[+] office to resi web edm.jpeg

<p>New research by architectural firm Hassell and the Property Council of Australia is reigniting debates about the potential to convert office towers into residential complexes.</p><p>But while the research reveals the surprising scale for potential office-to-residential conversion, even the staunchest advocates of adaptive reuse are saying that the practice is no silver bullet.</p><p>Underutilised offices in Melbourne alone could provide at least 12,000 apartments for 20,000 residents, according to Hassell principal Ingrid Bakker, but owners of under-tenanted office towers need to closely consider each building on a case-by-case basis.</p><p>“I was blown away that we found as many buildings as we did, that could work,” Bakker tells <em>The Urban Developer</em>.</p><p>“I thought we might find 10 or 12 buildings [in the Melbourne CBD]. So, to find nearly 90 buildings where we could apply this idea was very interesting.”</p><h2>Conditions for office-to-resi ripening</h2><p><br>The Hassell methodology cross-references vacant or under-tenanted buildings against characteristics that make them suitable for conversion.</p><p>“We’re not talking about every office turning into residential,” Bakker says.</p><p>Buildings built before 1990, more than 10 storeys and with a floorplates around 24m deep—therefore able to accommodate two apartments with an 11m depth plus a 2m wide corridor between them—are most suitable.</p><div id="7sKuSm79oCOtWwvGzfblG2"><picture><img src="//images.ctfassets.net/8pr762qjocl3/3sCS5zaOg6yGeEILZw98Rv/1d1c7d8f1b3219540401306582bc3ce7/2.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/3sCS5zaOg6yGeEILZw98Rv/1d1c7d8f1b3219540401306582bc3ce7/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The adaptive reuse of offices to residential has found success in other markets, including this Californian former office building at 8899 Beverly Blvd, West Hollywood, which was converted to condominiums.<br><br></span></div></div><p>Overlapping those conditions means buildings are more likely to benefit from conversion, can fit an appropriate configuration of apartments, and have the latent structural capacity for a few additional floors on top, Bakker says.</p><p>As well as getting the right building, design, planning, and financial considerations are also important, according to Hassell.</p><p>“How can we be really innovative, in what we do in a design sense, to really unlock the full potential of these sites?” Bakker says.&nbsp;</p><p>“Potential solutions might be some flexibility around [Melbourne Planning Scheme Amendment] C270, and the Better Apartment Design Standards.”</p><p>“We’ve got City of Melbourne and Department of Planning saying they’re open for business, and they’re happy to support these sorts of initiatives, which is amazing.</p><p>“And then on the market side: how do we really view the full picture so that carbon benefits can be given value?”</p><div id="5tLPjsktBUDillwPe4RI2I"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6wJOLGK5pMkpODHR7Epw5E/ed5a28f1e438cfe11c774b71cef59e95/3.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/6wJOLGK5pMkpODHR7Epw5E/ed5a28f1e438cfe11c774b71cef59e95/3.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Built in 1931, 330 Himrod Street, Brooklyn, New York was converted from a warehouse, factory and offices to an 80-apartment complex.<br><br></span></div></div><p>Experts <em>The Urban Developer</em> spoke to agree that adaptive reuse projects can reduce the embodied emissions of a building by roughly 40-50 per cent, compared to demolish and rebuild projects.</p><p>For some developers or tenants, that carbon reduction (along with mandates or financial incentives attached to sustainability) may help push office-to-resi projects into feasibility.</p><p>The City of Melbourne’s 2040 net-zero target also means the market is being pushed to convert 80 buildings a year, which may be a more aggressive rate than other jurisdictions are willing to incentivise.</p><p>Hassell says its analytical methodology can be applied to other jurisdictions, but that different planning and economic conditions may yield different results.</p><p>“The difference with Sydney is around the property values, and the proportionality of rent. Rents are almost double in Sydney, for office space, than they are in Melbourne,” Bakker says.</p><div id="5prUeiSsvf2b11DMWEXaI7"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6nSTyzX49LZGUNZGKDSQoZ/4cadfd2ea73c597f49e0fcd7f08cbeef/4.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/6nSTyzX49LZGUNZGKDSQoZ/4cadfd2ea73c597f49e0fcd7f08cbeef/4.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Alexander &amp; Albemarle is a mixed-use building in Canberra originally constructed as Commonwealth Government office accommodation in the 1960s.<br><br></span></div></div><p>The standard 18:1 FSR allowance in Melbourne, which many older buildings are not exploiting, also differs from other cities.</p><p>“So, the fact that you’ve got an empty office building in Melbourne, allows you to potentially look at this idea of reuse, because it stacks up. But I think there’s opportunities in Sydney, maybe in the fringe areas such as Darlinghurst and Pyrmont.”</p><h2>No silver bullet&nbsp;</h2><p><br>Owners of the right buildings are set to benefit from coming office-to-resi conversions, but the practice isn’t going to solve broader market woes, experts say.</p><p>B-grade and below office towers are in the doldrums at the moment, with recent PCA research showing national CBD vacancies are sitting at 12.8 per cent.&nbsp;</p><p>Demand was negative in the six months to July 2023, with net absorption of negative 21,740 square metres.</p><p>Meanwhile, the housing crisis is at the top of the political agenda, with National Cabinet agreeing this month to <a href="https://www.theurbandeveloper.com/articles/national-cabinet-housing-supply-new-deal" data-mce-href="https://www.theurbandeveloper.com/articles/national-cabinet-housing-supply-new-deal">a swathe of new initiatives</a>.</p><div id="5SUZAF54nMDM698vZHCUmm"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6Xpk5a6kBnxDv5MD6vTlJ/c6c01319453d8420ff4bdd906be9d7a0/flpoiur_moill1.jpeg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/6Xpk5a6kBnxDv5MD6vTlJ/c6c01319453d8420ff4bdd906be9d7a0/flpoiur_moill1.jpeg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Hassell Architecture was instrumental in the Flour Mill of Summer Hill project in Sydney, a mixed-use ​‘village’ with homes, shops, cafes, parks, plazas, laneways and links to new light rail.<br><br></span></div></div><p>“If you convert an office building into a residential building, you’re converting to strata, and you’re locked in for 40 or 50 years,” Philip Oldfield says.</p><p>Oldfield, head of school at UNSW Built Environment, is an advocate of office-to-resi adaptive reuse projects but acknowledges its limited impact on broader markets.</p><p>“Look, there’s empty office buildings in Sydney. And if we audited them all we might find shallow floorplates can be converted. But it is, in the scheme of the hundreds of thousand of homes we need, a drop in the ocean,” he says.</p><p>“There’s something of a design mismatch between office and residential buildings. What we find is the examples that have been converted tend to be quite boutique office buildings, shallow office buildings, of which there’s not a huge amount.</p><p>“They’re converted to premium housing because it’s quite expensive and technically challenging to convert. This is a lever we can pull, but it’s not, in isolation, going to solve the housing affordability crisis.</p><p>“It’s a niche field, but it’s a growing field. It’s a great idea, but it’s challenging to get it correct.”<br><br></p><hr><p><strong><br>You are currently experiencing <em>The Urban Developer Plus</em> (TUD+), our premium membership for property professionals. <a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans">Click here to learn more.</a></strong></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><br></div></div>

Repurposing towers in a time of office oversupply and residential it not a new idea, but its finally proving practical in at least one Australian capital…

