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Plans by almost one out of two Australian manufacturers to move their operations offshore could have serious implications for industrial property demand, a new survey has found.
Nearly half (46%) of manufacturing executives say their companies are looking into sending their operations offshore, while three quarters are concerned about manufacturing being sent overseas in the future, according to a survey by researcher Huthwaite Asia Pacific.
The survey, which drew response from 101 sales directors, marketing executives and general managers in the manufacturing industry, found that about a quarter of manufacturing companies are already combating competition from cheaper overseas manufacturers by moving their entire operations – or a strategic part – overseas.
Mark Courtney, director of research at Colliers, estimates between 15% and 25 of industrial property is owned or tenanted by manufacturers, meaning a drop in demand from the sector could have serious consequences.
Currently, the industrial sector is the poorest performing commercial sector in Australia. It is performing below the commercial property average, according to NAB’s Industrial Property Index.
However, NAB forecasts a recovery over the next 12 months.
Industrial hotspots have emerged in Melbourne’s west, where rents have risen above pre-GFC levels, and in Sydney’s outer west. In both cases demand has come from logistics and transport businesses. However, many CBD industrial markets are still trading below pre-2007 levels.
According to the Huthwaite survey, the majority of manufacturing executives want the government and industry associations to do more to help local manufacturers.
Huthwaite managing partner, Adam Thorp says the survey results reflect a worrying trend of local companies heading offshore, which is increasing with the high Australian dollar.
“Australian manufacturing has been in retreat for several years, with the cheap labour, manufacturing facilities and tax breaks of other Asian economies enticing companies to move their operations offshore,” he says.
“These latest survey results, which come in the wake of the rising Australian dollar, suggest this trend will continue and increase in the future.”
The Aussie dollar finished second only to cheap overseas products as the biggest stumbling block to competing with overseas manufacturers, the survey found.
China (79.3%) was identified as the leading competitor, ahead of India and Korea.
Survey respondents came from diverse manufacturing sectors including food, textiles and clothing, petroleum and coal, metal products, and machinery and equipment.
To combat the threat of cheap imports, more than half of respondents said their companies were repositioning their products as superior to overseas alternatives, while 24.7% said they were decreasing operational costs and/or downsizing.
Manufacturing executives believe about a third of Australian consumers are willing to pay up to a 10% premium for Australian-made goods.
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lschlesinger-FZcF9M3vE6

Demand for industrial property at risk as manufacturers consider offshore

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Economists have called for government action to address a long-running decline in residential land sales.
The calls follow the release of data showing residential land sales fell for a sixth consecutive quarter in March 2011, according to the latest HIA-RP Data Residential Land Report.
The volume of land sales fell to a record low in early 2011 – down 6% over the March 2011 quarter and 43% lower than the March 2010 quarter.
This is the lowest point land sales has reached since 2001, when accurate figures were first recorded.
As a result of the decline, residential construction is expected to weaken until at least the December quarter this year.
The depressed outlook follows official ABS figures which show building approvals for private sector houses fell 14% for the year to May 2011.
It also follows the Australian Industry Group (AIG) Performance of Construction Index falling to an eight-month low in June 2011, with housing and overall construction activity contracting for the 13th straight month.
HIA chief economist Harley Daley says while softer demand and over-speculation by developers in anticipation of a “fictitious” housing bubble are part of the picture, a big barrier remains the cost of serviceable land.
“Clearly this cost is excessive in a great number of areas around Australia. Governments need to address this substantial constraint on residential building which is generated by costs they impose,” Mr Dale says.
RP Data’s national research director, Tim Lawless, agreed with Dale, and placed much of the blame for low transactions volumes on an “excessive cash grab by state and local governments” on new developments which had resulted in affordability being eroded.
“On a rate per square metre basis, the cost of vacant land has exploded in recent years across most cities. Between March 2003 and March 2011 the rate per square metre price for vacant land has increased by at least 140% in each capital city analysed except for Sydney,” Mr Lawless says.
Land prices continue to rise despite the fall in the volume of sales.
The weighted median land value in Australia increased by 0.8% in the March 2011 quarter to $193,980, driven by growth of 2.7% in the median value for regional Australia (to $159,611), according to HIA and RP Data.
Over the year to March 2011, the median land value was up by 4.4% for capital cities and by 3.8% for regional Australia.
Mr Dale says the fall in demand for residential land indicates that new home starts could reach one of their lowest levels seen since the mid-1990s.
AIG director of public policy, Peter Burn, expects the difficult construction conditions experienced during 2010-11 to continue into the opening months of the new financial year.
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Govt must intervene to stimulate land sales: HIA/RP Data

