A landmark former orphanage site in Surrey Hills could be transformed into a new residential community under plans lodged by <a href="https://www.apartments.com.au/developers/antipodean-land-developments">Antipodean Land Developments</a> that would deliver 76 apartments and townhouses while restoring some of the suburb's most significant heritage buildings.

The burgeoninng Melbourne-based developer has submitted plans for the 9,158 sqm site at 1 Kent Road and 24 Durham Road, home to the former St Joseph's Home for Destitute Children, a historic institutional complex dating back to the late 19th century. The proposal seeks to adaptively reuse several heritage buildings while introducing two new four-storey residential buildings set within extensive landscaped grounds.

Designed by <a href="https://www.apartments.com.au/architects/woods-bagot">Woods Bagot</a> and Kerstin Thompson Architects, the project has been conceived as a contemporary residential village embedded within a restored heritage precinct. The development team describes the design approach as "The Village in the Garden," with new buildings positioned among mature landscaping by OCULUS and significant heritage structures.

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="44ec8c1b-c0b6-44ae-859e-5811b3e6a023" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%281%29.png?VersionId=p.p1_KFh4iQoV4nisdnPfQBAsWNi7m79" />

The proposal would deliver 76 dwellings comprising a mix of apartments and duplex-style residences, significantly increasing housing supply on one of the largest privately held residential landholdings in Surrey Hills. The development includes 127 car spaces, 24 bicycle spaces and more than 1,000 sqm of communal amenity, with the existing chapel building earmarked for conversion into resident facilities.

According to the planning submission, the project centres on the restoration and adaptive reuse of the site's most significant heritage assets, including the original c.1889 St Joseph's building, the chapel designed by architect Augustus Andrew Fritsch, and the historic brick perimeter walls and entry gates. The proposal also incorporates the retention of other contributory buildings including the former infirmary and school building.

Tract Consultants, in the planning report accompanying the application, said the scheme had been shaped through extensive heritage analysis and design development.

"The shared vision for the Site by the project team has culminated in a scheme which successfully breathes life back into a historic site while delivering upon the objectives of Victoria's Housing Statement in a carefully curated and contextually responsive manner."

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="7263b7d8-95ea-400f-9531-6ca7d22c3c33" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design%20%282%29.png?VersionId=4cR1tiWOsDpgxEOwZi5vVFcyvvOsYkIE" />

The proposal is being assessed under Victoria's Significant Residential Development with Affordable Housing pathway. As part of the application, three per cent of the project's residential development cost would be contributed to the Social Housing Growth Fund. The development would also provide a diverse mix of one, two and three-bedroom residences targeting a broader range of buyers than typically found in Surrey Hills' detached housing market.

Sustainability initiatives include an anticipated 66 per cent BESS score, natural cross-ventilation to 80 per cent of apartments, 28 per cent deep soil landscaping and a canopy cover outcome exceeding local planning requirements. The proposal also sets aside more than 1,083 sqm for communal indoor and outdoor resident amenity spaces.

<img alt="First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills" data-entity-type="file" data-entity-uuid="33fad46f-fe26-4d0a-acfd-6b776e1c6a3d" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Untitled%20design.png?VersionId=D9F6WVSyYCtGvSUmith35LRp6R7PQkw_" />

Planning documents describe the property as one of the largest underutilised residential sites in Surrey Hills, arguing it presents a rare opportunity to introduce "missing middle" housing in an established inner-eastern suburb while preserving and revitalising a significant heritage precinct.

Antipodean Land Developments has built a reputation for design-focused residential projects across Melbourne, particularly in the medium-density sector. Previous developments include Neighbourhood in Brunswick East, delivered with Breathe Architecture, and Balfe Park Lane, designed by Kerstin Thompson Architects.

They've been very active in site acquisition as they build out their future development pipeline. They recently launched Thornubury House, 45 apartments above a mix of commercial, retail, and food and beverage tenancies, and have plans for a boutique project in Fitzroy and another <a href="https://www.apartments.com.au/news/vic/antipodean-plan-apartments-for-deepdenes-missing-middle-on-whitehorse-road">"missing middle" project</a> on Deepdene's Whitehorse Road.

Joel Robinson

First look: Antipodean Land Developments plans heritage-led apartment community in Surrey Hills

Developer <a href="https://www.apartments.com.au/developers/auyin-property-development">Auyin</a> is the latest to turn to the Victorian Government's Development Facilitation Program in an effort to secure approval for its long-planned, mixed-use project in Elsternwick.