[+] No Easy Pickings in RSL Redevelopment

<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 wave of lucrative, high-profile RSL redevelopments is coming to fruition, with another tranche of proposals under way, but proponents warn that club projects shouldn’t be viewed as low-hanging fruit.</p><p>The combination of long- and short-term trends in the hospitality and clubs sector have made RSLs and other community clubs an enticing target for developers in recent years, with the number and scale of projects accelerating.</p><p>With favourable locations and site sizes, and a hungry partner, the financial appeal for developers is obvious. But proponents involved in club redevelopment ventures warn that the sector comes with a its own set of considerations and requirements, and that each project can be a difficult and individual process to get right.</p><p>Chairman of Capital Corporation Steve Grant suggests that understanding the existing business model and operations of the club, as well as convincing voting club members to get behind a plan, is crucial to success.</p><p>“We’ll go in, we do a demographics study, we look at their financials, we’ll understand the use of this space,” says Grant.</p><p>Capital Corporation’s project Bond, a joint venture with Bondi Junction RSL, is currently under construction with residential apartments at its core, but other club redevelopments in recent years have featured commercial towers, retail, hotels, or community and hospitality spaces.</p><p>“We’re going to have a holistic view of the club and see how we can improve the situation, regardless of whether it’s to knock it down tomorrow, or come up with a staged conversion, or whatever happens. Every case is different,” Grant says.</p><p>“They don’t always have spare land, they don’t always have good zoning. It’s really about meeting the people, understanding their constraints and putting together something that is going to help them survive and prosper.”</p><p></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/9f4d7c9a-f575-4601-8756-d7760f667fb2.jpg" width="960"/></picture><div><span style="align-content:center;opacity:0.8">▲ Capital Corporation’s joint venture with Bondi Junction RSL, Bondi.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Stephen Abolakian is managing director at Hyecorp, developers of a <a href="https://www.theurbandeveloper.com/articles/rsl-willoughby">joint-venture senior living facility with Willoughby RSL</a>, which will break ground next year. He says club projects go beyond simple transactions, and that building trust and understanding for partnership agreements is a long, involved process.</p><p>“We spent a couple of years understanding what was important for the club, the members, and the community,” Abolakian says.</p><p>“And then, once understanding all that, seeing if there is a planning and development pathway that can achieve what they wanted. It took years of discussions before there was any pen to paper—we’re probably eight or nine years in now.”</p><p>“Every club is different. Every membership base is different. You can’t have a short-term view on this. It’s absolutely a long, long game.</p><p>“If you don’t have that local community understanding, you’re not going to be able to do what’s really important. Absolutely it has to stack up, it has to be fundable, but you also need to tick the community box. You have to get that bit right.”</p><p>“I’m in the area. I’m here. I’ll be eating at this club with my family, it’s my local,” Abolakian adds.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Unlocking potential</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>RSL NSW has acknowledged that the brand is associated with “social clubs, pokies, old people, cheap food and cheap drinks”, while both long-term consumer trends and the impact of Covid shutdowns on hospitality have hurt clubs’ revenue.</p><p>“Most clubs are asset-rich and cash-poor, as the old saying goes,” Abolakian says.</p><p>“They need to be, obviously, unlocking the development value. But they also need to ensure the long-term survival of the club and its members, and its social purpose.”</p><p>“Is there some form of non-trading income that can also be generated out of development? How is the club going to ensure long-term survival instead of a sugar hit up front?”</p><p>Grant agrees that a successful joint venture with a club will add value beyond rezoning.</p><p>“It’s not all about building a very tall block of apartments and going home afterwards and thinking, ‘Gee, that was good’. You need to have done something to enhance their operation, so they’ll be around for many years to come,” he says.</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/cda8d4f8-0a58-451d-8609-d735713cdfcb.jpg" width="960"/></picture><div><span style="align-content:center;opacity:0.8">▲ An artist’s impression of the 18-storey commercial tower Endeavour Property has worked with Chatswood RSL on. It is in the final stage of due diligence with an unnamed development partner.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The managing director of Endeavour Property Andrew Gibbons has worked with Chatswood RSL <a href="https://www.theurbandeveloper.com/articles/-opportunity-knocks-for-rsl-tower-partner">on its 18-storey commercial tower project,</a> currently in the final stage of due diligence with an unnamed development partner. He warns that distributing added value equitably can be a challenge for clubs.</p><p>“One of the models that has been put in place on many club projects is that a developer will come along, in those instances where the clubs have been in various states of financial stress, and they will value the land at highest and best-use planning approval,” Gibbons says.</p><p>“Then they will pay for the planning component, and they will share the upside 50-50 with the client. That’s the typical model for clubs that don’t have the cash flow to do their own planning work and add the value.”</p><p>“So the developer will be helping the club significantly extract the value, but they’ll be also taking a lot of that value themselves. It really depends on the financial capability of the club to be able to fund some of the development planning through a DA, to then have the option of choosing a development partner with that value already added.”</p><p>Some clubs may be able to self-fund early development work, <a href="https://www.theurbandeveloper.com/articles/-opportunity-knocks-for-rsl-tower-partner">as in the case with Chatswood RSL</a>, while clubs with extremely distressed finances and poor long-term prospects at the site may consider sale and relocation.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Club projects in all shapes and sizes</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Among projects in early development in Sydney, Castle Hill RSL has proposed a $151-million senior living complex, alongside residential care facilities and other amenities, while Burwood RSL is under way with <a href="https://www.theurbandeveloper.com/articles/burwood-rsl-ramps-up-209m-development-plans">a $209-million commercial and entertainment district</a>. Petersham RSL is pushing <a href="https://www.theurbandeveloper.com/articles/deicorp-lodges-proposal-for-350-apartments-rsl-club-in-west-sydney">a residential and hospitality project,</a> while Campbelltown RSL is working through the approvals process for a hotel tower.</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/0dbc9149-4910-4ff4-8f10-039611802562.jpg" width="960"/></picture><div><span style="align-content:center;opacity:0.8">▲ Tarragindi Bowls Club in Brisbane is about to begin construction of its retirement village project.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>In Brisbane, Coorparoo RSL sold its site this year to Bolton Clark for $10 million, with a short-term leaseback clause. Bolton Clark intends to construct a vertical retirement village or residential tower on the site.</p><p>Melbourne’s Ringwood RSL is undertaking a $120-million project in conjunction with partner Costa Asset Management, a consortium, to add a mixed-use commercial space and apartments.</p><p>A number of clubs have early-stage projects under way in the sub-$100-million range, including a project to build retail, residential and commercial towers at the Cyprus Community Club in Sydney’s Stanmore. The club had been facing forced administration and a sell-off of its assets before refinancing through a community share-raising and successfully rezoning.</p><p>Bowls clubs also fit the sweet spot for site and asset characteristics and membership demographics, with a<a href="https://www.theurbandeveloper.com/articles/market-wrap-up-the-week-in-property-december"> four-building over-55s development</a> by Mirvac currently under construction at Waverley Bowling Club. </p><p>In Brisbane, the Tarragindi Bowls Club will enter construction phase in November 2021 for another retirement village project.</p><p>The success of these projects sits in stark contrast to the troubled Balmain Leagues Club site, which has undergone <a href="https://www.theurbandeveloper.com/articles/approval-for-balmain-leagues-club-redevelopment-in-rozelle-">multiple rounds of failed proposals</a> for more than a decade, before being subjected to a compulsory lease by Transport for NSW this year.</p><p>Mixed-use towers of up to 24 storeys had been proposed, but the site will instead be used to store material related to construction activity on the Western Harbour Tunnel.</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>

Developers and community clubs partnering up for projects is on the rise, but there’s a lot more to it than meets the eye...

[+] multi level warehouse web.jpg

<p>The buzz around multi-storey warehousing is beginning to result in completions in south Sydney, but stakeholders say that the new model is unlikely to spread and is not a solution to the world’s tightest warehouse market.</p><p>Interest and noise around multi-storey industrial facilities, touted as a solution to shortages of urban infill locations suitable for last-mile logistics, has been <a href="https://www.theurbandeveloper.com/articles/inside-south-sydneys-vertical-industrial-boom" data-mce-href="https://www.theurbandeveloper.com/articles/inside-south-sydneys-vertical-industrial-boom">growing in recent years</a>.&nbsp;</p><p><a href="https://www.theurbandeveloper.com/articles/goodman-group-multi-storey-warehouse-alexandria-nsw-first-look" data-mce-href="https://www.theurbandeveloper.com/articles/goodman-group-multi-storey-warehouse-alexandria-nsw-first-look">Goodman</a> and <a href="https://www.theurbandeveloper.com/articles/charter-hall-ascent-bourke-alexandria-work-begins" data-mce-href="https://www.theurbandeveloper.com/articles/charter-hall-ascent-bourke-alexandria-work-begins">Charter Hall</a> are among early movers in this space, while single-user e-commerce and delivery companies such as <a href="https://www.theurbandeveloper.com/articles/woolworths-500m-boost-to-warehouse-capacity-for-online-shoppers" data-mce-href="https://www.theurbandeveloper.com/articles/woolworths-500m-boost-to-warehouse-capacity-for-online-shoppers">Woolworths</a> and Amazon also see vertical as a viable play.</p><p>“Given that there’s no industrial-zoned land in south Sydney to develop on, the case for going vertical absolutely makes sense,” CBRE head of industrial and logistics research Sass J-Baleh tells <em>The Urban Developer</em>.</p><p>South Sydney now hosts a number of projects close to standing up, and industry players say that the south, south-west and western metro precincts will likely have several more in coming years.</p><p>ESR Australia has just settled on one of the few remaining large-scale industrial landholdings in Botany Bay, acquiring a 4.8ha site at 49 Stephen Road, Banksmeadow, for $143 million.</p><p>ESR will invest a further $300 million to develop a two-level facility with a GFA of about 58,000 square metres.</p><p>South Sydney may have embraced multi-storey, and the model has been proven out internationally, but tall sheds are unlikely to work for urban infill elsewhere in Australia, industry says.</p><div id="6uZjLw2vgBpgjDb8d9BetX"><picture><img src="//images.ctfassets.net/8pr762qjocl3/1Elu85q20Pe4cxg7wGZCwd/6d900b21df246da7fc2e0c6505e984da/1.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/1Elu85q20Pe4cxg7wGZCwd/6d900b21df246da7fc2e0c6505e984da/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A render of Goodman’s Axis Alexandria in Sydney’s south.<br><br></span></div></div><p>Centennial chief executive industrial and logistics Paul Ford says “the only other main supply that hasn’t yet come on in the inner-rings is multi-storey warehousing”.&nbsp;</p><p>“Multi-storey absolutely has merit and a place, however, it isn’t currently economical in many locations except for south Sydney.”</p><p>&nbsp;J-Baleh says that urban infill multi-storey industrial requires density and access to other logistics precincts to make sense. In Australia, land around the Port of Melbourne might be the only other viable area.</p><p>“In the next 10 years we might potentially see something starting up in the Melbourne market. At the moment it’s not feasible but it certainly will get there in the future,” J-Baleh says.</p><h2>Taller sheds won’t solve broader woes</h2><p><br>With Australia boasting the tightest industrial and logistics markets in the world, developers and tenants are desperate for solutions.</p><p>“Industrial’s been on a hell of a journey, the last five years or so. We’ve seen vacancy rates drop from 6 or 7 per cent down to half a per cent [nationally],” Centuria head of industrial Jesse Curtis says.</p><p>“We’ve had tenant demand increasing at a huge rate, we’ve had a massive uptake by newcomers.”</p><p>Curtis says that in addition to e-commerce, subsectors such as transport and logistics, data centres, and cold-chain storage centres were competing for urban infill sites.</p><div id="1vJoeybDvDE7bSSy72xczK"><picture><img src="//images.ctfassets.net/8pr762qjocl3/5dqvZl8GH4hQ7CZLthK8vc/cc7d778f17d1d3d0b1af9ac4dc2b9e45/5.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/5dqvZl8GH4hQ7CZLthK8vc/cc7d778f17d1d3d0b1af9ac4dc2b9e45/5.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The UK’s first multi-level warehouse, at Grand Union in Brent in London’s north-west.<br><br></span></div></div><p>Sources have told <em>The Urban Developer</em> that vacancies in Sydney may be as low as 0.2 per cent, with Melbourne floating around 0.5 per cent.&nbsp;</p><p>Surprisingly, analysts predict that the market will cramp up further in the months and years ahead.</p><p>“We don’t see demand tailing off materially in the short to medium term albeit there could be some moderate slowdown should we enter a recession … and we only see demand for industrial and logistics warehousing continuing to outpace supply,” Ford says.&nbsp;&nbsp;</p><p>“If we look at a global context, the average rents in some of the major cities around the world, Sydney’s still not even in the top 10,” J-Baleh says.</p><p>“There’s scope for further rental growth, just on that basis.”</p><p>J-Baleh says that rents will go up another 9.2 per cent by Christmas. Melbourne sheds can expect a particularly juicy year, up 14 per cent.&nbsp;</p><p>Expect the next few years to be scorchers too, with forecast CAGR in Melbourne of 6.8 per cent out to 2026.</p><p>That comes on top of about 37 per cent year-on-year growth already across the nation and factors in a slowing economy.&nbsp;</p><div id="6LBpJ6MFisjrWUPEIfcjdN"><picture><img src="//images.ctfassets.net/8pr762qjocl3/j8ybz7Qv9CFUyqxKYZD4I/3320125426e4dd451fbf3ea501e3a0b6/4.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/j8ybz7Qv9CFUyqxKYZD4I/3320125426e4dd451fbf3ea501e3a0b6/4.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The three-level Georgetown Crossroads warehouse complex near Seattle in the US.<br><br></span></div></div><h2>Land values key to stacking up sheds</h2><p><br>The core component of the financial case for multi-storey warehouses is land values, proponents say.</p><p>CBRE estimates that multi-storey becomes viable once land values are equivalent to 50 per cent of construction costs.</p><p>“There is no doubt supply of this product will increase over the medium to longer term in locations with high enough land values to justify it,” Ford tells <em>The Urban Developer</em>.&nbsp;</p><p>“Land values need to lift to enable that to become economic … they’re probably 70 per cent there in a number of locations but until land growth is at a level where it’s high enough, multi-storey supply will be constrained.</p><p>“When it does, it will help ease that burden but that is at least a few years away.”&nbsp;&nbsp;</p><p>Curtis says that, with the major players having plenty of experience in multi-storey in other markets, there’s no shortage of expertise when the time inevitably comes to go tall.</p><p>“These last-kilometre locations for industrial are only going to become more in demand. And they’re going to need to grow up, grow to multi-level.”<br><br></p><hr><p><br><strong>You are currently experiencing <em>The Urban Developer Plus</em> (TUD+), our premium membership for property professionals.<a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"> Click here to learn more.</a><br><br></strong></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><br></div></div><p><br></p>