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Investors in Western Australia will be buoyed by expectations of rental growth of 6.3% over the next two years, compared with a more modest national growth forecast, according to NAB’s latest quarterly residential survey.
While WA rental growth forecasts to June 2013 have held steady over the three months since the last survey, nationwide rent expectations have fallen from 5.2% in the March quarter, currently sitting at 4.4%.
The resource-rich state has also held steady while forecasts for NSW have dropped from around 6% in March 2011 to 4.6% in June.
Rental growth expectations in Victoria are weakest at 3.7%, but they have strengthened in Queensland from 2.5% in the March quarter to 4% in June and also in South Australian and the Northern Territory, where they have risen from 2.9% to 4.2% over the same period.
Over the last quarter rental growth was positive in all states, with the biggest increases recorded in SA/NT (2.4%), WA (2%) and NSW (1.5%). Rental growth in Queensland was slowest at 0.4%.
For the next 12 months, expectations for rents have been revised down slightly, with the latest survey pointing to nationwide rental increases of 3.1% over the next year, compared with 3.5% in the March quarter survey. Rental expectations were downgraded in all states to June 2012.
According to the survey, Australian resident investors make up more than quarter (28%) of the market, down from 34% in March.
The market continues to be dominated by owner-occupiers, who now account for 46% of total demand compared with 42% in March.
First home buyers account for 17% of the market, with those buying new developments most active in NSW (24%) and least active in Queensland (10%). The share of overseas buyers increased slightly to 7%, up from 6% in March.
“These trends are expected to stay broadly unchanged over the next 12 months,” the NAB survey says.
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WA rental growth expectations hold steady: NAB

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Australia’s two-speed economy is flowing through to demand for office space, with vacancy rates tightening in Perth and Brisbane, but easing off in Sydney, Melbourne and Adelaide.
The vacancy rate in the Perth CBD, which became Australia’s tightest CBD office market in the first quarter of 2011, tightened again in the second quarter from 5.6% to 5.4%.
Prime gross effective rents in Perth increased by 3.9% in the second quarter and have risen by 11.2% since a trough in the rental cycle was recorded in the third quarter of 2010.
Jones Lang LaSalle’s national head of office leasing, Kevin George, says large resource companies continue to be active in the Perth market.
“Investment spending in the sector remains at very high levels and businesses are moving quickly to secure space to accommodate their expected increase in headcount,” he says.
According to George, the next 12 months will see further rent escalations in Perth.
Prime office rents in Perth are expected to reach $859 per square metre by January, according to forecasts by the Property Council of Australia and Macquarie Bank.
Major office projects due to be completed over the next 12 months are expected to release significant amounts of backfill space, with George expecting a large proportion of the backfill space to be pre-leased prior to availability.
The biggest project is City Square North, at 123 St Georges Terrace in the Perth CBD, being developed by Brookfield Office Properties.
It will have mining giant BHP Billiton as its anchor tenant when it is completed in early June. Other tenants include international gold company Barrick, and PwC.
The development will comprise more than 75,000 square metres of office space in City Square Tower and a total of 7,126 square metres of retail space.
Brookfield has now lodged an application for a second, 16-storey office tower with about 30,000 square metres of net lettable area proposed.
It’s a similar story in Brisbane, where the vacancy rate has dropped to 6.8% in the second quarter of 2011 from 7.9% in the first quarter.
There was a net absorption of 11,000 square metres in the quarter, with the bulk taken up by mining companies.
BHP Billiton Mitsubishi Alliance has leased 6,000 square metres at 12 Creek Street and Rio Tinto leased another 1,600 square metres at 33-35 Herschel Street.
“Tenants are becoming increasingly aware that the window of opportunity to negotiate a favourable leasing outcome in Brisbane is closing,” George says.
“The sentiment in Brisbane will continue to improve when a number of pre-commitments, which are at an advanced stage of negotiation, are concluded for One One One Eagle Street.”
One One One Eagle Street, on the CBD side of the Brisbane river, is being developed by GPT and will accommodate more than 62,500 square metres of premium grade office space across 44 levels when it is completed later in 2011.
However, the Sydney and Melbourne prime office markets have been impacted by the resurfacing of the European sovereign debt issues in the second quarter of 2011 and the flow-on to business confidence in the finance and insurance sector.
Despite a strong net absorption result in the second quarter of 2011 (totalling 28,900 square metres), vacancy increased to 8.0% in the Sydney CBD.
Andrew Ballantyne, director of national office market research for Jones Lang LaSalle, says the primary reason for this increase was the quantum of backfill space left by CBA after its consolidation of multiple tenancies to the new development at Darling Quarter.
Melbourne CBD vacancy rates have risen to 6.0% following a net absorption of 11,600 square metres of prime office space and a rise in vacancy to 6.0%.
The negative result in the Melbourne CBD was largely attributed to the relocation of the Spotless Group from 350 Queen Street to St Kilda Road in a 10-year lease agreement negotiated by Colliers International’s office leasing director Ben Christie.
Rents increased by 1% in the second quarter. Since bottoming out in the second quarter of 2009, prime gross effective rents are up by almost 12%.
In Adelaide, vacancy increased marginally to 7% in the second quarter of 2011. However, the vacancy rate remains below the long-term average and has resulted in prime gross effective rents rising by 2.5% in the quarter and 9.4% over the past 12 months.
In Canberra rents were unchanged despite the rise in vacancy to 13.0% – a record high for the Canberra office market.
Across CBD office markets, positive net absorption of 24,800 square metres was recorded in the second quarter of 2011 with vacancy rate increased slightly to 7.6% from 7.4% in the first quarter of 2011.
While the quarterly net absorption was well down on recent quarters, net absorption in the 2010/2011 financial year was 279,700 square metres.
Jones Lang LaSalle expects below equilibrium vacancy rates in a number of office markets and a moderate development pipeline will combine to cause upward pressure on prime office rents in the June quarter of 2011. 
 
