[+] hero western sydney missing out web.jpg

<p>Parramatta may be growing at a rapid pace but it is still the poorer cousin to the NSW capital’s premier CBD.</p><p>Missing the money, arts and infrastructure required, western Sydney must attract more investment to create the bustling and well-connected CBD it aspires to be, promoters say.</p><p>“Western Sydney’s voice has never been strong enough,” Trevor Oldfield, former president of the Chamber Alliance of Western Sydney, says.</p><p>“The fact is the rapid growth of western Sydney as a preferred destination to live has resulted in poor infrastructure. Moving around western Sydney is a nightmare.”</p><p>The alliance is represented by 14 chambers across western Sydney.</p><p>Its aim is to be a united voice for issues pertaining to western Sydney, particularly those that affect small to medium enterprises, to address the need for further education and to ensure western Sydney—as the largest growth area in NSW—receives the support from all levels of government.</p><p>“Outside Blacktown there isn’t much happening as far as art and sport are concerned,” Oldfield says.</p><div id="ups7yUAsrphYXYmJjMteT"><div><div id="gkgzjsFspbK999TEHF5xX"><picture><img src="//images.ctfassets.net/8pr762qjocl3/QEHXQhw9YdKsYFMkCIdew/c4b4069eb661809245d678ad7dfa8f28/3.jpg" alt="The connectivity between greater Sydney and the west must improve." data-mce-src="//images.ctfassets.net/8pr762qjocl3/QEHXQhw9YdKsYFMkCIdew/c4b4069eb661809245d678ad7dfa8f28/3.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Prominent western Sydney residents say their part of the state is too often overlooked or ignored.<br><br></span></div></div></div></div><p>“The inter-connectivity within greater western Sydney needs to be vastly improved.”</p><p>A leaked $2-billion proposal to redevelop the Sydney CBD and eastern suburbs into a cultural and arts precinct, with a 24/7 hospitality sector, commercial office towers and affordable housing has put a cat among the pigeons. Prominent western Sydney locals claim that they are last when it comes to NSW government spending priorities.</p><p>Business Western Sydney executive director David Borger says more investment is needed to create more central workplace hubs to allow people to work in the area that they live, not travel to the CBD or beyond.&nbsp;</p><p>“In the west we have high levels of tertiary-educated graduates,” Borger says.</p><p>“We have the brain power living in our postcodes, yet for too many of them they must travel to the other side of Sydney for work. It makes sense for businesses to have a presence in the places where their workforce lives.&nbsp;</p><p>“As the new airport and the aerotropolis comes to fruition, we need to see a clear plan to get public transport access from across western Sydney to the airport.”</p><p>But Urban Taskforce chief executive Tom Forrest says they are putting the horse before the cart.&nbsp;</p><div id="ups7yUAsrphYXYmJjMteT"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6yOvlbFQFiFBSFmvojjjfD/d3be900dba3e6c59f5034ef41cc35419/4.jpg" alt="A render of the Parramatta Powerhouse museum designed by Japanese-French practice Moreau Kusunoki and local architect Genton." data-mce-src="//images.ctfassets.net/8pr762qjocl3/6yOvlbFQFiFBSFmvojjjfD/d3be900dba3e6c59f5034ef41cc35419/4.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A render of the Parramatta Powerhouse museum designed by Japanese-French practice Moreau Kusunoki and local architect Genton.<br><br></span></div></div><p>“Sometimes there is a desire from well-meaning public servants to deliver the full suite of infrastructure services, including public art and cultural institutions, up front,” Forrest says.</p><p>“This is simply not practical or affordable.</p><p>“It is important not to confuse infrastructure investment in long-established built-up urban areas with that required for greenfield areas in outer Sydney. The base infrastructure needed in greenfield areas include water supply, storm-water drainage and sewerage, key classified roads, public transport and electricity.&nbsp;</p><p>“Social infrastructure includes schools, hospitals, police facilities— typically paid for by the state government with the support of infrastructure contributions from the developers. Local infrastructure, provided by councils, is funded through developer levies and is maintained using council rates from the landowners.”</p><p>The development of <a data-mce-href="https://www.theurbandeveloper.com/articles/lendlease-to-build-parramattas-first-6-star-400m-building" href="https://www.theurbandeveloper.com/articles/lendlease-to-build-parramattas-first-6-star-400m-building" target="_blank" rel="noopener">Powerhouse Parramatta</a> is being touted as a game-changer for the area, which will be the largest cultural infrastructure project in NSW since the Sydney Opera House.&nbsp;</p><p>“The investment in Powerhouse Parramatta is a game-changing public investment in arts and investment within the region and is set to be complemented by a new Parramatta Riverside Theatre,” Property Council Western Sydney regional director Ross Grove says.</p><p>“These investments are in the order of $2 billion and represent a rapid transformation in state arts and culture funding in the region.”</p><div id="3piibYqzqKkvo8a25iIabW"><picture><img src="//images.ctfassets.net/8pr762qjocl3/BQC29veGcAy6OsFGnEqHo/feaf00f4576d8233dbf9e42211a1facc/2.jpg" alt="A render of the proposed Parkland City." data-mce-src="//images.ctfassets.net/8pr762qjocl3/BQC29veGcAy6OsFGnEqHo/feaf00f4576d8233dbf9e42211a1facc/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A render of the proposed Parkland City.<br><br></span></div></div><p>There is also the Western Parkland City Authority, which is a commitment within the Western Sydney City Deal, setting the foundation for the Parkland City to become a fully realised 21st century city.</p><p>The $150-million commitment and 20-year partnership between the Commonwealth, NSW government and the eight local councils in the Western Parkland City will deliver transformative change to shape the region to become an epicentre for liveability in Sydney.&nbsp;</p><p>The new Federal government’s first Budget allocated $1.4 billion for vital land transport infrastructure projects in NSW to improve safety and reduce travel times.</p><p>There is $400 million for the new Richmond Bridge and traffic improvements between North Richmond and Richmond with an additional $100 million thrown in from the NSW government; $220 million (split 50:50 between the Commonwealth and NSW governments) allocated to upgrading Epping Bridge; $127 million in funding for the Dunheved Road upgrade in Penrith and $75 million committed to improving and expanding the Northwest growth corridor among other projects.</p><p>“In order to meet the future housing and employment needs of the region, the state government needs to invest in targeted transport and utilities packages that unlock the capacity of our key growth areas,” Grove says.</p><p>“These are generally mid-sized, nine-figure projects that are critical to unlocking large parts of the region’s growth. The federal government’s recent $300-million western Sydney roads package is a great start for unlocking key parts of our residential growth areas, and we encourage both state and federal government to commit to a timetable toward the delivery of a state roads package for the western Sydney Aerotropolis.”</p><p>Grove believes that the <a data-mce-href="https://www.theurbandeveloper.com/articles/first-university-alliance-making-history-aerotropolis" href="https://www.theurbandeveloper.com/articles/first-university-alliance-making-history-aerotropolis" target="_blank" rel="noopener">western Sydney Aerotropolis </a>has been the focus of significant infrastructure investment already and it’s the intermediate roads that are required to start delivering the industrial land that is in such critical short supply.</p><div id="1vaP2XpXadF0uFgaSVcosU"><picture><img src="//images.ctfassets.net/8pr762qjocl3/12aXK2OAvRomVezQy7RvzR/c630705ecf4305cb48888407b6d1fcf9/Mid_article_resizes.jpg" alt="A render of a street in the western Sydney Aerotropolis." data-mce-src="//images.ctfassets.net/8pr762qjocl3/12aXK2OAvRomVezQy7RvzR/c630705ecf4305cb48888407b6d1fcf9/Mid_article_resizes.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A render of a street in the western Sydney aerotropolis.<br><br></span></div></div><p>“Our national supply chain is struggling to cope with the current shortage of industrial land, with vacancy rates in Sydney at 0.3 per cent or below,” he says.&nbsp;</p><p>“Our industrial members are already missing out on opportunities to host interested tenants because there isn’t enough properly serviced industrial land able to be cater to the demand—if we don’t address this soon the city will suffer from weaker productivity and gaps in our regional employment offering.”</p><p>With infrastructure at the forefront of planning and construction for the NSW and Commonwealth governments, it is only a matter of time before other main towns in the western Sydney take on more prominence in terms of business development and central offices for government departments and SMEs.</p><p>“As cities develop, grow and mature, the population grows, and the amenity for those centres follows,” Forrest says.&nbsp;</p><p>“In the mid-1980s, you would not have thought of Parramatta as the centre for government administration with its own justice precinct and the home of the arts, with museums, theatres and a thriving food scene.&nbsp;</p><p>“Similar transitions are taking place in Liverpool, Penrith and Campbelltown. With population growth comes improved public transport, improved education and health services.</p><p>“Solid up-front strategic planning ensures that public open space is preserved to accommodate the growth.&nbsp;</p><p>“But it is important to adjust expectations of infrastructure delivery to match the maturity of the development area.”<br><br></p><hr><p><strong><br>You are currently experiencing <em>The Urban Developer</em> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p><div id="2GhuueZl01Zwo2aFfjNVi2"><picture><img src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg" alt="TUD + Banner" data-mce-src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg"></picture></div>

Despite a slew of significant developments under way and in the pipeline, western Sydney says the bias in government towards the NSW capital’s CBD is throttling future growth…


