Major projects emerging from pandemic pause
Major projects emerging from pandemic pause
Developers are starting to rise from their COVID-induced slumber, with a revival in new project launches getting under way, development applications beginning to flow and construction progressing on major projects across the country.
For much of the pandemic, developers have concentrated on completing current projects rather than adding to their pipelines, raising concerns of future undersupply in key Australian markets.
A survey by the Australian Institute of Architects earlier this year revealed almost two thirds of respondents said they had projects stalled as a result of COVID-19.
Following the recent release of the 2020 budget, the institute echoed its concerns of the development industry falling off a construction cliff, with the federal government providing little support for residential and commercial developers.
But as the nation’s leaders plot a pathway out of the coronavirus-caused recession, developers are starting to once again mobilise major project plans.
In Melbourne, private development giant R. Corporation is set on being one of the first movers, with the company continuing to advance its $850 million R. Iconic project located in the Fisherman’s Bend urban renewal precinct, just south of the CBD.
In April, R. Corporation made the bold decision to continue with a planned marketing launch of R. Iconic, a striking two tower development comprising buildings of 40 and 32 storeys, with the first stage containing 456 apartments.
It’s a decision that’s paid off for the developer, with selling agents Colliers International squaring away more than 150 sales - valued at close to $100 million - despite the headwinds of the pandemic.
Colliers International managing director of residential Tim Storey said Melbourne’s Stage 4 lockdown also didn’t derail sales at R. Iconic, with a significant number of apartments sold via Zoom meetings.
Part of the attraction for buyers, Mr Storey said, was R. Corporation’s commitment to start construction before the end of 2020, which made R. Iconic buyers eligible to apply for the federal government’s $25,000 HomeBuilder grants.
“It’s good for the market to actually have a project launched and start construction this year - I don’t know of any other developer that’s done it in Melbourne,” Mr Storey told Australian Property Investor Magazine.
“The thing about Melbourne, if you take out the pandemic and the negativity you’ve heard in the last seven or eight months, Melbourne was in a situation of massive undersupply.
“This year was the peak supply level for all of the big projects that are out there, all of the big towers.
“Realistically, over the last two or three years we’ve only seen a handful of projects being launched in Melbourne.
“There were various reasons for that - there were some planning and government changes, where we were no longer able to get the large density of development as the plot ratios changed, particularly in the CBD.
“And we lost a lot of key development sites to the commercial market, but the big one is the input of the foreign buyer stamp duty and taxes that were brought in.
“That really impacted on developers’ appetite to put in these big supertowers that they were developing.”
The buyer profile at R. Iconic is made up of three distinct groups, with investors being the smallest due to the challenges of marketing to international buyers during the pandemic, first homebuyers being the biggest thanks to the HomeBuilder grants, and downsizers from surrounding suburbs taking up the larger, more expensive apartments on offer.
Buyers have also been attracted to the level of common amenity on offer at R. Iconic, Mr Storey said, which goes above and beyond what many of the developer’s competitors had created.
“The key to the apartment market in Melbourne is not only the location or the architectural aesthetics of the building, it’s actually the amount of amenities that are available,” he said.
“As the market has evolved in Melbourne the quality of apartments has gotten better, not only from a design aspect but also the amenity aspect, and people are becoming aware of the differentials in the market.
“As some of these buildings have been built, we’ve found that the market and the rents are very strong in these buildings.”
Mr Storey said R. Corporation had taken a leap of faith in advancing R. Iconic, not only because of the pandemic, but also because it is the first mover in Melbourne’s CBD South.
“The natural logical growth of the CBD will be through the Fisherman’s Bend urban renewal precinct,” he said.
“No one has really gotten into that market yet, it’s basically a brand new market.
“A lot of developers haven’t actively launched developments - there are a lot in planning and a lot have been proposed.
“One of the points of difference that we saw in the market was if we could create a CBD-style product for buyers that would have otherwise purchased in the CBD, they would see the value proposition in the extension of the CBD by buying in early before it was fully developed, and buying at a price point that is 30 per cent cheaper than what they would be paying in the CBD.