Tall sheds are taking off in one NSW market, but the belief they can solve Australia’s superheated industrial market is raising eyebrows…

1.jpg

<p>NSW is in the middle of the largest flood response operation in the history of the state, with flooding this week in the central west expanding the scope of that recovery.</p><p>With these disasters set to become more, not less, frequent as climate change rips up the flooding rule book, property sector stakeholders are calling for flood-risk mapping to undergo a step-change.</p><p>Forbes and surrounding areas in the state’s central west were evacuated for the second time in a fortnight, while Gunnedah was evacuated because of a sixth major flood this year.</p><p>For the first time in its history, the SES has called in international support, receiving defence and other emergency support as it evacuated towns by helicopter and boat.</p><p>But flood experts and property stakeholders say that extreme inundation levels of recent years need to be planned for, not planned around.</p><p>The current level of technology, and the frameworks around modelling future flood risk, are not yet fit for purpose, according to planners, researchers, and other property players. As the climate continues to change in coming decades, the regions that will be newly exposed to flood risk have not yet been identified.</p><p>Planning Institute of Australia policy national policy manager John Brockhoff told <em>The Urban Developer,</em>&nbsp;“We’re planning for floods in a changing climate”.</p><p>“We’re also managing strong growth in regional Australia. Those two things together, if we’re planning for it, mean more uncertainty around the climate and natural environment, bushfires and floods,” he says.&nbsp;</p><p>“We’ve got to take a more conservative approach to the way we do our long-term planning, so that we’re not putting lives and property at risk.”</p><div id="fYDWt6rkoPKqDZv8nXJ90"><picture><img src="//images.ctfassets.net/8pr762qjocl3/2YI5tcMAOFNOUAuIvuE2yw/12342804fa8a0e40256dd214781d8707/1.jpg" alt="Floods need to be planned for, not planned around, say experts." data-mce-src="//images.ctfassets.net/8pr762qjocl3/2YI5tcMAOFNOUAuIvuE2yw/12342804fa8a0e40256dd214781d8707/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Floods need to be planned for, not planned around, say experts.<br><br></span></div></div><h2>Future flood risk to worsen</h2><p><br>More work is needed to determine where future floods will occur, and the extent of their impact, but it’s certain that they are likely to be more extreme, researchers say.</p><p>Dr Chiara Holgate, a research fellow at the ARC Centre of Excellence for Climate Extremes, says that “our research shows that rainfall in eastern Australia is maximised when a particular set of climate drivers act in concert”.</p><p>“Of course, while the number and extent of floods this year seem unusual in the context of recent decades, it is my understanding that the extent to which it is actually unusual has not yet been scientifically established.”</p><p>Research recently undertaken with the support of the water infrastructure industry has revealed that current rainfall models need to be updated to account for climate change.</p><p>The paper estimates that rainfall catchment by 546 large dams across Australia is expected to increase between 14 and 38 per cent under a changing climate.</p><p>Under the current flood risk mapping model, the increase in rainfall already observed over the past 20 years is not taken into consideration, let alone future increases.</p><p>Johan Visser of UNSW’s Sydney’s Water Research Centre, the lead author on the paper, says that “under any future scenario, our estimate is that the [Predicted Maximum Precipitation] will increase”.</p><p>“The observational data shows that atmospheric moisture has been increasing over the historical record, and when you also factor in future climate projections from climate models, then you see that it’s projected to increase even further into the future.</p><p>“Dam owners regularly review the safety performance of their dams under a wide range of failure scenarios, and this research reinforces the importance of ensuring that in the future these reviews consider the implications of a warming climate on extreme floods.”</p><div id="2gMj01x49tbdP0NUzEWLOS"><picture><img src="//images.ctfassets.net/8pr762qjocl3/5Fg9XTIMwxAPjKv1je1ctb/335f5394a46f63a35a66ba52ea896b11/Mid_article_resizes__12_.jpg" alt="Dam performance is crucial to planning for future flooding events." data-mce-src="//images.ctfassets.net/8pr762qjocl3/5Fg9XTIMwxAPjKv1je1ctb/335f5394a46f63a35a66ba52ea896b11/Mid_article_resizes__12_.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Dam performance is crucial to planning for future flooding events.<br><br></span></div></div><p>Co-author Professor Ashish Sharma of UNSW’s School of Civil and Environmental Engineering says that anybody planning to build a large dam “needs to think 50 to 100 years ahead”.&nbsp;</p><p>“This research makes clear that future planning now needs to consider the future impacts of climate change on the plausible upper limit of rainfall extremes.”</p><h2>Spatial science can help</h2><p><br>FrontierSI is a not-for-profit company that provides research and advice to government and industry on spatial science and infrastructure.</p><p>The company recently released a report investigating how urban planners and the property sector can integrate earth observation (or satellite) data into their practices.&nbsp;</p><p>In terms of flood-risk mapping, that information can be used to understand, for example, runoff flows in urban networks, or the impermeability of land surfaces over large, or more granular, scales. Under the right applications, it can also be used in projecting future flood risk.</p><p>FrontierSI industry engagement manager Dr Serryn Eagleson says that “there’s increased availability of satellite data, coupled with machine learning and AI and sensor data. What we need to do now is better co-ordination across all these different data streams”.&nbsp;</p><p>According to Eagleson, many urban planners are also currently relying on off-shore providers of expensive data. Mapping Australian flood risk will require more high-resolution imagery available at reasonable cost.&nbsp;</p><p>But one of the major sticking points, and a current focus for FrontierSI, is in awareness and understanding within the property sector.</p><div id="7fYEZznEBpjL6gajXU01VF"><picture><img src="//images.ctfassets.net/8pr762qjocl3/4ROlqkZolYXg04uiaL5GbL/21ac072d8ea051b78372a3c871d2c9e7/3.jpg" alt="The spatial and property sectors need to get on the same page." data-mce-src="//images.ctfassets.net/8pr762qjocl3/4ROlqkZolYXg04uiaL5GbL/21ac072d8ea051b78372a3c871d2c9e7/3.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The spatial and property sectors need to get on the same page.<br><br></span></div></div><p>“One of the things we’re trying to do is talk about language. People in spatial science and people in the property sector, speak a different language. So we need to get together, we need to train the next generation,” Eagleson says.</p><p>“We need models that we trust, we need data in the conversation…we need to deal with awareness and training in this data because it’s quite new.</p><p>“What it’s really about is how do we embed up-to-date data science into the planning process, from day one.”</p><h2>Planners call for clarity, consistency</h2><p><br>Brockhoff argues that the NSW government needs to take a larger role in assisting planners and councils to map future flood risk, and is pleased by indications that it’s moving in that direction.</p><p>“It falls on the resources of individual councils, which have different degrees of resources, to do the mapping, apply the right parameters and assumptions, and to update the model with new information and new technology,” he says.</p><p>“Where state government can play a role is in providing some of the common parameters, common briefs, common data requirements and formats, and common assumptions for the models. That will play a role in driving greater efficiency, so local governments don’t have to reinvent the wheel each time.”</p><p>While financial assistance and common guidelines are important, according to Brockhoff, the state government also needs to provide a clear framework for decision-making around flood risk.</p><h2>New flood planning, recovery body</h2><p><br>In response to years of flooding turmoil in the state, planning minister Anthony Roberts introduced a Bill for a NSW Reconstruction Authority on November 9.&nbsp;</p><p>The establishment of the authority was a recommendation of the independent inquiry established in response to the 2022 Northern Rivers floods.</p><div id="1c9QDZjd5fXIPBbXzBFiD5"><picture><img src="//images.ctfassets.net/8pr762qjocl3/HMIAyhbKKOGSp4dUgsCui/1ade3cb64710a418506f5f9630c536c3/2.jpg" alt="The NSW Reconstruction Authority was a recommendation of the independent inquiry after 2022 Northern Rivers floods." data-mce-src="//images.ctfassets.net/8pr762qjocl3/HMIAyhbKKOGSp4dUgsCui/1ade3cb64710a418506f5f9630c536c3/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The NSW Reconstruction Authority was a recommendation of the independent inquiry after 2022 Northern Rivers floods.<br><br></span></div></div><p>A DPIE spokesperson told <em>The Urban Developer</em> that the authority will “be responsible for facilitating disaster prevention, preparedness, recovery, reconstruction, and adaptation for the impacts of disasters in NSW”.</p><p>“Some of the authority’s key responsibilities will be to develop a state disaster mitigation plan, carry out flood modelling, and set new flood planning levels, particularly for high-risk catchments. Flood modelling and other evidence-based data will help to improve land-use planning decisions.”</p><p>However, specifics of how the authority will undertake flood modelling, and co-ordinate flood planning, are not yet clear.</p><p>The Bill also provides the planning minister with wide-ranging powers to declare an area or project a disaster zone, or potential disaster zone.&nbsp;</p><p>Declarations will be made on ministerial discretion, and are not statutorily required to take any particular information or process into account.</p><p>The DPIE spokesperson says that the Bill includes “broad powers and functions for both the authority and Minister for Planning to ensure affected communities can better prepare for and recover more quickly from the impact of natural disasters, including the ability to work with communities through councils to develop local adaptation plans and, in certain circumstances, declare projects to deliver them faster when needed”.</p><p>The NSW Reconstruction Authority Bill 2022 has passed into the senate, and the government’s intention is to pass the Bill into law this year.&nbsp;</p><p>However, with only a handful of sitting days left in the year, and a caretaker period expected before the March 25, 2023, NSW state election, the timeline for passage of the Bill, and the authority’s establishment, remains unclear.</p><p>Planning Minister Anthony Roberts was approached for comment.<br><br></p><hr><p style="margin-top: 0pt; margin-bottom: 0pt;" data-mce-style="margin-top: 0pt; margin-bottom: 0pt;"><span style="font-size: 13.5pt; font-family: 'Times New Roman'; color: #282828; background-color: #ffffff;" data-mce-style="font-size: 13.5pt; font-family: 'Times New Roman'; color: #282828; background-color: #ffffff;"><br></span><strong>You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals.<a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"> Click here to learn more.</a></strong></p><p style="margin-top: 0pt; margin-bottom: 0pt;" data-mce-style="margin-top: 0pt; margin-bottom: 0pt;"><strong><br><a href="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg" target="_blank" rel="noopener" data-mce-href="//images.ctfassets.net/8pr762qjocl3/12UMq5eMSEOh0QxJVBYaDt/d7507cf4ceb1365cc9ce7eaff84d06cc/tud___banner.jpg"></a></strong></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><br></div></div><p style="margin-top: 0pt; margin-bottom: 0pt;" data-mce-style="margin-top: 0pt; margin-bottom: 0pt;"><br data-mce-bogus="1"></p>