In 2018, Auyin lodged plans with Glen Eira City Council for a 14-storey building, however Council approved a reduced eight-storey scheme. A subsequent VCAT appeal in 2019 upheld the eight-storey height limit.

The project was later amended to nine storeys, but Auyin is now seeking to revive something closer to its original vision. The developer argues that the planning context has evolved significantly over the past decade, particularly within the Elsternwick Activity Centre, where higher-density development has increasingly been encouraged along Glen Huntly Road.

The proposal would transform the 1,239 sqm site at <a href="https://www.apartments.com.au/new-apartments/7-12-horne-street-elsternwick-vic-3185">7-15 Horne Street</a>, opposite Elsternwick Railway Station, into a 13-storey residential and retail development designed by CBG Architects, with 40 apartments

The site currently comprises three commercial properties.

<img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="5f465dd4-509b-4082-a669-0253b313914b" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20podium.png?VersionId=72frWi0SmQ5AVJ3ARRhX5ILUYObhTm7x" />

The proposed apartment mix comprises 25 two-bedroom and 15 three-bedroom residences above 200 sqm of retail space at ground level. Residents would have access to a 90 sqm wellness facility, a 351 sqm communal indoor and outdoor terrace on the third level, and extensive landscaped areas throughout the development. A publicly accessible 135 sqm plaza would be created on the north-east corner of the site, providing seating, landscaping, and a new gathering space adjoining Horne Street.

The design adopts a four-storey podium that references the finer-grain character of the surrounding streetscape, with the upper tower recessed behind generous setbacks on all boundaries.

<img alt="First look: 13-storey mixed-use tower planned for Elsternwick activity centre" data-entity-type="file" data-entity-uuid="e637e763-2abc-4c34-a0aa-5c7ad36fae18" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/elsternwick%20open.png?VersionId=J1AoOpZgTyaF.KeeFSX6lMjEScX8KKRi" />

A key element of the proposal is the reconfiguration and widening of the surrounding laneways. Vehicle access would be retained from Lois Lane, with upgraded pedestrian connections linking Ross Street and Horne Street. The development would provide 58 residential car spaces, two retail car spaces, and 52 bicycle spaces across two basement levels and ground-floor facilities.

Architecturally, the building draws inspiration from the established character of Elsternwick Village. The façade combines dark charcoal brickwork, textured concrete, bronze-toned metal detailing, and extensive planting integrated into podium and tower levels. The design also incorporates a chamfered corner treatment and publicly accessible plaza intended to strengthen pedestrian activity around the station precinct.

Elsternwick's last new development completion was&nbsp;EVA Elsternwick by Pitard late last year. <a href="https://www.apartments.com.au/developers/milieu-property">Milieu</a> is working away on its nature-led neighbourhood, <a href="https://www.apartments.com.au/new-apartments/elsternwick-gardens-by-milieu-8-gordon-street-elsternwick-vic-3185">Elsternwick Gardens</a>, on Gordon Street, with its first stage expected to complete next year.

First look: Auyin seeks mixed-use apartment project in growing Elsternwick Activity Centre

<a href="https://www.apartments.com.au/new-apartments/otium-parkdale-123-125-como-parade-east-parkdale-vic-3195">Otium Parkdale</a>, the 13-residence boutique development by&nbsp;<a href="https://www.apartments.com.au/developers/huxtable-property">Huxtable Property</a>, has entered its final stages of delivery, with completion expected within the coming month and more than half of the residences sold.

The Como Parade East project is nearing the finish line at a time when opportunities to purchase new apartments in <a href="https://www.apartments.com.au/developments/parkdale-vic-3195">Parkdale</a> remain exceptionally limited. Fewer than 10 per cent of dwellings in the bayside suburb are apartments, making developments like Otium a relatively rare addition to a market traditionally dominated by detached housing.

[smartcode_project:default project_id=134974 project_image_fid=5427]

The three-level development comprises 13 residences, including ten two-bedroom apartments and three larger three-bedroom homes, all positioned above a secure basement car park.

Designed by <a href="https://www.apartments.com.au/architects/almeida-architects">Almeida Architects</a> with a strong connection to its coastal surroundings, Otium combines red brick, exposed concrete and dark metal detailing with integrated landscaping and greenery. Expansive glazing, generous balconies and terraces have been incorporated throughout the design to maximise natural light and reinforce indoor-outdoor living.

Inside, the residences feature engineered European oak flooring, natural and reconstituted stone benchtops, Bosch kitchen appliances, ducted heating and cooling, lift access and secure entry systems. The larger three-bedroom residences on the upper level have been designed with house-like proportions, while the two-bedroom apartments prioritise functionality, flexibility and low-maintenance living.

