<section data-scroll-anchor="false" data-testid="conversation-turn-5" data-turn="user" data-turn-id="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" data-turn-id-container="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" dir="auto">Time &amp; Place’s plans to transform the former David Jones factory building in Surry Hills into a mixed-use residential precinct have gone on exhibition through the NSW Government’s In-fill Affordable Housing pathway.</section>

<section data-scroll-anchor="false" data-testid="conversation-turn-6" data-turn="assistant" data-turn-id="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" data-turn-id-container="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" dir="auto">
The Marlborough House proposal, lodged for the <a href="https://www.apartments.com.au/new-apartments/marlborough-house-47-97-marlborough-street-surry-hills-nsw-2010">47-97 Marlborough Street</a> site, would see the adaptive reuse of the heritage-listed warehouse building alongside the construction of new residential additions and a separate apartment building on the northern portion of the site.

The proposal seeks approval for 172 apartments across three buildings, including 15 per cent affordable housing managed by a community housing provider for at least 15 years from occupation.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="5d1d3c2a-bf13-47d6-a335-7c01102cdee1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.36%E2%80%AFAM.png?VersionId=cjMYrbR.BLUlWH4dar0RVDDo0bG.u2YT" />

Interior view from the Northern Building Penthouse overlooking the park

&nbsp;

The redevelopment is planned for the prominent 3,413 sqm site bounded by Marlborough Street, Goodlet Street and Lansdowne Street, directly opposite Eddie Ward Park and around 200 metres from the Surry Hills light rail stop.

Time &amp; Place acquired the former David Jones building in 2024, marking the first time the property had changed hands in around 50 years.

Designed by Wardle, the proposal centres around the adaptive reuse of the former David Jones factory, originally constructed between 1913 and 1935 in the Inter-War Chicagoesque architectural style.

Wardle noted in its Architectural Design Report that the building “occupies a significant place in the industrial and cultural history of Surry Hills” and at its peak was “the largest department store manufacturing facility in Australia, employing over 800 people and fuelling the growth of Sydney’s fashion and retail industries.”

The practice said the project positions itself “not as an isolated intervention, but as a contributor to the civic, social, and architectural grain of the precinct.”

The proposal would deliver 75 apartments within the retained southern heritage building, 59 apartments within the central addition, and a further 38 apartments within the new northern building fronting Lansdowne Street.

Planning documents show the scheme would comprise a mix of heritage apartments, new-build apartments, townhouses and penthouses.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="57758518-40a3-4b83-958c-d06e96a2cffa" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.42%E2%80%AFAM.png?VersionId=VerlX9ST5xgBi8.1_YRsqdWTJeT6ygjs" />Interior View of the Heritage Building Apartment

The development would also include a ground-floor retail tenancy on the corner of Marlborough and Lansdowne streets, rooftop communal open space, a landscaped pedestrian link along the western edge of the site, and basement parking accessed from Lansdowne Street via a car stacker system.

&nbsp;

The scheme emerged from a competitive design process run by Urbis, with Wardle ultimately selected as the winning architect ahead of FJC Studio, TZG, Architectus and Wilkinson Eyre.

The Design Integrity Panel later described several aspects of the Wardle scheme as fundamental to the project, including “the stepped character of the new addition to the north of the site”, the landscaped western pedestrian link, and the “garden arrival” experience separating the original Marlborough House from the heritage addition.

Wardle’s design heavily references the site’s industrial and heritage history, while also responding to the surrounding Surry Hills streetscape.

The Architectural Design Report describes Surry Hills as “a finely grained neighbourhood with beautiful and expressive brickworks throughout the suburb,” with the proposal introducing a material palette intended to sit comfortably alongside the existing warehouse fabric and neighbouring terraces.

The report also outlines the project’s relationship with Eddie Ward Park and the broader landscape context of the area.

“Marlborough House occupies a site of deep cultural memory and the neighbouring Eddie Ward Park is of local ecological significance, where natural systems, topography, and stories have long shaped human experience,” Wardle noted in the report.

The architects said the proposal sought to “rebind built form to Country” through landscape, materiality and the adaptive reuse of the heritage structure.

<img alt="Marlborough House" data-entity-type="file" data-entity-uuid="9ae3f2f9-c85f-477a-a6f8-b43f6cb97c41" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.53%E2%80%AFAM.png?VersionId=B.qUCLqRvJOR.n9CvYcTpaknIX9LuqKZ" />

The project is also being progressed under the NSW Government’s in-fill affordable housing provisions, allowing developments that include affordable housing to access additional height and floor space incentives.