[+] insurance woes.jpg

<p>Building insurance premiums are doubling, and in some cases tripling, putting building owners in precarious positions in relation to tenants, ownership and affordability.</p><p>Steep rises in premiums during the past 12 months are especially putting pressure on owners to ditch tenants that insurance companies consider a high risk.</p><p>“Our insurance premiums have almost doubled in 12 months, rising from $3195 per year in 2021 to $6177 in 2022,”&nbsp; Matthews Real Estate business development manager Michelle Clair says.</p><p>“Some of the quotes were as high as $11,000, which is a four-fold increase, while up to half a dozen insurers wouldn’t even give us a quote because one of our tenants is a laundromat—and they have been in the building for decades.</p><p>“The doubling of our insurance premium was unexpected and we dread to think of what it could be in 2023. If it rises as high as $20,000, then we would have to think of cancelling the lease with the tenant due to it being unsustainable, but we are not in the mindset of moving people on.”</p><h2>Passing on higher costs&nbsp;</h2><p><br>The commercial building in question, in Annerley, Brisbane, houses three tenants and was purchased in 2019 for approximately $500,000 with an anticipated 20 per cent growth already in valuation.</p><p>But owners such as Matthews Real Estate can’t afford continual high insurance premium rises.</p><p>“We are hearing that insurers don’t want to insure laundromats, tattoo parlours and vacant buildings,” Clair says.</p><p>“If costs keep rising we will have to pass that onto the tenants, which is not what we want to do, but we can’t keep covering the additional expenses ourselves.”</p><div id="41MkaU9brjqaTfLiIjod1R"><picture><img src="//images.ctfassets.net/8pr762qjocl3/tIHm4nLyrpUntt3bAGpx4/9b887ba11b982e3b9ec0c8683b48ad06/1.jpg" alt="The Grenfell disaster in the UK brought cladding issues to the fore." data-mce-src="//images.ctfassets.net/8pr762qjocl3/tIHm4nLyrpUntt3bAGpx4/9b887ba11b982e3b9ec0c8683b48ad06/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The Grenfell disaster in the UK brought cladding issues to the fore.<br><br></span></div></div><p>Leading property service provider PICA Group says building owners and developers are in an unfolding insurance crisis that could decimate the industry.</p><p>“A combination of factors have driven up insurance costs,” head of property developer advisory at PICA Group Marcus Terry says.</p><p>“A spate of natural disasters has seen payouts increase. In addition, rising construction costs and lack of tradies have contributed to increased cost of repairs. The result of all of this is rising premiums.</p><p>“The type of tenants you have in your project will directly impact its insurability and premiums. Tenants such as dry cleaners, or those who store dangerous goods such as batteries or paint thinners, will be a red flag to an insurer.</p><p>“If you have a building that is likely to house a high-risk tenant, then design can play a vital role in mitigating risks. Ensure there’s safe storage for dangerous goods. Design must incorporate comprehensive use of firewalls, ventilation systems and other safety features that will minimise risks from a tenant’s activities.”</p><p>But rising inflation combined with escalating building insurance costs could force owners to not only terminate leases of tenants deemed unfavourable by insurance companies, but sell buildings at discounted costs if insurers determine that considerable work is need, particularly in such aspects as cladding.</p><p>“The 2017 Grenfell Tower fire tragedy was the catalyst for making insulation a front-and-centre issue for insurance companies,” Terry says.</p><p>“It prompted authorities across the world to take a closer look at the flammability of insulation in both existing and new structures.</p><p>“The use of flammable insulation was found to be widespread, so legislation was implemented across the globe to phase out its use.</p><p>“Insurance companies identified this insulation as a fire hazard and raised their premiums substantially to reflect this increased risk. In many cases, insurance companies won’t provide cover for buildings with too high a percentage of flammable insulation.”</p><h2>Three areas of concern</h2><p><br>Insurance brokers are having a tough time trying to appease clients with reasonable quotes as insurers ruthlessly escalate prices and take a ‘no holds barred’ approach to creating a blacklist of tenants that they don’t want on their books.</p><div id="5Ycv6fyy8abA2koJzJ6IoL"><picture><img src="//images.ctfassets.net/8pr762qjocl3/3yM32t3wDbU1aoMkJDu0p3/1d50b4ec18dfbee79bc6ef6ed39d9b9b/2.jpg" alt="Tenants seen as a risk, such as laundromats, are being shunned by insurers." data-mce-src="//images.ctfassets.net/8pr762qjocl3/3yM32t3wDbU1aoMkJDu0p3/1d50b4ec18dfbee79bc6ef6ed39d9b9b/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Tenants seen as a risk, such as laundromats, are being shunned by insurers. <br><br></span></div></div><p>The insurance costs are being spread across three key areas.</p><p>“There is an amplified cost of professional services,” Rivers Insurance Brokers branch manager Scott Denning says.</p><p>“Many clients in the building and property development sectors will be seeing their advisors trying to increase their fees. Part of this will be them trying to recover their increased professional indemnity insurance costs.</p><p>“There are also increases in the cost of insurances for the construction of the physical building. Contract works insurance has had a large year-on-year surge in the rates applicable to projects, together with escalation in excesses, which is making it more expensive to build.</p><p>“Also, we have seen a large growth in the cost of insuring the building once it has been completed,” Denning says.</p><p>He says this is particularly the case for large body corporate complex and strata title insurance, as the insurers that underwrite these large assets have all been experiencing very poor loss ratios.</p><p>“One of the largest insurers, QUS, has withdrawn from the market and is no longer renewing insurance policies.”</p><h2>How to be more appealing</h2><p><br>But the issue is only going to cause more grief to building developers and owners in the future.</p><p>“The fallout can be dramatic,” Terry says. “There’s less appetite for risk among insurers. This has contributed to rapidly rising premiums or, worse still, the building of an asset that’s effectively uninsurable.</p><div id="5BYJ7uvd7AnE4HXgLl05Zl"><picture><img src="//images.ctfassets.net/8pr762qjocl3/0g8gevW8YW97gkQ9KLb3G/234b744e0817e73a49ca7eedba0070e8/3.jpg" alt="The insurance crisis looks set to reshape the kinds of tenants that agents taking on." data-mce-src="//images.ctfassets.net/8pr762qjocl3/0g8gevW8YW97gkQ9KLb3G/234b744e0817e73a49ca7eedba0070e8/3.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The insurance crisis looks set to reshape the kinds of tenants that agents taking on.<br><br></span></div></div><p>“The flow on is that end users—tenants and owners—may well discount their level of investment.</p><p>“Developers and builders must be more aware of ways to reduce risks and be more appealing as an insurance prospect.</p><p>“Invariably that means formulating plans and strategies at the design phase of any new projects. While it can mean increased costs in terms of construction in some cases, the net saving in insurance can make this worthwhile.”</p><p>Both developers and owners can address outstanding issues at the design stage and-or in the current building. While this may involve a higher than expected cost at the outset, or to change cladding in an existing building, it should result in cheaper insurance premiums in the future.</p><p>“There are several ways to keep premiums at a minimum, and most require attention to design,” Terry said.</p><p>“Reducing the use of insulation is important. Looking at the components of your building and ensuring you minimise risky insulation use is essential. Also avoiding other highly flammable materials such as extensive decking or bamboo flooring.</p><p>“Using more traditionally fire-retardant materials such as concrete, brick and tile will help too. Having fire safety equipment that’s comprehensively placed is essential. The use of extinguishes and sprinkler systems will help for example. Also, establishing safe egress paths for residents in event of a fire will benefit.”</p><p>Getting on top of insurance premiums will be a priority for most building owners and developers in the next 12 months—but how the industry will cope on top of the substantial issues it is already facing very much remains to be seen.<br><br></p><hr><p><strong><br>You are currently experiencing <em>The Urban Developer</em> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p><div id="2GhuueZl01Zwo2aFfjNVi2"><picture><img src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg" alt="TUD + Banner" data-mce-src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg"></picture></div>

Building owners and developers are in an unfolding insurance crisis that could decimate the industry. The Urban Developer finds out why and what’s ahead…


