Sydney and Melbourne taking on new heights

12/11/2014 1:19 am

 

Aerial_view_of_Central_Business_District,_Sydney,_2009-03-06

According to a new report by JLL, residential development conversions are reaching an all new parameter with Sydney and Melbourne. By absorbing the excess older style stock, balance will be maintained in terms of oversupply in Sydney. Sydney and Melbourne showcase magnetism in residential developers towards acquiring strategically located properties for future residential development at prices which are well above commercial book value. As stated by JLL's head of Tenant Representation for NSW and ACT, Gavin Martin, over $1 billion property has been purchased in the past year for this purpose. There has been a remarkable rise in conversion of office spaces into residential use over the past five years, particularly in Sydney. In 2012, the estimate was 25,794 sqm for withdrawn office property with purpose of residential development whereas the figure almost doubled by next year i.e 46,940 sqm.

Though the situation is not the same across Australia. Like in Brisbane, CBD benefited from a proposed council program of incentives that would see the State Government and Brisbane City Council offering a program of incentives and support to encourage the conversion of older stock to alternative uses. Brisbane continued to lease its commercial space and retained stock when other CBD's where disposing off their aging stock in residential markets. 44% of Brisbane's office stock is classified as B-grade which is highest of all major capital city markets, compared to 27% across other CBD's. Canberra is synonymous with other states in experiencing a cycle of refurbishment , demolition and redevelopment. Perth faces a similar situation as well. Taking into account the various factors influencing this scenario like zoning changes with increased plot ratio allowances in CBD, the aging stocks with large vacancies are more likely to face refurbishment, redevelopment or demolition rather than residential conversions, according to JLL’s Head of Tenant Representation for WA, Andrew Campbell.