[smartcode_project:default project_id=134974 project_image_fid=5421]

The project is now in its final stages, with <a href="https://www.apartments.com.au/builders/labco">Labco</a> completing the remaining landscaping and external finishing works following the completion of the residences' interiors.

Otium's location within the heart of Parkdale continues to underpin its appeal. Residents will be just steps from local cafés, restaurants, shops and the newly elevated Parkdale Station, while the beach is less than a kilometre away.

With the project tracking ahead of schedule, buyers can currently secure a residence with a five per cent deposit and benefit from settlement terms of up to eight months. The advanced stage of construction also provides buyers with the opportunity to walk through the near-complete residences and experience the quality and finishes firsthand ahead of completion.

[smartcode_project_cta:default project_id=134974]

Otium Parkdale enters final month before completion as rare apartment opportunity nears sellout

A new boutique apartment development is entering the market in <a href="https://www.apartments.com.au/developments/chermside-qld-4032">Chermside</a>, with Brisbane-based developer <a href="https://www.apartments.com.au/developers/ausdev">Ausdev</a> bringing 33 residences to a well-connected pocket of Brisbane's north.

<a href="https://www.apartments.com.au/new-apartments/parkdrive-apartments-chermside-25-sammells-drive-chermside-qld-4032">Parkdrive Apartments</a>, at 25 Sammells Drive, will comprise a mix of one- and two-bedroom residences positioned within walking distance of Westfield Chermside, The Prince Charles Hospital, and Bradbury Park.

Established in 1989, Ausdev has a long-standing presence across both development and construction, with Parkdrive Apartments representing its latest residential project in Brisbane's northern suburbs.

[smartcode_project:default project_id=152125 project_image_fid=363778]

The development has been designed around open-plan living and natural light, with residences featuring stone benchtops, timber cabinetry, BOSCH appliances, and private balconies that extend the living areas outdoors.

Kitchens are positioned as the centrepiece of the homes, incorporating natural material palettes and integrated appliances, while bathrooms have been designed with a focus on functionality and understated finishes.

Residents will have access to a communal barbecue and entertaining area on Level 3, providing shared outdoor space within the development. Secure parking and lift access are also incorporated into the building.

The project will deliver a limited collection of 33 apartments, with one-bedroom residences priced from $749,000.

[smartcode_project:default project_id=152125 project_image_fid=363782]

Beyond the building itself, the location places residents within easy reach of several of Chermside's key amenities. Bradbury Park is around 350 metres away, while Westfield Chermside is approximately 1.3 kilometres from the site. The Prince Charles Hospital is located within 750 metres, and the Chermside Bus Interchange is around 1.5 kilometres away, providing connections across Brisbane.

Parkdrive Apartments adds to the growing residential pipeline in Chermside, a suburb that continues to evolve as a major retail, healthcare, and transport hub for Brisbane's north.

[smartcode_project_cta:default project_id=152125]

Ausdev introduces boutique Parkdrive Apartments to Chermside's growing centre

<a href="https://www.apartments.com.au/developers/skymark-group">Skymark</a>'s boutique Cronulla development Solis has secured a 10-year Latent Defects Insurance policy through Resilience Insurance, providing buyers of the 16-residence building on Ewos Parade with structural and waterproofing protection that extends a decade beyond the building's completion.

Currently under construction and due for completion in late 2027, <a href="https://www.apartments.com.au/new-apartments/solis-cronulla-8-ewos-parade-cronulla-nsw-2230">Solis</a> is one of a small number of new developments in the Sutherland Shire to carry Resilience LDI coverage, a distinction that carries increasing weight as buyer confidence in the off-the-plan sector continues to be shaped by how developers stand behind their product.

Latent Defects Insurance, which entered the Australian market in 2022 when Resilience Insurance was approved to offer the cover, protects buyers against major structural or waterproofing defects for ten years post-completion. Unlike traditional statutory warranties, it operates as a first-resort policy, if a covered defect arises, the insurer responds directly, without the buyer needing to pursue the builder or developer through a lengthy claims process.

Resilience Insurance CEO Corey Nugent has noted that the product addresses something fundamental to the new apartment market.

"The overarching feedback from prospective buyers in the new development space is that they want more confidence and assurances around the quality of the build," Nugent says.

"Resilience Insurance Latent Defects Insurance not only gives them complete peace of mind for 10 years, but it shows the developer they are buying from is standing by their product."

