive pressure from online shopping, experiential offerings and resident populations are becoming increasingly important in ensuring main streets and town centres remain vibrant and activated. Whilst consumers can and will continue to shop online, it is unlikely that they can enjoy the experience of eating out at a restaurant or socialising at a bar without visiting an entertainment precinct or a bricks and mortar business. With just over 20% of our business mix being considered hospitality (closer to 30% being classified as retail) there may be room for growth in Fremantle’s hospitality offering given changing consumer behaviour.
- A variety of major projects and investment initiatives are occurring across our immediate region. Whilst jobs and workers linked to these initiatives may be located in other LGAs, a genuine opportunity remains for Fremantle as a place for the people filling these jobs to live and play. As such it would be prudent for Fremantle to remain active in and supportive of broader sub-regional economic development activities in collaboration with other LGAs.
- Given the aforementioned observations the core underlying objective of all City led economic development initiatives should remain as the attraction of more people to our City Centre including residents, workers and visitors.
Based on the outcome of the review, and pending further findings from the series of detailed economic studies proposed, the following initiatives have been recommended as key priorities for consideration as part of the proposed 2 year action plan (in the lead up to the development of a new strategy for 2022):
- Collection/analysis of primary and secondary economic/social data that assists the delivery of informed decision making and will inform the next major review of the Community Strategic Plan and establishment of a robust economic development strategy beyond 2022.
- Continue to deliver on objectives and initiatives as identified in the current Destination Marketing Strategic Plan 2018-2022.
- Deliver support programs that focus on building capacity within existing local businesses to better leverage the current renewal underway in Fremantle. This should also incorporate a strong program of business engagement and communication to ensure the business community is across key opportunities relating to Kings Square and other projects.
- Establish and begin to deliver a place management and activation framework that provides an effective program of activation for the new Kings Square development, and can be rolled out to other precincts.
- Leverage the new destination brand to deliver a program of investment marketing with the objective being to raise the profile of renewal underway in Fremantle and to promote Fremantle’s key comparative advantages to potential investors (businesses, residents and developers).
- Develop and deliver a structured orientation/welcome program for the Department of Communities and other new organisations moving in to the Kings Square development to encourage dispersal of the estimated 1500 new workers throughout the CBD.
- Develop a prospectus of key ‘investment ready’ projects and associated business cases to support the delivery of a strong advocacy program in the lead up to the next State election in order to attract State Government support for the initiatives that form part of the City’s strategy for economic development beyond 2022.
- Based on an assessment of genuine comparative advantage, narrow the focus on current industry development/attraction efforts to four key sectors/opportunities:
- Knowledge and creative based industries
- Upstream and downstream supply chains linked to the defence [maritime?] sector
- Actively leverage and participate in sub-regional economic development and investment attraction initiatives in collaboration with other regional LGAs.