Builder-developer Urban Property Group (UPG) is continuing to expand into new markets. UPG is heading to the Hills District, where it is planning a 40-storey mixed use building near Castle Hill Metro Station.

They've gone down the favoured developer route of a State Significant Development Application, which should see developments approved within the space of nine months.

The tower will comprise 371 apartments, 42 of which will be affordable housing, above a ground-floor retail precinct at 16-20 Old Castle Hill Road, on the corner of Garthowen Crescent and within walking distance of Castle Hill Metro Station, an area identified for higher density under both local and state strategic planning frameworks.

Designed by <a href="https://www.apartments.com.au/architects/studiosc">Studio SC</a>, the tower would rise from a brick podium base, accommodating one retail tenancy and communal open space, before transitioning to a slender glazed residential form above. Six basement levels are proposed beneath the building to house parking and services.

<img alt="First Look: Urban Property unveils 40-storey mixed-use tower in Castle Hill with 371 homes and affordable housing component" data-entity-type="file" data-entity-uuid="08dc82f9-b826-4e18-8c60-4c90f7472317" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%20G%20%28b%29%20-%20Ground%20level%20render.jpg?VersionId=EOv1ly45k_Bc1F73C0hdwXSG4FVSTETt" />

“Castle Hill is undergoing a significant transformation, evolving from a traditionally low-rise suburban centre into a true metropolitan destination anchored by the Sydney Metro Northwest," the Architectural Design Report prepared by Studio SC noted.

The majority of apartments (194) will be two-bedrooms. 90 one-bedroom apartments are planned, 83 three-beds, and four four-bedroom apartments.

Studio SC’s design adopts a podium-and-tower composition, with warm-toned masonry at the lower levels intended to anchor the building within its streetscape context.

"At the podium, the architecture is anchored through solid brickwork in warm, earthy tones, reflecting the local sandstone formations and the natural colour palette of the surrounding hills," Studio SC added.

Above, the tower transitions to a lighter glass expression, articulated with fins and tonal variation to reduce visual bulk and respond to changing light conditions.

<img alt="First Look: Urban Property unveils 40-storey mixed-use tower in Castle Hill with 371 homes and affordable housing component" data-entity-type="file" data-entity-uuid="f13cb2ee-ebfc-4204-9aba-e2dbd9e5d4bd" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Appendix%20G%20%28a%29%20-%20Pool%20view.jpg?VersionId=Dnpusa.b5d6Nkx2clPlzWosDdh_1QW2V" />

Urban Property Group is one of Sydney's most active developers. They have projects currently under construction in Little Bay, Penrith, and Macquarie Park, with future projects earmarked for Wollongong.

Castle Hill has been one of the most popular suburbs for development across Sydney in the last five years, as developers scramble for land around the newly extended Sydney Metro.&nbsp;

Kassis Homes kicked it all off with Grand Reve, along with Deicorp who has delivered over 1,000 apartments in the area and continues to develop. The likes of Dubai-backed developer Arada will take to market their project in the coming months, while Masscon has just launched Avenue on Cadman Crescent.

Joel Robinson

First Look: Urban Property Group unveils 40-storey mixed-use tower in Castle Hill

One of the Gold Coast’s ‘bridesmaid suburbs’ is experiencing a wave of local suitors, with the latest sales figures from <a href="https://www.apartments.com.au/new-apartments/harbour-shores-biggera-waters-564-oxley-drive-biggera-waters-qld-4216">Harbour Shores</a> revealing over two thirds of buyers will be relocating from within a 5km average radius of the 16-hectare masterplan.&nbsp;

<a href="https://www.apartments.com.au/developers/lewis-land-group">Lewis Land</a> Head of Development Michael Long said the figures underlined a powerful shift for Biggera Waters that would reshape it into a thriving force behind the region’s growth corridor.&nbsp;

“We’ve seen a huge wave of interest from residents of Arundel, Paradise Point and Runaway Bay who recognise the urban transformation that is well underway here and want to be part of it,” Long said.&nbsp;

“Interestingly, 25 per cent of our Gold Coast buyers are also coming from the city’s southern hotspots, including Burleigh and Palm Beach.&nbsp;

“<a href="https://www.apartments.com.au/developments/biggera-waters-qld-4216">Biggera Waters</a>, and Harbour Shores in particular, has all the advantages of waterfront living with the benefits of resort-style amenity, for greater value than the southern beachfront suburbs.”&nbsp;