Under the plans, 2,593 sqm of the project’s floor space would be dedicated to affordable housing, slightly exceeding the required 15 per cent threshold.

In its Design Excellence Strategy, Urbis said the project aimed to “sensitively adapt and enhance the heritage-listed building on site through alterations and additions that preserve its historical significance” while delivering “high-quality market and infill affordable housing development in Surry Hills.”

Time &amp; Place has been one of the most active developers nationally in the last 12 to 24 months. Late last year they completed&nbsp;The Queensbridge in&nbsp;<a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, a mixed-use tower with 353 apartments and a hotel. They are currently selling Park Modern, 246 apartments near the famous Botanic Gardens in&nbsp;<a href="https://www.apartments.com.au/developments/south-melbourne-vic-3205">South Melbourne</a>, and have future projects, <a href="https://www.apartments.com.au/new-apartments/the-wilmot-173-burke-road-28-hope-street-glen-iris-vic-3146">The Wilmot</a>&nbsp;in&nbsp;<a href="https://www.apartments.com.au/new-apartments/glen-iris-vic-3146">Glen Iris</a>, the redevelopment of the Northcote Plaza, and another tower in South Melbourne.

The developer broke into Sydney just a few years ago with Two Tides in Manly. They have another project nearby, which is at the ultra-luxury end of the market on&nbsp;<a href="https://www.apartments.com.au/buildings/shoreline-manly-beach-89-90-north-steyne-manly">North Steyne</a>, fronting the beach.

It is also continuing to work through the <a href="https://www.apartments.com.au/news/nsw/first-look-time-place-settles-on-design-for-the-chimes-potts-point-redevelopment">redevelopment of The Chimes building</a> on Macleay Street in&nbsp;<a href="https://www.apartments.com.au/developments/potts-point-nsw-2011">Potts Point</a>, as well as a project on <a href="https://www.apartments.com.au/news/nsw/time-place-to-take-on-mosman-apartment-market">Mosman's Redan Street</a>.
</section>

Joel Robinson

First look: Time & Place unveils Marlborough House redevelopment designs for former David Jones warehouse in Surry Hills

The residential transformation of St Kilda Road is set to continue into with more new apartment plans for the sought-after boulevard.

Wing Tai Asia has lodged plans for a major residential tower at 464-466 St Kilda Road, replacing the former VACC House with an 18-storey mixed-use development designed around a retained heritage podium and a sculpted contemporary tower.

The proposal, prepared under Victoria’s Significant Residential Development with Affordable Housing pathway, would deliver 325 apartments and ground-floor retail across the prominent 4,653 sqm boulevard site in Melbourne’s St Kilda Road North Precinct.

The project centres on the adaptive reuse of the site’s heritage-listed VACC Building, an eight-storey office designed by Bernard Evans that has occupied the address for decades. Planning documents state the development would involve “carefully dismantling and conserving off-site the original metal fabric of the podium visible from St Kilda Road,” before reinstating it as the defining frontage of the new scheme.

Above the restored podium, Wing Tai is proposing a curvilinear residential tower. The scheme includes 172 one-bedroom apartments, 63 two-bedroom apartments, 66 three-bedroom apartments, and 24 four-bedroom apartments, alongside two ground-floor food and beverage tenancies fronting St Kilda Road.

The tower has been designed with substantial articulation and variable setbacks to minimise perceived bulk and maintain view corridors along the boulevard. Urbis, which prepared the planning report, said the design “has been significantly articulated through a curvilinear design” with “an interplay with materials, façade expression and depth” to create visual separation and visual interest.

The proposal also includes 254 basement car spaces, landscaped pedestrian links connecting St Kilda Road and Queens Lane, and a biophilic landscape strategy featuring canopy trees, raised planters, cascading greenery and a glass oculus pool overlooking the eastern frontage.

Planning documents confirm the $270.1 million development will contribute 3 per cent of project costs to the Social Housing Growth Fund as part of the application process.

Wing Tai acquired the St Kilda Road property in 2018 alongside Abacus Property Group for $95.38 million, before later consolidating ownership of the site. The property previously served as the Victorian Automobile Chamber of Commerce headquarters for around 60 years.

The transformation of the St Kilda Rd boulevard is already beginning to materialise, with a number of high-profile projects recently completed, launched, or approaching launch as developers continue to back the long-term appeal of the precinct.

Among the most notable recent completions is Louise by Samuel Property Group, just off the strip on Queens Lane, the same pocket Hirsch &amp; Faigen recently launched The Queensbury. Mirvac is too on the same street with The Albertine, which is approaching completion.