[smartcode_project:default project_id=150499 project_image_fid=370898]

For Solis, the Resilience LDI policy adds a meaningful layer of accountability to an already considered project. The development comprises nine two-bedroom and seven three-bedroom residences, including one dual-level three-bedroom apartment, across a five-storey building on Ewos Parade, positioned between Shelly Beach and South Cronulla.

Garden apartments connect directly to private landscaped courtyards, while upper-level homes capture beach views to the east from level four and above.&nbsp;

All 16 residences include at least one balcony or courtyard, and select apartments on the upper floors feature bar areas and secondary flexible living spaces.

Hiba Sander, Managing Director of Skymark, says Solis offers a rare balance, nestled between the quiet beauty of secluded beaches and the lively charm of South Cronulla's esplanade.

"It's a place to choose your pace and live gracefully, seaside'," Sander says.

[smartcode_project:default project_id=150499 project_image_fid=370900]

The architecture, designed by <a href="https://www.apartments.com.au/architects/ida-design-group">IDA Design Group</a>'s Michael Trinh, draws from the natural erosion patterns of <a href="https://www.apartments.com.au/developments/cronulla-nsw-2230">Cronulla</a>'s sandstone headlands, translating the organic forms of the coastline into soft curves, pavilion-style massing, and a material palette chosen for longevity in a salt-tinged environment.&nbsp;

Textured natural stone, soft renders, and timber-look battens reference the tones of the surrounding cliffs, while the building has been oriented to maximise natural light and passive ventilation, with primary living spaces facing north and east to capture morning sun and sea breezes.

"At Solis, our aim was to create architecture that feels quietly confident, grounded in natural materials like stone and timber, and elevated by light and landscape," Trinh says.&nbsp;

"The buildings are designed to sit gently within their coastal surrounds, with expansive glazing and abundant greenery creating a seamless dialogue between inside and out."

[smartcode_project:default project_id=150499 project_image_fid=370897]

Interiors by <a href="https://www.apartments.com.au/architects/hot-black">Hot Black</a> carry the same material language through to every room. Kitchens feature integrated Gaggenau appliances, sculpted stone benchtops, and Lo &amp; Co joinery, while bathrooms feature natural stone, timber, and brushed metal finishes.&nbsp;

Hot Black Founder and Design Director Sophie Safrin describes the intent as one of considered restraint: "At Solis, every detail has been thoughtfully considered to create a timeless coastal retreat, calm, refined, and effortlessly liveable. From natural finishes to seamless indoor-outdoor flow, Solis offers a quiet elegance that's deeply connected to its surroundings.

The landscape, designed by Julian Brady of <a href="https://www.apartments.com.au/landscape-architect/sitedesignstudios">Site Design Studios</a>, treats green space as an integral part of the resident experience rather than an afterthought.&nbsp;

"Gentle curves and layered native plantings mirror the ebb and flow of the ocean," Julian Brady says, "creating a serene connection between architecture and place."&nbsp;

Coco Republic has provided bespoke furniture packages tailored to the project's coastal palette.

[smartcode_project:default project_id=150499 project_image_fid=370899]

Skymark has an established track record in the Sutherland Shire, with a portfolio spanning Cronulla, Woolooware and Burraneer that includes Isla, Sylva, Bask, Shells, Sula and Mist. Securing LDI on Solis reflects a broader shift in how the developer is positioning its buildings to buyers, at a time when Resilience Insurance expects the policy to become mandatory in New South Wales by 2028.

Sales at Solis are launching soon through Ray White Projects, with an official event scheduled for 11 June. Enquire for more information.

[smartcode_project_cta:default project_id=150499]

