10km CBD Rule Why?

For some time now I have questioned myself as to the current day relevance of purchasing property within a 10km radius of a CBD.
We all try but why? and is it even still practical and or relevant in today's ever changing suburbs.
Some interesting points made below ...read..
A little food for thought.... who on SS works only a 10km radar?

By Leith van Onselen

Much of Australia?s planning policies are based on the presumption that the bulk of the population commutes to the central core for employment. As such there is the desire by planners to limit urban sprawl, which is believed to reduce overall commuting times, resource use and pollution, and the need for costly infrastructure improvements, such as new rail lines. Similarly, there has been a growing desire by planners to increase the proportion of housing located along transit nodes, such as train stations, again based on the assumption that most citizens commute to the central core for work.

Ross Elliott, author of The Pulse, has written a great primer questioning this notion. In association with Urban Economics, Elliott has undertaken a detailed examination of ABS Census data to determine where jobs in Australia are located. And contrary to popular belief, they have uncovered that the lion?s share of jobs in Australia?s capital cities are not located in the core, but the suburbs:

A widespread impression exists in the mind of many from the general community through to the media, urban planners and even some senior policy makers that the city centres (?central business districts?) of our capital cities are the biggest employers in our economy?

The reality, however, is that despite their profile, our CBDs account for a very small proportion of jobs in the economy. Census data for employment has its limitations but even with these limitations in mind, the evidence is emphatic: employment in our cities is overwhelmingly located in suburban locations.

Based on analysis of the ABS Census, in Sydney in 2011, the CBD accounted for only 8.3% of all jobs in New South Wales, and for only 13.4% of all jobs in wider metropolitan Sydney. Including the surrounding areas of Pyrmont, Ultimo, Potts Point, and Woolloomooloo raises this share to just 9.7% of all jobs in the state and 15.6% of jobs in metropolitan Sydney.

In Melbourne, the CBD is home to just 7.6% of the state?s total employment, and to just 10.6% of all jobs in greater Melbourne. Including the ?fringe? locations of Docklands and Southbank sees this share rise to only 10.3% of the state and 14.3% of greater Melbourne.

In Brisbane, the CBD share is just 5.8% of the state and 12.5% of the Brisbane region. Including South Brisbane, Fortitude Valley and Spring Hill raises this share to 8.8% of the state?s jobs and 18.8% of jobs across the Brisbane region.

Looking at it another way, in these major centres at least 9 out of 10 jobs state-wide are located outside the CBD/frame, and even across the metro region, about 5 out of 6 jobs are located in suburban locations as opposed to the centre?

?in 2001 the Brisbane CBD?s share of metro wide employment was 14.3%. Over the ten year period from 2001 to 2011, this share actually fell to 12.5%. Including the city fringe areas saw the ratio slip marginally from 19% to 18.8% over the same period, suggesting a leakage of sorts from the CBD to city fringe areas. CBD employment actually grew in that period by 18,793 jobs but what the data reveals is that suburban employment in the Brisbane metro grew faster and by much more ? an increase of nearly a quarter of a million jobs across the Brisbane metro region compared with the 18,793 increase for the CBD.

In Sydney, the CBD and inner city areas accounted for 15.1% of jobs in greater Sydney in 2001. By 2011, this proportion had changed little to 15.6%. (Boundary changes by the ABS over the period make CBD-only comparisons difficult). An increase of more than 40,000 jobs in the city area over that time was dwarfed by the increase of more than 200,000 jobs across greater Sydney in the same period. Hence the ratio remained unchanged.

In Melbourne, the CBD share of metro wide employment was only 10.2% in 2001. Ten years later, it too had changed little, reaching only 10.6% (although a slightly larger boundary in 2011 would account for this increase). The inclusion of the Docklands and Southbank precincts over this period sees the ratios move from 12.1% of greater metro Melbourne jobs in 2001 to 14.3% by 2011 ? a significant increase of sorts, which points to the impact of these new precincts on spatial employment patterns in Melbourne. But still, the combined areas of the Melbourne CBD, Docklands and Southbank account only for one in every seven jobs across the metropolitan region. Hardly a dominant position?

As for the policy implications of these results, Ross Elliott makes the following salient remarks:

There are a number of quite significant public policy implications that suggest themselves based on this evidence. Public transport policy is just one. Our public transport systems are mostly based on a hub and spoke system (particularly for fixed routes as with rail) where the hub is the CBD and the spokes spread out. This system serves a highly centralised employment model but is notoriously inefficient (and prohibitively costly) when it comes to decentralised employment.

If typically our CBDs contain only 10% to 13% of broader metropolitan area jobs, even with unlimited budgets, the capacity to ever reach high proportions of overall public transit use are virtually non-existent simply because the networks will struggle to take people where their jobs are (overwhelmingly in the suburbs). This reality of employment distribution is something which receives very little prominence in public policy discussions about public transport investment; perhaps it should receive more? If only 10% to 14% of all jobs in the metro region are in the inner city areas, how can we ever expect to set targets much above that for public transit use? It?s a logical and mathematical improbability.