“I think South Melbourne is $1.4 million and Port Melbourne is $1.7 million, so we are around those established suburbs, where you can’t buy a renovated terrace for under $2 milion.
“So not only do we have a CBD South market emerging, but we also have the opportunity to get the first homebuyer market who are renting in those established and trendy inner city suburbs and give them the affordable opportunity to purchase.”
In Sydney, the start of this month heralded the launch of a new force in development in Ellerson Property.
Co-founded by brothers Fayad Fayad and Remon Fayad, Ellerson has an impressive pipeline at launch, with three projects being planned comprising a total of 2,150 apartments.
While the three planned projects are located in Sydney, Ellerson has launched with a national focus, with ambitions of developing in Queensland and Victoria part of the company’s strategy.
Fayad Fayad said the launch of the company had been in planning for around two years, and while much of 2020 had been marked by challenging conditions for developers, he and his brother were starting to see positivity in the property market.
“Even after the year we’ve had, the traditional spring market is a great time to be in property, because at the end of the day, people still need quality new homes in which to live, and we are here to help deliver desirable communities that are designed to meet our buyers’ future lifestyle goals,” Fayad Fayad told Australian Property Investor Magazine.
“We’re seeing first home buyers returning to the market, especially with the boost provided by the NSW government’s assistance schemes.
“To a lesser extent we are also seeing a few investors becoming active again, and we think the combination of these two factors bode well for 2021.”
At launch, Ellerson Property has three major projects on its books, with the likely first starter a 62-storey residential project located at 87 Church Street in Parramatta.
Designed by architecture groups Nettleton Tribe and Fox Johnson, the tower will contain 450 apartments and was recently named as one of 10 projects in the NSW government’s fifth tranche of developments to be fast-tracked for planning approval.
“The requirement for projects to be fast-tracked is that they must be able to commence construction within six months, as well as deliver considerable public benefit through new public open spaces or affordable housing, and demonstrate an ability to create jobs both during construction and once complete – which 87 Church Street will undoubtedly do,” Remon Fayad said.
The biggest of Ellerson’s three initial projects is its South Quarter, a 14,287 square metre precinct at Parramatta’s famous Auto Alley, also on Church Street.
At South Quarter, Ellerson is planning to build five residential and commercial towers, ranging in height from 10 to 42 storeys, in addition to around 40,000 square metres of retail and commercial space.
International electric vehicle manufacturer Tesla has been signed as the precinct’s first tenant, a nod to the history of the Auto Alley site.
The project is in its final stages of design, with a modification of development consent currently being lodged.
Also in Parramatta, Ellerson is planning to develop a 60-storey, 950 apartment tower at the old Cumberland Newspapers headquarters on Macquarie Street, which will be complemented by two commercial towers of 35 levels and 25 levels, respectively.
Fayad Fayad said the aim for the projects was to establish Ellerson as a dynamic new brand for property consumers.
“With the hurdles that 2020 has thrown at us, the sector that has the most immediate promise for investors is residential,” Fayad Fayad said.
“As mentioned, we’re seeing green shoots of activity, especially in high-density product in outer urban areas, and this likely indicates it will be the first sector to return to some semblance of normality.
“Unfortunately, we expect the effects of the COVID-19 pandemic to be a little longer-lasting in the commercial, retail and hotel sectors, as the combination of ‘work from home’ arrangements, social distancing and travel restrictions play a role.”
In Sydney’s prestigious eastern suburbs, Dare Property Group has recently released its vision for a $51 million luxury apartment project located in close proximity to Tamarama Beach.
Designed by MHN Design Union, the boutique project will comprise eleven luxury residences designed to maximise views of the beach.
Dare Property Group managing director Danny Avidan said careful consideration had been given to ensuring the project, known as Kalypso, would fit in well with its surroundings.
“Tamarama is a place with a spell-binding energy,” Mr Avidan said.
“It’s not often you have the opportunity to develop in a location of this calibre, with views over a secluded cove, surrounded by stunning rugged cliffs.
“However, we’ve now had this opportunity twice, firstly with The Wave, which was also designed by MHNDU and has now become a landmark Tamarama building.