[+] bne rent freeze hero web.jpg

<p>A proposal to freeze residential rents across Queensland for two years would actually make the crisis worse, according to the property industry.</p><p>Such a measure would in fact further drive up housing costs and turn away investors just at the time when they are needed the most, critics say.</p><p>The Private Members Bill tabled by state Greens MP Amy MacMahon is to be assessed by a Queensland parliamentary committee.</p><p>Queensland is in the grips of a well-publicised housing crisis. <a data-mce-href="https://www.theurbandeveloper.com/articles/sqm-research-residential-vacancy-rate-may-2022" href="https://www.theurbandeveloper.com/articles/sqm-research-residential-vacancy-rate-may-2022" target="_blank" rel="noopener">Rental vacancies are at an all-time low </a>and there are about 50,000 people on the social housing waitlist.</p><p>In a move to address this crisis, the Queensland government <a data-mce-href="https://www.theurbandeveloper.com/articles/queensland-housing-summit-announced" href="https://www.theurbandeveloper.com/articles/queensland-housing-summit-announced" target="_blank" rel="noopener">announced on Tuesday that it would hold a housing summit in October</a> to look at a range of issues including unlocking more land for housing and fast tracking more social housing.</p><p>It will kick off with a roundtable on Friday between government and private sector stakeholders.&nbsp;</p><p>“The costs of owning an investment property continue to escalate,” Queensland executive director of the Property Council of Australia Jen Williams says.</p><p>“The last thing the state needs is yet another disincentive to investors purchasing and renting out dwellings.</p><p>“Rental properties in Australia are for the most part owned by ‘mum and dad’ investors. Investors are not immune to broader economic conditions and are increasingly faced with disincentives and added costs.</p><p>“Like everyone, investors are dealing with increasing mortgage costs, insurance hikes and rising inflation. In addition, the Queensland government’s new interstate land tax model will see many investors receive new or higher land tax bills in the coming year.”</p><p>The Greens proposal would freeze residential rents until August 2024 and would then cap rent rises at 2 per cent every two years.</p><p>This would make it very difficult for investors to improve properties or even cover major repairs and not lose money. Plus, the increases would likely lag inflation, meaning a cut to landlords’ rental returns in real terms.&nbsp;</p><div id="6Fhte2m9MQZVz7RGyoA5uU"><picture><img src="//images.ctfassets.net/8pr762qjocl3/3tYsd7eCKtO2DTgMMK3wuY/f04969bf41a198ea1c5addfed7e32015/bnerent_freezemid22.jpg" alt="Investment incentives, not freezes, will help alleviate the rental crisis, industry pundits say." data-mce-src="//images.ctfassets.net/8pr762qjocl3/3tYsd7eCKtO2DTgMMK3wuY/f04969bf41a198ea1c5addfed7e32015/bnerent_freezemid22.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Investment incentives, not freezes, will help alleviate the rental crisis, industry pundits say.<br><br></span></div></div><p>“Not everyone needs or wants to own a home, and not everyone is in a position to do so,” Williams says.</p><p>“For countless reasons, whether while travelling for work, in between houses or trialling what it is like to live in a different housing type, Queenslanders need access to a variety of safe, affordable rental accommodation.”&nbsp;</p><p>She says a more prudent focus would be on supply solutions that quickly provide an increase to the amount of rental accommodation available across Queensland.</p><p>“Each of the other major states has now introduced incentives to stimulate the construction of purpose-built residential accommodation, otherwise known as build-to-rent,” Williams says.</p><p>“The Property Council has released a paper, <em>A Home for Every Queenslander</em>, encouraging the Queensland government to follow suit and help the private sector boost the supply of rental accommodation.”</p><p>For property developers, who rarely want to get involved in politics or take sides, the freezing of rents would prove a disincentive to build properties to rent, as it would not allow any manoeuvrability to cover rising costs of materials or labour, as well as any incidental costs.</p><p>They want all parties—government and the private sector—to work together if the situation is to be remedied.</p><p>“We need to pull together as a community to work co-operatively to solve the acute housing shortage,” Consolidated Properties Group chief executive and chairman Don O’Rorke says.</p><p>“We all know vacancies at less than 1 per cent across the board are the lowest on record, and unsurprisingly rents are increasing as competition for the small pool of new rentals increases.</p><p>“Surging building prices are pushing up the cost for all property stock including housing and proactive initiatives such as loosening labour and immigration policies will start to relieve these pressures.”</p><p>The Federal government has agreed to increase permanent immigration visas in the current financial year by more than 20 per cent, however, this won’t ease the problem of building costs.</p><div id="3XCEFRUHsOnXxQ5prlmeNH"><picture><img src="//images.ctfassets.net/8pr762qjocl3/32x47FD7Ns3k7ygKExGEjK/93536ac5c5553981d977e645e3f5f64c/TUD_rentfreezemid-istock.jpg" alt="TUD+RentFreeze-midarticle" data-mce-src="//images.ctfassets.net/8pr762qjocl3/32x47FD7Ns3k7ygKExGEjK/93536ac5c5553981d977e645e3f5f64c/TUD_rentfreezemid-istock.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ For property developers, a rent freeze would prove a disincentive to build properties to rent.<br><br></span></div></div><p>CoreLogic research revealed that national residential construction costs increased 10 per cent over the 12 months to June 2022, the highest annual growth rate on record outside of the introduction of the GST in March 2001.</p><p>O’Rorke says governments at all levels need to be reducing costs directly related to them, “such as the increasing valuations on which land tax and rates are based”, as a means of encouraging more investment.</p><p>“On a practical level, if UCVs are used to calculate these taxes then decreasing the percentage levied against the increasing valuations would be sensible and will still deliver the same capital to government,” O’Rorke says.</p><p>“It is irrefutable that the percentage attributable to government costs in housing creation has been steadily increasing over the past 20 years and now amounts to somewhere between 30 to 40 per cent of the purchase price of a land block or apartment.”</p><p>He says it would also be sensible to release more land for development in both greenfield and infill areas as increasing supply is the simplest method to moderate price increases.</p><p>“No one part of the private or public sector has the solution but together we should be able to avert this crisis.”</p><p>The cost of metal, structural steel, reinforcing, fixing and fencing are all rising, leaving builders no choice but to increase estimated budgets for residential housing developments.</p><p>Freezing rents risks putting pressure on every aspect of the residential market and driving investors away.</p><p>“If even a small percentage of investors were to sell their Queensland properties or withdraw them from the permanent rental market, this would have a material impact on the state’s rental sector,” Real Estate Institute of Queensland chief executive Antonia Mercorella says.</p><p>“A rent freeze would significantly deter property investment and therefore comes with the real risk of reducing rental supply at a time when we’re already in a rental crisis.&nbsp;</p><p>“Australia’s building industry relies heavily on investors, so a logical consequence of significantly diminishing investor demand is that it discourages the construction and development of housing for investors.”<br><br></p><hr><p><strong><br>You are currently experiencing <em>The Urban Developer</em> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p><div id="2GhuueZl01Zwo2aFfjNVi2"><picture><img src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg" alt="TUD + Banner" data-mce-src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg"></picture></div>

