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>

Joel Robinson

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 

<section data-scroll-anchor="false" data-testid="conversation-turn-6" data-turn="assistant" data-turn-id="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-2" data-turn-id-container="request-WEB:84a2af5e-d7cf-4ddf-922a-f4d44d6c6caa-2" dir="auto">
<section data-scroll-anchor="false" data-testid="conversation-turn-2" data-turn="assistant" data-turn-id="request-WEB:5a5ab36c-8dd3-454c-b456-c501f22f0eb4-0" data-turn-id-container="request-WEB:5a5ab36c-8dd3-454c-b456-c501f22f0eb4-0" dir="auto">
The arrival of the first piling rig officially marks the commencement of construction at SIERA’s new beachside apartment development, Exhale, in Northcliffe.

<a href="https://www.apartments.com.au/new-apartments/exhale-surfers-paradise-8-enderley-avenue-surfers-paradise-qld-4217">Exhale</a>, a glass-encased tower featuring 54 large-scale apartments at 8 Enderley Avenue, is SIERA’s third Gold Coast development. It follows the recently completed PIPIS Bilinga beachfront project, which achieved suburb-record prices, and the soon-to-be-completed Chevron Island development, Tapestry.

[smartcode_project:default project_id=112661 project_image_fid=359603]

<a href="https://www.apartments.com.au/developers/siera">SIERA</a> Founder and Managing Director Brent Thompson said the arrival of the piling rig represented a significant milestone for the development, which is scheduled for completion in late 2028.

Over the next month, around 260 piles are expected to be installed as work progresses on the basement structure. The building is anticipated to rise above ground level early next year, before unveiling its sculptural glass curtain wall, developed in collaboration with specialist façade engineers.

“The façade was designed to maximise panoramic coastal views while creating a distinctive architectural identity,” Thompson said.

[smartcode_project:default project_id=112661 project_image_fid=355935]

Designed by BDA Architecture, Exhale will comprise just 54 two- and three-bedroom residences across 26 levels, a level of low-density living rarely delivered in this beachside pocket between Surfers Paradise and Broadbeach.

The project has been conceived as a resident-only building, with no short-stay accommodation permitted. SIERA says the model is intended to appeal to long-term owner-occupiers rather than transient holiday demand.

[smartcode_project:default project_id=112661 project_image_fid=361052]

Residences have been designed with large-format layouts and expansive glazing, with most apartments featuring more than 30 metres of glass frontage to maximise natural light and ocean views.

The amenity offering spans two levels and centres on wellness and lifestyle, including a heated magnesium pool, sauna, yoga and Pilates studio, gymnasium, private dining facilities, cinema lounge, and dedicated surfcraft storage.

[smartcode_project:default project_id=112661 project_image_fid=359607]

More than half of the apartments have already sold. SIERA has also opened a sales gallery for Exhale at its Chevron Island commercial premises, near its Tapestry tower and the site of its second Chevron Island apartment development, which is slated to launch in early 2027.
</section>
</section>

[smartcode_project_cta:default project_id=112661]

SIERA kicks off construction at Northcliffe tower Exhale

Local Little Bay residents, along with buyers from premium postcodes across Sydney’s affluent Eastern Suburbs, have dominated purchases in developer-builder Urban Property Group’s first Eastern Suburbs apartment development, <a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a>.

The $250 million coastal project, one of the first new developments in the area in several years, has proven particularly popular with downsizers, especially those from Coogee and Bondi. One Double Bay downsizer paid $4.7 million for a four-bedroom penthouse, setting a new local apartment price record in the process.

Buyers have been attracted to the combination of coastal tranquillity, premium design and amenity-rich neighbourhood living. The walkable village setting, along with proximity to three of Sydney’s leading golf courses, New South Wales Golf Club, St Michael’s Golf Club and The Coast Golf Club, has also been a key drawcard.

[smartcode_project:default project_id=112343 project_image_fid=352689]

Built across two low-rise buildings designed by <a href="https://www.apartments.com.au/architects/hill-thalis-architecture-urban-projects-pty-ltd">Hill Thalis</a> and set along a lush, landscaped green spine, designed by leading landscape architect <a href="https://www.apartments.com.au/landscape-architect/arcadia-landscape-architecture">Arcadia</a>, ESTE Little Bay offers a collection of one, two, three and four-bedroom residences with interiors by Richards Stanisich.