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Resources a boom for Perth and Brisbane office markets

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Plans by ASIC to implement a tougher disclosure regime for unlisted property trusts starting July 2012 have received support from the Property Funds Association (PFA).
PFA board member Hamish Bowman says the cost of complying with new benchmark requirements will be outweighed by improved investor security and investor sentiment.
“It is a step in the right direction,” he says.
Under the ASIC proposal, unlisted property trusts will be required to comply with six key benchmarks around gearing, related party transaction, valuations and distribution, and they will also be required to advertise that they are complying.
According to Bowman, who is also chief executive of Salvest Capital, the proposed legislation has come at a good time, because funds are starting to trickle back into the unlisted property sector and the new rules will help raise investor confidence.
"Investors were the ones that carried the financial burden, to a large extent, throughout the global financial crisis and that was because there weren't many hurdles," Bowman told InvestorDaily.com.
"Now, it is going to put the onus back on managers to substantiate, to another level, the investment that investors buy into." However, Dugald Higgins, a senior investment analyst at research group Zenith Investment Partners, told the AFR some funds may push back against the tougher guidelines because they do not wish disclose sensitive financial metrics such as cost of capital.
Furthermore, Higgins, who has analysed 100 of the largest funds, which hold $12.4 billion in assets, warns the proposed compliance regime will not be a “silver bullet” for investors, who will still need to their homework on a fund before investing.
“It is very easy to project false confidence,” he says.
Industry participants have until September 6 to comment on the consultation paper.
ASIC will then draft an updated regulatory guide to be released in December 2011.
July 1, 2012 is proposed as the start date for trusts to begin disclosing against the benchmarks and amended disclosure principles.
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Unlisted trusts: ASIC compliance worth the cost: industry

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As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
 
<img src="/images/stories/melbapartment-cropped.png">
March quarter ABS tourist accommodation figures for Melbourne’s serviced apartment market (15 rooms or more) suggest residential investors should take a closer look at the sector.
Melbourne, with 107 apartment complexes and 7,348 serviced apartments, makes up more than three quarters (78%) of the 9,525-room Victorian market.
The capital city has enjoyed strong growth in all key aspects of the serviced apartment sector.
Occupancy rates increased strongly to 83% in March 2011, compared to 74% at the start of the year and 77% a year ago.
Rooms occupied by guests rose from 167,000 nights in January 2011 to 188,000 in March, after suffering a slight dip in February. They are 8% higher than March last year, when room nights tallied 174,000.
Over the March 2011 quarter, overall guest numbers rose from 98,000 arrivals to 107,000, while total guest takings were up 6% to $34 million. On average, one night’s accommodation in a Melbourne serviced apartment generates $181, compared to $176 a year ago, and not far off the $199 a night a Melbourne hotel generates on average per paying guest.
Private hotels, motels and guesthouses in Melbourne generate about $130 a night.
Apartments selling at under $200,000
Against the backdrop of a strong growth, searches of real estate listings reveal a number of affordable serviced apartments for sale in the Melbourne CBD.
Agents are targeting the properties at residential investors, who would otherwise not have the funds to gain direct access to the leisure sector.
A one-bedroom Oaks serviced apartment at 480 Collins Street in the CBD, advertised for sale by First National Real Estate City Residential at $165,000, currently returns net rents of $10,143 per year and 3% capital growth.
The building offers tenants a business centre, pool, gym, sauna, laundry service and restaurant. All outgoings are paid by the tenant.
Just outside the Melbourne CBD, Grant Wallace from Hocking Stuart is selling a Quest apartment at 651 Chapel Street, South Yarra, for $300,000. The apartment offers a rental return of about 5%.
And in Melbourne’s Docklands area Richard Mindraoui from City Residential Real Estate is selling a 65-square-metre, one-bedroom apartment leased by the Mantra Hotel at 222 Russell Street for $310,000.
Mindraoui says the apartment brings in net rents of $18,720 per annum and is currently secured with a 13-year lease.
Regional markets in the doldrums
The ABS figures provide little detail on regional serviced apartment markets outside Melbourne.
Where they are available, it appears these markets have suffered the same fate as other regional markets in Queensland and NSW, where occupancy rates and takings have trended downwards.
In western Victoria, which includes the regional cities of Geelong and Ballarat, serviced apartment occupancy ratios have fallen from 74% at the start of year to 61% in March 2011. Over the quarter, monthly guest arrivals dropped from just under 11,000 to just over 9,000, while average takings per room per night dropped dramatically from $209 in January 2011 – higher than Melbourne – to $163.
This decline reflects the fact regional serviced apartment markets are more heavily reliant on domestic tourism and leisure visitors. However, while in other regional markets in NSW and Queensland serviced apartment guest numbers have declined in line with drops in hotel guest numbers, suggesting a drop in tourism demand is to blame, in western Victoria, hotel occupancy have strengthened over the quarter from 65% to 69%.
This suggests the western Victorian serviced apartment market is weak in its own right.
For the state as a whole, Victoria’s serviced apartment market continues to perform strongly, mirroring Melbourne’s performance over the quarter.
The state’s occupancy ratio stands at 77% in March 2011 compared to 72% at the start of the year and 74% a year ago.
According to research by CBRE, the serviced apartments market is generally 10% more profitable than the hotel market, while yields on serviced apartments averaging between 4% and 5% compared to 3% to 4% for residential investments.
“The unique blend of major hospitality business and strata real estate has produced an investment class that has given opportunity for individual “mum and dad” buyers to enter a sector previously the domain of high-net-worth individuals and institutional investors,” says Ken Smith, CBRE Hotel’s regional director of valuations.
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Melbourne serviced apartments yielding strong returns