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<p>While housing markets around the country head into negative territory, Toowoomba’s continues to rise on the back of an ‘infrastructure boom’ that has pushed its population up by 20 per cent over the past decade and a half.</p><p>This confidence is borne out by CoreLogic’s latest Regional Market Update, released in August, which shows that houses in the inland city, about 130km west of Brisbane, have increased in value by more than 20 per cent in the past year and are selling quicker than anywhere else in regional Australia, at 12 days on the market.</p><p>“Toowoomba has been in the midst of an infrastructure boom over the past decade with the second range crossing, the Wellcamp Airport, business park and the inland rail all being built or in progress,” LJ Hooker Toowoomba principal Mike Stewart says.</p><p>“Subsequently, there’s been heightened demand for property and that’s underpinned growth in property prices. Toowoomba’s real estate market is significantly undersupplied. Over the next three years we’ll see around 2000 homesites added to the market across the region.”</p><p>It is a combination of the affordable housing, quality schools, first-class medical facilities and amenable weather that is attracting Australians to the region.</p><p>The past two years have provided favourable conditions for the farming sector too. Small crop production still faces challenges but cattle and grain production have been healthy.</p><p>“Toowoomba is a milder climate and offers a lifestyle that’s comparatively affordable—entry-level four-bedroom, two-bathroom homes begin at around $550,000—while still having quality schools, the well-resourced University of Southern Queensland, and shopping centres including Grand Central, which houses Myer and many national retailers,” Stewart says.</p><p>“In the rental market, the vacancy rate is circa 0.1 per cent. Rents for investors have been going up an average of 10 per cent and as high as 15 to 18 per cent over a 12-month period for highly sought-after properties.”</p><h2>Competitive housing market</h2><p><br>The rental housing market is only going to get more competitive.</p><p>“With the lack of rentals, more first home-owners have entered the market, who had to compete with the local and non-local investors,” CBRE senior valuer Joseph Kelly says.&nbsp;</p><div id="5ymxWNFU3HFIU404XNzMjj"><picture><img src="//images.ctfassets.net/8pr762qjocl3/5cHwpO9zT5mgbniKWKD7ZU/ca0b26b0a8f4bb2bb06ef101ad662db7/1.jpg" alt="Toowoomba’s iconic Empire Theatre. A theatre has been on the site since 1911—it underwent a rebuilt in the 1930s and was reopened after renovations in 1997." data-mce-src="//images.ctfassets.net/8pr762qjocl3/5cHwpO9zT5mgbniKWKD7ZU/ca0b26b0a8f4bb2bb06ef101ad662db7/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Toowoomba’s iconic Empire Theatre. A theatre has been on the site since 1911—it underwent a rebuild in the 1930s and was reopened after renovations in 1997.<br><br></span></div></div><p>Entry level properties can still be found for less than $400,000, Kelly says, although this is expected to rise as non-local investors enter the market. He says the rental shortage has also seen a significant rise in rents, which has increased yields.</p><p>“With the lack of land, the council is intending on increasing medium-density housing for the city, which may be positive if done correctly in the right location, where services are available such as schools, shops and transport.”</p><h2>The impact of Inland Rail</h2><p><br>The <a data-mce-href="https://www.theurbandeveloper.com/articles/webuild-infrastructure-project-upsurge-drives-growth" href="https://www.theurbandeveloper.com/articles/webuild-infrastructure-project-upsurge-drives-growth" target="_blank" rel="noopener">Inland Rail development </a>will have a big impact upon Toowoomba. The 28km Gowrie-to-Helidon section includes constructing a new track through the Toowoomba and Lockyer Valley region and building a vast freight tunnel.</p><p>The new dual gauge track will include several significant viaducts and cuttings designed to create an efficient route through the steep terrain.</p><p>A 6.2km tunnel will be built through the Toowoomba Range, making it the largest-diameter diesel freight tunnel in the southern hemisphere.</p><p>“The Inland Rail will circle around the city’s north, near the airport, and will employ 1200 people locally during construction,” Stewart says.</p><p>“Industrial land in Toowoomba is a third of the price of what you’d get in Brisbane. Here, you’re looking at $120 to $130 per square metre for 2ha sites.”</p><p>He says another major infrastructure project is the $1.3-billion Toowoomba Public Hospital, which will be located at Baillie Henderson campus in the city’s north. The existing hospital will be repurposed as a major health hub for day surgery, education, training and other affiliated uses.</p><div id="54lyN55QIPWhbDe4wP48NM"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6KpvyMpUwU4MocJ6w4gwZ4/154fdbdc05beac558ff78e37e628b322/3.jpg" alt="The Wagner-Corporation-owned Wellcamp airport near Toowoomba." data-mce-src="//images.ctfassets.net/8pr762qjocl3/6KpvyMpUwU4MocJ6w4gwZ4/154fdbdc05beac558ff78e37e628b322/3.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The Wagner-Corporation-owned Wellcamp airport near Toowoomba.<br><br></span></div></div><p>Toowoomba is also set to have one of the world’s largest medicinal cannabis facilities. Now under construction on a 75ha site in Wellcamp, it includes a 40ha glasshouse facility.</p><p>Stewart says that after a prolonged drought, the past two years have provided favourable conditions for the farming sector.&nbsp;</p><p>“Small-crop production still faces challenges but cattle and grain production has been healthy,” he says.</p><p>The construction of the <a data-mce-href="https://www.theurbandeveloper.com/articles/boeing-aerospace-precinct-wellcamp-wagner" href="https://www.theurbandeveloper.com/articles/boeing-aerospace-precinct-wellcamp-wagner" target="_blank" rel="noopener">privately owned Toowoomba Wellcamp Airport</a> by the Wagner family in 2014 has certainly helped business and contributed to population growth. It now has international weekly flights being operated by Singapore Airlines and Cathay Pacific.</p><p>It also has daily passenger flights to Sydney, Melbourne, North Queensland and also takes produce from the Lockyer Valley, Southern and Western Downs and Moree Plains to Asian markets.</p><p>“Boeing has set up an assembly facility here, which is the first ‘final assembly’ facility for it outside of North America; Schlumberger established themselves out of the Wellcamp Business Park, adjacent to the airport; Russell Mineral Equipment is also based out at Glenvale,” Stewart says.</p><h2>Growing from within</h2><p><br>Newlands is one local company that has benefited enormously from the state and federal government investment in the region.</p><p>Established in 2001, the privately owned Australian company specialises in design and construction services for civil, essential services (water and sewer), mining and commercial sectors.</p><div id="1sUyOGZ4Er8pxKZYxoEhaU"><picture><img src="//images.ctfassets.net/8pr762qjocl3/GIZHa2V9qMESXtCYGaN23/bab550fa74bf900c60f715d22c448d49/inland_rail_toowoomba.jpg" alt="The 28km Gowrie-to-Helidon section of the Inland Rail development includes constructing a new track through the Toowoomba and Lockyer Valley region." data-mce-src="//images.ctfassets.net/8pr762qjocl3/GIZHa2V9qMESXtCYGaN23/bab550fa74bf900c60f715d22c448d49/inland_rail_toowoomba.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The 28km Gowrie-to-Helidon section of the Inland Rail development includes constructing a new track through the Toowoomba and Lockyer Valley region.<br><br></span></div></div><p>“We are currently working on the Inland Rail project and we have a pretty full book for the next 12 months,” Newlands design manager Ashley Milner says.</p><p>“We have seen unprecedented growth in the past few years with no signs of that abating. There is so much infrastructure development going on here across a range of sectors such as agriculture, medical and transport and that, combined with the local airport, means people are confident to invest and live in Toowoomba.”</p><p>The Australian Bureau of Statistics puts the official population at 175,316 as of June 30, 2021, a steady increase of 20 per cent from the 145,992 recorded at June 30, 2006.</p><p>“The Queensland Government Statistician Office medium series projections identify population growth to 2051 to be in the order of 57,000 additional residents and 30,000 jobs,” Toowoomba Regional Council mayor Paul Antonio says.</p><p>“While this is substantial growth for the region, council has laid the platform to cater for this growth.”</p><p>He says few regional centres in Australia can point to more than $800 million in private and public investment in their city centre over the past decade.</p><p>“The combination of these major projects, the booming agricultural sector mixed with our growing health and education industries, makes Toowoomba one of the nation’s most diverse economies which is the envy of communities throughout Australia.</p><p>“Toowoomba has a promising and sustainable development pipeline which is consistent with long-term sustainable growth.”<br><br></p><hr><h2><br>Council investments</h2><div id="55WDWey45FSdILcvBsfGoD"><br><picture><img src="//images.ctfassets.net/8pr762qjocl3/56SIMxZA7GNW5qcmX1q1o5/52663a654b60c8c20b056d4c54f007ab/soldiersmem_hall_toowoo.jpeg" alt="Soldiers Memorial Hall Toowoomba" data-mce-src="//images.ctfassets.net/8pr762qjocl3/56SIMxZA7GNW5qcmX1q1o5/52663a654b60c8c20b056d4c54f007ab/soldiersmem_hall_toowoo.jpeg"></picture><div><br></div></div><p>The Toowoomba Regional Council has a number of&nbsp; projects in the pipeline including:</p><p><strong>Railway Parklands:</strong> with a $25-million funding pledge through the City Deal (three levels of government).</p><p><strong>Charlton Sports Precinct:</strong> Council has endorsed a business case and master plan for seven stages of precinct development over 20 years. The total cost of the project is estimated at $197 million.</p><p><strong>Highfields Library:</strong> The new library, customer service centre and community meeting facility at O’Brien Road is on track to open in September. The current facility supports 52,600 visitors annually.</p><p><strong>Central Highfields:</strong> a masterplan is developing appropriate retail, commercial and industrial uses for the future town centre and private-sector investment opportunities.</p><p><strong>Toowoomba CBD:</strong> Russell Street refresh stage 1 completion; stage 2 under construction and expected completion in November.</p><p><strong>Water projects:</strong> Mt Kynoch Water Treatment Plant upgrade is progressing. Other water main upgrades; trunk sewer upgrades; wastewater treatment plant upgrades; the commissioning of the new water treatment plant at Clifton and waste facility upgrades across the region.</p><p><strong>RSL Soldiers’ Memorial Hall, Toowoomba:</strong> the $4.4-million upgrade jointly funded by the federal government and council is scheduled to open soon.&nbsp;<br><br></p><hr><p><strong><br>You are currently experiencing <em>The Urban Developer</em> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.&nbsp;</strong></a></p><div id="2GhuueZl01Zwo2aFfjNVi2"><picture><img src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg" alt="TUD + Banner" data-mce-src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg"></picture></div>

Few regional centres can boast the level of investment that’s been pouring in during the past decade, but there’s more to Toowoomba’s growth than just that…