<a href="https://www.apartments.com.au/developers/urban-property-group">Urban Property Group</a> Sales Director, Tom McIvor said the response to ESTE has been "nothing short of extraordinary."

“Buyers have been quick to recognise ESTE as a rare opportunity to invest in a coastal sanctuary that offers both seclusion and connectivity to the heart of Sydney,” McIvor said.

[smartcode_project:default project_id=112343 project_image_fid=352687]

<a href="https://www.apartments.com.au/project-marketer/srm-residential">SRM Residential</a> Senior Director, <a href="https://www.apartments.com.au/project-marketer/srm-residential">Clayton Ross</a> said the local market has responded incredibly well, driven by ESTE’s exceptional location and the rarity it offers.

“We’ve seen strong interest from a variety of buyer groups, all of whom are drawn to the exclusivity and quality of the build and construction by the 4.5-star iCIRT-rated builder / developer, Urban Property Group. There’s truly nothing else like it along Sydney’s coastline.”

[smartcode_project:default project_id=112343 project_image_fid=352690]

The project also includes robust buyer protections, including Resilience Insurance’s Latent Defects Insurance, providing 10 years of structural cover, and an independent iCIRT-rating of the developer.

“The iCIRT-rating adds another layer of confidence,” Ross added. “Buyers see it as a safeguard for their investment and their lifestyle.” A highlight of ESTE’s offering is its exclusive wellness amenities, including a heated rooftop infinity pool and outdoor heated spa, a state-of-the-art Technogym fitness centre, and a sauna.

<a href="https://www.apartments.com.au/new-apartments/este-little-bay-jennifer-street-little-bay-nsw-2036">ESTE Little Bay</a> is topped out and is on track to complete towards the end of 2026, with residents moving in before Christmas.

[smartcode_project_cta:default project_id=112343]

Eastern Suburbs buyers snap up ESTE Little Bay apartments

Office

<html><body>
A Chinese developer has snapped up an open plan office in the Melbourne CBD for $1.26 million.
The 420 square metre office suite is located at 20 Queen Street and features a boardroom and executive offices.
Tom Tuxworth, Chris Pharr and Ed Wright of CBRE Strata Projects negotiated the sale.
The agents said the property attracted an unprecedented level of buyer enquiry, with five expressions of interest to purchase.
The sale price equated to a rate of $3,000 per square metre.
Tuxworth said the new owner planned to use the property as its new Melbourne headquarters.
“Offshore developers who have been highly active in purchasing large development sites in the Melbourne CBD are now looking for commercial office space for their headquarters,” Mr Tuxworth said.
“Offshore groups are now competing with local owner occupiers and investors, resulting in competitive buyer demand and strong prices consistently achieved.” 
</body></html>

kjiminez-eaYKfU7qd2

Chinese developer buys Melbourne CBD office

<html><body>
An article in the weekend Financial Review opened with:"Macquarrie Group, a bellwether for the strength of the office leasing market, is expanding."
And this clearly accords with a recent report released by BIS Shrapnel, which confirmed the office recovery would be stronger in "service and trade exposed markets like Sydney and Melbourne, but weaker in the mining-based markets such as Perth and Brisbane".
<img src="/images/2014/05/06/lang%20may%207%20one.png" alt="">
Source: Knight Frank/Australian Financial Review.
For Melbourne, you are now seeing strong demand in and around the city fringe — mainly within Southbank and the Docklands precinct.
Developers in these areas enjoying obvious cost advantages, which are then reflected in a lower rent profile for their prospective tenants.
And this is what led the likes of ANZ and NAB to relocate to Docklands, over a decade ago.
A growing number of major corporate tenants are progressively realising they no longer need be located within the heart of Australia's CBDs.
Instead, they can pre-commit to prime-grade Offices at very competitive rentals — and have that accommodation designed and fitted out, to meet their specific needs.
And this demand appears to be flowing through to established suburban markets as well.
With most of these new developments having significant pre-commitment from major tenants … this should curb the tendency for speculative development, over the next 3 to 5 years.
And this will help safeguard against an oversupply of space, within the Sydney and Melbourne office markets.
 