“Given MHNDU’s understanding and appreciation for the beauty of Tamarama, they were an easy choice for Kalpyso, which they’ve crafted with the contrasting tones and textures of the rugged coast it overlooks, foremost in their minds.”
Also in Sydney, Tian An LFD recently appointed Binah Group to build its $320 million Auburn Square project in Auburn, which has experienced a surge in interest following the federal government’s announcement it would extend the First Home Loan Deposit Scheme.
Tian An’s Auburn Square will comprise 427 apartments designed specifically for first homebuyers.
Brisbane bouncing back
Meanwhile in Brisbane, developers are preparing for the next wave of development en masse, with no less than six major development applications lodged since August.
In early August, town planning firm Urbis lodged a development application for a 28-level mixed use project at 251 Wickham Street in Fortitude Valley, on behalf of Pidson Investments.
Urbis described the project as an urban catalyst, which has the potential to strengthen the daytime economy of the Fortitude Valley precinct.
The proposal will comprise 14,550 square metres of commercial space, with considerable end of trip facilities and other amenities available for tenants.
Alceon Group also advanced plans in early August for its latest project, a $200 million mixed use precinct proposed to be built at 240 Sandgate Road in Albion.
Named Hudson Common, the plan centres on the refurbishment of an existing 10-storey office tower, and construction of a new, seven-level commercial building and a 15-storey residential tower.
If approval is issued later this year, work is expected to start early next year, with the precinct to be complete by late 2022 or early 2023.
In Bowen Hills, private developer Hudson Bowen Hills applied in late September to build a 24-storey commercial office and hotel project at 41-47 Brookes Street.
The Cottee Parker-designed project will comprise around 15,000sqm of commercial space and 128 hotel rooms.
ARA Private Funds also joined the DA rush, submitting plans for a 23-level commercial tower in Brisbane’s CBD, at 133 Mary Street.
The proposal has been designed by Fender Katsalidis.
South Brisbane has also been a focus for new projects, with Stockwell unveiling plans for two residential towers at 30 Merivale Street in September.
Stockwell collaborated with Mode Design Corp to create two buildings of 23 levels and 27 storeys, containing a total of 124 dwellings.
Rounding out the new DAs in Brisbane is a new three-tower residential proposal at the old Banyan Tree site in Kangaroo Point.
Developer Pikos Group has proposed to build two 15 storey buildings alongside a 14-level tower, replacing previous plans that called for a single tower to be built on the site.
A total of 63 three-bedroom apartments will be on offer.
Across the Nullarbor in Perth, ASX-listed developer Finbar Group has announced a new joint venture to create a $200 million apartment precinct on Hay Street in East Perth.
Finbar said it and its joint venture partner, Singapore headquartered Ventrade Australia, had acquired the site from the WA state government for $16 million.
The site had previously been earmarked for development by private developer Diploma Group, which collapsed in 2016 owing creditors tens of millions in unpaid debts.
Finbar is proposing a two-stage project comprising 340 apartments across two buildings.
Managing director Darren Pateman said the developer had attempted to acquire the site several times in the last eight years.
“This is an important acquisition that reflects Finbar’s historic and significant presence in the East Perth inner city precinct and its timing aligns well with the recent government announcements regarding amenity upgrades to the surrounding area which includes $60 million towards funding a new public pool and other improvements to the nearby WACA ground and $50 million for the new Heirisson Island cycling and pedestrian bridge improving local connections around the Swan River,” Mr Pateman said.
Mr Pateman said he believed the timing was right to add to Finbar’s pipeline of inner-city projects, with another development at 238 Adelaide Terrace to be marketed later this year.
“We are also currently experiencing an improving sales environment as a result of Western Australians returning to the state from interstate and overseas, and the increased economic activity taking place within the state,” Mr Pateman said.
The new project follows Finbar restarting marketing for its stalled $400 million Civic Heart in South Perth in September.
Private equity group Sirona Capital also returned to market recently in South Perth with a 37-level project known as 28 Lyall, designed by heralded architecture firm Bates Smart.