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Increased confidence in the housing sector is the only positive aspect to emerge from Westpac/Melbourne Institute’s latest survey of consumer sentiment.
Against a backdrop of overall sentiment falling 8.3% in July, confidence in the housing sector increased by 3.3%, reaching its highest level since January 2010.
The improvement in housing market sentiment comes as ABS lending figures for May reveal owner-occupier financing commitments increased by just 2.2% to $14 billion on a seasonally adjusted basis, compared to stronger gains for commercial lending (up 8.7%) and personal lending (up 3.8%).
According to RP Data, national city dwelling values have fallen 2.3% over the last 12 months while properties for sale listings have reached 280,000 compared with 217,000 at the same time last year.
Westpac chief economist Bill Evans attributes the improvement in housing confidence to modest recent falls in house prices, improving affordability.
The survey found the majority of respondents still expect house prices to rise, though Evans notes that the majority has “shrunk noticeably since we last asked the question back in April”.
“Recognition that houses have become a little more affordable might improve sentiment but concerns that prices may fall further are likely to continue to restrain households’ buying intentions,” Evans says.
Buying intentions may also be tempered by a 16.5% drop in the confidence of mortgage holders, due to the RBA persisting with “its strongly hawkish rhetoric”, he said.
“This is continuing to undermine confidence amongst households who it would appear are incredulous that such a policy is favoured given the current circumstances,” Evans says.
The ABS figures reveal that total commercial finance commitments rose 8.7% on a seasonally adjusted basis in May to $32 billion, compared with $29.5 billion in April – their highest level since September 2009.
Fixed commercial loans increased 9% following an 11.2% fall in the previous month, while revolving commercial credit commitments rose 8% during May.
Personal loans ticked up by 3.8% to just over $7 billion.
Leasing finance fell by 5.7% in May on a seasonally adjusted basis, reversing rises of 2.1% in April and 11.2% in March 2011.
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Housing confidence at 18-month high: Westpac

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A-REITs that hold a majority of industrial assets will be better insulated against the impact of the government’s carbon tax scheme while those that own business parks will be worse off, according to a leading analyst.
“Our analysis suggests gross rents could be impacted by between 0.1% at the low end and up to 0.6% at the high end, with industrial property least impacted and business parks most impacted,” says Goldman Sachs analyst Simon Wheatley in a note looking at the impact of the tax.
Impact on gross rent
<table cellpadding="0" cellspacing="0" border="1"><tbody>
<tr>
<td valign="top" width="154">
 
</td>
<td valign="top" width="154">
Typical
gross rents
($sqm)
 
</td>
<td valign="top" width="154">
Carbon tax
cost
increase
($/sqm)
 
</td>
<td valign="top" width="154">
Carbon tax
impact on
gross rent
 
</td>
</tr>
<tr>
<td valign="top" width="154">
Office 
</td>
<td valign="top" width="154">
$800 
</td>
<td valign="top" width="154">
$3.06 
</td>
<td valign="top" width="154">
0.4%
</td>
</tr>
<tr>
<td valign="top" width="154">
Retail 
</td>
<td valign="top" width="154">
$1,800 
</td>
<td valign="top" width="154">
$2.86 
</td>
<td valign="top" width="154">
0.2%
</td>
</tr>
<tr>
<td valign="top" width="154">
Business parks 
</td>
<td valign="top" width="154">
$350 
</td>
<td valign="top" width="154">
$2.06 
</td>
<td valign="top" width="154">
0.6%
</td>
</tr>
<tr>
<td valign="top" width="154">
Warehouses 
</td>
<td valign="top" width="154">
$120 
</td>
<td valign="top" width="154">
$0.13 
</td>
<td valign="top" width="154">
0.1%
</td>
</tr>
</tbody></table>
Source: GS&amp;PA Research Estimates
 
Increases will relate to common area energy charges which are typically recoverable from tenants since most leases in the A-REITs sector are net leases.
The cost estimates are based on the assumption that the carbon tax will passed through to commercial property landlords and tenants.
According to Goldman Sachs, some A-REITS such as GPT have already been preparing for a likely carbon tax by focusing on reducing energy intensity costs over the past six years.
“GPT has saved energy costs estimated by GPT at $8.3m, averaging $1.38m per year, which will help soften the blow to tenants of the carbon tax impost, in our view,” the analyst note says.
Goldman Sachs expects investors to prefer prime or A-grade office portfolios such as those managed by Commonwealth Property Office Fund, Dexus and GPT due to the risk that older buildings may see their capex requirements pulled forward as a result of the carbon tax scheme.
The carbon tax is expected to have no discernible impact on asset valuations with slight reductions in net rents offset by higher market-led rents as construction costs increase.
The investment bank has not adjusted any earnings estimates or valuations of A-REITS as a result of the likely carbon tax impact.
The government’s carbon tax scheme, unveiled on July 10, proposes a carbon price of $23 per tonne.
The scheme is due to take effect in July 2013 and will rise at 5% per annum for the initial three years of implementation.
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Industrial to face lesser carbon tax impact than offices: Goldman Sachs