</body></html>

chrislang-EQKojcgJPV

Demand for office space on the improve

<html><body>
In a coup for Telstra Super and Aspen group, the South Australian government has signed a five year lease at its premium grade office building in the Adelaide CBD.  
The state government agreed to lease 277 square metres of space at 26 Franklin Street, at a gross rent of $520 per sqaure metre. 
CBRE’s Michael Pfitzner negotiated the lease  on behalf of lessor Aspen/Telstra Super.
</body></html>

South Australian government to lease Telstra Super and Aspen group building

<html><body>
Global IT company Arbor Networks has secured an office suite at 151 Castlereagh Street in the Sydney CBD.
The company has agreed to lease 428 square metres in the Valad owned building for a three year term, on an initial rent of $585 per square metre gross.
CBRE’s Tim Courtnall and Tim Molchanoff negotiated the lease.
“Arbor Networks was attracted to its location in the evolving midtown precinct, as well as the contemporary design of 151 Castlereagh Street,” Mr Courtnall said.
“The ability to complete a new fit out incorporating the balcony in the suite was also a major drawcard.” Arbor Networks had recently acquired a local business and said to be looking to grow exponentially over the next three years.
In a separate lease, in the same building,  Silverstone Investments has leased a 222 sqaure metres suite on the sixth floor. The rent was struck at $625 per square metre gross on a five-year term.
</body></html>

Arbor Networks secure Sydney office lease

<html><body>
The Brisbane office market is facing a perfect storm.
A sobering report by forecaster BIS Shrapnel is predicting the sunshine state to be hit with an oversupply of stock for the next decade, along with a vacancy rate set to reach 18% plus in 2016.
The city's looming oversupply woes was just one of the topics examined in the Brisbane office market report. It looked at the strength of leasing and investor demand, all of which pointed to a challenging few years for the market.
Not mincing it's words, BIS Shrapnel said: "there’s a perception that further oversupply in the Brisbane CBD office market may be averted by withdrawing secondary buildings for conversion to residential or short term accommodation uses".
"While there are perhaps a handful of suitable candidates, it will be a case of too little too late."
The report warned that because of that oversupply pressure, rents and property values will take a hit. 
<img src="/images/2014/04/29/chart-of-the-week-april-29.-breakout.jpg" alt="">
Author of the report, Christian Schilling, said there were three towers currently under way in the CBD that would add another 186,000 square metres of new space before the end of 2016, equal to 9% of current stock. 
In contrast, withdrawals for conversion or re- development expected over the same time horizon, he noted,  sum to just 72,000 square metres, or 120,000 square metres to the end of 2017.
"On balance, that is still one tower too many", he said. "And this is on top of weak demand and a vacancy rate of 14.2% at January this year".
Among some of the buildings slated as withdrawals in the report were 80 Albert Street,plus a number of buildings to be vacated by the state government over the next three and a half years, which include Health House, 80 George Street, the Executive Building, the Executive Annex, Neville Bonner Building and Forestry House. The Primary Industries Building was also flagged as a potential withdrawal for redevelopment, along with some odd small buildings for conversion to residential or short term accommodation. 
Against this backdrop, BIS Shrapnel is also forecasting demand to be weak in the near, with the CBD expected to suffer "a triple hit in the form of the Government’s release of surplus space, tenants leaving for the fringe, and falling mining investment".
The forecaster estimates that since 2012, cuts to the public service and it's accommodation have resulted in 120,000 square metres of surplus space in the CBD, plus a further 20 square metres in the fringe, all of which the government intends to release as lease expire.
It is forecasting another 70,000 square metres of space to be released in the CBD over the next 3 years.
Compounding the situation, it notes is the space vacated by BOQ, Ventyx, Flight Centre and Robert Bird Group, all of which are leaving the CBD for the fringe, resulting in more than 40,000 square metres of vacated space.
Also constraining demand, it added, was the downturn in mining investment.
“I don’t want to talk the market down, but it’s simple maths”, said Schilling. “Unless mining investment takes off again, which is highly unlikely to happen over the next three years, vacancy rates will blow out to over 18% in 2016.”
As such, he believes, the Brisbane office market would represent a very challenging environment for building owners, developers and investors.
"Anyone contemplating investing in Brisbane in the short term should think carefully about the potential consequences, as the market weakness is likely to persist for the rest of this decade”, Mr Schilling warned. 
Photo courtesy of <a class="owner-name truncate" href="https://www.flickr.com/photos/burningimage/" target="_blank" title="Go to Nam Nguyen's photostream" data-track="attributionNameClick" data-rapid_p="21">Nam Nguyen</a>/Flickr.
</body></html>