[smartcode_project:default project_id=113271 project_image_fid=290031]

Long said half of the purchasers at Harbour Shores were under the age of 55.&nbsp;

“When locals choose to stay local, it creates a genuine community, turning the most sustainable master planned community in the Gold Coast’s history into a diverse and vibrant ‘village of villages’.”&nbsp;

[smartcode_project:default project_id=113271 project_image_fid=336743]

<a href="https://www.apartments.com.au/project-marketer/colliers">Colliers</a> Gold Coast Sales Director David Higgins said the hyper-local market demand was unique to Harbour Shores when compared to other projects in the region.&nbsp;

“We are seeing as much as 60 per cent of new apartment sales on other projects go to interstate or international buyers, but Harbour Shores is bucking this trend and attracting a larger proportion of the local market,” Higgins said.&nbsp;

“Only 13 per cent of Harbour Shores’ existing purchasers are interstate. There has been a resounding endorsement from local buyers and that validates the project’s vision and investment in design, lifestyle and liveability.”&nbsp;

[smartcode_project:default project_id=113271 project_image_fid=4579]

Harbour Shores is 16ha visionary masterplan dedicated to wellness and an active, healthy lifestyle. Designed by <a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>, Harbour Shores embeds extensive green connections and more than 2.5km in pedestrian networks – including a 1.2km boardwalk along the water’s edge.

Harbour Shores was recently recognised by the BETTER FUTURE World Design Awards 2026 as a silver winner in the category of environmental sustainability. Boasting a 6 Star Green Star Communities V1.1 rating, Harbour Shores will deliver more than 2,000 homes over the next ten years.&nbsp;

The first stage will deliver three residential collections including luxury three and four-bedroom waterfront villas at The Residences, as well as apartments in The Waterline and Palm House, surrounded by resort-style amenities.&nbsp;

[smartcode_project_cta:default project_id=113271]

Biggera Waters no longer a 'bridesmaid suburb' as Gold Coast locals jump to Harbour Shores

Developer <a href="https://www.apartments.com.au/developers/ellipse-property-group">Ellipse Property</a> has officially launched Lily Lane, the second stage of its Carrington Place masterplan in Sydney’s North-West. The new stage will deliver over 200 apartments to the sought-after Hills District, supported by new retail and resident amenity.&nbsp;

Located near the Hills Showground Metro Station at 32 Carrington Road, Castle Hill, <a href="https://www.apartments.com.au/new-apartments/lily-lane-at-carrington-place-castle-hill-32-carrington-road-castle-hill-nsw-2154">Lily Lane</a> has launched with the release of 105 apartments.

Designed by award-winning architects <a href="https://www.apartments.com.au/architects/ptw">PTW</a>, Lily Lane comprises a combined total of 213 units over two 12-storey towers anchored by a ground-floor retail offering. A range of floorplan configurations are available including 67 one-bedroom, 100 two-bedroom and 46 three-bedroom apartments.

One-bedroom apartments are sized from 50-72 sqm with prices starting at $720,000, while two-bedrooms are priced from $960,000 with sizes ranging from 75 to 132 sqm. The three-bedroom floorplans are sized between 97 and 182 sqm, with prices starting at $1,350,000.&nbsp;

Six exclusive penthouses crown the Lily Lane towers, offering opulent interiors of up to 285 sqm. They are priced from $2.9 million.

[smartcode_project:default project_id=151821 project_image_fid=360285]

Blake Schulze, National Director – Residential at <a href="https://www.apartments.com.au/project-marketer/colliers">Colliers</a>, says Lily Lane builds on the sell-out success of Carrington Place’s first stage, Atrium.&nbsp;

“Lily Lane offers everything north-west buyers are seeking - including spacious, flexible floorplans with premium finishes and sweeping views of the Hills District to the north," Schulze said.

"Its central location brings residents even closer to Hills Showground Metro Station, with retail, dining, recreation and essential services at their fingertips.

Schulze says early enquiries reflect pent-up demand for Lily Lane’s three-bedroom and penthouse apartments, reinforcing the appetite for house-sized units in <a href="https://www.apartments.com.au/developments/castle-hill-nsw-2154">Castle Hill</a>,&nbsp;especially among downsizers.

