[+] Coronation Drive Renewal ‘Doesn’t Stack Up’

Coronation Drive in Brisbane’s inner west may never enjoy the revitalisation other River City office precincts are undergoing, despite its development potential. The 2km riverfront road is hampered by a lack of space and the value of existing older commercial buildings. Silverstone Developments and its founder Troy Daffy won approval for its 25-storey office tower at 299 Coronation Drive last month that will replace an existing four-storey office building. But Daffy acknowledges that Coronation Drive is in a transitional commercial stage and no longer viewed as a premier office location. “The buildings are dated … their vacancy rates are not great … [and] their efficiencies are poor … so the flight to quality has hurt a lot of the properties,” Daffy says. “The office accommodation is also low quality compared to what’s being offered in Fortitude Valley, South Brisbane and the city.” Daffy says that construction on his office tower can’t begin for at least five years until existing leases expire and as with other developers, he is mindful of increased construction costs since Covid, although residential costs may be easing. CoreLogic’s Cordell Construction Cost Index report shows national residential construction costs have grown at the slowest annual rate in 22 years. ▲ Coronation Drive west of the Brisbane CBD. Coronation Drive’s existing buildings—some of which have undergone substantial improvements—have also caused issues for developers. Daffy says it made sense for South Brisbane or Fortitude Valley developers to knock down often vacant “tin sheds” and replace them with taller buildings as demolition costs were minimal. But most of the older, commercial buildings on Coronation Drive offer relatively good value. “The highest and best use of a site here is still a B and C-grade building, even though the rent and quality are poor,” Daffy says. He says the sale of Centuria Group’s building at 555 Coronation Drive for $37-million-plus was a key sign the building would not be demolished and replaced. “If someone’s going to pay $34 million or more for a building … they’ve got no intention of knocking it down,” he says. “They’re going to set leases for the next 10 or 15 years.” JLL Brisbane senior executive Andrew Benson leases office and retail space at Milton Green, a 4ha precinct on Coronation Drive similar to the adjacent Kings Row precinct and also owned by the Taiwanese-based Shayer Group. Shayer Group hopes to build on Coronation Drive demand with its application submission in June 2023 to develop an “urban village” at King’s Row. The $300-million-plus masterplan would feature four towers of up to 37 storeys comprising residential and office tenancies and include heritage-listed Milton House. ▲ The historic Milton House that dates from the 1850s. But the plan is in limbo amid concerns the buildings will block riverside views from Milton House, a heritage-listed villa at 50 McDougall Street built in 1852. Morris Property Group’s 33-storey residential application filed in July 2023 for 19 Eagle Terrace, at the corner of Coronation Drive, is also waiting for approval although its $250 million, 24-storey office tower for the same site has been ticked off. Benson believes Coronation Drive’s peak commercial build time is limited or may never occur with residential spaces succeeding sooner as approvals for high-density buildings increase. Yet, he says, commercial owners and developers could profit from the near-build out of South Brisbane and Fortitude Valley in the long term. “It wouldn’t be unsurprising to see commercial landlords consider sales to a residential owner,” Benson says. Two residential developments on Coronation Drive are proving successful with Consolidated Properties Group’s Monarch Residences at number 600 almost sold out. The $450-million, dual-tower project on the former ABC site features 224 apartments—with just 17 still available—and includes the heritage-listed Middenbury House. Seventy per cent of Spyre Group’s $150-million Arc Residences project at 570 Coronation Drive, which is now under construction, has also been sold off the plan. But again, Coronation Drive’s limited space is a problem for developers. Colliers International residential director and Monarch sales agent Andrew Scriven says apart from Monarch and Arc, there are only “scattered opportunities” for residential projects. ▲ A render of the Arc Residences under way at 570 Coronation Drive. He says that the straight’s abundant office spaces means redevelopment into residential is unlikely as they would need to be rezoned, and commercial owners were already collecting good rents and enjoying high occupancy rates. Knight Frank’s Brisbane Fringe Office Market report says Toowong’s vacancy rate was 7.5 per cent in January. However, Milton’s vacancy rate of 19.1 per cent remained the highest in the Brisbane fringe area, a figure elevated by the inclusion of the refurbished, fully vacant building at 30 Little Cribb Street at Milton Green. Knight Frank investment sales directors Blake Goddard and Matt Barker—the latter one of the agents behind Centuria Group’s office building sale—says there had been a spotlight on Coronation Drive lately. With fellow Knight Frank agent Justin Bond, Barker listed 339 Coronation Drive in June 2023 . While now withdrawn from sale, the property was the largest office building to hit Brisbane’s fringe market in 2023. Barker and Goddard say they expected the straight to remain a mixed-use precinct with offices remaining important. High-density possibilities also gave residential spaces a good chance of succeeding. “In the short term, refurbishment and small developments will provide the only options for refreshed space, with no significant new assets under construction,” they say. “But with 20-30 storey planning allowances for parts of Milton, there is more scope for residential developments (than commercial), given the current difficulties with commercial feasibility.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Coronation Drive Renewal ‘Doesn’t Stack Up’

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