Oversupply and vacancy rate creating a perfect storm for Brisbane office market

<html><body>
GUEST OBSERVATION
Despite the global financial crisis now in the rearview mirror, investor risk aversion continues drive the flight to quality - prime office, retail and industrial assets in major markets.
Australia, with its yields offering a premium to markets such as New York, London and Paris, continues to be a magnet for large global pension funds and sovereign wealth funds hunting for yield. With their big cheque books they are aggressively competing with domestic investors for a limited supply of prime assets.
As a result, cap rates have been pushed lower and prices higher – the so-called “weight of money effect”. Investors are being forced to pay up for the perceived safety of these prime assets – and in some cases they are really taking on more risk as their assets are being “priced for perfection”. This has caused a disconnect between real estate capital and real estate space markets.
The underlying real estate fundamentals continue struggle post the GFC. Across our major CBD office markets, vacancy rates and tenant incentives remain elevated. The Brisbane CBD office market hit a record high vacancy rate in January and tenant demand across Australia’s office markets was the lowest on record in 2013. Retail sales have been subdued albeit it is now showing signs of picking up. Industrial demand spurred on by changes in logistics and distribution has been the one bright spot.
Part of the justification I continually hear is that the yield spread – the difference between real estate yields and real bond yields - is at historical highs. Prime Sydney CBD office yields are around 6.75% offering a spread of some 470 basis points which is 50 basis points higher than the long-term average. However, a spread this wide is unlikely to last. Bond yields are starting to tick up at the same time as cap rates are firming. Hopefully, any fallout from rising bond yields on real estate values will be offset by improving real estate fundamentals and income growth.
We aren’t at the heady days of the late 90s or 2007/2008 when Sydney CBD prime office yields hit a record low of 5.5% in both periods. So we can draw some comfort. But at the same time we should not get complacent. The “weight of money effect” if it continues could push yields well below today’s level. I don’t think they will get that low in this cycle but one can never rule it out – when the money’s flowing it’s hard to stop.
So what should investors be looking for in the coming year?
I have always taken the view that you make money in real estate by buying well. Overpaying now for an asset in a low growth, low inflation environment doesn’t give you many get out of jail free cards. Sure the underlying real estate fundamentals should improve as economic growth picks up but paying too much now for that future growth may cause some investors pain down the track. Discipline buying is critical.
Investors could look beyond prime markets and seek out quality assets in non-prime locations which are trading at a yield premium to the prime locations. Suburban office markets are definitely worth looking at.
Investors prepared to move up the risk curve could purse value-add strategies – repositioning assets, re-leasing etc to create core product for the more risk averse investors. Timing the entry and exit, and active asset management, are critical to successfully executing on this strategy.
Finally, one strategy that I believe has real merit is to expand the definition of core assets beyond office, retail and industrial to real estate related social infrastructure such as child care, student accommodation, seniors housing and medical/health to name a few. The yields are typically higher, the leases longer, the demographics are on your side and they often have government backed cashflows. And the competition for assets is less intense. Well at least for now!
Greg Paramor is managing director of <a href="https://www.folkestone.com.au/" target="_blank">Folkestone</a>.
</body></html>

What should investors be looking for in the coming year?