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A lack of new development and a drop in owner-occupier activity have pushed prime industrial rents in Melbourne’s west above pre-GFC levels.
Average prime grade industrial rents in the west are now about $70 per square metre, compared with $63 per square metre in 2007, according to latest Colliers data.
For 2011 to date, 131,977 square metres of space has been leased compared with a total of 201,741 square metres leased throughout 2010.
<img src="/images/stories/rentchart-cropped.png">
Recent deals in the area include the Simon de Winter Group, part of the Solomon Lew empire, which has leased 7,340 square metres across at warehouse 7 at 4 Judge Street, Sunshine, for seven years in a deal negotiated by Colliers International’s Stephen Newsham.
The group is relocating from 660 Rathdowne Street, Carlton North, which has been sold and is about to undergo a major redevelopment.
In January 2011, transport and logistics provider Northline signed a six-year 23,000-square-metre lease at 65-76 Strezlecki Avenue in Sunshine at $68 per square metre.
According to Nerida Conisbee, Colliers International national research director, Melbourne west is the only industrial market in the country where the market has bounced to levels above those recorded in 2007.
As a result of the increased demand and lack of development, Conisbee says there are now major opportunities for developers who are in a position to capitalise on the improving conditions.
Nathan Bingham, manager-in-charge of Colliers’ Melbourne West office, says while tenant demand is strong, owner-occupier activity for properties in excess of 5,000 square metres has slowed dramatically and new development has been scarce, which has further contributed to the growth in rents.
“In 2010, there were nine major owner-occupier deals in the west in excess of 5,000 square metres. This year there have been none,” he said.
“This is driven by a lack of supply in the market of buildings that are available for sale, as well as fragile confidence from potential owner-occupiers, and difficulty getting finance,” he says.
Bingham says this is all good news for established private developers looking to undertake new speculative development to capitalise on the improving market conditions.
“In the short term, in the absence of new development, rents are likely to continue increasing this year and given fewer developers can get finance and tenant demand continues to grow, it’s very unlikely that development that does come online in the medium to long term will outstrip demand,” he says.
According to Colliers, the city fringe market remains the most expensive, with rents about $110 per square metre, but well below pre-GFC levels of more than $140 per square metre. Average rents have hardly moved in the last three years.
Melbourne’ s south-east and north industrial markets have also rebounded strongly in 2011. 
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Melbourne west industrial rents soar

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As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
 
While the Sydney serviced apartment market continues to perform strongly, the state’s two biggest regional markets – the Mid-North Coast and Northern Rivers regions – have seen occupancy rates drop sharply in line with declining tourist accommodation demands.
According to latest ABS tourist accommodation statistics, occupancy rates for the Mid-North Coast’s 1,500-room serviced apartment market dropped from a healthy 72% in January 2011 to 62% in March 2011.
The market, which comprises the regional towns of Port Macquarie, Taree, Coffs Harbour, Forster and Kempsey, has fallen in line with a drop in hotel occupancy ratios for the region which are down 10% for the same period to 54%.
Guests are staying for shorter periods – three days instead of four – while average takings per night are down from to $135 from $188 at the start of the year.
It’s a similar story for the Northern Rivers towns of Grafton, Lismore, Tweed Heads and Byron Bay which make up the bulk of the region’s 1,800 rooms.
Occupancy ratios fell from 65% to 53% over the March quarter. At the same time the combined tourist accommodation sector dropped from a 58% occupancy ratio to just over to 53%.
Guest stays are down to two and a half days on average compared with four nights at the start of the year.
According to research by CBRE Hotels, the growth of the serviced apartment market in tourist areas was driven by leisure traveller demands.
In contrast, Sydney, which makes up half of the 12,000-bed strong NSW market, had an occupancy ratio in March 2011 of 88% compared to 85% in January.
Its 6,000 rooms were occupied for 163,000 nights in March, generating average takings per night of $197; slightly down from $199 in January, but up on a year ago when average room takings were $182.
According to research by CBRE Hotels, serviced apartments in regional areas are heavily reliant on domestic travellers, with just 10% of their guests coming from overseas.
In comparison, a quarter of guests in CBD apartments are visiting from overseas.
Online searches revealed very few serviced apartments up for sale in NSW.
The Waldorf Apartment group is current selling a studio serviced apartment in the Parramatta Apartment Hotel at 110-114 James Ruse Drive for $179,000, with guaranteed rent of $260 per week.
Further up on the Central Coast, a two-bedroom apartment at the Entrance Waldorf Apartment Hotel is for sale for $279,000. The Waldorf is offering investors a two-year leaseback option returning 4.5% net per annum on the unit's purchase price.
ABS statistics reveal the Central Coast market declined strongly during the first quarter of 2011, with occupancy ratios falling from 72% in January to 41% in March. However, for the March quarter, the occupancy ratio stands at 54%; higher than 52% recorded in March 2011, suggesting that seasonal factors may play a major role.
Against the backdrop of Sydney’s strong showing, Ken Smith, regional director for CBRE Hotels, tips the serviced apartment market to become a much more dominant force in the Australian market in 2011.
Yields on serviced apartments are between 5% and 6%, compared to between 3% and 4% for residential investment properties, according to CBRE research.
 