Dexus recently secured approval for its slice of St Kilda Road, while Gurner also has approved plans for the precinct.

Wing Tai unveils 325-apartment St Kilda Road tower on former VACC House site

Malaysian developer <a href="https://www.apartments.com.au/developers/s-p-setia">SP Setia</a> is the latest to jump into St Leonards booming Transport Oriented Development precinct.

The developer, which has previously delivered Sapphire by the Gardens apartment development in Melbourne, identified the Atchison Street site in 2023. It filed a Scoping Report around 12 months ago, and now has revealed the designs for the new&nbsp;40-storey mixed-use tower.

The State Significant Development Application covers <a href="https://next-portal.urban.com.au/projects/14650/summary">20-22 Atchison Street</a>, a 1,374 sqm site positioned between St Leonards Station and the new Crows Nest Metro station.

Designed by <a href="https://www.apartments.com.au/architects/cox-architecture">COX Architecture</a>, the project would deliver 181 apartments, above a four-storey commercial podium, five basement levels, and new public domain works along Mitchell Street. The apartment mix comprises 35 one-bedroom apartments, 39 one-bedroom-plus-study apartments, 85 two-bedroom apartments, and 22 three-bedroom residences.

The proposal has been lodged as a shop-top housing development under the NSW Government’s TOD planning pathway, which allows increased density around key transport infrastructure. The site sits within the recently rezoned Crows Nest Accelerated TOD Precinct.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b799673d-48e2-46b0-801a-0e33a9330100" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20site.png?VersionId=dPh0UfwfaHpbFL1R7H1cbZNbIW0CHbCC" />

SP Setia acquired the Atchison Street site as part of its continued expansion into the Australian apartment market. In comments made to City &amp; Country (The Edge Malaysia) in 2023, SP Setia President and CEO Datuk Choong Kai Wai described the acquisition as “a strategic move” aligned with the group’s post-pandemic market recovery strategy.

“Our target for this exceptional development is local and overseas buyers, including first-home buyers, downsizers and investors,” Choong said.

The tower has been designed as a slender vertical form rising from a mixed-use podium, with COX Architecture positioning the development as a response to the evolving St Leonards and Crows Nest skyline.

“The purpose of the project is to facilitate the delivery of high-quality housing at a strategically located site and deliver a built tower outcome that is consistent with the desired future character of St Leonards and aligns with the TOD controls,” the design report stated.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="b1a85eee-76f7-436c-a6da-73ba827b9b13" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/atchinson%20entry.png?VersionId=dA9jHGPMcm.dDbwk4QfxqWiY5bfh3UVt" />

The podium would incorporate retail uses fronting Atchison Street, commercial tenancies, landscaped communal areas, and pedestrian improvements along Mitchell Street. Vehicle access and loading would be consolidated via Atchison Lane.

Residents would have access to more than 665 sqm of communal indoor and outdoor spaces, while the development proposes 96 parking spaces across five basement levels.

The proposal also includes a commitment for 10 per cent of residential floor space to be allocated toward affordable housing through a monetary contribution.

COX said the tower form responds directly to the emerging high-density character of the precinct while seeking to maximise solar access, cross ventilation, and outlook from apartments.

<img alt="First look: SP Setia targets St Leonards skyline with 40-storey TOD tower" data-entity-type="file" data-entity-uuid="2163f85c-f63b-4be3-aafa-f8763976cec5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Article%20Feature%20Image%20%28Grid%29_5.png?VersionId=WiAmtIKJ6.ZQ41EtYEQ1fol7AeorKBlL" />

“The building is orientated towards north,” the Apartment Design Guide compliance report noted, adding that the tower’s slim form was driven by the constrained inner-urban site dimensions.

The design also incorporates landscaped setbacks and communal open space at podium level, intended to soften the interface with surrounding streets and improve pedestrian amenity.

The project adds to a growing wave of redevelopment proposals reshaping St Leonards and Crows Nest following the opening of the Sydney Metro City line and the NSW Government’s push for higher-density housing around major transport nodes.

Last week Stockland filed plans just down the road. They want to build a <a href="https://www.apartments.com.au/new-apartments/601-pacific-highway-st-leonards-nsw-2065">52-storey tower on Pacific Highway</a>.

Read more:&nbsp;<a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">First look: Stockland plans 52-storey, 538-apartment St Leonards tower&nbsp;</a>

First look: SP Setia targets St Leonards skyline with 40-storey TOD tower

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> has revealed plans for a new mixed-use tower at 10 Dangar Street, Wickham, advancing a proposal that would reshape the southern gateway to Newcastle’s city centre with one of the city’s tallest residential buildings.