Flood risk mapping needs a major overhaul as climate change rips up the rulebook. The Urban Developer looks at what’s being done in NSW off the back of its worst floods in history…

[+] hero nsw building reforms web.jpg

<p>Developers and builders will face additional administration costs and burdens under reforms currently working through NSW parliament, sector experts say.</p><p>But the proposed reforms should be welcomed by industry, with the efforts to stamp out bad operators having financial benefits for the industry at large over the long term.</p><p>“We’re on the precipice of the largest reforms that I can recall, over 20 or 30 years of practicing,” Gadens construction disputes partner Matthew Taylor says.&nbsp;</p><p>“If you’re a competent and honest developer or builder, you’ve got to welcome these reforms with open arms,” he says</p><p>“There’s only an upside for consumers, in terms of protection.”</p><p>The slate of legislation currently under consultation, including the Building Bill 2022, have been developed out of the reform agenda led by <a data-mce-href="https://www.theurbandeveloper.com/articles/nsw-building-commissioner-david-chandler-reverses-resignation" href="https://www.theurbandeveloper.com/articles/nsw-building-commissioner-david-chandler-reverses-resignation" target="_blank" rel="noopener">NSW Building Commissioner David Chandler </a>and, although exhaustive, carries few surprises for industry.</p><p>“The consultation has been informed by extensive discussion with industry and community stakeholders, analysis of regulatory data (including from our proactive enforcement regime) and research,” a Department of Fair Trading spokesperson tells <em>The Urban Developer</em>.</p><p>Their content is aimed at improving protections for consumers, and covers new licensing requirements, extensions of warranties, increased liabilities, and a comprehensive overhaul and consolidation of new and existing legislation.</p><p>There are also new powers for regulators, including the ability to make investigations and stop-work orders in relation to residential and aged-care projects.</p><div id="4jYKiza7laDcvKax3CQIQi"><picture><img src="//images.ctfassets.net/8pr762qjocl3/436fAkgduSVGRPbnuwYjLC/9e80cdddf02badb51c8e4754b6f6e73b/1.jpg" alt="Property Council of Australia acting NSW executive director Adina Cirson." data-mce-src="//images.ctfassets.net/8pr762qjocl3/436fAkgduSVGRPbnuwYjLC/9e80cdddf02badb51c8e4754b6f6e73b/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Property Council of Australia acting NSW executive director Adina Cirson: the council supports the reforms.<br><br></span></div></div><p>Property Council of Australia acting NSW executive director Adina Cirson says the council supports reforms to deliver compliant and safer buildings, “while being mindful not to add additional red tape that add costs that would eventually be passed onto customers”.</p><p>“The policy intent is to increase the standard of building work across the state. Developers who do not comply would be required to lift their game to bring confidence back to the marketplace.”</p><h2>Short-term costs</h2><p><br>Developers and builders will take on additional administrative burdens under the new regime, which will carry associated costs. Insurance for the sector, already an issue for many certifiers in particular, will continue to be a challenge.</p><p>In the long term, however, the financial impact of the legislation will be positive, Taylor says.</p><p>“It’s going to reduce the impact of collapse—of building collapses and <a href="https://www.theurbandeveloper.com/articles/doomed-to-fail-inside-the-probuild-collapse" data-mce-href="https://www.theurbandeveloper.com/articles/doomed-to-fail-inside-the-probuild-collapse">company collapses</a>. You can feel the effects of those on insurance and government bailouts, everywhere in the industry, for years and years.</p><p>“To what extent insurance costs will be passed down will be an issue. The number of construction insurers on the market are on the decline.</p><p>“Who would insure the construction industry at the moment? It’s a risky business.</p><p>“So, there will be cost consequences in terms of administration and insurance. But the long-term impacts will benefit the industry.”</p><div id="l3FB1IAGxlCSsXhLgMIZj"><div><div id="29QmXtHeSMP5bs1UeKVu3u"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6tpVKjBPR6ww9219MItI1U/d2ca47fbd640aa3c11066e5979ea106f/david_chandler.jpeg" alt="NSW Building Commissioner David Chandler" data-mce-src="//images.ctfassets.net/8pr762qjocl3/6tpVKjBPR6ww9219MItI1U/d2ca47fbd640aa3c11066e5979ea106f/david_chandler.jpeg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ NSW Building Commissioner David Chandler.</span></div></div><br></div></div><p>Cirson says the council is concerned about the housing crisis across NSW but that the reforms should help to address shortages.</p><p>“Increasing building quality will allow for owners to have confidence in the developments that are completed,” Cirson says.</p><p>A spokesperson for the Department of Fair Trading NSW told <em>The Urban Developer</em> that “the draft legislation currently out for consultation is accompanied by Regulatory Impact Statements which detail the benefits and costs of the proposed reforms”.&nbsp;</p><p>“The regulatory impact statements have identified the proposed reforms present a net benefit to industry and the community.”&nbsp;</p><h2>Threshold for some defects lowered</h2><p><br>The definitions and processes around defects will be amended under the new regime, making it easier to bring claims for issues such as waterproofing failures.</p><p>“If it caused mould, for example, that would be considered a minor defect under the current legislation,” Taylor says.</p><p>“A leaking shower might mean the whole wall needs to be cut out. That’s tens of thousands of dollars, but previously the consumer would not have been protected against something like that.”</p><p>Waterproofing-related issues constituted 11.46 per cent of all defects in class 2 buildings, a 2019 study by Griffith and Deakin universities found.</p><div id="1y5mgw0HE06kIgpfakMvic"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6BW6x0y4EY9k2qeVv2do9j/a9743978ca2535f9316486052cd5aa83/2.jpg" alt="The reforms will also allow more claims to be dealt with by Department of Fair Trading." data-mce-src="//images.ctfassets.net/8pr762qjocl3/6BW6x0y4EY9k2qeVv2do9j/a9743978ca2535f9316486052cd5aa83/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The reforms will allow more claims to be dealt with by Department of Fair Trading.<br><br></span></div></div><p>“But now major defect is changed to serious defect. That brings waterproofing in, so it gives you more time to commit to action for these defects.”</p><p>The reforms will also allow more claims to be dealt with by Department of Fair Trading teams, rather than requiring litigation.</p><h2>‘Duty of care’ lawsuit threat unchanged</h2><p><br>The Design and Building Practitioners Act 2020 introduced a duty of care for developers and builders, which opened up the threat of litigation over defects in design and materials.</p><p>That liability has already been tested in a number of court decisions. The 2022 Goodwin case established that the duty of care extends beyond class 2 buildings, potentially to any form of building work.</p><p>The proposed new legislation will also enshrine the duty of care in the revamped Home Building Act, although that merely consolidates, rather than extends, the liability. According to Taylor, the threat of litigation may be causing undue anxiety for some developers.</p><p>“A lot of developers have been anxious that they’ll be liable for anything. But if you do your work and certify, you’ll probably be fine,” he says</p><p>“Some people are getting carried away with the DBPA. Justice Stevenson [who determined the Goodwin case] has held in a number of decisions that you really need to prove the breach.</p><p>“The new Building Bill doesn’t actually change the duty of care, it just consolidates it all … It offers a broader range of causes of action. But if you are going to win under the Home Building Act, you probably would have won under the Design and Building Practitioners Act.”</p><h2>Directors’ liability and phoenixing in focus</h2><p><br>Another major component of the proposed reforms takes aim at directors, holding them accountable for the failures of their companies.</p><p>The Building Compliance and Enforcement Bill 2022 will include provisions for regulators to hold directors personally liable for failure to comply with undertakings and rectification orders.</p><div id="Zw6AcnZi2j6V1sNcMlSeZ"><picture><img src="//images.ctfassets.net/8pr762qjocl3/1iXdHM1orNmaDXQWIyCDnG/e3b935ec6aa7358e52756957b45799c2/3.jpg" alt="The responsibilities of directors is one of the focuses of the reforms." data-mce-src="//images.ctfassets.net/8pr762qjocl3/1iXdHM1orNmaDXQWIyCDnG/e3b935ec6aa7358e52756957b45799c2/3.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The responsibilities of directors is one of the focuses of the reforms.<br><br></span></div></div><p>Again, however, developers should not be overly concerned, Taylor argues.</p><p>“This element about directors’ liability, it’s just seeking to make it more specific. It augments what’s already present under the [Commonwealth] Corporations Act 2001,” Taylor says.</p><p>Under the Corporations Act, directors are also able to access ‘safe harbour’ provisions, which give them some protections if trading while distressed.</p><p>Separately, the ATO has issued a November 30 deadline for all company directors to register a unique identification number. That move is intended to prevent ‘dummy directors’ and phoenixing companies, a problem felt acutely in the construction industry.</p><h2><strong>Plenty of time to adjust </strong></h2><p><br>While the legislation is not expected to meet any political hurdles, the property industry has plenty of time to prepare for the new regime.</p><p>With the 2023 election looming, the Bills will be considered by the new parliament, and transition arrangements will likely extend into 2024.</p><p>The proposed legislation is open for comment until November 25.<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>

Reforms aimed at forcing out dodgy operators from the NSW building industry come at a cost, but will the industry be better for it? 