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Sydney strong, but regional serviced apartments shedding guests

<a href="https://www.apartments.com.au/developers/arada">Arada</a> has wasted little time expanding its ambitions in Campsie, lodging plans for a second major project in the rapidly transforming town centre just months after unveiling its three-tower One Campsie proposal on Beamish Street.

The UAE-backed developer has now taken aim at one of the suburb’s most strategically positioned sites, filing a State Significant Development Application for a <a href="https://www.apartments.com.au/new-apartments/10-north-parade-campsie-nsw-2194">33-storey mixed-use tower</a> at 10 London Street and 43 North Parade, directly opposite the future Campsie Metro Station. The proposal is currently on public exhibition and represents another significant vote of confidence in Campsie's emergence as one of Sydney’s key transit-oriented growth centres.

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a>, the development would deliver 156 apartments above a podium containing retail and commercial space, creating a new residential and commercial gateway to the town centre. The scheme also includes a four-level above-ground parking podium and a dedicated residential amenity floor featuring wellness and recreation facilities. At least 10 per cent of the apartments would be allocated as affordable housing for a period of 10 years.

The proposal occupies a 1,631 sqm site bounded by London Street, North Parade and Dispensary Lane, immediately adjoining the future Metro station precinct and just metres from Beamish Street’s retail and dining strip. According to the Urban Design Report, the project seeks to deliver "a great place that prioritises human-scaled experience and provides spatial improvements to the area."

<img alt="First look: Arada doubles down in Campsie with 33-storey Metro-front tower plans" data-entity-type="file" data-entity-uuid="175a8324-015b-4856-abe3-ce6f23199fa7" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/podium%20campsie.png?VersionId=742UGwXFhFBX4GEl6wX4PYIWREAgn6il" />

Woods Bagot describes the tower as a key marker within Campsie's next phase of growth.

"Located directly opposite the new Campsie Metro Station on North Parade, 10 London Street is a thoughtfully composed 33-storey mixed-use tower that contributes to the ongoing transformation of the town centre," the Architectural Design Report states. The report says the project is intended to provide "high-quality homes within a vibrant, connected urban environment, while helping define Campsie's future skyline."

A strong emphasis has been placed on the public realm. The ground floor incorporates over 500 sqm of retail space and active frontages along both London Street and North Parade, while the podium is wrapped by extensive landscaped planting intended to soften the building's scale and strengthen the pedestrian experience. The development would also widen surrounding footpaths and improve connections between the Metro station and the broader town centre.

Above the podium, residents would have access to more than 1,400 sqm of communal amenities, including a pool, gym and landscaped recreation spaces. A distinctive green-wall treatment extending across four podium levels forms a major architectural feature, helping differentiate the project within the emerging high-density precinct.

The tower's design is closely tied to the broader Campsie Town Centre Master Plan and the arrival of Sydney Metro. The Urban Design Report notes the proposal "directly supports the Campsie Town Centre Master Plan by delivering new homes in a location explicitly identified for growth, improved accessibility, and high-quality urban renewal." It adds that the project contributes to the master plan's vision for a strengthened town centre supported by thousands of new homes around the future Metro station.

<img alt="First look: Arada doubles down in Campsie with 33-storey Metro-front tower plans" data-entity-type="file" data-entity-uuid="bfd17654-253e-489a-bade-6278d63db412" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/base%20campsie.png?VersionId=3roJPMQGs36dazpkhvpvbDDP73Ld.Ica" />

The application follows Arada's recently lodged One Campsie project at 124–142 Beamish Street and 16–18 Ninth Avenue, where the developer is seeking approval for 346 apartments across three towers rising 24, 32 and 39 storeys. Together, the two proposals would cement Arada as one of the most influential developers shaping Campsie's future urban form.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-arada-files-for-trio-of-apartment-towers-in-campsie-town-centre">First Look: Arada files for trio of apartment towers in Campsie town centre</a>

Arada entered the Australian market in 2024 and has rapidly assembled a significant development pipeline across Sydney. Alongside its Campsie holdings, the developer is soon to launch <a href="https://www.apartments.com.au/new-apartments/wattle-green-2-fishburn-crescent-castle-hill-nsw-2154">Wattle Green</a> in Castle Hill, and has expanded its local operations following its acquisition of construction firm Roberts &amp; Co.

Located around 14 kilometres south-west of the Sydney CBD, the site sits at the centre of one of Sydney's fastest-changing middle-ring precincts. The Metro conversion of Campsie Station, combined with Canterbury-Bankstown Council's master planning framework, is driving significant residential intensification around Beamish Street and North Parade, with thousands of new homes expected over coming decades.

Joel Robinson

First look: Arada doubles down in Campsie with 33-storey Metro-front tower plans

For the first time in a long time, Australia's inflation story is starting to look more like a landing than a fight.

The latest Consumer Price Index figures from the Australian Bureau of Statistics showed annual inflation eased to four per cent in May, down from 4.2 per cent in April. On the surface, that might not seem like a major move. Inflation remains above the Reserve Bank's target range and some categories continue to record stubborn price growth.

But the significance of this result lies less in where inflation sits today and more in what it means for where interest rates are likely heading next.

The biggest takeaway is that inflation continues to move in the right direction.