It also means that the billions of dollars needed to upgrade public transit systems will only ever be able to serve the minority of the working population whose jobs are in locations capable of being served by public transport, based on current distribution of employment and the nature of transport networks. And it means that the majority who use private transport to reach their suburban workplaces would be unrealistic to expect the scale of infrastructure investment needed to de-congest the suburban road network. Fixing this conundrum means either a massive re-centralisation of employment around the CBD or achieving rates of population density across urban areas of Australia that are more likely to be found in Asian centres. Neither of which will happen soon.

The other large, daily population movement around our cities, that of students, is obviously also very decentralised and thus not efficiently serviced by a CBD-centric transportation system. Plus, community wide changes of attitude about child safety have had a noticeable impact on the proportion of students who catch public transport, walk or cycle to school. by students.

There is no easy answer in this but setting unrealistic public policy targets for public transport systems in cities where employment is overwhelmingly suburban and not easily serviced, is setting ourselves up for public policy failure and community disappointment.

Another implication that flows from this spatial distribution of employment involves TODs (transit oriented development). The premise on which much TOD thinking is based is that creating housing options around transit nodes such as suburban train stations will allow people more convenient commutes to the inner city and hence relieve road congestion by lifting public transit patronage, among other promised benefits. There will no doubt be a proportion of the population for whom this is very appealing but given the low proportion of jobs actually located in CBDs compared with suburban locations, this level of demand is finite.

Indeed, it may be that as well as creating higher density housing opportunities around suburban train stations in order for residents to commute into the city, we could equally consider creating higher density employment opportunities around suburban train stations, so that inner city residents could commute to suburban workplaces. Is it fair to suggest that to date, the emphasis on TOD planning has been largely on TODs as dormitory residential opportunities for inner city workers, and that this doesn?t align very neatly with the realities of the demography of employment? The evidence points to a broader land use mix for TODs than many have envisaged.

Another public policy implication is both planning and market based. Our CBDs are expensive places for businesses to operate from, but this higher cost base is offset against a number of locational and marketing conveniences along with amenity factors that CBDs have in their favour. However, steeply rising rents, combined with costly car parking may be pushing more employers out of these locations and into city fringe or suburban locations. The evidence is there to support this?

This high cost structure may be encouraging a decentralisation of employment away from CBDs. If this is true, this would mean that costs are pushing jobs into locations that are less well served by public transport. Suburban employment is efficiently served by the private vehicle while centralised jobs in high density CBDs are well served by public transit. Further public policy attempts to raise the cost of business in CBDs (such as cordon tolling ? a vehicle tax on the inner city) may only have the effect of further decentralising employment and working against the very claims of its proponents (to encourage more public transport use)?

Planning regulations which typically favour housing density in inner city areas may need to be more flexible in the future if creating housing closer to places of employment is to be a reality.

It?s equally possible that the potential for employment land uses in suburban locations has been inadequately considered by policy makers. It is a complaint of many developers that access to suitably zoned employment land in suburban locations is constrained. Perhaps allowing more opportunities for this to happen would mean creating opportunities to take workplaces closer to peoples? homes? The same could be said for major transit nodes. As noted earlier in this article, while these have traditionally been thought of as high density dormitory opportunities for inner city workers, the evidence suggests they may equally offer opportunities as high density employment locations for residents living along the network.
Entertainment, night-life, shopping, or somewhere central between friends and family?

People also change careers or job locations. There are many suburbs but only once CBD. Should you move suburbs every time you change jobs? It wouldn't make sense to stay south of the CBD if your new job is far North?
Yes, I think they didn't consider that being Central is another aspect. My hubby can end up working on either side of the city. If we live 25k's south and he lands a job for a couple of years 20k's North it can really add up on traveling so the closer we live to the city the easier it is with his workplace constantly changing.
Interesting post, imho, for Melbourne, the sweet spot is anywhere between 10-15km radius and towards the Eastern end. Not too far from CBD but also not too close so it doesn't "feel" like a work day.

Any suburbs closer and it feels like a bit too close to CBD with very small parcels of land, 15km+ and it seems like whoop whoop.
For some time now I have questioned myself as to the current day relevance of purchasing property within a 10km radius of a CBD.
We all try but why? and is it even still practical and or relevant...

Yep, it's relevant. I read somewhere last year that well over 500,000 people head to the Sydney CBD to work each day.

For some time now I have questioned myself as to the current day relevance of purchasing property within a 10km radius of a CBD.
We all try but why? and is it even still practical and or relevant in today's ever changing suburbs.
Some interesting points made below ...read..
A little food for thought.... who on SS works only a 10km radar?
That was an interesting article. I don't it is fair though to say that we all try to buy within 10km of the CBD. That strategy only represents one of the multitude of strategies adopted by people on this forum. I know one person only buys greater than 15km from the CBD. Another person only buys (or builds) new places. I know some people have done well out of apartments but apartments are not part of my strategy.

My strategy (to date) is to buy places with development potential within 15 km of a CBD. I have one in Melbourne that is 13 km from the GPO and one in Perth that is 10km from the GPO. That's phase one.