Skymark takes out 10-year Resilience Insurance LDI at Solis Cronulla

Commercial Market

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GUEST OBSERVER
Mixed-use developments are back in favour and a growing trend, with many developers opting to incorporate several property uses into new projects.
Many factors are driving this trend including uncertainty in the residential market, growth in the hotel sector, the continuing scarcity of prime sites and the creation of activated lifestyle precincts.
Today’s mixed-use development model is emerging as a modern fusion of commercial, retail, residential and even hotel uses to maximise planning criteria. 
Rather than relying on one “star performer” property type, such as residential over the last five years, risk is now being reduced with developments incorporating several uses. 
In addition to risk being minimised by using the mixed-use development model, another core benefit for developers is that mixed-use projects are a highly efficient way to unlock the best value out of land and potentially increase return on investment. 
I liken it to a return to the good old-fashioned mixed business retail model we all grew up with. A bit of this and a bit of that for sale, and not all the eggs in “one basket” so to speak. 
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Rather than asset classes having to independently compete against each other in silos to generate the highest return, a mixed-use project enables different property types to work together and collaboratively deliver maximum value. 
Interestingly, hotels are now being proposed on the lower levels of new high rise residential towers where solar and ventilation criteria can't be met for residential uses. It’s an organic move, a bit like complimentary planting to create a sustainable garden, but rather complimentary planning where property uses complement each other to safeguard their individual on-going survival. 
In this case the hotel can be constructed on the lower levels not suited for residential development and create an opportunity for on-going cashflow or immediate sale, yet the upper levels with views can be developed as apartments and derive higher profit margins. 
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The on-going trend toward the creation of lifestyle precincts is also another factor influencing the surge in mixed-use developments. This is particularly evident in CBD and fringe environments with the focus in activating beyond the traditional “9 to 5” hours of an office building. 
Mixed-use developments have the added benefit of creating active and connected communities where people can work, rest, sleep and play. This supports the property sector’s fascination with sustainability and also ensures further opportunities for developers to maximise returns on investment are not missed. 
The benefits of mixed-use developments are far-reaching and transpire beyond developer profits to improve communities and ensure efficient use of our space. We certainly have not seen the end of mixed-use projects and will see more interesting combinations of property uses in new developments over the next few years as developers become more experimental in their planning. 
Drenka Andjelic is managing director of Construction Assignments and can be contacted <a href="https://www.constructionassignments.com" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

The secret is in the mix: Mixed-use developments cut risk, deliver value 

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The worrying health of the global economy, workforce strategies and rising cost and speed of business are having a big impact on real estate decision-making for major corporations, finds a new survey by CBRE Group, Inc of global corporate real estate executives.
“The volatility of today’s global economy is challenging executives to align naturally long-term real estate initiatives with increasingly short-term corporate agendas,” said Karen Ellzey, executive managing director of consulting for CBRE Global Workplace Solutions.
“Today’s real estate strategies have to focus on delivering ‘growth without growth’ — expanding a corporation’s capabilities without spikes in capital investment or operational expense.”
More than 400 corporate real estate executives from around the world participated in the CBRE survey. Nearly half (49 percent) cited economic uncertainty as their greatest challenge, while 43 percent noted cost escalation as their greatest challenge.
Forty-eight percent projected a stable real estate footprint for this year. Seventy-nine percent stated that they are actively using space-efficiency initiatives—“saving in place”— to manage costs, combining ground-up workplace strategies with top-down cost management initiatives.
“Controlling costs and supporting employee needs are the leading goals of workplace strategies globally,” said Julie Whelan, head of Americas occupier research for CBRE.
“There has been a natural shift to create workplaces that are efficient, functional and modern, allowing corporate real estate executives to balance employee desires with cost management disciplines.”
Workplace strategies are also driven by talent-centric initiatives. Fifty-five percent of survey respondents cited better collaboration as the main driver in designing and implementing workplace strategies, while 49 percent cited employee attraction and retention as a key aim.
Work-life balance is also top of mind, with executives reporting workplace flexibility, high indoor environmental quality and easy access to public transportation as features important to employees.
Global corporate executives favoured emerging markets as destinations for growth, with Southeast Asia and India as top locations for expansion. Fifty-six percent of respondents indicate interest in expanding their corporate portfolios in the coming three years in Southeast Asian markets where economic opportunities are emerging.
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Global economy, workforce and rising costs of business driving corporate real estate decisions: CBRE study 

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The Como Centre in South Yarra has attracted the attention of the boutique funds manager Newmark Capital, which is led by Chris Langford, the former star of AFL club Hawthorn.
The Australian newspaper reports Newmark is looking at the purchase of the Como Centre, listed by Mirvac for close to $230 million.
The group secured the nearby Jam Factory for about $165 million last year from financial services company Challenger.
The Como is a two-hectare site with street frontage to Chapel Street, Toorak Road and River Street.
The property generates more than $14 million of net income from more than 25,000 sqm of office space and 6600 sqm of retail space.
There is a 113-room hotel operated by Accor on a lease expiring in June 2021, with a five-year option.
The centre has a car park for 614 vehicles.
Newmark Capital was founded in 2011.
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Newmark consider adding Como Centre after Jam Factory acquisition