4.jpg

<p>High-end fashion and jewellery brands are hunting in packs, desperately seeking CBD retail space and providing asset owners with a recession-proof tenant.</p><p>The market is hot on both sides for luxury brand tenancies, according to industry players, with the category defying Covid-19 lockdowns and reduced footfalls.</p><p>Despite negative economic indicators, luxury brands such as Louis Vuitton, Ortega, and Chanel, are moving in packs as they search desperately for significant CBD sites.</p><p>And landlords are just as desperate to accommodate them, seeing haute couture boutiques, watchmakers and jewellers as a hedge against future Covid-19 waves or the threat of recession.&nbsp;</p><p>Cartier is the latest brand to spotlight the trend, recently opening a 783sqm two-storey flagship ‘maison’ at 388 George Street, Sydney. The jeweller anchors a new-build five-storey freestanding complex with other luxury retail and F&amp;B at one of Australia’s busiest pedestrian intersections.</p><p>Co-owners of the freshly redeveloped site, Brookfield and Investa Gateway Offices, said that the area already hosts a number of luxury brands, and is ripe for more.&nbsp;</p><p>Brookfield properties co-head Danny Poljak told <em>The Urban Developer</em> that the Cartier store is “leveraging the pedestrianisation of George Street” and “anchors the surrounding luxury precinct”.</p><h2>Pandemic blessings for luxury set to continue</h2><p><br>Bizarre monetary, fiscal, and social conditions in the pandemic years have been fruitful for the top-shelf retailers. The more expensive their wares, the more they have benefitted from a case of coronavirus.</p><div id="6Sql6q8TIbsL2t0mAUvGwq"><picture><img src="//images.ctfassets.net/8pr762qjocl3/3BiWCoi0ww3PLPhIBaoGEi/8f8a029532242e49b56bb19dcd8b99d4/8.jpg" alt="The Cartier flagship store on George Street in Sydney." data-mce-src="//images.ctfassets.net/8pr762qjocl3/3BiWCoi0ww3PLPhIBaoGEi/8f8a029532242e49b56bb19dcd8b99d4/8.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The Cartier flagship store on George Street in Sydney.<br><br></span></div></div><p>JLL head of leasing, Queensland, Cameron Taudevin said that “The Australian luxury market has matured significantly in the past 10 years”.&nbsp;</p><p>“Most interestingly, the market has seen the most significant growth during and post the pandemic lockdowns that began in 2020,” he says.&nbsp;</p><p>Head of retail tenant advisory at CBRE Tim Starling agrees.</p><p>“The growth of these brands through Covid has been phenomenal”, Starling says.&nbsp;</p><p>“You’ve had people sat at home, plenty of discretionary spending, and wanting luxury.</p><p>“The luxury brands are now doing one or two stores a year, each…I would never call anything recession-proof, but in this market, everyone’s been blown away by how much spend and appetite there’s been, despite the economic conditions.”</p><p>Starling works with retail brands to optimise their property strategy, and says that tourism numbers are hugely important to luxury brands. But from a property perspective, there’s not much correlation between ailing airport retail and the flashy CBD flagships.</p><p>And while there’s massive potential upside once tourists start returning in big numbers, the luxury brands have already proven that they can thrive without them.</p><p>“There’s about $60 billion that leaves Australia each year, against $30 billion in inbound tourism spend. So when the borders are shut, there’s a lot more onshore spending in this sector,” Starling says.</p><div id="4XyCepA8E6iN3XsLUiEOgL"><picture><img src="//images.ctfassets.net/8pr762qjocl3/72HQX0xraFeUirUiGMdQIa/19edbaa5687b2a6db5219685e0290d93/2.jpg" alt="The luxury retail market is eagerly anticipating the return of customers for mainland China." data-mce-src="//images.ctfassets.net/8pr762qjocl3/72HQX0xraFeUirUiGMdQIa/19edbaa5687b2a6db5219685e0290d93/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The luxury retail market is eagerly anticipating the return of customers for mainland China.<br><br></span></div></div><p>“By the end of 2024, we’re expecting tourism figures to normalise. We don’t have mainland Chinese coming back yet, and they spend three times more than other tourists. We’re also watching the Middle East and Africa, and North America; these are important markets for luxury tourism.</p><p>“But if you look at the current revenue figures, [luxury] has got an incredibly strong business off a low footfall base. So you’ve got to work off the basis that this is the new normal, and there’s plenty more to come.”</p><h2>Landlords ‘future-proofing’ further expansion</h2><p><br>Understanding the unique characteristics of the market, and how it’s evolving, is crucial to capturing the continued expansion of the luxury brands.</p><p>Taudevin says that the majority of interest in “super prime central CBD [sites]” on the east coast is coming from luxury.</p><p>Many brands are still looking to place a flagship onto the east coast, while others are growing their footprints.&nbsp;</p><div id="3lwhuQRLxvjdQfmrHwkuae"><picture><img src="//images.ctfassets.net/8pr762qjocl3/juSQRNC13KoEc43cmZue6/7cbe0b02bd80126b73ef6134f9cff756/6.jpg" alt="Inside the George Street Cartier store." data-mce-src="//images.ctfassets.net/8pr762qjocl3/juSQRNC13KoEc43cmZue6/7cbe0b02bd80126b73ef6134f9cff756/6.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Inside the George Street Cartier store.<br><br></span></div></div><p>“This market is very active at the moment, and in most cases, established brands across the country are looking at expanding their in-store footprint to offer more stock off the back of increased sales,” Taudevin says.</p><p>“We don’t have enough suitable space to house the entry of new luxury brands into Brisbane City. These brands have very specific requirements around ceiling heights, exposure and neighbouring tenants, and as a result, it’s very hard to get the right formula.”&nbsp;</p><p>“Some landlords are at capacity with luxury occupants, and existing expiries in other locations are yet to be reached, which will continue to further drive demand for this type of retail property.”</p><p>According to Starling, luxury brands will follow each other if the conditions are right. Location is crucial, but landing the right tenant can crack a precinct open for others.</p><p>“In Sydney and Melbourne, it’s very defined where luxury goes. In Perth they’ve moved because landlords couldn’t accommodate them,” Starling explained.</p><p>“In Adelaide there’s no single owner who could accommodate them, so they’re now looking at Burnside Shopping Centre.”&nbsp;</p><p>“In Brisbane, Queen’s Plaza redeveloped and got them. [Other sites nearby] are about to redevelop to capture the remaining demand.”</p><div id="5oH9Ul5BvWH9MZHOKvd0gk"><picture><img src="//images.ctfassets.net/8pr762qjocl3/1Z1tCr0ivzXuQVI62BTjsI/67f5f27d605cb311c339a4efbe02eef5/4.jpg" alt="Inside the Chanel Maison store on George Street, Sydney." data-mce-src="//images.ctfassets.net/8pr762qjocl3/1Z1tCr0ivzXuQVI62BTjsI/67f5f27d605cb311c339a4efbe02eef5/4.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Inside the Chanel Maison store on George Street, Sydney.<br><br></span></div></div><p>Starling says landlords looking to play in the luxury space would be wise to plan their developments around the timing and space requirements for luxury expansion.</p><p>As the market has matured, stores in the Sydney CBD have moved around in the hunt for square metres. In Melbourne’s Chadstone, luxury footprints began at 200sq m and have upsized several times, now in the range of 600sq m over a duplex.</p><p>“Louis Vuitton wants 1000sq m or more at the moment, Gucci wants 800-1000sq m. Dior wants 6-800sq m. Everyone else is in the range of 400sq metres,” Starling said.</p><p>A canny landlord might plan for a luxury tenant to expand upwards or downwards into a duplex configuration when a contract is renewed.</p><p>“Assets are currently not future-proofed for these guys to grow,” Starling said.</p><p>“Everyone’s having to reconfigure space every three to five years. In Hong Kong and Singapore, retail leases are down to three years. Whereas a luxury brand in a CBD, they want a ten-year contract with two 10-year extension options.”</p><p>“You would be very wise to place those tenancies, knowing that they’re probably going to grow in size over the next 10 years. Retrofitting existing assets can be quite expensive, but if you’ve got the ability to do that, I think you probably would.”<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>

High-end fashion and jewellery brands are hunting in packs, desperately seeking bigger CBD retail spaces. The Urban Developer peels back the wrapping on these recession-proof tenants and how asset owners can lure them... 