The State Significant Development proposal, now on exhibition, seeks approval for a <a href="https://www.apartments.com.au/new-apartments/bowline-10-dangar-street-wickham-nsw-2293">43-storey tower</a> immediately adjacent to the Newcastle Interchange. The project would deliver around 200 apartments, including 42 affordable housing dwellings, alongside 99 co-living units, a 171-room hotel, retail space, and new public domain integrated through the site.

The scheme marks a significant escalation of plans previously approved for the site. Urban Property Group took over the prominent 2,904 sqm parcel, where excavation and demolition had already commenced under an earlier consent for a 14-storey mixed-use development.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="58a96dd9-407f-4d20-86b4-94e4bfeef74b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20podium.png?VersionId=LGlf08pdFGAZDzvx_CXC4XakHNZRuEE0" />

Designed by <a href="https://www.apartments.com.au/architects/sjb-architects">SJB</a>, the tower has been conceived as a landmark transit-oriented development anchored to the Newcastle Interchange precinct. The proposal includes 245 build-to-sell apartments across a mix of one, two, and three-bedroom residences, as well as two penthouses. Fifteen apartments and one operational unit are earmarked for NDIS housing. The co-living component would add a further 99 units, while the podium would accommodate retail uses and hotel facilities.

SJB said the site presents “a valuable opportunity to anchor the precinct by setting the standard for design, active ground planes and character at the key southern gateway.”

The architecture responds directly to the site’s position beside major transport infrastructure and within one of Newcastle’s fastest-evolving urban renewal precincts. The tower form sits above a sculpted podium designed to frame new public spaces, including a through-site pedestrian link connecting Station Street to Hannell Street, landscaped plazas, and activated retail edges.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="a7bd6ff0-f7db-4ce8-a6dc-ea56e72c6149" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20lanne.png?VersionId=xzf39VADyhj7zBQY2I9fx9vI62u2tuSb" />

The design report describes the project as part of the broader transition of Wickham into “a vibrant, high-quality mixed-use urban precinct” that leverages proximity to the station, open space, and regional connectivity.

A detailed public art strategy has also been prepared for the development. The strategy positions the project as “a transit-oriented development of state significance at the gateway to Newcastle’s city centre” and outlines a series of integrated artworks responding to Newcastle’s industrial and transport heritage.

Creative Road’s curatorial framework for the project, titled Unveil, draws on “stratified surfaces, carved volumes, and light-filled apertures” while referencing Newcastle’s transformation from an industrial city into a contemporary education and technology hub.

<img alt="First look: Urban Property Group unveils Newcastle’s next supertower at Wickham interchange" data-entity-type="file" data-entity-uuid="77a882bb-14b1-4d28-99ff-9438e39508c0" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/wickham%20site.png?VersionId=cevgo_vN0eKPK78P8YcEu3mKPLkpFqE7" />

The proposal is being advanced through the NSW Housing Delivery Authority pathway after being declared State Significant Development in June 2025. The accompanying scoping report states the development aims to “maximise the site’s proximity to the Newcastle Interchange by delivering transit-oriented development” while increasing housing supply and affordable housing provision within the Newcastle LGA.

Urban Property Group’s plans align with the long-term strategic vision established under the Wickham Master Plan, which identified the interchange precinct as suitable for substantial uplift in height and density. The current proposal would significantly intensify that vision, positioning the tower among the tallest developments proposed for Newcastle.

The site sits immediately north of the Newcastle Interchange, bounded by Dangar Street, Hannell Street, and Charles Street. It is surrounded by a rapidly growing cluster of residential towers and mixed-use projects that have emerged following the completion of the light rail and transport interchange.

First look: Urban Property Group unveils Newcastle’s latest tower at Wickham interchange

Bottega House has completed settlement of a landmark riverfront site in Macquarie Street, St Lucia, representing its first major Brisbane development.&nbsp;

Positioned on the banks of the Brisbane River, the <a href="https://www.apartments.com.au/new-apartments/180-macquarie-street-st-lucia-qld-4067">premium site at 180 Macquarie Street</a> features uninterrupted river frontage in one of Brisbane’s most tightly held residential precincts.&nbsp;

The proposed development, currently under assessment with Brisbane City Council, has been designed by <a href="https://www.apartments.com.au/architects/plus-studio">Plus Studio</a> with interiors by <a href="https://www.apartments.com.au/interior-designers/mim-design">Mim Design</a> and will deliver a boutique collection of premium residences positioned specifically for owner occupiers and downsizers.&nbsp;