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The veteran Brisbane developer Kevin Seymour will mothball his $200 million Fortitude Valley apartment project until the next property cycle.
Demand in the city is no longer deep enough to warrant the development, Seymour told The Australian.
The Seymour Group would not proceed with the Arena nightclub redevelopment, but will hold the 312-apartment project until the market rebounded.
“I don’t think the demand is there without taking abnormal risk,” Mr Seymour said. “The heat has come out of the market.”
The market was in a “slight downturn” with Mr Seymour saying his approach was to develop in a rising market.
“It’s a fantastic site and we will leave it to the next cycle when we can get a premium for the apartments that we cannot get in the present cycle,” he said.
Brisbane has seen a wave of apartment projects with Seymour Group continuing with its prestige 30-apartment project at inner-city New Farm.
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Kevin Seymour mothballs his Fortitude Valley, Brisbane residential project until next boom

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Confidence in the CBD hotels sector outweighs office and retail for the year ahead by sector, according the NAB Quarterly Australian Commercial Property Survey Q1 2016, which noted the Commercial Property Index fell to +12 points but is above the long term average.
According to the report all markets are tracking above long-term average levels, except CBD Hotels, which it continues to out-perform the broader market. 
NAB chief economist Alan Oster said Property professionals in the CBD hotels sector are also the most confident in the next year, followed by office and retail.
"However, confidence levels are broadly similar across all market sector participants in 2 years’ time," he said.
"By state, sentiment improved in NSW and it continues to lead the country by some margin, led by a strong contribution from the Office sector. Sentiment also improved a little in WA, but remains deeply negative and by far the worst performing state, dragged down by chronically under-performing Office and Industrial property markets. Sentiment was lower in all other states. 
“Property professionals in NSW are the most optimistic in the next 2 years, but those in Victoria are expecting the biggest improvement. WA remains the most pessimistic state, but only just ahead of SA/NT." 
On average, capital values are expected to increase most for CBD hotels in the next 1-2 years (1.4 percent &amp; 3.4 percent). 
"Office rents are expected to grow 1.1 percent and 1.5 percent in the next 1-2 years, led by  NSW and to a lesser extent Victoria. Significantly, for developers intending to start new projects, a survey low 38 percent indicated they were targeting residential developments, down from 54percent in Q4, presumably reflecting the over build in apartment markets,” he said. 
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po-LsXgBTHBmX