Lily Lane has sought to incorporate features that are more&nbsp;traditional in freestanding homes. Over 75 per cent of residences include dedicated studies, multipurpose rooms or family rooms, with select layouts offering walk-in pantries and laundries.

Buyers have two interior colour schemes to choose from. ‘Breeze’ is a light-toned palette with warm timber accents, and ‘Dawn’ is a cooler mid-toned colourway.&nbsp;

[smartcode_project:default project_id=151821 project_image_fid=360572]

Apartments also feature premium Miele appliances, including ovens, washing machines, dryers, gas cooktops and dishwashers. Larger homes offer integrated Miele microwaves, Fisher &amp; Paykel integrated refrigerators and five-burner Miele cooktops.

Lily Lane’s ‘village-style’ architectural design is designed to maximise walkability and access to green space. Its two elegant towers are separated by a central landscaped laneway lined with lily plants, giving the project its name.&nbsp;

The towers will be crowned by rooftop terraces with BBQ areas offering views of the Hills District. Residents can also access a shared community room, complete with a fully equipped kitchen.

“As the gateway to the wider Carrington Place masterplan, this new stage delivers a premium experience,"&nbsp;said Puja Khanna, Associate Director – Design, Marketing and Sales at Ellipse Property.

"It features beautifully curated landscaping, refined interiors and architecture designed to maximise space, light and views. With a supermarket and essential services just minutes away, the addition of Lily Lane’s ground-floor retail will elevate everyday convenience and deliver a vibrant precinct for residents.”

[smartcode_project:default project_id=151821 project_image_fid=360286]

Lily Lane will be constructed by award-winning iCIRT-rated builder Decode Group, with construction to commence in mid-2026 and expected to complete early 2029.

Carrington Place comprises more than 800 apartments and is being delivered across multiple stages. Completion of the masterplan is expected in 2032. Integrated with neighbouring bushland, the project will feature over 20,000 square metres of outdoor recreational area, including a one-kilometre boardwalk to the nearby Fred Caterson Reserve.&nbsp;

The Hills Showground Metro Station is just a two-minute walk away, offering fast connectivity to Sydney’s CBD, North Sydney, Chatswood, Macquarie Park and Norwest Business Park.

[smartcode_project_cta:default project_id=151821]

Ellipse launches Lily Lane, stage two of Carrington Place

<a href="https://www.apartments.com.au/developers/one-global-capital">One Global Capital</a>, a Sydney-based global property development and investment firm, is set to transform a 1.4-hectare site in Five Dock into a $1.5 billion mixed-use precinct.

The integrated precinct is planned to include 750 apartments across five residential towers, a 150-key hotel, around 10,000 sqm of retail and lifestyle space, as well as health and wellness facilities, extensive landscaped open space, and community amenities.

Planning approval submission is targeted for June 2026.

One Global Capital Founder Iwan Sunito told Apartments.com.au that the Five Dock site, which he has owned for over two decades, is one of the best he's ever had.

"I probably hadn't appreciated the uniqueness of the site until more recently when putting together the concept plans," Sunito says.

"The proximity to the water, and the golf course opposite, is unlike any other part of Parramatta Road. We have a unique position and view corridors over the water that makes this one of the best sites I've worked on."

<img alt="Urban renewal in Five Dock via mixed-use precinct" data-entity-type="file" data-entity-uuid="76667592-c421-49f5-9ab8-45cfec815651" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Five%20Dock%201.png?VersionId=puhL_lSxd5IB5VA9fQKPsKHgmkinuwuI" />

Sunito said he wants to create a "city within a city", designing a multi-cultural precinct with the convenience of retail and public space at the forefront.

"We want to create a development that's not only to be seen, but to be experienced by the whole local community."

He adds that the Five Dock is emerging into a "really solid suburb", with the growth in&nbsp;the area continuing to be supported by rising residential values across the Canada Bay and Leichhardt local government areas, driven by major infrastructure investment and enhanced transport connectivity.&nbsp;

The new precinct will benefit from close proximity to a key transport network, including the Five Dock Metro Station, located approximately 1.1 kilometres from the site. The new Burwood Metro stop will be just 800m.