The residences are set to redefine luxury apartment living in the area, with a focus on architectural quality, refined finishes, landscape integration and elevated amenities including curated wellness facilities, resort-style pools and recreation spaces rarely seen in the local market.&nbsp;

Exclusive sales for the project will be led by Keenan &amp; Byrne, ahead of an anticipated launch later this year.&nbsp;

Bottega House Managing Director Nick Malloch said the project reflects the group’s ambition to deliver a highly curated residential offering within one of Brisbane’s most tightly held precincts.&nbsp;

“This is an incredibly rare riverfront opportunity and one we have approached with a long-term perspective,” Malloch said.&nbsp;

“Our vision from the outset was to create a boutique collection of residences that feel more like private homes than traditional apartments, with generous proportions, refined finishes and exceptional amenity throughout."

Malloch says there is a&nbsp;lack of premium owner-occupier stock of this quality in the market, particularly for downsizers wanting space, privacy and a true lifestyle offering without compromise.&nbsp;

"Demand is expected to be strong given the scarcity of premium riverfront opportunities of this nature within Brisbane’s inner-west."&nbsp;

Bottega House secures landmark riverfront site in St Lucia 

Commercial

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A 50% stake in North Sydney’s 101 Miller Street/Greenwood Plaza has sold for $300 million plus.
The deal, one of the biggest commercial property transactions for the fourth quarter, was negotiated by Rob Sewell and Simon Rooney of JLL &amp; CBRE.
TIAA Henderson Real Estate, on behalf of TIAA-CREF purchased the half stake from Eureka Funds Management.
The remaining 50% share of the landmark office tower and dominant shopping centre will continue to be owned by the Mirvac Group.
Mirvac will continue to operate 100% of the asset.
Rob Sewell said 101 Miller and Greenwood Plaza was one of Australia’s limited stock of 35 premium grade buildings.
"But more importantly it is the only premium asset across Australia that is outside of a CBD area," he said.
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jchancellor-FAypfDUnLy

Half share in North Sydney's 101 Miller Street-Greenwood Plaza sold for $300 million plus

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Building materials company Hanson is selling off its South Brisbane riverfront site.
The ­market expectations are for as much as $40 million, according to the Australian Financial Review.
The site is located within the draft Kurilpa Riverfront Renewal Master Plan area, which ranks as Brisbane’s largest inner city urban renewal precincts.
The site with a 110-metre frontage to the Brisbane River has been listed through Brendan Hogan and Pat George of Colliers International.
Offers for 14 Nott Street covering 9,878 square metres and 3043 square metre at 19 Nott Street close 3 December.
Under the draft plan, the site may be developed with maximum building heights of up to 20 storeys.
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Hanson Building site offering on Brisbane River