<p>When Paul McGrath learnt he would be taking the reins at YHA Australia, during the 2019-2020 bushfire seasons, he knew he was expected to shake things up.</p><p>“The organisation’s just over 80 years old and I’m the third chief executive in those 80 years,” McGrath tells <em>The Urban Developer</em>.</p><p>“And it’s well-known in the backpacking space, it’s well-known in hostelling. They come with certain perceptions in Australia.</p><p>“Overseas, it has very different connotations altogether, it has very positive connotations for travellers.”</p><p>On top of a horrific summer for the tourism industry, YHA was suffering from a mismatch between market and marketing. Australians associated the not-for-profit with backpacking—cheap and often nasty—while international visitors thought it too dowdy, compared to more overtly party-focused hostel brands.</p><p>It would be a difficult enough set of circumstances for any organisation, and for any leader. Nobody would have asked for, let alone predicted, a pandemic to be added to the mix.</p><p>Since then, McGrath has led the organisation through a restructure of financing, shuffled the 44-property asset portfolio, and overhauled the brand identity. Perhaps even more importantly, while the core mission hasn’t changed, YHA has adapted the markets it targets and the way that it services them.</p><p>In short, it’s trying to change the meaning of hostelling.</p><div id="6w9rVgjKZzhfPhA6jgSpLU"><picture><img src="//images.ctfassets.net/8pr762qjocl3/2N5lkXA47kMJ77L8Pal5fJ/d034d43cc17e454f3f4f52ae725d4d26/1.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/2N5lkXA47kMJ77L8Pal5fJ/d034d43cc17e454f3f4f52ae725d4d26/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The YHA’s Paul McGrath and part of the shared workspace opened last year at the Katoomba YHA hostel.<br><br></span></div></div><p>“We’re really looking at all parts of the business. New revenue streams, operating systems and management systems, our property portfolio,” McGrath says.</p><p>“Everything on the inside of the business has changed, and we’re targeting new, more contemporary market segments.</p><p>“We’ve purposely worked through it. We’ve developed a broader market. The pandemic has really assisted. Even though it was devastating for the business, it’s actually assisted in that transformation.”</p><p>In reward, YHA is running occupancy rates as high as 87 per cent, including 97 per cent on a 500-bed asset. The company’s also projecting a profitable 2022, despite dire macroeconomic conditions and a tourism sector limping well below top speed.</p><h2>Evolving to meet needs</h2><p><br>Part of that success has come from understanding which customer demands have evolved and which have stayed the same.&nbsp;</p><p>While hostels traditionally use beds instead of keys as a metric, private rooms are gaining in popularity. The organisation’s product is now 32 per cent singles, doubles or triples. But YHA visitors still appreciate the focus on facilitating connection through shared spaces and experiences.</p><p>“The backpacking market, the hostelling market, is changing and has changed. People are looking for low-cost accommodation, but quality low-cost accommodation,” McGrath says.</p><div id="51YfdGl0dxvgZN5gw6yHvL"><picture><img src="//images.ctfassets.net/8pr762qjocl3/6Yho9VXcB6SPc3HeloR2dW/080972c7f735c28a724e4ff93d5e94bb/2.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/6Yho9VXcB6SPc3HeloR2dW/080972c7f735c28a724e4ff93d5e94bb/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The Byron Bay YHA hostel also now has a co-working space.<br><br></span></div></div><p>“Our proposition is different compared to a hotel, as we focus on building community.</p><p>“There are commercial hostelling organisations out there, which do well, whose focus is on that party atmosphere. Which is cool. And I guess that’s where backpacking gets the reputation from. But that’s not us.&nbsp;</p><p>“We’re about providing quality, low-cost accommodation for like-minded people. We do a lot of school groups, we have a lot of families travelling, we have a lot of grey nomads.”</p><p>Since the start of the pandemic, YHA has seen a reversal of the 70/30 per cent international/domestic customer split. But one of the biggest pivots for YHA has been the recent move into co-working spaces, with a trio opening. in the Katoomba, Byron Bay, and Brisbane hostels, in late 2022.</p><h2>Gap in co-working spaces</h2><p><br>It’s a curious play that comes after exhaustive market research, but for McGrath it’s both intuitive and an earner.</p><p>“All these guys, WeWork and the co-working spaces, are in the CBDs ...WeWork in a CBD goes for about $100 a day for a desk. Obviously there’s a big demand for low-cost co-working spaces,” he said.</p><p>“What we saw in the market was a big gap for co-working spaces in regional areas. And the majority of our properties are in regional areas.”</p><div id="6LkIu6stbhDjZRsAgfa7Gd"><picture><img src="//images.ctfassets.net/8pr762qjocl3/726xJZ1EZAWksQn2DQuBzs/cc97ff30e4dc543d54a5a34a8a8ef469/4.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/726xJZ1EZAWksQn2DQuBzs/cc97ff30e4dc543d54a5a34a8a8ef469/4.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The rooftop of the Brisbane YHA Hostel.<br><br></span></div></div><p>McGrath says part of the solution is providing a desk and good WiFi and a fairly quiet environment: “all those things that you would expect in a workspace. But what makes these places work is a network”.&nbsp;</p><p>“So again, leaning on our opportunity to build community in properties where people stay, it’s the same type of experience that we were looking to create in our co-working spaces … we see that as being a revenue-generating opportunity. We see that it’s actually adding to our product mix.”</p><p>Somewhere between 5 and 10 per cent of YHA’s trade is already customers working and travelling simultaneously. The organisation is now looking to lasso multiple segments with its co-working spaces: work-from-home types in remote areas who want to get out of the house occasionally; digital nomads, who permanently play by day and manage client calls by night.&nbsp;</p><p>A third target is the work-from-anywhere market, or office workers who enjoy a change of scenery for a few weeks a year.&nbsp;</p><h2>Move a big shift for YHA</h2><p><br>While international brands such as Selina have already pushed hard into specialising in work-travel markets, it’s a big shift for YHA. Instead of targeting the great unwashed hordes of 18-24-year old backpackers on their gap year, YHA is looking for laptop-wielders with a little salt-and-pepper.&nbsp;</p><p>The ideal customer wants to experience Australian culture at a rate of $40 per night, while being exposed to both local and itinerant businesses.</p><p>And that’s led to an evolution in property strategy for the organisation, including the massive deal at the heart of Sydney’s Tech Central.</p><p>“There’s obviously the work-from-home flavour, because of the pandemic. But also there’s the shift to work-from-anywhere. Our partners Atlassian have a work-from-anywhere policy,” McGrath says.</p><div id="40Wydp56MUlibDgi4Yusqs"><picture><img src="//images.ctfassets.net/8pr762qjocl3/3xMg7DIskvFzb33jDPhi6i/470b3f5db338823400baf33ce782f100/3.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/3xMg7DIskvFzb33jDPhi6i/470b3f5db338823400baf33ce782f100/3.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ YHA has embraced the growth of work-from-anywhere with co-working spaces in its hostels and a partnership with Atlassian for its Tech Central tower in Sydney.<br><br></span></div></div><p>“We’ve partnered with Dexus and Atlassian to build a brand new property in the first five floors of the Atlassian Global Headquarters at Tech Central.&nbsp;</p><p>“Half of level one is going to be a co-working space. So we see a good opportunity there, and it’s certainly going to be part of our DNA going forward.”</p><p>The existing YHA asset on the site has been dismantled carefully and will be integrated into the new tower’s structure, on track for a 2026 opening.</p><h2>Appeal for “curious travellers”</h2><p><br>McGrath says the intense focus on environmental sustainability will be attractive to their “curious travellers”, who will also appreciate the organisation’s social experiences.</p><p>“As a not-for-profit, we need to provide profitability to be able to continue to reinvest in our properties. So it’s a key thing.&nbsp;</p><p>“But we also have very strong social commitments, and we need to be able to fund our social experiences and environmental experiences. That’s really super important to us.”<br><br></p><hr><p><br><strong>You are currently experiencing <em>The Urban Developer</em> Plus (TUD+), our premium membership for property professionals.<a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"> Click here to learn more.</a></strong></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><br></div></div><p><br></p>

Embracing work-from-anywhere travellers as well as backpackers means revamps and a property play with Atlassian for a global hostel provider…