The project marks a renewed collaboration between Sunito and internationally acclaimed architect <a href="https://www.apartments.com.au/architects/koichi-takada-architects">Koichi Takada</a>, the creative partnership behind some of Sydney’s most recognisable residential landmarks, &nbsp;including Infinity, Arc, and Skye North Sydney.&nbsp;

<img alt="Urban renewal in Five Dock via mixed-use precinct" data-entity-type="file" data-entity-uuid="a9184a45-f429-4628-87ce-9bd6c70cb597" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Five%20Dock%202.png?VersionId=zJZRfLAZCkpww5VcmR_wgRXjoaSgPSyv" />

“The concept for this development is born from our design approach to naturalising architecture," Koichi Takada said.

"The public realm benefits from biophilic design that integrates generous landscaping, and the development is optimised &nbsp;for natural daylight, airflow and water views to foster wellbeing, sustainability and spaces that foster community interaction."

A key feature of the mixed-use development will be a lifestyle retail precinct, offering shopping and dining &nbsp;experiences - including a proposed state-of-the-art car showroom - as well as communal spaces for community &nbsp;use. Veteran retail and commercial property practitioner, Simon McTigue, has been engaged to consult on the &nbsp;delivery and leasing of the retail precinct, having previously worked on notable mixed-use projects such as East &nbsp;Village Shopping Centre in Zetland and South Village Shopping Centre Kirrawee, as well as other projects with &nbsp;Iwan Sunito in Green Square and Parramatta, to name a few.&nbsp;

“The Five Dock site offers a unique opportunity for retailers, conveniently located within easy walking distance &nbsp;of the metro station. On completion, the integrated precinct will provide the community with a new Inner West &nbsp;town centre, offering daily convenience via a proposed large format supermarket and fresh food precinct, as well &nbsp;as a restaurant and café district situated alongside key services such as a medical and health centre. It will be a &nbsp;place to live, work and play,” said Simon McTigue, Director of Wallaringa Consulting.&nbsp;

Samuel Sunito, Director of Capital at One Global Capital, confirmed strong inbound interest from both domestic and global investors seeking co-investment opportunities in the project. “We are currently engaging with &nbsp;investors both locally but also globally from Indonesia, the United States, China, Singapore, Vietnam, and Dubai &nbsp;to ensure alignment of vision and long-term value creation,” he said.&nbsp;

Investment participation will remain open until approximately Q2 2026, with equity allocations managed selectively.&nbsp;

“Equity available to the broader market will be limited, with priority given to long-standing capital partners. In terms of One Global Capital’s investment philosophy, we will continue to retain majority ownership, ensuring &nbsp;strong alignment of interests and preserving the long-term integrity of the project for all stakeholders,” Samuel &nbsp;said.

"A city within a city": Iwan Sunito flags $1.5 billion mixed-use precinct in Five Dock

Holiday home buyers who have long gravitated to Queenstown’s alpine setting are increasingly looking for low-maintenance apartments that allow them to lock up and leave, while still generating income when they’re away.

For Wendy, who had spent years visiting the Queenstown and Arrowtown region, <a href="https://www.apartments.com.au/developers/safari-group">Safari Group</a>’s Mountain Oak Apartments provided the opportunity to formalise what had previously been a recurring holiday pattern.

“We always had Queenstown in the back of our minds to buy something there as a holiday home,” she says. “We love the Queenstown and Arrowtown area.”

<img alt="From slopes to markets: Mountain Oak connects residents to the best of Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_auto/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/658d4f_48c3ec1ae5df4a2cab7d23c07c7f51b3~mv2.jpg?VersionId=27K8oQ4ExDN8Yu70VHDa9Olq59XU36m3" />

Time spent visiting her sister-in-law, who owns in Arrowtown, along with regular stays at Millbrook Resort, had already shaped a strong personal connection to the region.&nbsp;

Rather than approaching the purchase purely as an investment play, Wendy’s starting point was lifestyle.

“We were more thinking about ourselves and where we could stay, and then the rental aspect was second.”

Mountain Oak Apartments, located within the masterplanned Remarkables Park precinct in Frankton, aligned with that thinking. The ability to secure the apartment with a deposit and settle on completion made the timing work.

“The fact that we could put a deposit down with the balance on completion was a bonus for us,” she explains.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_auto/https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/313_Livingv2_WEB.jpg?VersionId=nV229fM0ZeYpoxOrX372HyGjfwY_LR8c" />

Wendy selected a two-bedroom, two-bathroom penthouse, a configuration that supports both private use and guest flexibility.