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<p>The recent purchase of the Sir Stamford Hotel at Circular Quay by JDH Capital for $210.5 million to be converted into luxury apartments is the start of a more open-minded approach from investors to look at alternative uses for existing assets.</p><p>JDH Capital also purchased The Vibe Hotel in Rushcutters Bay in late 2021, which is being converted from 260 rooms to 120 luxury residential apartments and is due for completion late 2023.</p><p>“The Sir Stamford Hotel proposes the conversion of 105 hotel rooms to potentially 90 luxury apartments,” says Dedico development director John Green.</p><p>“There are very few opportunities for ‘wholly’ luxury residential developments in prime locations in Sydney.&nbsp;</p><p>“As the purchase of the hotel is based on redevelopment to luxury apartments, the market shows that this is the highest and best use for this site, particularly given the prime locations.&nbsp;</p><p>“We believe the downsizer buyer market is particularly drawn to the unique locations for these luxury apartment locations.”</p><p>Hotel valuations and <a data-mce-href="https://www.theurbandeveloper.com/articles/darwin-brisbane-hotel-room-rates-increase" href="https://www.theurbandeveloper.com/articles/darwin-brisbane-hotel-room-rates-increase" target="_blank" rel="noopener">occupancy are building back</a> to pre-pandemic 2019 levels, as both businesses and individuals are travelling interstate and internationally again.</p><div id="13kuCckAbaGxCvgHbtiGZn"><picture><img src="//images.ctfassets.net/8pr762qjocl3/1FllDdcQOqaaLQZux59YRl/c98649bf47b202a7eb57bc4ee9c75c7a/1.jpg" alt="A room in Vibe Rushcutters Bay, Sydney." data-mce-src="//images.ctfassets.net/8pr762qjocl3/1FllDdcQOqaaLQZux59YRl/c98649bf47b202a7eb57bc4ee9c75c7a/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A room in the Vibe Hotel, Rushcutters Bay, Sydney. Sold in late 2021, it is being converted into a luxury residential block.<br><br></span></div></div><p>CBRE’s Market Conditions Survey released in July 2022 reveals that investors, operators and developers see 50 per cent more investment towards the hotel sector, with the same percentage expecting higher interest rates to flow into yields, while two-thirds see growth in values over the medium term.</p><p>Sydney, the Gold Coast and Brisbane are expected to be the best performing states in 2023, while Melbourne and Perth have years of struggles ahead.</p><p>Pessimistically, investors, operators and developers surveyed believe that although demand is recovering, international arrivals are at least three years from returning to pre-pandemic levels. But that may not be the reality, with almost all Covid restrictions removed for any overseas guests wanting to visit Australia.</p><p>“Hotels are <a data-mce-href="https://www.theurbandeveloper.com/articles/strong-signs-hotel-sector-recovery-hitting-its-straps" href="https://www.theurbandeveloper.com/articles/strong-signs-hotel-sector-recovery-hitting-its-straps" target="_blank" rel="noopener">recovering quickly</a> from the effects of the pandemic, and in most capital city markets average daily rates are materially exceeding 2019 levels,” says CBRE’s Michael Simpson, managing director, capital markets, hotels.</p><p>“However, residential conversions or redevelopments of existing hotels are becoming more common in some markets. Many hotels are situated in prime locations which are attractive for residential uses, subject to applicable urban planning constraints,” he says.</p><p>“In Sydney in particular, the residual land value of the hotel property which is being used for residential conversion or development often far exceeds its value as a trading hotel.&nbsp;</p><p>“The ‘saleable area’ of a residential conversion-redevelopment of a hotel property exceeds that of a trading hotel.&nbsp;</p><p>“The achievable price per square metre of net saleable area is usually much higher for residential uses compared to hotel uses, particularly those apartment projects with Sydney Harbour views and other neighbouring amenities such as public open space parks and dining precincts.</p><div id="13kuCckAbaGxCvgHbtiGZn"><div id="vmN5TP9Y5N3L1CkDw9oXZ"><picture><img src="//images.ctfassets.net/8pr762qjocl3/2wVkS4k7qkQnjN61ys1jtC/107d167dcf551b0c1796ba8065cc18ef/2.jpg" alt="The Sir Stamford Hotel at Circular Quay, Sydney." data-mce-src="//images.ctfassets.net/8pr762qjocl3/2wVkS4k7qkQnjN61ys1jtC/107d167dcf551b0c1796ba8065cc18ef/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The Sir Stamford Circular Quay hotel, Sydney. <br><br></span></div></div></div><p>“A prime example is the recent sale of the Sir Stamford Circular Quay. The most recent valuation as a hotel was $90 million, but the sale transaction price as a residential redevelopment was $210.5 million.”</p><p>Interestingly, in the CBRE survey, Queensland (77 per cent) and NSW (76 per cent) were seen as the two most attractive markets to purchase hotels.&nbsp;</p><p>Victoria came in a distant third at 50 per cent. The split between hotel class was corporate (56 per cent) and leisure (44 per cent).</p><p>But an appetite exists from local and overseas investors to <a data-mce-href="https://www.theurbandeveloper.com/articles/build-to-rent-conversion-boosts-hotel-transactions-to-2b" href="https://www.theurbandeveloper.com/articles/build-to-rent-conversion-boosts-hotel-transactions-to-2b" target="_blank" rel="noopener">purchase hotels for other uses</a>.</p><p>“Hotels are capital-intensive and technology-intensive assets,” says Simpson.</p><p>“Existing owners of older unrenovated properties may find that it is more profitable to either redevelop or convert their hotels into other uses, including residential, or to sell them to a developer to do the same.</p><p>“It is most prevalent in Sydney where residential apartment prices per square metre of NSA are the highest in Australia.&nbsp;</p><p>“However, it is a factor in each of these cities where the hotel product is not able to perform effectively against their competitors, and where there is demand for new residential apartment stock.</p><div id="6lBba7dEjBQGmJ05WWMetb"><picture><img src="//images.ctfassets.net/8pr762qjocl3/2Py4QcqUolkzCqodEpGdIE/bcc5a8f1605ac04137931c9defd673ba/4.jpg" alt="The rooftop pool at the former Vibe Hotel, Rushcutters Bay." data-mce-src="//images.ctfassets.net/8pr762qjocl3/2Py4QcqUolkzCqodEpGdIE/bcc5a8f1605ac04137931c9defd673ba/4.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The rooftop pool at the former Vibe Hotel, Rushcutters Bay.<br><br></span></div></div><p>“This is a normal cycle of real estate usage and evolution. For the balance of existing hotel stock, the decrease in supply will be positive, given there will be less competition.</p><p>“It may also create additional opportunities for other sites for the development of newer, more contemporary hotel room inventory.”</p><p>Overseas buyers are looking fondly at the Australian hotel market with a view, where feasible, to finding alternative asset uses for the existing product.</p><p>“What we are seeing is investors approach traditional assets with an open mind,” says Savills NSW and Victoria hotels director Nick Lower.</p><p>“We currently have an overseas buyer looking at purchasing hotels in Australia to turn into student accommodation. There are also investors wondering what to do with traditional offices, as they are not expecting them to be fully utilised again, experts say.</p><p>“They are asking the questions of how they can repurpose traditional CBD offices but overall the theme is that investors are looking for prime assets that they can upscale into another asset class for better returns.”</p><p>Indeed, the next 18 months may well see a flurry of A-grade asset sales in Australia for new uses for traditional hotels and offices as investor appetite grows.<br><br></p><hr><p><br></p><p><strong>You are currently experiencing <em>The Urban Developer</em> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p><div id="2GhuueZl01Zwo2aFfjNVi2"><picture><img src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg" alt="TUD + Banner" data-mce-src="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg"></picture></div>

Plans to turn a landmark Sydney hotel into luxury apartments is just the latest such project to convert hotels into residential. So, what’s driving this trend and what does it mean for the accommodation sector? The Urban Developer finds out…

After a 40-year career in hotels, none of the fire has gone out of Geoff York as he leads the Crystalbrook Collection’s expansion in Australia and beyond.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>At his 21st birthday, Crystalbrook chief executive Geoff York was doing something unusual—he was serving other people food and drinks.</p><p>But that wasn’t the unusual part of his landmark birthday—York was living and working in South Africa, earning a whopping 30 rand (about A$3) a month to gain invaluable work experience for his catering and hotel management degree back in Victoria.</p><p>“I was keen to see the world. I had read a lot of Wilbur Smith books and thought Africa looked interesting.” York said. </p><p>“So, I wrote to the Southern Suns Hotel group in South Africa seeking an opportunity. They wrote back and away I went.</p><p>“It was probably the best experience of my life. They were a big hotel group and I moved all around, working in Johannesburg, Eastern Transvaal (Mpumalanga) and Durban among other cities. </p><p>“They were a progressive hotel group and I learnt a lot. More importantly, it confirmed to me that I wanted to be in the hospitality sector.”</p><p>It was the late 1970s when York made his decision to travel to South Africa, a time before the internet, and the 24-7 TV and radio news cycle, so York made his decision based on what we would consider today to be limited information. </p><p>“I think life is all about gaining new experiences and that certainly gave me the impetus to work in an industry where that option was always going to be available,” York said. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/7a1e3e57-c206-4659-8733-a0679028e25c.jpeg" width="940"/></picture><div><span style="align-content:center;opacity:0.8">▲ A hotel guy: Crystalbrook chief executive Geoff York.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>When York returned to Australia, he finished his degree at the then Victoria University and then set about working his way up through the hotel management chain with groups such as Sofitel and Accor.</p><p>He is  now the chief executive officer of Crystalbrook Collection Hotels and Resorts, a boutique hotel ownership group, backed by Syrian billionaire <a href="https://www.theurbandeveloper.com/articles/ghassan-aboud-byron-bay-resort-spa">Ghassan Aboud</a>, that has been rapidly expanding its portfolio.</p><p>“I am a hotel guy,” York said. “I have worked around the world and have now moved on from day-to-day management to growing hotel brands.</p><p>“I spent four years building the Atura and Eventhouse hotel brands and now have created the Crystalbrook Collection Hotels and Resorts group name from scratch, with seven hotels and more to be purchased in the near future.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/01d60458-e586-4a49-b8a1-2f0ab00579f4.jpeg" width="940"/></picture><div><span style="align-content:center;opacity:0.8">▲ The Riley in Cairns—Crystalbrook began in Cairns and has since spread along Australia’s east coast.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The UAE-based Aboud has ambitions to spread the group’s influence into the mainstream hotel market in the lucrative Sydney and Melbourne CBD markets.</p><p>Aboud has unlimited funds to invest and is keen on a new model of ownership in the hotel game. He doesn’t want to just be a tenant, he wants to own the land, the building, the name and everything associated with every hotel that the Crystalbrook Collection group buys.</p><p>“Aboud initially wanted to buy existing hotels and give them to other people to run,” York said.</p><p>“But upon reflection he didn’t want people telling him how to run his hotels. So, he decided to own everything and to initially focus on upmarket boutique hotels on the Australian east coast before expanding into more mainstream CBD locations.”</p><p>The Crystalbrook Collection group currently owns hotels in Cairns, <a href="https://www.theurbandeveloper.com/articles/newcastle-gets-its-first-five-star-hotel">Newcastle</a>, Port Douglas, <a href="https://www.theurbandeveloper.com/articles/ghassan-aboud-byron-bay-resort-spa">Byron Bay</a>, <a href="https://www.theurbandeveloper.com/articles/fantauzzo-sale-solidifies-brisbanes-hotel-position">Brisbane</a> and Sydney.</p><p>“I joined around the time when decisions were made to build three hotels in Cairns,” York said. </p><p>“We have always said we were starting in Cairns but not finishing there.</p><p>“I was in a position to influence this change. My motivation was to build something. I have had a 40-year stint in hotels and I would like to think that I haven’t had 40 one-year stints repeated.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/10e4d580-347d-4f78-88bb-882d716bb097.jpeg" width="940"/></picture><div><span style="align-content:center;opacity:0.8">▲ Crystalbrook Albion is the company’s first Sydney property.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>York says that Aboud hadn’t been to Australia for almost three years but is planning a visit in 2022 and that the pair talk regularly.</p><p>“We keep him proactively informed on what is happening. Back in 2017 we had nothing and now we have an $800-million investment of 1300 rooms a night to fill. We are small but substantial,” he said.</p><p>“We have a heavy proportion of our portfolio in Cairns but now we are balancing out with capital city locations. We are keen to purchase assets in the key markets of Sydney and Melbourne—they are where the big-demand hotels are.</p><p>“We bought the 35-room Albion Hotel a few years ago with to give us a foothold in the Sydney market.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Sustainability a focus</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The Crystalbrook point of difference extends to design, technology and focus on sustainability. </p><p>All of its hotels embrace a mantra of “responsible luxury” with an emphasis on environmental change to enhance guest experiences, York said.</p><p>“Sustainability is important to me,” he said. </p><p>“We are leading conversations—ours is an industry that has to consider its environmental footprint. </p><p>“For example, we have removed single-use plastics from our properties. Our room keys are discs made of recycled timber with a microchip embedded in them. </p><p>“We don’t have plastic bottled water, we use recycled cardboard. We don’t have those small bottles of shampoo and conditioner, we use pump packs—we led the charge in doing that. </p><p>“Our coat hangers are recycled cardboard and there is no paper in the guest rooms. We have iPads and other electronics everywhere. We have solar in the hotels. We are truly environmentally friendly.</p><p>“I would love to see other hotels doing what we do because it would have a more meaningful impact.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/a1dc32a0-b2c8-4c6e-a8f1-5db7fb20f689.jpeg" width="940"/></picture><div><span style="align-content:center;opacity:0.8">▲ The Vincent, Crystalbrooks’ hotel in Brisbane, was opened last year.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Of the future, York said he was keen to buy more hotels in Sydney and Melbourne to give the group a more prominent presence in Australia, as well as establishing itself as the premier boutique hotel group in the country.</p><p>“Our expansion plan is to acquire hotels in Sydney, Melbourne Auckland and Queenstown,” York said.</p><p>“This will either be via direct acquisition or hotel management acquisition.</p><p>“We don’t mind either but we will only buy when the price is right and it makes commercial sense to do so.</p><p>“We are in this for the long run so we are prepared to wait and negotiate until we have agreed on a price that is palatable.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

After a 40-year career in hotels, none of the fire has gone out of Geoff York as he leads the Crystalbrook Collection’s expansion...