Markets had been bracing for another sticky result after a period where progress appeared to stall. Instead, headline inflation came in softer than expected, helped by falling fuel prices and easing transport costs. Annual transport inflation halved from 6.6 per cent in April to 3.3 per cent in May, while automotive fuel prices fell 11.9 per cent during the month following lower oil prices and the impact of reduced fuel excise measures.

While petrol prices don't solve Australia's affordability challenges, they are one of the most visible and immediate costs for consumers. Falling fuel costs feed through the economy quickly, helping ease pressure on household budgets and business operating expenses.

The ABS data also showed headline inflation is now sitting at its lowest annual level in several months, reinforcing the broader trend that price growth is gradually moderating.

That trend is important because it aligns with what many economists and lenders have been saying for the last month.

Prior to this week's inflation data, ANZ, NAB and Commonwealth Bank had all shifted their forecasts, now believing the Reserve Bank had likely reached the peak of the interest rate cycle. Following the May inflation release, ANZ reaffirmed that view.

In its latest economic update, ANZ said it expects quarterly trimmed mean inflation to come in at 3.7 per cent for the June quarter, slightly below the Reserve Bank's forecast of 3.8 per cent. Importantly, the bank said that outcome, when combined with slowing economic activity, "supports our view that the cash rate has peaked".

The Reserve Bank has spent the better part of three years attempting to bring inflation under control through higher interest rates. If Australia's major banks are correct and rates have now peaked, the conversation shifts from how much higher rates could go to when they might begin coming down.

Westpac's caution comes from underlying inflation. The trimmed mean, the measure most closely watched by the Reserve Bank, increased from 3.4 per cent to 3.6 per cent annually. Housing inflation remains elevated at 6.5 per cent, reflecting ongoing increases in rents, electricity costs and new dwelling construction.

Electricity prices remain particularly problematic, rising 21.1 per cent over the past year following the removal of government rebates.

Housing construction costs are also showing signs of renewed pressure. ANZ noted new dwelling costs rose 0.9 per cent in May and are now running at an annualised pace of 8.6 per cent over the past three months. Builders continue to face higher labour, fuel and material costs, a reminder that inflationary pressures have not completely disappeared.

Housing affordability has deteriorated largely because of higher interest rates rather than higher property prices alone. Even modest reductions in mortgage rates would improve borrowing capacity, increase buyer confidence and reduce repayment pressure on existing homeowners.

While August is far from a certainty, the latest inflation result has strengthened the view that the next move in rates is more likely to be down than up. For borrowers, buyers and the development sector, that alone represents a significant shift from the conversation that dominated much of the past two years.

The inflation result the property market was waiting for

Commercial property group FiveX is doubling down on its move into the residential space.

The group, founded by Joshua and Marko Berger more than five decades ago, has followed up its plans for a 39-storey tower on North Sydney's Alfred Street with a proposed 61-storey tower in Chatswood.

The new tower at <a href="https://www.apartments.com.au/new-apartments/815-pacific-highway-chatswood-nsw-2067">815 Pacific Highway</a>, which would be one of the tallest proposed in Chatswood in recent years, will comprise 490 apartments, 76 of which will be dedicated affordable housing and managed by Evolve Housing for a minimum of 15 years.

The project will replace the long-standing Panorama Building, originally known as the BMA Tower, a 14-storey office building completed in 1972 and designed by Hungarian-born architect Hugo Stossel. At the time of its completion, the building was the tallest structure in Chatswood and became a local landmark due to its distinctive curved form and external glass lift.

<img alt="FiveX" data-entity-type="file" data-entity-uuid="956bd299-3864-47a0-8ea6-162b5524c5d8" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-24%20at%201.02.03%E2%80%AFPM.png?VersionId=EWx7teUr7RcYrI9mgRytwppwt5AdUDtb" />

fjcstudio is behind the designs. Its Architectural Design Report argues the ageing commercial building no longer reflects Chatswood's role as one of Sydney's key strategic centres and that the site is ideally positioned to support significantly higher residential density.

"The site is located at the heart of Chatswood, within the TOD accelerated rezoning area that supports higher density development around the new Metro station," the report states.

"The site's role within a walkable 400-metre radius catchment is where housing, employment, retail and community uses are encouraged to cluster in support of transit-oriented living."

<img alt="fjc" data-entity-type="file" data-entity-uuid="8d198f5e-cc71-4175-9357-be6ec7207473" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-24%20at%201.18.27%E2%80%AFPM.png?VersionId=5WUFc3IYBPvhQMBUYLCsjJhzdcVeYodE" />

The proposal has undergone two rounds of review by the NSW State Design Review Panel, with the design evolving through an extensive assessment process focused on design excellence, public realm outcomes, residential amenity and the integration of affordable housing.

fjcstudio says the residential component provides a diverse mix of apartment typologies, supporting a broad demographic and contributing to housing supply in a highly accessible location close to major transport, employment and retail infrastructure.

The application follows FiveX's plans for a 39-storey tower at <a href="https://www.apartments.com.au/new-apartments/275-alfred-street-north-north-sydney-nsw-2060">275 Alfred Street</a>, which it <a href="https://www.apartments.com.au/new-apartments/275-alfred-street-north-north-sydney-nsw-2060">submitted through the same NSW Government pathway</a> in December. That's for 184 apartments.