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GUEST OBSERVATION
There has been much talk about the “search for yield” in investment markets. 
Investor interest in decent yield bearing investments has seen the price of such assets rise and their yields (or the cash flow they provide relative to their price) fall. This is clearly evident during the last three years. 
The chart below shows the yield available on various Australian assets today versus what they offered three years ago. All have seen a fall in their yields to varying degrees. 
<img src="/images/2014/10/23/oliver-oct-23-one.png" alt="">
But what's driving this? Is it a bubble? What warning signs should we watch? What does it mean for investors?
Why all the interest in yield? 
The first thing to note is that interest in the yield or cash flow an investment provides is a normal part of investing. But it seems to become a greater focus at various points in time. This is particularly so when interest rates are relatively low and investors are a bit wary about going for growth.
In Japan it’s become the norm as interest rates have stayed at/near zero for 15 years. In the US and Australia, yield focussed investing was in favour in the 1950s when interest rates were low and investors still cautious after the Great Depression and WW2. It became particularly apparent last decade as investors started putting more into yield plays like property, infrastructure and credit as bond yields remained relatively low only to be interrupted by the GFC. It has since returned with a vengeance.
There are three main drivers:
<ol>
<li>Low interest rates have pushed bank deposit rates and bond yields down, all of which is encouraging investors into higher-yielding alternatives. </li>
<li>Reduced fear of economic meltdown has helped investors feel comfortable taking on more risk but with memories of the GFC and its aftermath still fresh, this is only in a cautious fashion. So there is a desire for the comfort provided by investments that get a high proportion of their return from income. </li>
<li>Finally, aging populations are driving a longer term interest in yield. This started last decade as the first baby boomers moved into their pre-retirement phase and is intensifying now as they are starting to retire. This is driving demand for investments paying decent income in the form of dividends, rent, interest payments, etc. That said, trying to get a handle on the precise impact of this is nigh on impossible given increasing retirement ages and longevity driving a need for a decent growth exposure. </li>
</ol>
Is it structural of cyclical? 
The safest option in investment markets is to assume something is cyclical (ie short-term) rather than structural (ie long-term) until proven otherwise. Demographic influences are clearly structural and long-term. However, there is a structural aspect to low interest rates that cannot be ignored. 
First, to state the obvious, interest rates have been trending down with lower peaks and troughs since the 1980s. 
Second, the period of near zero/low global interest rates that has followed the GFC doesn’t look like it is about to end anytime soon. While the low global rates and easy money of the last few years have been constantly met with scepticism and concern about inflation and higher rates around the corner, the reality is that it hasn’t happened.
We are now into the fourth year in a row where the hoped for lift off to above trend global growth has not happened. Global growth remains OK at around 3 to 3.5%, but it’s below trend and uneven with periodic flare ups of concern about recession and deflation as we have seen during the last month or so in relation to Europe.
While it’s dangerous to say “this time it’s different”, quite clearly the world is different to the pre-GFC environment with excess levels of saving, spare capacity and more cautious attitudes to debt resulting in sub-par, uneven growth and low inflation/deflationary risks.
Article continues on the next page. Please click below.
<hr class="system-pagebreak">
The impact of low bond yields 
The logic of the chase for yield can be seen in relation to Australian commercial property (ie office, retail and industrial property). The next chart shows average commercial property yields relative to 10-year bond yields. While commercial property yields have fallen over the last 34 years from an average of 8.3% to an average of 6.6%, the yield on bonds has literally collapsed.
While the step down in bond yields was initially treated with scepticism on the grounds that “it’s just a bubble” or “inflation will soon take off forcing yields back up”, the longer it has persisted, thanks to sub-par growth and low inflation, the more investors have come to expect bond yields to stay down. So they increasingly invest in yield bearing alternatives such as property.
<img src="/images/2014/10/23/oliver-oct-23-two.png" alt="">
Faced with the choice of investing in a 10 year government bond yielding 3.2% as they are in Australia now, or allocating to commercial property with a 6.6% average yield and capital growth of, say, 2.5% pa (ie inflation) giving a total return of 9.1%, an investor might well conclude the latter makes more sense. 
In fact, looked at this way the property risk premium – ie the return potential property provides over current bond yields – at about 5.9% is about as high as it ever gets.
<img src="/images/2014/10/23/oliver-oct-23-three.png" alt="">
And of course, the same logic can be applied to investment in assets such as infrastructure, shares and corporate debt.
But is the chase for yield on borrowed time?
Is it wise for investors to behave this way? Probably yes… until it goes too far, bond yields surge or growth disappoints.
Has it gone too far? 
Inevitably the search for yield will be pushed too far as it was last decade. Perhaps the greatest risks are seen to be around corporate debt where the gap between US investment grade and junk bond yields and US government bond yields has fallen to the range that prevailed prior to the GFC.
However, credit spreads remained around these narrow levels for many years in the mid-1990s and mid-2000s before trouble arose. Nor have credit lending standards deteriorated like they did prior to the GFC.
<img src="/images/2014/10/23/oliver-oct-23-four.png" alt="">
In terms of equities, there has certainly been a narrowing in the gap between the forward earnings yield on shares and bond yields. But, as can be seen in the next chart, this gap – or a guide to the risk premium shares offer relative to bonds – still remains relatively wide compared to pre-GFC levels.
<img src="/images/2014/10/23/oliver-oct-23-five.png" alt="">
And finally for real assets (if commercial property is a guide), as indicated earlier, the risk premium offered by commercial property relative to bonds remains about as wide as it’s ever been.
So overall, it’s hard to argue the search for yield has gone too far. That said, corrections like the one we have seen in shares and corporate debt markets during the last month are healthy in ensuring this remains the case.
Article continues on the next page. Please click below. 
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What about the risk of an upswing in bond yields? 
The events of the last month, with renewed worries global growth and deflation, tell us that the immediate threat from higher interest rates is low. The US is closest to raising rates but global risks and a strong US dollar importing low inflation to the US could see that pushed out to the second half of next year.
Australia is under no pressure to raise rates, with sub-trend growth and low inflation, and probably won’t start raising rates till after the US and for both it will be gradual. Rate hikes aren’t even on the horizon in Europe, Japan and China.
What about the risk of slower growth? 
Slower growth is perhaps a bigger risk globally, with the global economic recovery remaining fragile. In the absence of a major external shock or a major monetary tightening, however, it’s hard to see a sharp slowing in global/Australian growth.
What to watch?
Our basic assessment is that the search for yield hasn’t yet gone too far. Key indicators to watch for signs that it has include the following:
<ul>
<li>Valuation indicators - such as price to earnings multiples and the gap between earnings yields and bond yields for shares, corporate bond yield spreads and the return premium property offers over bonds;</li>
<li>Signs global growth is becoming more synchronised and picking up and that global inflation is rising as a guide to global monetary tightening.</li>
<li>Global business conditions PMIs as a guide to whether growth is slowing again.</li>
</ul>
So far so good, but they are all worth keeping an eye on.
What does it all mean for investors?
While the yields and return potential across most assets has continued to fall, shares, non-residential property and infrastructure continue to offer better prospects than low yielding cash, government bonds and term deposits. Some value has also been returned to corporate debt following the recent back up in corporate bond yields.
Shane Oliver is head of investment strategy and chief economist at <a href="https://www.ampcapital.com.au" target="_blank">AMP Capital</a>.
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The chase for yield: What it really means for investors