[+] boom and bust 2022 review hero web.jpg

<p>Whichever direction property markets go in 2023, construction companies may keep toppling.</p><p>Record-setting real estate prices and elevated construction and transaction activity hasn’t correlated to a healthy building sector in recent years.</p><p>High-profile construction company busts have been headline fodder in 2022, with every week seemingly seeing another builder going under.</p><p>Insiders and analysts have blamed trading conditions, the macroeconomic environment, and a broken business model for sending some of Australia’s biggest names to the wall.</p><p>But beyond the anecdotes, data reveals that a significant acceleration in construction insolvencies is under way.</p><p>ASIC figures for the 2021-2022 financial year ‘only’ record 1284 construction company collapses. But the first quarter of the 2022-23 financial year alone saw almost half that figure taken down in the span of three months, with 605 construction companies going under.</p><p>While insolvencies in general are ticking upwards, construction is also claiming a larger share. In the the 2021-2022 financial year, construction represented 26 per cent of all insolvencies in the country; so far this financial year the sector is running at about 30 per cent. The nearest competitor, the beleaguered accommodation industry, is topping out at 13 per cent.</p><div id="6myST9y7KRBSIBkvYoueme"><picture><img src="//images.ctfassets.net/8pr762qjocl3/fWzFnLfvLxd9MvCfTwNrL/c312544984195f9818ca60dd679ae992/Hero_Image_Re-size__920x600___1_.jpg" alt="Metricon cuts 200" data-mce-src="//images.ctfassets.net/8pr762qjocl3/fWzFnLfvLxd9MvCfTwNrL/c312544984195f9818ca60dd679ae992/Hero_Image_Re-size__920x600___1_.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ It was a bumpy ride for Metricon this year. <br><br></span></div></div><p>Australia’s biggest home builder, Metricon, fended off an insolvency crisis in May with its owners tipping in a $30 million war chest to ride out the turbulence. Metricon also announced the doubling of a working capital credit facility from Commonwealth Bank, keeping its 2500 staff employed on a pipeline of about 4000 homes.</p><p>But others weren’t fortunate enough to count on the foresight and financial backing of investors and bankers.&nbsp;</p><h2>Bad hand for the building game</h2><p><br>While construction has historically experienced higher levels of company churn than other industries, a combination of issues has created systemic threat for the sector in recent times.</p><p>Labour shortages and hikes in material prices have pushed costs on some fixed-price projects over their razor-thin margins. Over the year to September, residential construction costs went up 11 per cent, according to the Cordell Construction Cost Index.</p><p>Builders have been forced to choose between renegotiating contracts, delivering at a loss, or raising the white flag—and in some cases, the choice has been made for them.</p><p>Elevated rainfall in the eastern states has also taken a toll, with stoppages shunting schedules—and budgets—out of whack. According to SafeWork NSW, unstable soil conditions caused by La Nina are also responsible for a rise in excavation and earthmoving accidents.</p><p>Interest rate hikes, signaling the end of the era of easy money, will start bringing more pain to both mortgage holders and the property sector, in coming months. Housing Industry Association figures show that new home loans were down 0.9 per cent in October, to the lowest level in more than three years.</p><div id="6loP2KuF8I978TLW7EsI7i"><picture><img src="//images.ctfassets.net/8pr762qjocl3/5v1lJyeLlSKlqputdxPx9Y/2e5452fa8b3ae694a0b9b101096b26e1/1.jpg" alt="The full effect of recent interest rate hikes are unlikely to be fully felt until later next year." data-mce-src="//images.ctfassets.net/8pr762qjocl3/5v1lJyeLlSKlqputdxPx9Y/2e5452fa8b3ae694a0b9b101096b26e1/1.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ The full effect of recent interest rate hikes are unlikely to be fully felt until later next year.<br><br></span></div></div><p>HIA economist Tom Devitt said, “It is clear in the New Home Sales Survey that the RBA has brought the housing boom to an end”.</p><p>“The effect of the latest hike in December will not be fully reflected in building activity until late-2023 … Further hikes will cause a deeper and more prolonged trough in home building activity.”</p><p>Beyond home-building activity, the impacts of rate hikes on access to capital will be tested in 2023.<br></p><h2>Auld lang syne for Aussie builders&nbsp;<br></h2><p><br>A roll-call of construction companies reveals the breadth and depth of distress in the market, with the bell tolling this year for builders large and small, from Sydney to Perth, across all types of project.</p><p>A Tasmanian franchisee of <strong>Hotondo Homes</strong> was placed into liquidation in January, with about 40 homes under construction. <strong>Tasmanian Constructions</strong> blamed <a data-mce-href="https://www.theurbandeveloper.com/articles/hotondo-homes-tasmanian-constructions-voluntary-administration" href="https://www.theurbandeveloper.com/articles/hotondo-homes-tasmanian-constructions-voluntary-administration" target="_blank" rel="noopener">access to materials and rising costs</a>, for making delivery on its fixed-price contracts untenable.</p><p><strong>Probuild</strong>’<strong>s</strong> February collapse really kicked things off, coming despite $180 million in support from its South African parent and a $5-billion workbook. The company was facing a $50-million loss on a <a data-mce-href="https://www.theurbandeveloper.com/articles/probuild-administration" href="https://www.theurbandeveloper.com/articles/probuild-administration" target="_blank" rel="noopener">$350 million Cbus project at 443 Queen Street</a>, Brisbane, and had been known for undercutting rivals by tens of millions to secure projects.</p><p>Gold Coast giant <strong>Condev</strong>’s founder, Steve Marais, tried to <a data-mce-href="https://www.theurbandeveloper.com/articles/crunch-time-inside-the-condev-crisis" href="https://www.theurbandeveloper.com/articles/crunch-time-inside-the-condev-crisis" target="_blank" rel="noopener">negotiate the firm’s way out of trouble</a> in March, but couldn’t reach an agreement with developers. The company downed tools with 18 projects under way, liquidating while it was still solvent.</p><p>Early in 2022, Perth-based <strong>New Sensation Homes</strong> said that, in response to difficulties, “We’ve hired extra support staff, started our own brickie teams and even created our own concrete company to keep the show on the road”. But by April, it had been <a href="https://www.theurbandeveloper.com/articles/wa-builders-collapse-but-whole-lot-worse-to-come" target="_blank" rel="noopener" data-mce-href="https://www.theurbandeveloper.com/articles/wa-builders-collapse-but-whole-lot-worse-to-come">put to the sword with 53 homes under way</a>, followed days later by another Perth-based company, <strong>Home Innovation Builders</strong>.</p><div id="7gPsHdF3dMUIv9mirFbAF7"><picture><img src="//images.ctfassets.net/8pr762qjocl3/5wsbgBiEOHDgU1AarLyyIf/761f4e1550c74838b58173eebf17da59/alegUntitled-9.jpg" alt="▲ Alegria, Palm Beach, another one of Condev’s slated projects.
" data-mce-src="//images.ctfassets.net/8pr762qjocl3/5wsbgBiEOHDgU1AarLyyIf/761f4e1550c74838b58173eebf17da59/alegUntitled-9.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Alegria, planned for a site at Palm Beach on the Gold Coast—one of Condev’s slated projects.<br><br></span></div></div><p>Gold Coast developer <strong>Pivotal Homes</strong> <a data-mce-href="https://www.theurbandeveloper.com/articles/construction-industry-pressure-builds-pivotal-collapses-metricon-cashes-up" href="https://www.theurbandeveloper.com/articles/construction-industry-pressure-builds-pivotal-collapses-metricon-cashes-up" target="_blank" rel="noopener">shut its doors in May</a>, owing at least $5.4 million and with more than 100 homes under construction. The company reportedly suffered a ransomware hack in the weeks prior to liquidation that meant some financial records were lost.</p><p>Also in May, the West Australian <strong>Pindan Group</strong> was forced to wrap up, <a data-mce-href="https://www.theurbandeveloper.com/articles/wa-builders-collapse-but-whole-lot-worse-to-come" href="https://www.theurbandeveloper.com/articles/wa-builders-collapse-but-whole-lot-worse-to-come" target="_blank" rel="noopener">dropping 68 projects behind it</a> and $80 million in debts. Receivers Ernst &amp; Young said that most of the debt would be uncollectible.</p><p><strong>Snowdon Developments</strong> went under in July with an order book of 550 homes, and $18 million owing. An emergency buyout from Mimosa Homes may mean some customers receive a share of value, although the deal did not include Snowdon’s debts.</p><p><strong>Oracle Platinum Homes </strong><a data-mce-href="https://www.theurbandeveloper.com/articles/oracle-homes-collapse-queensland" href="https://www.theurbandeveloper.com/articles/oracle-homes-collapse-queensland" target="_blank" rel="noopener">went belly-up in August</a> with a pipeline of 300 homes, and debts somewhere in the order of $20 million.</p><p>October saw <strong>Lanskey Constructions</strong>’<strong> Queensland arm</strong> <a data-mce-href="https://www.theurbandeveloper.com/articles/lanskey-constructions-queensland-liquidation-fti-consulting" href="https://www.theurbandeveloper.com/articles/lanskey-constructions-queensland-liquidation-fti-consulting" target="_blank" rel="noopener">roll down the shutters</a>, owing $11 million including a $1.5-million debt to Wagstaff Piling. Lanskey’s other companies are unaffected.</p><p>WA big fish <strong>FIRM Construction</strong> went into liquidation in November, with a number of school projects and a Metronet station still in its portfolio. Director Mark O’Gorman said, “It is unfortunate that five projects awarded by the state government between July 1 2021 and May 2022 did not qualify for any financial relief for the significant cost escalations they incurred”.<br></p><p>And the December collapse of civil engineers<strong> Clough</strong> showed that construction woes aren’t ringfenced around residential and commercial. Clough has handled some of Western Australia’s biggest infrastructure projects, and its demise has left nation-building schemes <a data-mce-href="https://www.theurbandeveloper.com/articles/clough-group-collapse-snowy-2.0-webuild" href="https://www.theurbandeveloper.com/articles/clough-group-collapse-snowy-2.0-webuild" target="_blank" rel="noopener">Snowy Hydro 2.0 and the Inland Rail under clouds</a>.<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>

As the year closes we take a look at the boom and bust of the construction sector in 2022, which claimed some big scalps across the country...