Of the sectors knocked about by the global pandemic, hotels must be near the top of the list. But signs are beginning to show the market is recovering.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Up to 15 Australian hotels were passed in this year due to sellers’ unrealistic price expectations as buyers wait patiently for reasonable offers to be accepted.</p><p>Two years of a global pandemic—with little sign of it truly abating—has meant that picky buyers can spend months negotiating prices as they await further clarity on how Australia, and the world, will handle any new movement restrictions.</p><p>Prominent hotels that failed to sell in 2021 included the Rydges Sydney Airport Hotel, Novotel Melbourne South Wharf, Rydges Sydney Harbour, Novotel and Ibis hotels at Darling Harbour, Rydges North Sydney and the Jasper Hotel in Melbourne.</p><p>“Hotels, by and large, are going concern investments with no income certainty or security,” JLL head of investment sales Peter Harper said.</p><p>“Trading interferences and volatility will remain heightened as we progress through the recovery phase and therefore profitability won’t be as high or consistent as what was experienced pre-Covid where the Australian hotel market was one of the most stable in the world.</p><p>“Put simply, hotels remain a highly sought-after asset class globally. Like most real estate asset sub-classes, they have been impacted throughout the pandemic, however, their inherent investment fundamentals haven’t materially changed. </p><p>“For the year-to-date to September almost $US39 billion (about $55bn) hotels have traded globally, which is only 24 per cent down on the same period in 2019.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/2807f526-501b-4189-b3df-468b346badd9.jpg" width="900"/></picture><div><span style="align-content:center;opacity:0.8">▲ The Jasper Hotel, Melbourne was among hotels passed in this year.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Buyers who have been prepared to wait and negotiate through the pandemic have been able to secure hotels for well below their asking price.</p><p>A JLL Investors’ strategy survey revealed that the weighted average discount sellers are willing to accept is 2 per cent while buyers are seeking a discount to 2019 pricing levels of 17 per cent.</p><p>One such prominent deal, that only settled in the second half of 2021 despite the deal being agreed more than 14 months ago, was <a href="https://www.theurbandeveloper.com/articles/fantauzzo-sale-solidifies-brisbanes-hotel-position">Crystalbrook’s purchase of Brisbane’s The Fantauzzo </a>Art Series Hotel.</p><p>Crystalbrook is backed by Syrian billionaire Ghassan Aboud, who has ambitions to spread the group’s influence into the mainstream hotel market in the eastern states.</p><p>“We want to balance our portfolio and this was a good opportunity presented to us. It is a fairly new hotel with good design ethos,” Crystalbrook chief executive Geoff York said.</p><p>York says that the deal to buy The Fantauzzo, now re-named The Vincent, came through a third party approaching the group on behalf of the Deague family.</p><p>“We were never going to buy a standard hotel. </p><p>“After three months of negotiating, we were able to get the price we wanted. We had a price range in mind and there was a gap and eventually we met in a good place.</p><p>“We have ambitions to buy mainstream hotels on the east coast of Australia but we are not in a hurry.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/0e26a391-2a1b-4052-8a57-9f178ef6f052.jpeg" width="900"/></picture><div><span style="align-content:center;opacity:0.8">▲ The Vincent in Brisbane: its sale to Crystalbrook finalised in the second half of 2021.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The Crystalbrook Collection Hotels and Resorts group now owns seven hotels and is watching both macro- and micro-economic trends as it pursues both on- and off-market opportunities. </p><p>“We are a four-year start-up,” York said. “I have been here from the start and we have one main investor.</p><p>“We started in Cairns with one investment and we are now in capital cities. We want to balance our portfolio to CBDs, and away from leisure to corporate and meetings.”</p><p>York is optimistic that 2022 will <a href="https://www.theurbandeveloper.com/articles/str-australia-hotel-occupancy-october-2021">provide a solid year</a> in terms of hotel bookings with enquiries for conferences more than “1000 per cent” than in 2021.</p><p>“I think the first half of next year will see a return of leisure travel, especially within Australia, as long as this Coronavirus strain doesn’t impact too much,” York said. </p><p>“International travel will take a bit longer to be fully embraced but certainly businesses are looking into conferences and events across Australia from 50 to 500 people, which is very encouraging.</p><p>“While people are confident business travel will return, I will think it will increase but not significantly until 2023, which obviously affects the hotel market.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/d259b809-d13e-4f42-9d7c-3db1ebc4c265.jpeg" width="900"/></picture><div><span style="align-content:center;opacity:0.8">▲ The Ibis Darling Harbour in Sydney was among the hotels that failed to sell this year.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Yields achieved across hotel assets largely range on location. On average, the yield rates for core Sydney CBD hotels have transacted at less than 5 per cent, while regional hotel yields have seen a compression, and have been hovering in the bracket of 8 per cent to10 per cent.</p><p>CBRE Hotels national director Wayne Bunz believes that while there are still considerable obstacles to entry to buying hotels within Australia, we provide excellent sound investment grounds.</p><p>“We have stable government, a strong economy, we have handled the coronavirus well compared to other countries and we offer strong returns,” Bunz said.</p><p>“There are incredibly high barriers to entry in the hotel sector and in many instances assets are still being sold below replacement value. This is fuelling interest in available opportunities in what continues to be a very low interest rate environment.</p><p>“Investors are taking a mid- to long-term view on the sector’s future performance, underpinned by expectations of a relatively sharp recovery in trading conditions as borders re-open and international travel resumes.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

Around 15 hotels on the Australian market have been passed in over the past year, pointing to disparities between sellers and buyers...

A reduction of less than 5 per cent to the overall area of a lot may entitle a buyer to rescind an off-the-plan contract. What will this mean for off-the-plan contracts and development financing risk going forward? 