After they have been built out, I will be looking to buy some blocks to build on. They will not be within 10 km of the CBD. I will use different selection criteria to choose the blocks. Different strategy, different criteria. For example, I might buy something close to Perth Airport, something where there is a future train station or near a shopping centre upgrade. At this stage planning to purchase in the 15 km to 20 km to CBD range. Proximity to the CBD will not be a consideration for those purchases. I hope this helps!
The article is a great example of twisting statistics to look like one particular outcome.

Take the Melbourne CBD. It accounts for 10.3% of jobs in Victoria and 14.3% of metro jobs. The CBD also accounts for less than 1% of the land area of metro Victoria.

Simply put, the Melbourne CBD has the highest employment density of Victoria, probably by several orders of magnitude.

Real estate prices are driven by supply and demand. The inner suburbs of Melbourne have the most limited supply in the state, and simply based on employment stats (nobody likes a long commute), by far the highest demand. Hence it's the most expensive real estate in Victoria. This also ensures it will continue to be amongst the top performing real estate in Victoria.

Next we can talk about where the highest density of the most prestigious private and public schools is in Victoria (hint: there's some great schools all over the state, but the highest density is within 10km of the Melbourne CBD).
As Peter said he is just twisting statistics.

If you take Melbourne as an example - 14.3% of jobs are in the CBD, Docklands & Southbank - that's just 3 suburbs. If you added suburbs within 2km of the CBD (Richmond, St Kilda Road, Port Melbourne, South Melbourne, Carlton, North Melbourne, Parkville, etc) I think you'd quickly find that over a third of all Melbourne jobs are located within a couple of km's of the city. That's very significant when you consider the size of our city.
Statistics aside some interesting points made by all..
Governments for one, in particular QLD are very pro active in looking at decentralization of workers based in city locations for cost saving alternatives.
The creation of numerous business hubs and technology parks in the suburbs could add further debate to a progressively less centralized workforce. However we live in changing times and though we may hold opinion of what seems obvious, certainty only holds within the moment..
I agree the CBD holds great significance to people as a respectful landmark for work and leisure but more importantly I believe on a deeper level it holds a psychological and physiological bearing from which guides our social and environmental compass and we don't even know it:eek:... For this reason I believe our inner city's will always prove popular.
However I'm calling that 15km will soon become the new 10...;)
The tenant / future buyer demographic matters

It seems to me that if your target tenant or future buyer is a particular demographic, lets say professionals on a good salary with no kids then where is the highest concentration of this demographic?

In this situation, with this demographic in mind you are going to be more interested in the proportion of people in this demographic compared to the total jobs in an area. This information is readily available in the census data, albeit dated now (2006 & 2011 the most recent).

For example, if there are 2000 full time employed people in a suburb and 75% of these are professionals and 60% of households have no kids it might be a better situation than a suburb with 5000 full time employed people of which 25% are professionals and 10% have no kids.

The latter has a greater % of jobs than the former, but it might be absolutely useless for your decision making.

I think the reality is that the 2-10km ring has a good balance between amenity, time lost commuting, lifestyle options, employment, government services etc.

When I started investing I followed the 10 km rule but this was probably more about what I thought I needed to do to achieve growth and my inexperience in the property game.

We can rattle off statistics till the cows come home, but what really matters at the end of the day is supply vs demand and this is not exclusive to areas 10km from CBD, and also probably has nothing whatsoever to do solely with employment stats.
Small % of jobs, perhaps, but the types of jobs most people would aspire to would all be 'within 10km of the CBD' too...
Small % of jobs, perhaps, but the types of jobs most people would aspire to would all be 'within 10km of the CBD' too...

That's a good point. Would be interesting to see some stats on the percentage of 'high' incomes, or incomes above average in the CBD.
can not just focus on jobs.....

jobs vs affordability, and the product which may/may not be suitable for families.
Been investing in the inner 10klm's southside of Brisbane for the past 26 years from west end out too rocklea,west end seems to have a higher middle class % of academia and phd's,where as rocklea has more blue collar workers in different employment sectors,but from what I see the big benefits go to the top and bottom ends of the socioeconomic spectrum not the middleclass but the big question will all those jobs be still there over the next decade..
That's a good point. Would be interesting to see some stats on the percentage of 'high' incomes, or incomes above average in the CBD.

I read a while back that the median income of people living pretty close the the Sydney CBD was over $100,000. I didn't verify the source so take it with a grain of salt but it makes sense.
This old furphy again.

Cities are becoming increasingly decentralised and have been for decades making this close to the CBd nonsense more and more irrelevant every year.
This old furphy again.

Cities are becoming increasingly decentralised and have been for decades making this close to the CBd nonsense more and more irrelevant every year.

There are plenty BA that promote this furphy, time in the market will cure this
There are plenty BA that promote this furphy, time in the market will cure this

From reading the responses above, investing within 10kms of the CBD seems to be widely accepted by many investors as well.

Over the years I've come to understand that investing is multi dimensional, taking into account capital growth, yield and strategy.