<html><body>
Just three days after the close of an expression of interest campaign, a Malaysian investor has swooped in on a whole top floor stratum titled office in Melbourne's South Yarra.
At $4.28 million, the sale is seen as one of the most significant Melbourne strata office transactions in recent years, equating a rate of $7,781 per square metre.
More than 60 enquiries were received through a marketing campaign steered by CBRE's Ed Wright, Tom Tuxworth and Mark Wizel.
The property has a total building area of 645 square metres, of which 366 square metres is available for immediate occupation. The balance - 279 square metres- is leased to the Bridge Consulting Group, generating a net income of $156,000 per annum.
The property at 9 Yarra st, South Yarra was sold with "value-add potential" with plans and permits to add an additional 16th level incorporating 591 square metres of building area.
</body></html>

Malaysian investor buys South Yarra strata office for $4.28 million

<html><body>
In one of the strongest signs that corporate Australia is in recovery mode, the sub-lease vacancy rate across the CBD office markets contracted in the first quarter of this year.
Sub-lease availability, seen as a bellwether for business confidence in corporate Australia, recorded a reduction of 11,500 square metres across CBD office markets in the first quarter. The only city not to record a reduction was Melbourne.
The results were contained in JLL's Q1 statistics on the national office market report, which said the reduction was the "first sign that corporate Australia is moving from a consolidation to growth mode". 
But the positive numbers were muted by the national CBD office market vacancy rate, which held steady at 11.7% over the same period. 
JLL’s head of office leasing in NSW &amp; Australia, Tim O’Connor, noted that the "reduction in sub-lease availability we recorded over Q1 is the first phase of a metamorphosis from a weak leasing market to a market that is in the early stages of recovery". 
For a company to remove sub-lease space from the market, he said,  implied that it was likely to make headcount increases over the next two to three years. 
The Sydney CBD experienced the most notable reduction in sub-lease availability - falling by 10,500 square metres in Q1 to 1.27% of total stock. 
"Sub-lease availability is now at the lowest level since Q4 2012 in the Sydney CBD", said the report.
As a result, the Sydney CBD recorded its first positive quarterly net absorption result -1,500 square metres - since Q2 2012. Partly driving that uptake was the higher activity in technology sector. 
Mr O'Connor said that in Sydney, Symantec had leased additional space at 207 Kent Street, while a number of other technology firms had active requirements.
Despite Melbourne experiencing no reduction in sub-lease availability, the vacancy rate in the CBD fell to 10.4%, which a according to JLL is now the tightest of the monitored CBD office markets.
The tenant demand environment remained challenging in the resource-dependent markets of Brisbane and Perth. Both markets recorded a further quarter of negative net absorption in the first quarter. 
The Perth CBD recorded a seventh successive quarter of negative net absorption of -18,600 square metres. The contraction in net absorption over that period, it noted, had totalled -150,000 square metres. As a result, the vacancy rate in the Perth CBD moved out by 1.0 percentage point to 11.8%.
The reduction in Brisbane was a negative-1,600 square metres and the CBD vacancy  remained at a record high of 15.5%. 
JLL’s head of capital markets research, Andrew Ballantyne highlighted that the demand slowdown in the near-city markets of Brisbane Fringe and West Perth, which had a higher concentration of resource sector tenants than the CBD, had been more pronounced. "The West Perth vacancy rate has pushed out to 13.6%, while the Brisbane Fringe is sitting at 14.3%”, he said. 
Adelaide recorded zero net absorption over the quarter and vacancy remained at 13.9%, while Canberra recorded positive net absorption of 8,600 square metres.
O’Connor said: “The Reserve Bank of Australia recently noted that there are encouraging signs that the handover from mining-led demand growth to broader private demand is beginning".
"We expect the Sydney and Melbourne office markets to be the main beneficiaries of this transition over 2015 and 2016.” 
Supply additions across CBD office markets in 2014 were expected to be at the lowest level since 2002, he added.
</body></html>