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The Horsham Plaza in regional Victoria’s Wimmera region has been sold for $24.85 million.
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The 12,701 square metre neighbourhood shopping centre is on a 2.1 hectare land Darlot Street holding.
It is anchored by a Kmart and includes 26 specialty stores. 
It last sold for $12 million in 1996.
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Horsham Plaza sold for $24.85 million

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The new Northpoint Shopping Centre sold for $36.5 million in a newly developed suburb just north of Toowoomba.
The 1.95 hectare property has four street frontages including Ruthven Street, which is also the New England Highway. Developer Hallmark Property offloaded it through Jones Lang LaSalle’s Jacob Swan and Sam Hatcher.
The centre is the first investment of the Australian Property Opportunities Fund II.
The fully leased income is $2.751 million, which shows a yield of 7.63%.
The centre, which opened earlier this year, has a land area of 6,868 square metres and is anchored by a Coles supermarket and a medical centre.
There are 24 specialty shops and one kiosk, with a strong national tenant representation including Subway, Coffee Club, The Reject Shop and BWS.
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Northpoint Centre, Toowoomba sold

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Bourke Street Bakery has confirmed they will take up space at Lend Lease’s Barangaroo South project on Sydney harbour.
Bourke Street Bakery will be located in the development’s Lime Street Shops precinct.
“For us, Barangaroo seemed like the perfect location as it capitalises on the CBD position with strong population numbers and it also enjoys a connection to Sydney Harbour,” Bourke Street Bakey co-founder Paul Allam said.
“We’re not trying to replicate <a href="https://www.barangaroosouth.com.au/retail/discover-retail-at-barangaroo/bourke-street-bakery" target="_blank">our Surry Hills store</a>, but we will bring a sense of familiarity to our Barangaroo store when we open mid next year.”
Paul Allam and David McGuinness, both baker/chefs, began Bourke Street Bakery in Surry Hills in 2004. 
The original store, for which the company is named, has become a cult favourite with Surry Hills locals and those from afar who appreciate quality coffee and the finest in baked goods. 
Bourke Street Bakery has grown to over six stores with expansion plans for two more and employing circa 120 staff across the company.
McGuinness and Allam met when they worked at Brasserie Bread in Banksmeadow in 2002.
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Bourke Street Bakery expands to Barangaroo South

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After eight years ownership, the unlisted property fund manager, ISPT, has sold its 37-hectare Werribee development parcel in Melbourne’s outer south-west for $25 million.
It was bought by the local developer, Dacland Group, led by John Dwyer.
The three adjoining sites come with a permit in place for 500 dwellings.
Robbie Demian of Oliver Hume Real Estate told the Australian Financial Review it was a record price per hectare for the City of Wyndham market.
Wyndham ranked as the second most expensive growth corridor land market this year.
It has a net median lot price of $218,000.
House and land packages start from $347,000, according to Oliver Hume.
The Wyndham Growth Corridor is one of the fastest growing regions of ­Melbourne with its population forecast to reach 200,000 by 2031.
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Dacland adds to Werribee land subdivsion sites