Recent activity in Chatswood includes Hyecorp launching its Archer Street project, Celine, and Develotek securing approval for a 34-storey tower.

First look: FiveX targets Chatswood skyline with 61-storey tower after North Sydney plans

Bridgewell Capital and SLD Development seem to be bullish on the Killara apartment market, filing plans for a second new development next to the Killara Golf Club.

The new plans are for 79 apartments across an amalgamated 4,989 sqm site on Buckingham Road.&nbsp;The project has been designed by BKA Architecture and is being assessed under the NSW Government's Low and Mid-Rise Housing and Infill Affordable Housing reforms. It is just 300 metres from&nbsp;Killara train station.

The majority of the apartments are three-bedrooms (46), with 23 two-bedroom apartments, seven one-beds, and three four-bedroom apartments. 17 of the apartments&nbsp;are proposed as affordable housing, representing 15 per cent of the project's gross floor area, allowing the development to access additional floor space and height incentives available under the NSW Housing SEPP.

There will be 131 resident and visitor car spaces, and more than&nbsp;1,450 sqm of communal open space. Landscaped areas would account for approximately 45 per cent of the site.

<img alt="Killara" data-entity-type="file" data-entity-uuid="75ef5ef7-a53b-4932-a8f1-38f63169eec9" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-06-24%20at%2011.04.00%E2%80%AFAM.png?VersionId=d_lG1A1StDaMQilljy25Fr8SF1BnAmKE" />

The site currently contains three detached dwellings and occupies a prominent position on the eastern side of Buckingham Road, with frontage to an area that has already begun transitioning towards higher-density housing. Existing apartment buildings of up to six storeys surround the site, while the Killara Golf Club forms its southern boundary.

The application has been lodged as a State Significant Development due to the affordable housing component and the scale of the project.

According to the design report, the proposal has been shaped by the area's evolving planning framework, which is encouraging greater housing density around transport infrastructure.

"The site sits along a growth area anticipated to undergo transformation in line with broader trends across New South Wales, driven by the implementation of the Low and Mid-Rise and Transport-Oriented Development State Housing Policies," the report states.

"Being within 800 metres walking distance to Killara Train Station, the project seeks to provide high-quality apartments designed for various family sizes, located in a vibrant landscaped setting."

The Upper North Shore suburb has become one of the most closely watched testing grounds for the NSW Government's housing reforms. A number of developers have moved quickly to consolidate sites around railway stations across suburbs including Killara, Lindfield, Gordon and Roseville, where the new planning settings are creating opportunities for apartment developments that would previously have been difficult to achieve.

The likes of Aqualand, Hyecorp, Holdmark and Vermont Property Group have projects in the region.

Bridgewell has several developments in the pipeline. Last September they submitted plans for <a href="https://www.apartments.com.au/news/nsw/bridgewell-capital-seeks-55-apartment-project-in-killara">55 new apartments</a> at&nbsp;23-25 Lorne Avenue in Killara, just the other side of Regimental Park from their new project. In May they filed for <a href="https://www.apartments.com.au/news/nsw/first-look-bridgewell-plots-120-apartments-and-childcare-centre-in-maroubra-town-centre">120 apartments in Maroubra</a>.

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First look: Bridgewell, SLD Development double down on Killara Golf Club

Sydney developer&nbsp;<a href="https://www.apartments.com.au/developers/central-element">Central Element</a>&nbsp;is doubling down in Drummoyne, lodging plans for a boutique apartment development on St Georges Crescent, only one-kilometre down the road from its first Drummoyne development, Bianca.

The new project at 15A-21 St Georges Crescent,&nbsp;a&nbsp;1,701sqm north-facing site overlooking Iron Cove, will have 45 apartmnts across 10 levels. Eight of the units will be dedicated to affordable housing.

The site sits within walking distance of Drummoyne Village, Birkenhead Point, ferry services and the Bay Run, and offers harbour views towards the Sydney Harbour Bridge and CBD skyline.

Designed by MHN Design Union, the development will deliver a mix of one, two and three-bedroom apartments, alongside resident amenity including a gym, landscaped communal open space and three levels of basement parking.

The project has been lodged under the NSW Government's Low and Mid-Rise Housing reforms, with Drummoyne Village identified as a town centre capable of accommodating additional housing supply.

Central Element acquired the site earlier this year as part of its continued expansion across Sydney's eastern suburbs, lower north shore and inner west.

The developer's current pipeline includes luxury apartment projects Pearl Bondi and a separate development on Lamrock Avenue in Bondi, a residential project in Barry Street, Neutral Bay, and a mixed-use seniors living community in Greenwich.

Central Element Managing Director Nathan Chivas said the project would address a shortage of new owner-occupier housing opportunities in Drummoyne.

"While we're seeing a significant shift across Canada Bay as major infrastructure investment, population growth and planning reform drive a new chapter for the region, in suburbs like Drummoyne there remains a genuine shortage of new boutique luxury housing opportunities for owner occupiers," Chivas said.

"Sites of this nature are increasingly difficult to secure, particularly those that combine a north-facing aspect with direct water outlook. Our St Georges Crescent project responds directly to the market demand, offering a level of exclusivity, outlook and lifestyle in the highly sought after suburb."

The development application has been lodged with the City of Canada Bay Council, with the project expected to launch to market in early 2027.

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Larry Schlesinger

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