“The two-bedroom, two-bathroom configuration appealed from both a rental viewpoint and for the ability to have friends stay while we are there,” she says.

Across the development, two-bedroom apartments range from 64sqm to 78sqm, with two-bedroom plus flexi options from 71sqm to 75sqm, each with an allocated car park. The flexi layouts introduce an additional space suited to work or hobbies, reflecting demand from buyers who split their time between leisure and remote work.

Apartments include underfloor heating in bathrooms, heat pumps to living areas, and joinery positioned to maximise natural light and mountain outlooks. The Remarkables Park precinct is known for its extended winter sunshine hours, water frontage and open views toward The Remarkables.&nbsp;

Units come in light and dark interior colour schemes.

<img alt="Mountain Oak Apartments draws holiday home buyers to Queenstown" data-entity-type="file" data-entity-uuid="fd685a22-3b95-43a1-87cb-48fdd42bb4ba" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/658d4f_f9f89107c2704ebbbe5a6b36da508cb3~mv2.jpg?VersionId=MigFIEm6b.mrANANwxSmwHvC4RdJUuyR" />

While lifestyle was the primary driver, the fundamentals of the Queenstown market added reassurance.&nbsp;

“Proximity to the airport and tourism being the main attraction all year round,” Wendy says, when asked what stood out from an investment perspective.

Mountain Oak sits just eight kilometres from Queenstown’s CBD and around a two-minute drive from Queenstown Airport.&nbsp;

For Wendy, that airport proximity carries practical value.

“The airport proximity is a bonus, we think that being so close will be an attraction for the convenience side.”

Residents are also a short drive from Coronet Peak, Jack’s Point Golf Course, New World Supermarket, Five Mile Shopping Centre, and the dining, medical, gym, cinema and library amenities within the town centre, as well as the seasonal Remarkables Market.

Importantly, the purchase does not lock owners into a single use. Mountain Oak offers the flexibility to opt for short-term visitor accommodation or longer-term residential rental management, with 365-day visitor accommodation consent in place. Owners can utilise Safari Group’s 24/7 on-site management service or appoint their own provider, and do not need to decide on a strategy immediately.

“It was a bonus that we can rent it out as well as use it for ourselves,” she says.

Additional buying options, including furniture packages and storage units available for purchase within the building, further support a lock-and-leave model suited to interstate and overseas owners.

<img alt="Safari Group’s Mountain Oak Apartments brings new investment potential to Queenstown" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_auto/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Ext_Cam15_Sunny.jpg?VersionId=SJAROUM_1s.Tr5ciMk4EEj5oAt_Vewmv" />

Mountain Oak Apartments comprises 141 residences, ranging from one-bedroom configurations through to larger apartments and penthouses. One-bedroom apartments are currently priced from NZ$639,000, with three-bedroom options from NZ$1,299,000.

With 365-day visitor accommodation consent, the development is structured to respond to Queenstown’s established four-season tourism economy, spanning winter ski traffic and summer hiking, cycling, golf and lake-based activity.

Although Wendy acknowledges the strength of rental demand, her approach remains long term.

“We’re not planning to sell it anytime soon, so we are keen to hang on to it, but the passive income will be a bonus.”

Confidence in the developer also influenced her decision. Before proceeding, Wendy sought feedback within the local building community.

“We asked around and Safari Group had a good reputation,” she says.

Safari Group has delivered more than 2,000 hotel units and residential apartments across over 18 developments nationwide, with more than 25 years’ experience in the sector.

With completion anticipated by mid-2027, Mountain Oak is attracting a cross-section of buyers, from yield-focused investors to lifestyle purchasers seeking a foothold in one of New Zealand’s most tightly held alpine markets.

For Wendy, it represents both a future holiday base and a long-term asset within Queenstown’s year-round tourism economy.