[+] film facilities web 1.jpg

<p>A wave of government-led investment and new revenue streams for the film industry has property players eyeing coming opportunities in related facilities.vbv</p><p>But property developers looking to ride the growth in demand for Australian screen production facilities need to understand the nuances of the industry to take advantage, observers say.</p><p>Screen Producers Australia chief executive Matthew Deaner says that “there’s an expansion of the sector happening”.&nbsp;</p><p>“And the reality is we need more facilities to be able to service lots of different layers.”</p><h2>Covid prompts mega-facilities</h2><p><br>Hollywood productions decamped en masse to Australia in 2021, attracted by a relatively Covid-free environment.&nbsp;</p><p>In response, new film facility projects have popped up, including a <a href="https://www.theurbandeveloper.com/articles/peter-montgomery-plans-440-million-coffs-harbour-film-studio" data-mce-href="https://www.theurbandeveloper.com/articles/peter-montgomery-plans-440-million-coffs-harbour-film-studio">$440-million Coffs Harbour play</a> led by Russell Crowe, and a $100-million WA project.&nbsp;</p><p>The proponent of the WA project is developer Hesperia, who intends to operate the facility through a subsidiary, Home Fire.</p><p>A spokesperson from WA’s Department of Planning, Lands and Heritage told <em>The Urban Developer </em>that the project is under assessment by the WA Planning Commission and, if approved, will break ground before the end of the year.</p><div id="6oinmunhxKsgblDNeJ79jN"><picture><img src="//images.ctfassets.net/8pr762qjocl3/240zIAhn9R8B10UUDAeJx7/ebc92d0118bd92882d9048976db36885/Mid_article_resizes__2_.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/240zIAhn9R8B10UUDAeJx7/ebc92d0118bd92882d9048976db36885/Mid_article_resizes__2_.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A render of the $100-million studio slated for Western Australia.<br><br></span></div></div><p>While there’s no guarantee that pandemic-induced demand for Australian facilities will continue, screen industry players are optimistic that incoming push-pull regulation will provide a new baseline for industry revenues.</p><h2>New regulation to stabilise revenue</h2><p><br>As of July 1, an amendment to the Location Offset will increase filmmakers’ tax rebate to 30 per cent.&nbsp;</p><p>Meanwhile, the Albanese government announced in January its intention to regulate streaming services’ investment into Australian content.&nbsp;</p><p>That move is widely expected to take the form of a mandated 20 per cent of domestic revenues pushed back into the local industry, to take effect from July 1 next year.</p><p>Acting Screen Queensland chief executive Dr Belinda Burns says “the global demand for screen content, particularly for streaming platforms such as Netflix, Stan and Disney+, is exploding, and so is the need for suitable production spaces for production and post-production”.</p><p>Deaner agrees, saying that “[streaming services] have big pockets and, collectively, a global spend of about $30 billion or so on content production”.</p><p>“Australia’s looking to capture its part of that as part of a regulatory exercise. That goes hand in hand with stable tax incentives which have been announced to ensure we also are an attractive place to shoot.</p><p>“I would say those pieces will result in more private sector money being injected into the industry now and consistently into the future.</p><p>“For the industry and surrounding industries it means things are more stable and secure and sustainable.”&nbsp;</p><div id="64cHvU8ToASy60iWIpxUhk"><picture><img src="//images.ctfassets.net/8pr762qjocl3/nsC3fDBvfG1f6FsOtfnUp/cc073d40ad9aa237a4799fe183747036/2.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/nsC3fDBvfG1f6FsOtfnUp/cc073d40ad9aa237a4799fe183747036/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A render of the Cairns studio under construction on the former site of a Bunnings.<br><br></span></div></div><h2>Public purse leads infrastructure push</h2><p><br>Previous plays into the Australian film industry by property stakeholders and big funds have not always gone smoothly.</p><p>Melbourne’s Docklands studios were initially developed by the Victorian government with a private consortium of investors and property developers, who pulled out in 2008 after underwhelming returns.&nbsp;</p><p>A Macquarie Bank foray into film production in the 2000s, Macquarie Film Corporation, was rolled up after just seven years. Its string of comedies had tanked so badly with audiences that observers were concerned it may have killed off the industry.</p><p>Asset managers are active in the acquisition and operation of filming facilities overseas but their counterparts in Australia are tight-lipped about big funds’ interest in—or wariness of—similar local projects.</p><p>That leaves governments and established film industry players to lead and capitalise on the demand for more filming facilities in Australia.</p><p>“I think that governments have realised that they’ve got to have infrastructure in place to bring all sorts of productions to fruition,” Deaner says.</p><p>“And it’s not always the case that private capital feels [screen production infrastructure] is the safest investment—it can depend often on the relationships the private capital has with the sector.”</p><div id="3ivATqpu9pwjDKnboefCuW"><picture><img src="//images.ctfassets.net/8pr762qjocl3/7iWlUwPbr3faSejvGvHflg/ab24b7ec99660743fcf6b47eea19b457/Mid_article_resizes__1_.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/7iWlUwPbr3faSejvGvHflg/ab24b7ec99660743fcf6b47eea19b457/Mid_article_resizes__1_.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ A still from The Clearing, coming to Disney+, a psychological thriller television series shot in Victoria.<br><br></span></div></div><h2>Location is key</h2><p><br>Screen Queensland is constructing a new government-owned facility in Cairns, stumping up $12.6 million alongside a further $7.95 million from the Palaszczuk government for operational costs.</p><p>It will fit into Screen Queensland’s existing portfolio, including a large soundstage complex in Brisbane, and a coming $5-million facility on the Gold Coast.</p><p>Burns told <em>The Urban Developer </em>that the Cairns site was carefully chosen.</p><p>“We investigated a number of commercial sites available at the time, taking into deep consideration how existing infrastructure could be converted into a sound stage and support facilities like production offices, construction workshops, hair and makeup departments and more.&nbsp;</p><p>“Ample space, height, carparks, electricity, data bandwidth and a competitive lease were huge factors, as was the proximity to the international airport, accommodation and dining.”</p><p>Deaner says that property developers need to consider bedding down ongoing costs and revenue streams.</p><p>“To de-risk it for a developer, you would want to be close to a whole range of infrastructure [airports, logistics, crew housing]. It’s a game of risk mitigation.</p><p>“Sometimes private studios might have an arrangement with government; they might have been given certain dispensations to be able to help manage costs, or try to mitigate risk.</p><p>“[Large Hollywood films] may not necessarily be the most practical and sensible option for property developers. It really depends on a range of factors.&nbsp;</p><p>“They may be better off thinking about this through the prism of returnable television series, that need a particular piece of infrastructure year after year. In some ways that is lower-risk.”<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>

Tax concessions, government-mandated investment and streaming services’ ravenous appetite—opportunities in the film industry are on the rise… 

<p>New digital modelling tools, including AI-assisted design, are offering architects and developers faster and cheaper methods of achieving innovative buildings.</p><p>But the craft of traditional scale model-making is still an essential component of the architect’s skillset, proponents say.</p><p>Anycie Barakat, head of generative design at Archistar, told <em>The Urban Developer</em> that automating parts of the modelling process “is a game-changer”.</p><p>Archistar’s platform combines mapping technology with datasets covering every planning regime in Australia, as well as built-in generative design capabilities. Planners and developers can use it to find suitable sites quickly, and spit out a variety of automated designs to fit a set of parameters.</p><p>“Instead of just creating one building that complies with a certain set of rules, we create multiple buildings. And depending on how big the site is, that could be hundreds or thousands,” Barakat said.</p><p>“You can start analysing what’s currently around in this area, what kind of building designs that have been approved, and build those strategies into the system. So you can extend and really speed up that initial design process.”</p><p>The generative designs are concept stage, rather than final plans. Barakat says that developers and real estate agents are particularly excited about these tools, which allow them to get a rough estimate of what architects could possibly do.&nbsp;</p><div id="3JEQe3e4MdZoshc8coCp7S"><picture><img src="//images.ctfassets.net/8pr762qjocl3/8cFS3VSWTYj6KH2iu0xE5/becf6729ccd0d5aedf464ea6e7f72337/4.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/8cFS3VSWTYj6KH2iu0xE5/becf6729ccd0d5aedf464ea6e7f72337/4.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Anycie Barakat, head of generative design at Archistar.<br><br></span></div></div><p>Meanwhile, more polished digital 3D models can be used to communicate with clients what finished interiors will look like.</p><p>Dr Tuan Nguyen of the Museum of Applied Arts and Sciences agrees that digital modelling technologies can be used for the same design and communication purposes as traditional scale models, of which the Powerhouse has an extensive collection.</p><p>“We have several models of the Sydney Opera House, including a copy of the architect Jørn Utzon’s first model, a cross-sectional model that shows Utzon’s unbuilt interior design, a wooden model used for wind-tunnel testing, a model illustrating the roof geometry based on a sphere, and a finely detailed presentation model that was displayed for many years at the Opera House itself,” Nguyen says.&nbsp;</p><p>“They show that designs shown in models are not always realised, that their purpose runs the gamut from utilitarian to polished display models, and that models document the first to final stages in the design process.</p><p>“3D printing and CAD are the drafting table of today, allowing designers to iterate their designs rapidly. At the same time, models continue to have the promotional, persuasive and pedagogical power that they have always had.”</p><h2>Traditional modelling ‘still necessary’</h2><p><br>David Jaggers, of architects Durbach Block Jaggers, says that world-leading studios such as Rem Koolhaas, SANAA, or BIG, have “acres of models in their offices”.</p><p>“Models play a huge part in how all of those practices work … I think it’s because you can’t really push the envelope of what architecture is without a [physical] model.&nbsp;</p><p>“It’s such an important tool to experiment with space.”</p><p>While DBJ embraces digital tools for design and modelling, Jaggers says that the firm has a strong tradition of hand-cut balsa models as a core element of its design practice.</p><div id="1Ml2XDm0SLPul7P8PiMYch"><picture><img src="//images.ctfassets.net/8pr762qjocl3/7yc9dgtgISbWvgsgJblnrF/82b48d28b0f8f97c534d3beb1227be67/2.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/7yc9dgtgISbWvgsgJblnrF/82b48d28b0f8f97c534d3beb1227be67/2.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Acres of models: David Jaggers, of architects Durbach Block Jaggers, and a model by Kinkfab.<br><br></span></div></div><p>“I think the big difference is: we don’t jettison the tool. Maybe some practice has moved into [digital modelling] and thinks that you don’t need the traditional model-making in the back end.</p><p>“But we see that, from a design point of view, it’s still crucial…In the making of a model, the design develops.</p><p>“When you’re modelling on the computer, there’s a sort of neutralisation that occurs with the light levels and the materiality of things.&nbsp;</p><p>“And things can look quite seductive in a digital model, everything kind of looks okay, whereas with a physical model, you’re actually having to resolve how the elements of a building go together.&nbsp;</p><p>“That’s one of the big tasks of an architect, particularly if you’re trying to experiment with space.”</p><h2>Robots not ready to replace architects</h2><p><br>Physical models from hand-cut to 3D-printed will continue to play a role in architectural practice, particularly as many councils require them as a component of a DA.</p><p>“I don’t think this skillset has been lost,” Nguyen tells <em>The Urban Developer</em>.&nbsp;</p><p>“In terms of the number of practitioners, you might see its role as diminished but the capabilities have not been lost. It is typical for architectural and design students to still produce models.”</p><div id="68eig3nbHcvzsTgwqIDhCp"><picture><img src="//images.ctfassets.net/8pr762qjocl3/4tVpGwMtGNXmMRqDPVRop4/84653834b10e1ba850ffb0ab0567ce31/Mid_article_resizes__14_.jpg" alt="null" data-mce-src="//images.ctfassets.net/8pr762qjocl3/4tVpGwMtGNXmMRqDPVRop4/84653834b10e1ba850ffb0ab0567ce31/Mid_article_resizes__14_.jpg"></picture><div><span style="opacity: 0.8;" data-mce-style="opacity: 0.8;">▲ Dr Tuan Nguyen of the Museum of Applied Arts and Sciences and a cutaway model of the Sydney Opera House from the Powerhouse collection.<br><br></span></div></div><p>Barakat says cutting-edge apps such as&nbsp; ChatGPT are making AI available to everyone, but more advanced tools require a user who knows the field.&nbsp;</p><p>Generative designers have to understand what’s being fed into the program, and must interpret and validate the outputs.&nbsp;</p><p>“You have to know what to ask it, and you need to roughly expect what you’ll get out of it, to use [AI tools] well,” Barakat said.</p><p>Rather than replacing architects, Barakat says, Archistar is speeding up and expanding some elements of their work. In a tight labour market, digital modelling can save time and costs.</p><p>Jaggers argues that iterative design moves between modes, and that the process of translating physical to digital models, or vice versa, can help progress the plan.&nbsp;</p><p>“You’re the most in touch with the development, the design, when you’re the one making the model, because you’re the one interpreting strategy, or the sketch, or the 3D computer model into the design,” Jaggers said.&nbsp;</p><p>“It’s a sort of privilege to be the one who gets to make the models, in some ways.”<br><br></p><hr><p><br><strong>You are currently experiencing <em>The Urban Developer</em> Plus (TUD+), our premium membership for property professionals. <a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans">Click here to learn more.</a></strong></p>

Digital modelling can speed up planning and sell a project, but traditional
model-making isn’t going anywhere…