CBD hotel confidence leads office, retail: NAB

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GUEST OBSERVER
Commercial property sales hit a near record of approximately $28.4 billion in 2015 with 40 percent coming from offshore investors.
Sydney and Melbourne are among the top 10 destinations for international capital and with [gross or face] yields 3 percent higher than other gateway cities. These trends are so far continuing in 2016.
Given the long term nature of property it is important to look beyond the short term, so at Cromwell, we are focused on understanding how the market will look in five years and what trends will emerge across each of the sectors.
Our analysis shows that office markets are the most popular with international investors but other sectors such as hotels, retail, student accommodation and aged care are also increasingly sought after.
In all market sectors however, prices have generally run ahead of leasing fundamentals. The continued weakness of the economy means relatively subdued tenant demand for property in the short term albeit this demand should gradually improve as the economy begins to benefit from the pick-up in non-mining investment in a few years’ time.
Stronger growth in demand will then, to the extent that it leads to a tightening in leasing markets, underpin rises in rents and a further firming of prices. The timing and extent to which this happens will vary by market and geography.
A 5 year view sector by sector
Retail
Retail will show solid rather than spectacular income growth with differences between outcomes dependent on population, catchment growth and competition within each catchment.
Retailers still face significant challenges from internet shopping, a lower AUD and from aggressive competition. Even so, consumers have maintained expenditure growth and we believe that we are now largely through the weak period when increased vacancies in retail centres led to increased incentives and weak rental growth. 
Those vacancies are now drying up as demand for retail space improves.
Industrial
The industrial sector is basking in the glow of investor appetite after a long stint in the wilderness. Industrial demand is strengthening across the eastern seaboard capitals, underpinned by supply chain outsourcing and e-commerce.
Sydney is leading the pack, with the strongest demand in 15 years. The current growth drivers will remain in place, boosted as non-mining investment recovers but the rents will stay flat even though demand will be improving.
The market is still diminished by an ample supply of sites for development. There is plenty of zoned but not yet serviced land and aggressive development competition will keep a lid on growth in rents and prices.
The main issue is the impact of low interest rates on yields and hence rents. The firming of yields has improved development feasibilities, allowing developers to offer incentives which have spread to the re-leasing of existing properties. As a result, effective rents have fallen. Should interest rates rise, the development proposition would tighten and put upward pressure on effective rents. However that is still a way off.
Hotels
Hotels in capital cities catering to the business market were in extremely tight supply following the collapse in building post-GFC, particularly in cities servicing mining. That has now led to a building boom which when completed over the next few years would, if business was the only demand driver, oversupply those markets, city by city. However that will be offset in some cities by strong growth in tourism, both overseas and domestic. 
Hotels in tourist regions, where there has been very little building, will do extremely well as increased demand leads to tightening occupancy and rising room rates. We expect a boom in refurbishment and building of new hotels in tourist areas over the next 10 years. That will broaden to growth in the associated regional economies. 
Residential 
We are nearing the peak of the residential boom, but with marked differences between cities. Building is at record levels. Investor demand has driven the market, to some extent boosted by Chinese demand for bolthole properties, with owner occupiers relatively slow to follow.
Accordingly, the market has been driven by apartments with strong building in the inner-city.  Prices have risen strongly leading to concerns about affordability. This has turned into a classic cycle. The outcome will ultimately be driven by demand and supply in each market.
Office markets
Office markets fundamentals have come through an extremely difficult period dominated by weak tenant demand across the board as employment growth, and in particular business services employment (the primary driver of office demand), evaporated. 
Australia-wide, demand is now slowly recovering from that period of negative net absorption, albeit still affected in some cities by falling mining investment. There are marked differences between cities.
Regardless of these fundamentals, the Australian office market is experiencing cyclical high demand from investors, with record-low yields being accepted for CBD office assets. This is the preferred property sector for foreign capital, and will likely continue as the yield of Australian commercial assets aligns more closely with the global norm.
Summary
Overall, we believe the Australian economy will stay soft for the next two to three years as it works through the end of the mining investment boom. There will be a slow transition to more balanced growth, driven by industries benefiting from a lower AUD.
With Australian governments focusing on deficits and cost constraint, government investment is still falling overall. NSW is leading the way on using the cyclically strong investor demand to crystallise cash from asset sales to unlock future infrastructure investment. The next round of infrastructure investment will, however, take time to have an impact.
Inflation remains below target and until growth strengthens the RBA has a bias for rate cuts. The US, on the other hand, has begun raising rates and the reduced gap between the two monetary policies will likely see the AUD fall further.
There will be no recession in Australia but there will be a transitionary period. We expect it will be two to three years before non-mining business investment builds sufficient momentum and growth strengthens.
In the mean time, property fundamentals are not supporting the prices being paid for assets, and from our experience, a balancing of these two variables is inevitable.
Damian Horton is head of property, Cromwell Property Group and can be contacted <a href="https://www.cromwell.com.au" target="_blank">here</a>.
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The outlook for Australia’s property market: Damian Horton

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Melbourne’s construction boom is getting another boost with another $42 billion of projects set to commence within just two kilometres of Melbourne’s CBD, fuelling a second wave of local and international investment with investors from Europe, China, Singapore, Malaysia, the UK and the US attracted by the city's population growth and development pipeline, according to Savills.
The construction boom, which has produced a record 160 cranes on the skyline - mostly on new apartment towers to accommodate population growth and overseas students – will now see a whole new round of residential tower construction, new hotel construction on the back of a rise in tourist numbers, and at least $20 billion of major infrastructure projects including Melbourne Metro railway and Flinders Street station, hospital, road and sporting upgrades.
"The stimulus provided by all of this development and new infrastructure is driving a whole new level of investment in Melbourne in all sectors of the commercial property market including office and retail assets, subdivision land, car parks, shopping centres, hotels and development sites, and investor confidence in Melbourne is soaring as a result," said Savills’ state sales director Clinton Baxter. 
"Obviously, we’re experiencing a massive rush of capital into our market from interstate, China, Malaysia and Singapore, but the attraction of Melbourne has now spread globally with assets being sold to international interests from Canada, the Netherlands, UK, USA, India and New Zealand. We’ve also had investors out from Botswana, Indonesia, Germany, Russia, Vietnam, Korea and Japan scouring the Melbourne market for opportunities.
Savills’ analyst Mark Stafford said the apartment construction boom, already five years old, was set to escalate with a huge new round of apartment tower construction led by Australia 108 in Southbank, the 92-level Aurora development opposite Melbourne Central, and a further 20 plus apartment towers in excess of 200 metres in height already in pre-sales or early stages of development.
Hotel construction is also in full swing as local and international hotel operators scramble to take advantage of the record high room occupancy rates throughout the city, he said.
Stafford said the 110 projects totalling $42.035 billion and ranging from $25 million to $11 billion included:
<a href="/images/2016/03/30/melbourne1.jpg" target="_blank">Click to enlarge</a>
 <img src="/images/2016/03/30/melbourne1.jpg" alt="">
Baxter said the most significant drivers for international investors were Melbourne’s rapid population growth, its most liveable city status, and its nation-leading overseas student/education sector, while the combination of stable government and a relatively safe social environment were additional factors which added up to a very sound investment CV. 
The low Australian dollar was the icing on the cake, making the investment rationale extremely compelling, said Baxter.
He said after a slow start in the role, Victorian Planning Minister, Richard Wynne had also played a major role in rapidly restoring confidence in the development sector with a spate of major new apartment tower approvals throughout the CBD, Docklands, Fisherman’s Bend and Southbank amounting to several billion dollars of future development. 
"Inner Melbourne is maturing rapidly, Docklands is filling fast, our population is set to double to eight million by 2050, student and tourist numbers are rapidly trending upwards, tens of thousands of construction jobs are being created, which in turn fuels housing and retail spending, and all levels of government are actively promoting development in the inner urban area.
"We limited our assessment to larger projects within just two kilometres of Melbourne’s CBD. When you take into account all the projects throughout the whole metropolitan area, plus additional major infrastructure investment such as the Melbourne Airport and Port of Melbourne expansions, the weight of investment into Melbourne’s growth is absolutely enormous and extremely exciting for all market participants.
"Melbourne is firmly on the map for global investors, and with so much scheduled growth, we are already experiencing the emergence of a second wave of international investment.’’
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Melbourne gears up for second construction wave: Savills