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The third quarter 2014 statistics for Australia’s national office markets have been released by JLL, and it appears that it’s a largely positive story, with net absorption at a positive of 19,800 square metres over the quarter and the national CBD office market vacancy rate holding steady at 12.4%.
Over 2014, business conditions did improve as job advertisements trended higher, explains JLL national director of research Andrew Ballantyne.
“However, the start of the 2014/15 financial year appears to have been the catalyst for increased tenant enquiry and activity,” said Ballantyne.
A third successive quarter of positive net absorption was recorded for Sydney, at 15,100 square metres, with Melbourne also leading the recovery.
Other markets have been less positive, with resource-dependent Brisbane and Perth recorded negative absorption over the quarter and increasing vacancy rates.
However, Sydney’s recovery isn’t being led by the traditional large office space occupants, the legal firms and finance companies.
Instead, it’s technology and related firms expanding, explains JLL head of office leasing New South Wales and Australia Tim O’Connor. In particular, North Sydney is exposed to these businesses.
“Sydney is following the same trend as east coast US office markets – technology firms are expanding, upgrading and locating themselves in core locations alongside traditional users including investment banks. LinkedIn has committed to relocate to 1 Martin Place and will occupy space in the same building as Macquarie,” said O’Connor.
Despite this, incentives remain high at 30% in Sydney CBD.
“Tenants have had the luxury of time in the Sydney CBD over the past three years. We only have to see a few instances of tenants being unable to secure their first choice of accommodation before two things happen – the first is that decision making timeframes begin to reduce and the second is there will be downward pressure on incentives,” he said.
Meanwhile, Melbourne is undergoing a round of centralisation.
“Viva Energy and Pragmatic Training both committed to CBD space over the quarter. The acquisition of office stock with residential conversion potential in St Kilda Road will support further centralisation over the next two to three years,” he said.
<img src="/images/2014/10/15/ev.owa.jpg" alt="">
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Start of new financial year the “catalyst” for increase office enquiry: JLL

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The ­Australian Centre for Photography on Sydney’s Oxford Street has been sold for $5,035,000.
The centre will lease back the premises for the time being with the site has potential for development.
The 5.9% yield was secured by Miron Solomons, of Colliers International.
 “Yields of this level have not been seen on Oxford Street in several years, indicating a resurgence of the area,” he told Fairfax Media.
The 663-square metre building has been the home of the Australian Centre of Photography for 33 years.
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Paddington retail secures 5.9% yield with Australian Centre for Photography sale

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A Kings Cross terrace with 10 bedrooms and 10 bathrooms has been relisted by McGrath Estate Agents, with its front façade repainted since initially sold last month.
The property sold recently for $2 million when more than $1.8 million was being sought by the <a href="https://www.mcgrath.com.au/buy/house-potts-point-nsw-2011/241590/?searchID=43511206" target="_blank">agent Peter Starr</a>.
The buyer has spotted another investment opportunity, so have put the property up for sale after a splash of beige paint on its façade. Its former black exterior is pictured below. 
<img class="img-responsive" src="/images/phocagallery/2014/07/potts-point-july-22/potts%20point_0000_1.jpg.jpg" alt="Pre-auction $2 million deal for Kings Cross 'special' offering">
Last month Property Observer reported Martindale sold for <a href="/expert-insights/investing/pre-auction-2-million-deal-for-kings-cross-special-offering">$2 million pre-auction</a> through McGrath Estate Agents with a distinctive black facade at 52 Kellett Street features an insightful floor plan indicating (pictured below) the purposeful layout.
The property at 52 Kellett Street features an insightful floor plan indicating (pictured below) the purposeful layout. 
Click to open in new window:
<a href="https://propertyobserver.com.au/images/2014/07/22/potts-point-july-22-floor-plan.gif" target="_blank"><img src="/images/2014/07/22/potts-point-july-22-floor-plan.gif" alt=""></a>
It featured in the 1999 SMH report by the investigative duo Kate McClymont and Andrew Clennell entitled, "Our Brothel Barons".
At the time it reportedly traded as Classique, a brothel whose advertising once boasted of a speciality in lesbian double acts. It has more recently traded as Studio 52, Star 52, Antonio’s Angels and Secret Desire. The rates have been at around $120 for 30 minutes.
The building, which has been marketed as in Potts Point, was listed previously in 2011, 2012 and 2013 without success.
It last traded at $2.1 million in 2006 when bought by ETC Australias Group Pty Ltd. Its earlier sales were $1.5 million in 2004 and at $1.38 million in 1999.
The premises were for sale, not the business.
There is no registered lease, with no rental income advisory given in <a href="https://www.mcgrath.com.au/buy/house-potts-point-nsw-2011/228008/?searchID=41071082" target="_blank" style="line-height: 1.3em;">the first McGrath marketing</a>.
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