Sub-lease vacancy rate falls in strong sign of corporate recovery

<html><body>
Expectations that Melbourne's CBD office market is in recovery mode have been declared premature by as much as 18 months.
The cautious assessment was revealed in BIS Shrapnel’s latest Melbourne Commercial Property Prospects 2014 to 2024 report which disputes claims that the mid-year fall in the city's CBD office vacancy rate from 9.8% to 8.7% as at December 2013 was a sign of a turnaround.
Instead, BIS Shrapnel senior project manager and report author, Maria Lee, attributed the reduction in vacancy rate in December 2013 to an unusually high level of withdrawals from stock.
"Had it not been for those withdrawals, the vacancy rate would have increased because net absorption was very weak", said Lee.
BIS Shrapnel doesn't expect such high levels of withdrawals to continue.
"The market will have trouble absorbing the quantum of floor space due for completion this year and next", she said.
"That said, due to the lumpy nature of completions it’s quite possible that the vacancy rate will fall temporarily in June 2014, but essentially we are bumping around the bottom in terms of the leasing market, vacancies and rents.”
BIS Shrapnel expects net absorption to remain fairly moderate in the near term, albeit it should pick up from the 10 year low recorded in calendar 2013.
Driving that view is the sustained soft patch in the Victorian economy. Specifically, Lee points to residential building activity falling, non-residential building being subdued and cuts in government investment a drag on growth.
She added that the high Australian dollar over the past few years had hit Victoria’s key trade-exposed industries, namely agriculture, manufacturing, finance and business services, international student education, and tourism.
Those factors "will not turn around immediately", said Lee.
BIS Shrapnel’s report sets out several reasons why the weakness in the Victorian economy is likely to continue for at least the next year before stronger fundamentals begin to reassert themselves:
<ul>
<li>Total building activity is likely to be soft for some time, dragged down by the residential sector despite the inner city apartment boom underway. </li>
<li>New public investment is expected to continue to trend downwards over the near-term as the state government attempts to consolidate the budget. </li>
<li>Engineering construction work done has further to fall due to the lack of major projects (apart from East West Link). </li>
<li>The Australian dollar is not yet weak enough to significantly boost the competitiveness of the state’s trade exposed sectors. Meanwhile, the closures of Ford, Holden and Toyota are a particular blow.</li>
</ul>
BIS Shrapnel anticipates that Victoria’s pace of economic growth will underperform against the national average for a "few more years".
For landlords and tenants, the report said, that meant that leasing incentives were likely to remain high for some time yet, continuing to affect owners but affording tenants a great opportunity to lock in low rents and/or upgrade to better quality accommodation.
Despite those headwinds, Lee made a point of saying that the economy was fundamentally strong and that the key drivers that underpinned the strength of the Victorian economy last decade were still in place.
"Consequently, the report forecasts a strong rebound in Melbourne’s office market in the second half of this decade," she said.  
</body></html>

Forecasts of a Melbourne office recovery premature: BIS Shrapnel

<html><body>
GUEST OBSERVATION
Behind the buildings that are our business in the commercial and industrial property sector, is the real value: our people.
No matter how much hard work goes into planning, design and construction, a building remains a liability without people; that is, the tenants.
I think our sector can lose sight of the reality that it’s the people who use a building that release the entrapped value in the building.
And while they may be our “tenants” or our “customers”, the reality is that they’re people first, and we all know people value relationships that go beyond the transaction.
We believe the old business saying that the ‘customer you have is the one you want to hold onto’ is a cornerstone for success.
It’s more difficult and costly to get new customers than to retain existing ones.
Our strategy is to retain existing customers – our “tenants”.
We systematically travel the country to meet tenants face-to-face, respecting both their time and their businesses.
<blockquote>
The core of our business is maintaining relationships and keeping tenants happy - and keeping them in our buildings.
</blockquote>
We ensure our tenants can focus on running their businesses rather than stepping outside their expertise. We deal with the complex property processes for them, because that’s our area of expertise.
And no matter where they are on the leasing cycle – 10 years out or just months to expire – we value and deliver the same standard of service.
Putting relationships first builds trust and that means we can move quickly, act decisively and confidently. Our confidence gives others confidence and in turn drives their success.
To explain, less than 12 months ago Quintessential Equity acquired a five level commercial building with a net lettable area of 7,129 square metres at 166 Epping Road, Lane Cove West in Sydney.
The building was 20% unoccupied and had been for some time. Our immediate priority was to attract new tenants, but to do this we had to make significant enhancements. 
Within the first month our engineers had assessed the building’s condition and discussed enhancements with existing tenants, based on their needs.
A year after settling on the property in April 2013, occupancy is now 97.75%.
If you don’t have tenants, your building can quickly become a liability and your asset can enter financial distress. 
The core of our business is maintaining relationships and keeping tenants happy - and keeping them in our buildings.
This is a very simple philosophy, but it pays dividends to us.
And it will be how we continue to run our business regardless of the ups and downs, because it is what we believe.
Shane Quinn is director of <a href="https://www.quintessential.com.au/" target="_blank">Quintessential Equity</a>.
</body></html>

Office

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

Office

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News