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Hobart's commercial market is witnessing a number of hotel developments, including a 296-room project by Singapore-based Fragrance Group.
Describing the commercial market in the Tasmanian city as “selectively robust”, Raine &amp; Horne Commercial co-principal Leslie Simpson says there is "strong demand for some categories of commercial property and limited interest for other assets, which is probably similar to other cities around Australia”. 
Self-managed super funds are driving exceptional demand for passive investment stock, adds Simpson.
“These investors are happy to acquire assets that reflect yields below historic benchmarks for the Greater Hobart area,” he said. “Many will accept these returns based on the justification that they are still better than bank account earnings. However, this purchaser type is highly risk averse, with interest quickly diminishing if not supported by a strong lease covenant”.
According to Leslie, the more traditional investors in the Hobart market are still seeking higher, more traditional yields, often leaving a gap between vendor expectations and market interest for secondary investment stock with short term leases.
Retail, industrial and visitor accommodation properties are attracting significantly more interest than other forms of commercial real estate, according to Leslie.
“Tasmania’s impressive recent growth in both domestic and international visitor numbers has seen very strong market interest in visitor accommodation, particularly from Asian interests.
“We currently have three new hotels under construction in the Hobart CBD, and there are another four hotels either proposed or with permits subject to appeal."
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Hobart commercial market is selectively strong: Raine & Horne

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Superannuation-backed developer and fund manager ISPT has secured Michelin star restaurant Tim Ho Wan as a tenant in its retail and office property at 206 Bourke Street in central Melbourne.
ISPT paid $118.3 million for the five-level property, owned by Singapore's Hiap Hoe, in November.
The 330-square-metre restaurant will be the first Tim Ho Wan in Melbourne, complementing two in Sydney. 
Singaporean-owned Tim Ho Wan, which is famous for its pork buns, has been called "the cheapest Michelin star restaurant in the world".
Rents in the Bourke Street centre average $2,000 per square metre. 
Gary Loo, director of leasing at Knight Frank, brokered the deal.
"The were looking for a property close to Chinatown with direct street access and frontage to allow for large signage and a weatherproof space to accommodate the long queues of customers that are a trait of their Singaporean counterparts," he said.
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Michelin star restaurant rents super fund ISPT-owned Bourke Street space in Melbourne 

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A South Yarra address leased to MasterChef Australia patissier Adriano Zumbo’s Fancy Nance and Little Frankie’s eateries has sold for $3.705 million before auction.
The Fridcorp-developed Lilli building at 21 Daly Street, South Yarra is spread across 410 square metres and is located on the ground floor.
Zoned Commercial 1, it was sold with a new 10-year lease with two five-year options to Zumbo’s high tea restaurant Fancy Nance and Little Frankie’s, returning a rental of $197,514 per annum plus outgoings and GST.
The yield works out at 5.3 percent.
Fitzroys' Chris Kombi and Andrew Hewett handled the selling campaign.
“This is an enormously successful location with a huge catchment of over 3,000 residents and workers immediately surrounding the property, with high growth prospects for the future,” said Kombi.
The building had been on the market for 48 days before Zumbo snapped it up.
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