Economic, financial and social impacts of the Subiaco East redevelopment project

The Issue

The planned demolition of Subiaco Oval stadium and the decommissioning of Princess Margaret Hospital have provided an opportunity to re-activate Subiaco East through creating new residential areas, community spaces, cultural precincts and commercial spaces for retail, dining and entertainment. LandCorp engaged Synergies to compare the expected economic, financial and social outcomes of several shortlisted concept plans for the area. The objective of the analysis was to identify options for carrying forward to a  detailed business case.

The Solution

Synergies prepared a range of scenarios that reflected the development cost and demographic profiles derived from key defining features of the selected concept plans such as dwelling configuration (number of bedrooms) and building size (number of apartments).

To assess these scenarios, we applied various analytical techniques to assess the economic stimulus, financial impact, wider economic costs and benefits and social outcomes arising under each scenario. These analyses provided government decision makers with a comprehensive understanding and robust analysis of the potential impact of the proposed redevelopment project at multiple stages, depending on the concept plan chosen.

Firstly, we conducted an economic impact analysis to assess the economic stimulus associated with the growth during preparation of the lots for release (construction expenditure) and after residents have moved in (jobs, industry value-add, etc.) for Subiaco and Greater Perth.

Next, we conducted a financial impact analysis to quantify the net financial impact on the state government.

Using a cost benefit analysis, we evaluated the wider economic costs and benefits of this urban infill project, relative to a base case scenario in which the project does not proceed. Benefits included reduced travel times for commuters and environmental benefits of shorter car journeys, avoided infrastructure costs that would otherwise be incurred through further development on the urban fringe and higher urban amenity values – as reflected by increased land values.

Lastly, social outcomes and impacts of the development were assessed. This included assessing social impacts on various population groups. For example, the project is expected to improve housing affordability and diversity for people wanting to live in an inner-metropolitan area.

The Results

The economic benefits were assessed at both a local level and a state-wide level and were reported in several different measures, including:

• the Net Present Value and Cost Benefit Ratio of the project over a period of 50 years;
• Annual ‘value added’ and associated employment benefits during construction and once the development is completed to Greater Perth and Subiaco; and
• The net financial returns to the State Government from sales of land generated by the collection of stamp duties and other rates and taxes.

Conclusion

Our comprehensive analysis of the proposed redevelopment helped inform LandCorp’s decision on which concept option merited further development and evaluation for inclusion in a detailed business case.

In early September 2019, the Subiaco East Redevelopment received state government approval and $227 million of state funding has been committed to transform the Subiaco Oval and former Princess Margaret Hospital (PMH) sites.