How Mountain Oak Apartments draws holiday home buyers to Queenstown

Melbourne Office

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The owners of three adjoining Melbourne commercial buildings have opted to take them to the market together following a strong 2019 Melbourne office market.
They have reported $75 million hopes.
They recently received a major planning permit across the combined site which allows for a hotel and mixed-use development project.
The property, comprising around 30,000 sqm of buildable area, is expected to attract the attention of larger domestic and international development groups.
CBRE Melbourne Middle Markets agents Mark Wizel, Josh Rutman, Lewis Tong and Scott Orchard are offering the properties either in one line or separately. 
Hotelier Aziz “Ozzie” Kheir, Prebuilt founder Phil Merton and developer Frank Palazzo did have hotel plans.
The largest of the asset is the former Sands &amp; McDougall building at 355 Spencer Street (pictured above). 
The historic 7,363sqm corner office building once housed Melbourne’s leading printing and publishing firm for well over a century.
Sands &amp; McDougall was best known for its annual Directory of Melbourne publication – a near encyclopaedic book that captured the identity and address of every business in Melbourne – which ran from 1862 to 1974. The company’s main printing house was located within the building and the proud horse logo still adorns the façade. 
Mark Wizel said the repositioning and rejuvenation of older character buildings has become extremely lucrative in recent years, and this asset is perfectly placed to capture unsatisfied tenant demand for unique, but well-located, accommodation.
“With office vacancy at record lows and the residential market also showing strong signs of recovery, there’s little wonder why investors are showing such strong appetite for buildings in and around the Melbourne CBD,” Wizel added.
In a similar transaction of a heritage building in late 2019, 22 William Street, known as Swann House, sold for $52,000,000 which will see the buyer embark on a refurbishment program, targeting rents of over $700/sqm.
 
 
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jrobinson-rf4aSBido9

Three adjoining Melbourne office buildings to attract investors and occupiers

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SPONSORED POST
Melbourne is the most sought after office real estate location in Australia, with unprecedented local and offshore appetite for Melbourne CBD office assets continuing. Part of what is contributing to this trend is the overall cost of capital. With a strong chance of further interest rate cuts in 2019, pressure is building on banks to start freeing up credit. Another major factor is Melbourne’s anticipated rental growth. 
Rents are increasing in Melbourne faster than anywhere in Australia, particularly in the Melbourne CBD. And while investors are naturally attracted to longer leases at lower rents, Melbourne’s market is so strong that we’re seeing an equal amount of rental growth and security with short-term leases at higher rents.  
The trend and history of Melbourne’s rental growth 
There was a time in the mid-2000s when the Melbourne office market was ‘held back’ because of major developments such as Docklands. Since then, to say that Melbourne’s office space has recovered would be somewhat of an understatement.  
Melbourne’s total office vacancy now sits at a record low of 3.3% (including Docklands which now sits at &lt;1%), down from a high of 10% in mid-2004. 
More recently, nearly all of the additional 300,000sq m of CBD Prime office space has be pre-committed. These are developments such as 80 Collins St (South Tower), Collins Arch, Olderfleet, 405 Bourke St, 150 Lonsdale St and Flinders Gate. As further proof of Melbourne’s outperformance, a significant amount of the backfill of these major pre-commit deals have been leased. 
What the fringe says about the city
Aside from low vacancy and pre-committed leases, probably the most telling rental growth factor is the performance of properties in Melbourne’s city fringe when compared to properties in the CBD. 
Traditionally, rents within city fringe areas are cheaper than rents within the CBD, so that when fringe rents are high, we know that CBD rents are even higher. 
There are major pre-commit deals currently being leased at approximately $600/sq m net in areas such as Richmond, Cremorne and South Yarra. ‘A’ Grade CBD rents are currently hovering around sub-$600/sq m net and even some Premium Grade passing rental profiles are reflecting rents at similar levels. Most of the recent Premium Grade deals are pre-commit leases. These deals usually reflect a discount to the sitting market, so there is significant room for growth in the CBD in the short to medium term.
While the attractiveness of long term leases may not be going anywhere (particularly amid current and anticipated interest rate cuts), there’s now a significant strength in short-term options. Demand for CBD office assets with the ability to capture rental growth in the short to medium term (i.e. short WALE), will continue to be on the radar of local and offshore investors. 
Essentially the Melbourne CBD market covers both ‘cash-on-cash’ or ‘running’ yield buyers, as well as a buyer seeking a ‘total return’, whose basic benchmark metric is an internal rate of return (IRR). 
Much of this is predicated on forecasted rental growth. Melbourne’s story for most investors is extremely positive, even for assets with high capital expenditure.  Buyers in this space, generally of a B-Grade nature, are backing rental growth to offset the capex spend, as well as B-Grade assets’ rental profiles reflecting sub-$400/sq m net in the Melbourne CBD.
The investment story bodes well for Melbourne in the short and long term, which is reflective of current transaction volumes, which are at an all-time low. Those that own Melbourne CBD assets wish to capture the growth and those that are looking to purchase have a very strong reason to invest. 
Savills is a leading global real estate service provider offering the full spectrum of services from strategic advice to managing assets and projects and transacting deals. James Girvan is a Director within the Savills Capital Transactions team. To learn more about Savills, visit <a href="http://www.savills.com.au/">savills.com.au</a>.
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Why it’s the right time to invest in the Melbourne office market 

