Do firms want to be in suburban centres?

We know that most jobs in Melbourne are now in the suburbs. There’s also an increasing understanding that large metropolitan areas are now generally polycentric rather than monocentric in form i.e. there are significant activity centres outside the CBD with large numbers of jobs. The strategic planning update to Melbourne 2030, Melbourne @ 5 Million, released in October 2008, explicitly acknowledged this reality.

It is clear that firms can increasingly obtain the benefits of density, such as face-to-face contact, in both inner city and suburban centres where they don’t have to carry the extra costs in rent and congestion imposed by the very high density of the CBD. The CBD’s share of metropolitan jobs has consequently fallen significantly over the last 30-40 years (it has staged a small revival since 1996, showing significant jobs growth in absolute terms, but its share of metropolitan jobs has not increased).

Tysons Corner - the archetypal edge city

Yet many studies in many countries have found that while the number of suburban and inner city activity centres is increasing, the proportion of jobs located within them is falling. In fact, around a half to two thirds of employment in US cities is scattered across the metropolitan area at relatively low densities. Inter-city and cross-country comparisons are difficult, but the evidence suggests that suburban jobs are even more scattered in Melbourne.

It seems that firms can increasingly achieve the benefits of agglomeration at a larger geographical scale than that of the CBD or suburban activity centres. The advantages of physical proximity have apparently declined to such an extent that the costs of aggregation now exceed the benefits at ever lower levels of density.

But why are firms increasingly spurning density? Read the rest of this entry »