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>A recent Victorian Supreme Court decision ruling in favour of purchasers of an off-the-plan residential development has caused unrest among developers.</p><p>The decision found that a variation in the size of a lot, less than the 5 per cent tolerance rule, materially affected the lot in question—entitling the buyer to rescind an off-the-plan contract.</p><p>“I think the 5 per cent tolerance rule is fundamentally misunderstood,” SLF Lawyers property partner Brendan Hoogenbosch says. </p><p>“Firstly, it isn’t a rule. The purported rule is distilled from the courts comments in Buckley v Drk, which favoured 5 per cent as opposed to 2 per cent or 10 per cent, but the court ultimately determined the matter on an objective basis.”</p><p>SLF Lawyers represented the plaintiffs Sylvain Jean-Marie Taupenas and Edwin Alvarez Velasquez against the defendants, Longboat Holdings.</p><p>“In our matter, the defendants relied on Birch v Robek &amp; Anor, which referred to Buckley and its application in respect of a suburban allotment of approximately 700sq m—but in the very next paragraph of Birch, the court noted that in smaller apartments, any difference in size could be expected to have a much larger impact.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Buyers rescind after 4.4pc amendment</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The case involved two similar off-the-plan contracts for residential apartments in West Footscray, Victoria. The purchasers sought to rescind the contract upon receiving an amended plan from the developer.</p><p>There were five changes reducing the lots by 4m, down to 91m from 95m, or 4.4 per cent.  The main issue from the plaintiffs was that the master bedrooms were reduced in size. </p><p>The other material issues raised by the plaintiffs, which the judge viewed in their favour, were the size of the light court (reduced from original plan), the creation of a council reserve (previously common property) and exclusion from common property.</p><p>On a material change to the size and location of one of the assigned car park spaces, the judge ruled in favour of the developer. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>The practicality of the 5pc rule</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“I think there is very little utility in the purported 5 per cent rule,” Hoogenbosch says. </p><p>“First, it appears to be void under section 14 of the <em>Sale of Land Act</em> 1962; second, the purported rule to the extent it can be relied upon does not apply to multi-storey apartment buildings—at best it applies to a regular suburban lot and even that is doubtful.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c4fdd3e2-4f5b-478d-b01b-5730b794c266.jpeg" width="1322"/></picture><div><span style="align-content:center;opacity:0.8">▲ Longboat Holdings’ Eternity development at West Footscray: Two purchasers sought to rescind their contract upon receiving an amended plan from the developer.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“Third, these matters are always determined on an objective basis; and fourth, amendments to owners’ corporation common property, as in this case, and lot liability and entitlement, also in this case, have been held to materially affect the lot sold, even though those changes did not alter the boundaries or size of the lots in question—in these cases it is difficult to see how the 5 per cent rule could possibly apply.”</p><p>Purchasers have rights to rescind an off-the-plan contract under the <em>Sale of Land Act</em> 1962. This right comes into play where a change to the proposed plan of subdivision will materially affect the lot to be purchased.</p><p>The act requires vendors to notify purchasers in writing of amendments to the plan within 14 days of the amendments being made. A purchaser then has 14 days to rescind the contract if the amendments will materially affect the lot to be purchased.</p><p>“The issue is that amendments to the plans are often required—and all too often notification is not given,” Hoogenbosch says. </p><p>“This is because there is no penalty for failing to comply with the notification requirements, but there are risks that a developer will lose its sale if it does. In this case, notification of the amendments to the plan were known by our clients early on and we wrote to the developer about them, but formal notification of the amendment to the plan was not given until just before registration.</p><p>“The right to rescind is only enlivened after the notification of the amendment is given and as such the purchasers had to wait in order to exercise their rights to terminate. </p><p>“Had our clients been formally notified earlier, the vendor could have set about marketing the property prior to its completion and might have even been able to secure a further sale with settlement to occur on or about the same time as the rest of them.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Court decision ‘won’t change anything’</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>As for agents, they will continue to be the middle party in all the discussions.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/a3fa524c-2a0b-46d1-afb2-300d88144757.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Longboat Holdings’ Eternity development at West Footscray: Legal experts say the decision to end two buyers&#x27; contracts is only a positive for buyers.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“The court decision is good because purchasers know that the 5 per cent tolerance is not being taken advantage of,” Castran Gilbert director Michael Lang says. </p><p>“They know now they can get protection from the court system.</p><p>“But it also works for the developer in that it forces them to have a deeper consideration rather than carte blanche to work within 0 to 5 per cent tolerance rate.</p><p>“The reality is that it hasn’t changed anything. It is a case-by-case basis.”</p><p>Lang said the biggest issue was the lack of communication between the two parties and if they had initiated dialogue earlier then court action could probably have been avoided.</p><p>“It is better to say to the purchaser at the time that the plans may change, which may or may not have an effect on whether the sale goes ahead,” Lang said.</p><p>“It is how you prepare and how you frame it. You should never wait until the building is complete.</p><p>“If there is an issue there may be some way we can work it out.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Should developers be worried?</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>For developers, professional and clear communication with off-the-plan purchasers is essential, so there is no misinterpretation when it comes to the final plan.</p><p>Written communication clearly stating any changes is a must</p><p>“From a developer’s perspective my main view is that an issue you need to talk to the purchaser before it goes to court,” Oz Property Group director Raghav Goel says.</p><p>“The ruling is a wake-up call. The <em>Sale of Land Act</em> is continuously amended. I think the main change I can see is that developers and solicitors working together to ensure formal communication goes out.</p><p>“Plans change so it is about how that change is handled. Developers need to ask themselves what have they promised the purchaser? It is one thing to settle, another issue to make sure that they are happy.</p><p>“If the purchaser is not happy, it is not a good outcome.</p><p>“Dreams can change if plans change.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/62e11181-57af-4cb1-a2e5-e3f4b2d3dfcd.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Longboat Holdings’ Eternity: Oz Property Group director Raghav Goel says the ruling is a wake-up call.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><br><strong>The final word</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Developers need to be circumspect about making changes to plans and informing purchasers at the last minute. Early and clear communication will, hopefully, avoid court cases.</p><p>Hoogenbosch believes that the outcome is only a positive for buyers.</p><p>“I think that this is a positive move for off-the-pan sales and can only have a positive impact on confidence for buyers to enter into these type of contracts,” he says. </p><p>“As this matter showed, the inclusion of special conditions aimed at curtailing the rights of a purchaser to terminate the contract where a material change to the plan has been made are not enforceable at law.</p><p>“I don’t think you will see a removal of these types of conditions from contracts, as they can have a deterrent effect on a purchaser exercising their rights—but ultimately these conditions will not stand up should a purchaser pursue the matter.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a><strong></strong></p><p><strong></strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

A recent legal decision allowing buyers to rescind their contracts upon receiving an amendment plan has developers worried...

[+] Developers Eye Car Yards as Sector Shifts Gear

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>It comes as no surprise that two-thirds of Australians are buying their cars online due to convenience, perceived price benefits and ease of purchase.</p><p>Which leaves the question: what is the future of car yard real estate?</p><p>Australia is littered with car yards throughout its fringe CBDs and into the suburbs with popular streets such as Parramatta Road in Sydney “over-exhausted” with dealerships taking up valuable commercial property that have been almost vacant with foot traffic due to ongoing lockdowns during the past 18 months.</p><p>In Victoria, the situation has been even worse prompting numerous “off-market” inquiries into car yard sales with expression of interest campaigns launching with regular frequency.</p><p>“In the next 10 years most of the car yards in metropolitan Sydney and Melbourne will be redeveloped for commercial and residential use,” Charter Keck Cramer chairman Scott Keck says.</p><p>“This will be more appropriate development in alignment with the growing population of the states. Councils will come under pressure to rezone the land. Some car yards will move out of the city and inner city suburbs into regional Australia, where there will be more space.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cell-sm-3 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/27a03fd7-7d94-4dbb-bba9-e38cb6bbb884.jpg" width="1280"/></picture><div></div></div></div></div><div class="cell cell-sm-9 cx12"><div class="ci cl"><p><br><a href="https://www.theurbandeveloper.com/articles/carparks-asset-class-development-future"><strong>Future of Carpark Real Estate in Limbo</strong></a><br>What is the future of carparks in major cities globally? <em>The Urban Developer </em>investigates... </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“Car yards are quietly being displaced. I believe there are going to be more selling of vehicles through the internet, boutique presentation of vehicles such as shopping centres, as Tesla have done, and overall, I think there will be different marketing strategies to attract existing and new buyers of cars.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>New car sales slump</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>What is not aiding car yards is the drop in new car sales. There were 916,968 new vehicles sold in Australia 2020—a fall of nearly 14 per cent from 2019, making 2020 the softest year for new car sales since 2003. </p><p>Statistics from the Federal Chamber of Automotive Industries reveal that from 2017 new car sales in Australia have been declining. In April 2021, new car sales had plummeted 48.5 per cent year-on-year, the biggest decline in 30 years and the 25th consecutive month of plunging new car sales.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/ef7a476f-4d64-43e4-9846-b2611fc8223f.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ New car sales have slumped on the back of pandemic lockdowns and as consumers explore new ways to buy a vehicle.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>At the same time, used car sales rose significantly with record prices for second-hand cars. Consumers don’t feel the need to go to a car yard to buy a used car. </p><p>A poll conducted in unison by Bingle and Newspoll found that 64 per cent of Australians found buying a car online was a lot easier than dealing with a salesperson. Almost, 80 per cent of consumers believed they had saved money by purchasing online.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>An outdated model</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“The retailing of cars by traditional means of large showrooms and open air car yards is outdated, and on the verge of major disruption,” Savills CBD and metropolitan sales state director Clinton Baxter says.</p><p>“The notion of occupying a huge area of land in prime highway positions, millions of unused stock on site sitting for weeks or months in the elements, for just a few sales per week, is fast becoming an absurd business model.</p><p>“With pressure on land use in our major cities leading to rising land values, and hence rising occupancy costs such as land tax, car yard operators are now looking to other methods of selling cars and are vacating or selling sites and freeing them for redevelopment for alternate and better uses.”</p><p>New car companies such as Tesla have also taken a different approach to selling their vehicles, ignoring its competitors by not leasing or paying for vast sums of land but by marketing their vehicles cleverly online or in established areas of heavy foot traffic.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/26995770-f402-4483-b7f6-6007dc9263b8.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ The steady rise of Tesla in Australia has shown consumers are not wedded to buying new cars from a dealer.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“Telsa has demonstrated that it can sell thousands of cars in the Australian market without a single traditional dealership,” Baxter says. </p><p>“Tesla uses regular-sized shops in major suburban shopping centres to introduce its product to the market. The rest of the purchase is done 100 per cent online, with delivery and service in non-prime industrial locations—not main highways.</p><p>“Even Eagers Automotive set up Carzoos in Brisbane, which was a little village, where customers could return a car within seven days if they didn’t like it—no questions asked.”</p><p>All cars in the Carzoos village came with a discounted no-haggle price, a 175,000 km warranty and 12-months free comprehensive motor vehicle insurance.</p><p>However, Eagers Automotive has now abandoned that concept and replaced it with Easyauto123—aiming to have 11 used car outlets by the end of the year.</p><p>Most car yard owners don’t want to admit publicly that their business model is in trouble. Many are quietly working behind the scenes to foster deals to sell land and hold less stock. After all, if the pandemic has emphasised to the general public one simple fact, it is that almost anything can be bought online and either delivered to your door or picked up.</p><p>The days of open-air car yards along our main roads are fast-becoming a thing of the past.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/a1e76fbb-9a69-4809-bffd-fe66f5e4d3d1.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ The days of the mega car yard seem numbered as consumers&#x27; habits change and the opportunity these prime sites present for redevelopment become too good to ignore.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“We are sticking true to our ‘hub and spoke’ dealership model, but that is not to say there is no change in the sector, with some manufacturers re-evaluating their distribution strategies,” Peter Warren Automotive Holdings chief executive Mark Weaver says.</p><p>“We firmly believe that this evolving strategy will rely on consumer experience centres, delivery centres and service hubs and hence lend themselves to multi-branded, highly cost effective locations such as our existing auto-mall concepts, which allow for the growth and contraction of individual brands from a single location or in close proximity.</p><p>“The pandemic has obviously touched every corner of the world and car manufacturing and supply chain distribution is certainly among them. This has driven some, in our opinion, fundamental changes to the way the automotive supply chain will manage inventory going forwards which will in turn lead to more customisation of cars.</p><p>“We’re in an online world now and consumers can customise their cars more than ever before.”</p><p>Not only that, but consumers can buy from wherever they want, changing the dynamic back in their favour.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Car yard sales in 2021:</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Sunbury Ford</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/f6dbbbcb-999f-4442-aaa2-ea9fa67e4a45.jpeg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Address: </strong>101-107 Horne Street, Sunbury<br><strong>Land:</strong> 4700sq m<br><strong>Lease:</strong> New 15-year lease at $500,000 per annum rental<br><strong>Price:</strong> $9.6 million<br><strong>Sale: </strong>Sold to Sydney-based investor</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Former Honda showroom and car display yard</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/36e02e68-8985-4ff2-9699-afa654404c0e.jpeg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Address:</strong> 1022-1028 Burwood Highway, Ferntree Gully<br><strong>Land:</strong> 3930sq m <br><strong>Lease:</strong> Vacant<br><strong>Price:</strong> $2.88 million ($734 per square metre)<br><strong>Zoning:</strong> Commercial 2 zoning<br><strong>Sale:</strong> Sold to a developer</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Former Honda showroom</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c3858cd6-ece3-4c8a-8f81-073496dabdf2.jpg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Address:</strong> 85 Maroondah Highway, Ringwood<br><strong>Land:</strong> 2616sq m<br><strong>Lease:</strong> Vacant<br><strong>Zoning:</strong> Commercial 1 zone<br><strong>Price:</strong> $6.6 million ($2500 per square metre)<br><strong>Sale: </strong>Sold to a developer  </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Burwood Nissan</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/62ef18c4-ebc3-46c3-999a-7d70958bd7b3.jpeg" width="800"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br><strong>Address: </strong>101 Burwood Highway, Burwood<br><strong>Land: </strong>3928sq m<br><strong>Lease: </strong>Leased at $552,000 p.a. to Autopact Group on a 3-year lease <br><strong>Zoning:</strong> Mixed-use <br><strong>Price:</strong> $10.9 million<br><strong>Sale: </strong>Bought by an investor</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