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The Melbourne office market vacancy rates, in particular in the Melbourne CBD, city fringe and inner east, are lower than the long-term average vacancy levels and are anticipated to further decline in the second half of 2019, according to the latest Commercial Market report from Herron Todd White.
The Melbourne CBD’s overall office vacancy rate was at 3.2% in January 2019, the lowest of all of Australia’s CBDs. according to the Property Council of Australia’s Office Market Report. 
According to HTW's property valuation reporters, there is limited new supply and available stock in the market until 2020. 
The robust leasing market is also being fuelled by healthy tenant demand driving strong rental growth in both face and effective levels.
Due to the rise in CBD rentals, the city fringe precinct continues to gain popularity from the creative, technology and professional services sectors.
Tenant demand is also strong in the inner east markets, particularly in highly soughtafter suburbs such as Richmond, Cremorne and Hawthorn. The inner east has a vacancy rate of 3.58%, the lowest amongst all of the metro precincts in Melbourne.
The June report stated, "It is expected that rental growth will continue for the remainder of 2019 in these precincts for well-located, good quality stock. Sales demand is particularly strong for well-located, land-rich investment assets."
"A circa 1990 double storey office building at 79-83 High Street, Kew (pictured in title) sold off-market ahead of the launch of an EOI campaign for $19 million in April 2019, reflecting a passing yield of approximately 6.2%. The property comprised 19 strata units with a total lettable area of approximately 3,361 square metres situated on a 3,760 square metre Commercial 1 zoned land allotment."
"The building had 10% vacancy and was sold to fund manager, Terraplex, with intentions to refurbish the building and potentially add extra floor space," they noted.
In the outer suburban market, the sale at 347-351 Burwood Highway, Forest Hill represents the largest metropolitan office transaction this year.
The property was sold to an adjoining owner, a Melbourne based developer, for $45.85 million in April 2019.
The property is situated opposite the Tally Ho Business Park and comprises a 2.62 hectare Commercial 1 zoned allotment improved with two office buildings with a combined net lettable area of approximately 10,692 square metres.
The property is approximately 70% leased to a variety of tenants including NEC, Bolton Clarke and Hamilton Morello.
The HTW valuers said, "we highlight that the purchaser elected to purchase the property as is without a 30% rental guarantee from the vendor and without deduction of outstanding incentives. The property has a WALE (by income) of 3.4 years and a reported reversionary yield of approximately 7.32%."
"The relatively low yield for an asset of this nature with sizeable leasing risk demonstrates the confidence buyers currently have in the Melbourne metropolitan office market."
"Due to the slowdown in the residential market and tightening lending criteria, demand for development sites within the inner suburban region has declined somewhat, however we are aware of ongoing, albeit subdued demand from developers seeking to secure well located sites to establish mixed use developments within close proximity of neighbouring retail strips, amenities and public transport."
"It is uncertain when residential market conditions will begin to recover and purchasers are cautious that any future downturn in economic activity may lead to a reduction in demand and market value, however we note that demand for commercial development sites, particularly sites with holding income, is strong in inner city areas such as Richmond, Cremorne and South Melbourne where developers are intending to deliver commercial office projects instead of apartment projects in the current market to capture the strong office leasing and sales conditions," they concluded.
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Melbourne CBD office vacancy rate lowest in Australia: HTW Commercial

