Lord Mayor Adds Bonuses to Melbourne Office-to-Resi Promise

After a “thumping victory”, City of Melbourne’s new Lord Mayor, Nicholas Reece, has revealed details of a major election promise: the push for more conversion of office to residential . Reece now plans to introduce incentives for developers to take on such conversions. “I flagged during the election that I would look at the planning code and see what we could do in terms of development bonuses to make it attractive for property owners and developers to do office to residential conversions,” Reece tells The Urban Developer . The Mayor has put up development bonuses, rate holidays, permit and other charge waivers to incentivise developers, particularly for the first few projects. “We’ll have to run a number of trial projects to work out what is needed to make these projects viable,” Reece says. “And so certainly on the first five projects we wi ll be very generous in terms of ... incentives to see developers and land holders build more housing stock in the city.” The City of Melbourne council will need to approve Reece’s ideas before they become policy. But it is not just office conversions Reece is keen on—he also sees value in adapting and reusing buildings generally, especially if it can avoid demolition and rebuilding. “I hope to see other types of conversion happen as well—that could be office to aged care, office to health care, office to education, office to hospitality,” Reece says. ▲ The adaptive reuse of offices to residential is a global trend on the rise, such as this example in West Hollywood, California. Going up is another worldwide trend Reece is keenly aware of. “When you look at a lot of other big cities around the world, whether that’s Tokyo or New York or other cities throughout Asia, you see vertical villages,” Reece says. “Tall towers that are used for not just office, not just residential, but many other uses, like aged care, like education, like healthcare ... I would love to see more of that in Melbourne.” Research outlines opportunity In 2023, architecture firm Hassell produced a report, Radical Reuse: From Office to Home for the Property Council of Australia that detailed how many buildings could be adaptively reused. The report found that of the 1323 buildings in the Melbourne CBD built before 1990, about 86 buildings could fit the bill for office-to-residential conversion. “These buildings are typically not A-grade or premium quality, making them more appropriate for repurposing,” according to the report. “They also tend to have a higher chance of being unoccupied, simplifying the reuse process. “Additionally, these older buildings are well-suited in size (not overly large), often require substantial upgrades, and have untapped structural potential.” The buildings also needed to be more than 10 storeys and with widths that did not exceed 24m to keep within the Better Apartments Design Standards (BADS) for accessibility to natural light when designing the apartments. Not all 86 buildings will be suitable, according to the report, but it estimated that even converting half of the buildings would generate between 10,000 to 12,000 new homes within the CBD. Reece’s election promise was a more conservative 4000 new homes. ▲ The map shows 86 buildings ripe for conversion. Image: Hassell. Source: CoM CLUE Data 2021 The conversion plan provides ways for investors and developers to get value out of B, C and D-grade office buildings built during the 1970s to the 1990s. Upgrading such assets to modern, A-grade standards would not be financially viable. “Employers understand they need to win the commuting of their workforces,” Reece says. “And so that means that offices need to be of the highest standard, both in terms of amenity and sustainability. “So for many of those ageing office towers, converting them to residential housing is an attractive alternative.” Precincts on rise Other projects, Reese says, involve “cracking on” with key precincts: Fishermans Bend, Arden, Macaulay and West Melbourne. “Melbourne is blessed to have large tracts of land suitable for residential living very close to the city,” Reece says. “I am going to be pushing hard to see new development happening in these areas.” But changes to key planning schemes around development contribution schemes and infrastructure for these precincts has been slow. The council noted this year that the Victorian planning department had not responded to queries around amendments for the Macaulay precinct that would provide lower infrastructure contributions for developers and allow authorities to act on flood planning measures. Reece says he is not happy with the pace of progress in the Fishermans Bend precinct, a small part of which falls in the City of Port Phillip, a council that has been equally vocal about the lack of progress. “I have been frustrated by the pace of development in Fishermans Bend,” Reece says. “I expected to see more development occur there than what we have seen so far. “I had hoped to see a more substantial commitment from the State Government around transport infrastructure into Fishermans Bend in the form of a tram line, and ultimately Metro too, which would be an underground rail line through Fishermans Bend.” ▲ Reece says he had expected more development at Fishermans Bend. Transport infrastructure is vital to ensure the precinct can support the housing projects the city councils and the State Government envision for the precinct. “At the west end of Fishermans Bend, those transport connections are really important,” Reece says. “At the east end ... they are not as critical.” He also noted that the five new train stations on the Melbourne Metro service would have a profound impact on the city, creating opportunities for more development around them. “That will bring 150,000 extra people into the city,” Reece says. “And those five stations, they’re not just railway station portals, they are new precincts for Melbourne ... I expect to see a lot of new activity around those stations, in those new precincts, presenting exciting new opportunities for developers.” The Greenline project Reece also confirmed his support for the Greenline project, the council’s plan to redevelop and green the northern bank of the Yarra River, Birrarung Marr. The cost of the project became an election issue. “This is now the third election we have had in the city of Melbourne, where Greenline has been debated in an election and it is now the third time that the people of Melbourne have given [it] a resounding yes,” Reece says. ▲ A render of the entrance to Birrarung Marr on the Greenline. He says that there will be a significant return on investment in Greenline. “It returns more than three-to-one to the city for every dollar invested,” Reece says. “It will do for the north bank of the Yarra River what Melbourne did on the Southbank 30 years ago with South Gate Crown Casino and the Southbank promenade.” The new promenade extends from the tennis centre along the river to Docklands, covering 4 kilometres. Reece’s message to developers is that Melbourne is open for investment and development. “Melbourne is now the biggest city in Australia,” Reece says. “We are also the fastest growing—and when you are the biggest and fastest-growing city in a country, that presents enormous opportunities and possibilities. “I can’t wait to see what the development community plans to do in Melbourne.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

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