Card yards in metropolitan areas are already being sold off for redevelopment, with commercial and residential projects springing up...

The future of carparks

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>A never-ending global pandemic threatening to make central business districts redundant, combined with the onset of electric vehicles and autonomous cars spells doom for the future of carparks in major cities around the world. Or do they?</p><p>Depending on who you talk to, carparks are either a strong investment for the next 10 years or an asset that needs an exit strategy—and sooner rather than later.</p><p>“Carparks can have excellent investment characteristics,” M3 Property managing director Michael Coverdale said. </p><p>“Typically, they require low levels of repairs and maintenance, provide stable revenue streams, involve nominal incentives and generally minimal income disruption at lease expiry.</p><p>“Overall cashflow volatility for well-managed facilities is generally considered to be low—in the absence of severe state-wide locks and domestic and international travel restrictions.”</p><p>Coverdale says that while carparks generate stable returns, the investment market has been on the cautious side as Covid-19 continues to create headwinds.</p><p>“At the moment, just like most property sectors, investment yields have lowered considerably over recent years on the back of sustained low interest rates and the forecasted bond rate,” Coverdale said.</p><p>“Nationally and prior to the pandemic, yields typically would vary from circa 4.25 per cent to 6.5 per cent for quality facilities. Variance is dependent upon occupancy performance, lease tenure and other factors.</p><p>“Total returns, such as internal rates of returns, have been running at a minimum of 100 basis points higher. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/1ba24438-e162-47d0-997b-bf2dad888fbf.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ The future of carparks as an asset class is under scrutiny.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“You would expect that under current market conditions emanating from Covid-19, however, once markets open back up, occupancy rates should rebound quite quickly but will vary from facility to facility and will be based on surrounding competition and the habits of core occupiers of each facility.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Owners prepare for electric, driverless future</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Wilson Car Parks is the major player in Australia, owning key CBD locations in Sydney and Melbourne. They see no end in sight to their business.</p><p>“We believe that the future of carparks will see them shaped by emerging technologies—and we have invested heavily in parking technologies that keep people safer and make it more convenient to get to their designation,” Wilson Parking’s chief technology officer Paul Sidwell said.</p><p>“At Wilson, we already have one of the top-rated parking apps available to allow for easier trip planning and bay booking, as well as contactless payment, which are essential when travelling during this pandemic.</p><p>“Covid has added a layer of precaution when it comes to travelling and commuting, but we’ve noticed many customers are choosing to drive when they need to go to the CBD.”</p><p>First Parking is a relatively new player in the Australian carpark market who has revamped the traditional business model into a simpler, dynamic and practical structure that benefits all users.</p><p>“We have revitalised the model of carparking, which had been in place since the 1980s, as it made no sense to us,” First Parking managing director Daniel Hitchcock said.</p><p>“We thought that flat rates offer a more sustainable business model as it stops commuters watching the clock and racing back to their cars in order to avoid paying for another hour of parking.</p><p>“Our model is $29 flat rate in the CBD and $19 on the fringe. We also revamped the technology so once you register online it recognises your number plate and charges your credit card automatically. This saves the continual hassle of obtaining tickets and machines breaking down causing delays with entering and exiting.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4e9b8c21-e925-4cc1-81f0-4c9c00ccec34.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ The changing use of private vehicles as well as the rise of electric cars will change how carparks operate.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>First Parking lease carparks from companies such as JP Morgan, Dexus and the Meriton Hotel among others and already have a presence in Sydney, Brisbane, Parramatta and Newcastle with Melbourne coming soon.</p><p>But they are preparing for the full impact of electric vehicles.</p><p>“The effect of both electric and driverless vehicles is only in its infancy in Australia,” Hitchcock said. “Unless the Commonwealth government subsidises electric vehicles the uptake in Australia will probably be lower than in the rest of the world.</p><p>“That being said, carparks will need to adapt to implementing models that they require along with storage facilities for these types of car models, because you can’t have 1000 driverless vehicles driving around the CBD in peak times.</p><p>“I still believe that individuals aged 30 years and up will want to drive their own vehicles.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Repurposing carpark real estate assets</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Not everyone believes that the future is bright and commuters will continue to drive their cars into the CBD once more freedoms return.</p><p>“Clearly the CBD car parking industry has been placed under enormous stress by the challenges of Covid, particularly during times of lockdowns when CBD’s become virtual ghost towns,” Savills state director Clinton Baxter said.</p><p>“The future of commercial car parking facilities within CBDs is relatively precarious, with the transition to ride-sharing and driverless cars inevitable over the next one to two decades. While in its infancy at the moment, once it happens the change will be very rapid. </p><p>“We expect traditional carparking facilities to become mostly redundant in time. The owners of commercial carparks, whether within existing office, retail and residential buildings, or standalone facilities need to begin contemplating repurposing options.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Car sales boom firms up demand</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Australian car sales have rocketed throughout the pandemic with individuals using the disposable income they are saving on holidays, especially on overseas trips, to upgrade to new models.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/eaa6c547-ae18-423b-9fd4-1c204aa88e67.jpg" width="1600"/></picture><div><span style="align-content:center;opacity:0.8">▲ Opinion is divided over whether carparks will remain viable.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“New car sales in Australia have averaged 95,000 per month in the first six months of 2021, compared to around 87,000 per month during the same period  in 2019,” CBRE pacific head of research Sameer Chopra said.</p><p> New vehicle sales in Australia grew 16.1 per cent in July 2021 over the same month last year, to 84,161 units. It’s the highest July tally since 2018. As such the year-to-date sales total now sits 26.5 per cent higher than the same point in 2020, at 651,629 units— also the best year-to-date tally since 2018.</p><p>“The near-term outlook for carparks is nuanced,” Chopra said. </p><p>“On the one hand, the need to work from home has impacted traffic and demand. But evidence on re-opening stories, particularly from China, showed a greater propensity to use private cars rather than public transport and taxis, with traffic up 11 per cent  to23 per cent across Guangzhou, Shanghai and Beijing in May 2020 compared to December 2019.</p><p>“So, while the current return to work posture may have caused carpark demand to fluctuate over the past 18 months, there may be a contrarian buy-signal if private car usage increases post-pandemic.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>The future of cars</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“New car parks may see more hybrid spaces and more features that support electric and autonomous vehicles, as well as alternative mobility options such as bikes, scooters and ride-shares,” Wilson’s Paul Sidwell,  said.</p><p>“We believe car parks will become ‘pick-up anddrop-off service’ hubs for fleets of autonomous, shared vehicles, as well as hubs for mobility, freight, logistics and business services.</p><p>“Like any business, the parking industry is responsive to consumer demand and changes to demand will only be truly revealed when we’ve emerged from Covid-imposed lockdowns.”</p><p>Toby Lewis, founder and managing director of Marquette Properties, believes carparks are still a solid investment.</p><p>“I would gladly be investing in car parks, as owning a car is very personal,” Lewis said.</p><p>“Even though electric vehicles and automated vehicles will become prominent in Australia in the future, I will always want to drive. And when automated cars come into play they will need somewhere to stop, park and recharge otherwise the city would become inundated with vehicles.</p><p>“I also think there is scope for redevelopment of carparks. There could be many options to adding residential or retail to buildings, depending on their design.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><strong><u>Click here</u></strong><strong> to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

Carparks: a strong investment for the next 10 years or a redundant asset that needs a quick exit strategy? The Urban Developer investigates… 