Economists often get a bad rap – we are the purveyors of the bad news that media loves to portray; interest rates, unemployment rates, GDP, inflation, wages growth. It is no wonder that economics has been derogatorily referred to as the dismal science! But before you shoot the messenger, let me assure you that economics and particularly as it relates to property development, is a critical but often misunderstood or dismissed element that often (wrongly I assure you!) falls a long way down the list of essentials within the development application process. However, there are intrinsic linkages between your centre design, the traffic generation and role of your proposed development within the planning scheme, that can be enhanced through a rigorous economic report. 

Whilst some planning schemes and policies such as the City of Logan’s Planning Scheme Policy 2 or Whitsunday Regional Council’s Development Needs Assessment or Economic Impact Assessment report requirements, are quite specific as to the requirements and areas to be addressed, others can simply reference the requirement for a Need and Impact Assessment Report or leaves it to the discretion of an Information Request to detail Council’s requirements.  Again, we have seen some quite ambiguous Information Requests simply stating the requirement to supply an Economic Need and Impact Assessment Report with little direction as to the purpose of the report or what it is intended to demonstrate, and how it would inform Council’s decision process. 

Economic Need and Impact Assessments are required to explore the need and demand for a proposed development, in light of the surrounding network of facilities, and to provide an analysis of the likely impacts of the proposed development. 

It must be remembered that when considering need, need is more than simply an estimated level of demand for a proposed development, nor does it relate to how a proposed development would actually perform. 

Need, as is recognised by the Queensland Planning and Environment Court, relates to the betterment to the community that may be derived from a potential development or how a proposed development would address unmet demands within a community. 

There are typically three components of “need” – economic, community and planning need. We define economic need as relating to the demand for a proposed development, the quantification or measurement of changes in demand that necessitate or support additional facilities – growth of a population, growth in the number of young children needing childcare places, growth in motor vehicles generating additional demand for fuel retailing facilities, the growth in older persons requiring access to aged care beds etc. 

Community need is somewhat more esoteric, in that it explores the betterment to the community as a result of the proposed development or indeed the disbenefits to the community if the proposed development did not proceed. Qualitative issues can include an improved level of convenience or accessibility to a supermarket, the introduction of a new, modern childcare centre, choice in service station operator, improved access to health care for an at-risk community. 

Planning need from an economic perspective, assesses how any demonstrated economic and community need for the proposed development could be or cannot be accommodated within the planning scheme – is there centre zoned land that could accommodate an expansion to retail activities or are there existing vacancies within a shopping centre that could accommodate the proposed mix of uses? Is there sufficient industrial zoned land to accommodate a new warehouse development? Can a residential aged care development be accommodated within the residential zone to meet the needs of an aging residential community? This exercise is often a cross-over between economics and planning disciplines in exploring existing and intended zoned land relative to the proposed mix of uses. In one recent example, the economic report demonstrated that the local planning scheme had indeed been overtaken by events and that there was need to rezone additional land for residential purposes that would cater for both strong population growth and address challenges to affordability.  This required considerable interaction between the town planning and economic disciplines to identify the scale of existing and zoned residential land relative to approvals and densities, and in relation to the timeframe to support projected growth in demand for additional detached residential lots.     

A comprehensive Economic Need and Impact Assessment report will undertake a demand and supply analysis and critique in exploring the role of the proposed development, how the proposed development will meet economic and community needs, and in demonstrating how these needs can or cannot be adequately accommodated within the surrounding network.  Key tasks and deliverables may include:

• Trade area analysis including population growth, demographic profile

• Supply analysis

• Demand analysis

• Economic, community and planning need

• Assessment of impacts of the proposed development

• Critique of potential economic and community benefits

We also consider that it is important to demonstrate to Council what are the key demand and supply drivers influencing the proposed development and the need for the proposed development, which could include key development or industry sector trends, changes in consumer behaviour, social or demographic changes that are influencing demand. 

The impact assessment is intended to test the implications of the proposed development on the existing supply – for instance, what are the effects of a proposed shopping centre on turnover performance of existing centres? What would be the implications of a new childcare centre on occupancy rates for existing centres?

Councils with defined centres hierarchies may also want to understand the implications of the proposed development of a new shopping centre or commercial development on the role and function of the centres’ hierarchy.  For instance, the Need and Impact Assessment Report will be required to explore what changes if any, the development of a new shopping centre or commercial development may have on the role of other centres in the hierarchy – will it elevate a centre to a higher order in the hierarchy? How will the proposed development fit into the existing hierarchy? Are the facilities proposed consistent with the nature of centres intended for the hierarchy? Will the proposed development have an undue level of impact on performance of centres in the hierarchy?

Council officers will either review the report internally or depending on the range of issues, may elect to have the report peer reviewed by an independent economic consultancy.   The report may also be subject to reviews by submitters.  We are regularly engaged by a range of local authorities to undertake such peer reviews.  Where there are clear policies in place the peer/independent review will assess how the Need Report has met the requirements of the policy/reporting or Information Request, and may recommend to Council any additional areas that will need to be addressed for Council to make an informed decision as to the application. 

“How to” Journalist Darrell Huff’s book “How to Lie with Statistics” states that “there is terror in numbers”.  Not so! Numbers can be a TERRIFIC resource in contributing to the development application process and rigorous economic reports can articulate the economic and community benefits or contributions and the economic, community and planning need for proposed developments. 

Knowledge as they say is power, and understanding the local demographics, the existing supply network, gaps in the market and growth potential can be as vital to the design, positioning and scale of your project as contributing to Council’s assessment of the economic and community implications of the proposed development. 

Kerrianne Muelman, Managing Director, Urban Economics