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SPONSORED POST
The Melbourne CBD recorded the greatest yield compression throughout the past three years across CBD office markets globally, as reported by Savills latest Impacts report. 
In Impacts, Savills global thought-leadership programme, Savills explores the link between office yields and borrowing, and concludes that the relationship has become more tenuous as investors’ profiles have changed and fewer investments have been predicated on finance from bank borrowing. 
According to Savills, a rise in interest rates in any domain (which is looking increasingly improbable) is unlikely to result in a corresponding rise in prime office yields so they are likely to remain stable or continue to fall in many markets. 
Looking at the level of yield compression across key CBD markets globally, Melbourne led the charge, with prime yields falling 174 basis point since 2015, followed by Beijing (-132 basis points) and Berlin (-120 basis points). 
Savills Australia’s CEO, Paul Craig, said that while Australian cities were still off the 3.0 percent mark hit by other CBD markets worldwide, “It would be prudent to assume that yields Down Under will fall in a similar trend in the next five years”. 
“This is even more so the case given the Melbourne CBD’s status as a regional gateway city and the Sydney CBD’s status as a global gateway city,” he said.
CBD prime office market yields are now sub-3.0 percent in Hong Kong (2.43 percent), Frankfurt (2.9 percent), Tokyo (2.9 percent) and Berlin (2.9 percent), in a reflection of the new benchmarks being set globally. Savills report forecasts that the Paris (3.0 percent) and Amsterdam (3.5 percent) prime CBD office markets could see market yields harden to under 3.0 percent by the end of 2019.
“Throughout the past three years, we have seen growing investor demand from both foreign and domestic investors drive yields down to record low levels,” Savills Australia’s Director for <a href="https://www.savills.com.au/services-and-sectors/sales-and-investment/capital-transactions.aspx" target="_blank">Capital Transactions</a> in Victoria, James Girvan, said.
“Investors are drawn to the Victorian capital, not only because of strong demand drivers and nation-leading economic indicators.
“The risk-adjusted return for Melbourne CBD remains among the highest recorded across all office markets globally (according to latest available data from the MSCI IPD).”
Positively, as a result of record low interest rates, and thus record low long-term bond yields, the yield premium throughout the 10-year bond rate remained elevated at 305 basis points, according to Savills data in March 2019.
“We are seeing more and more investors, both domestically and internationally, recognise the investment potential in Australia, which will likely drive yields further down, particularly with interest rates likely to remain low in the short to medium term,” Savills Australia’s Director for <a href="https://www.savills.com.au/research/australian-research.aspx" target="_blank">Research &amp; Consultancy</a>, Shrabastee Mallik, said.
“We are not only seeing our peers abandoning tightening monetary policies globally, but domestically, there is also a growing consensus that the RBA will likely bring the cash rate down further this year. 
“We are seeing swap markets pricing interest-rate cuts for the remainder of 2019, which will add more downward pressure on 10-year bond rates, keeping the yield premium elevated and in favour of commercial property.
“Based on global data, yields in Australia remain elevated, compared to comparable investment destinations, providing the impetus for foreign investors to invest in Australian office markets. 
“In the past six months, we have seen increasing foreign investor activity in recovering markets like Perth and Brisbane, as they look to capitalise on relatively higher yields.”
Savills Australia’s Director for <a href="https://www.savills.com.au/services-and-sectors/sales-and-investment/capital-transactions.aspx" target="_blank">Capital Transactions</a> in Western Australia, Nick Charlton, said the prime yield differential between Sydney and Perth was at historical highs, with an approximate 170-basis-point spread encouraging international investors to look more closely at counter-cyclical investment opportunities in the Perth CBD office market.
“Investors are confident the spreads are too wide and set to narrow in the short to medium term,” he said.
“Interest in the CBD office market has been further heightened by the prospect of net effective rental growth in prime office buildings forecast to be at 9.0 per cent per annum between now and 2021, with the lack of new stock and tightening vacancy rates, which are now at sub-5.0 percent.”
Mr Charlton went on to say that Perth was “a distinctly two-tiered market”, with the premium and upper A-grade segment behaving very differently to the lower-quality A and B Grade stock, which were seeing persistently high vacancy rates. 
“Investors see this is where the opportunity lies, finding functional, well-designed and well-located buildings that can be re-purposed to capitalise on the lack of new supply and the forecast net effective rental growth,” he said.
Click here <a href="https://www.propertyobserver.com.au/images/2019/5/1/Savills-yields.jpg" target="_blank">to enlarge</a>.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2019/5/1/Savills-yields.jpg" alt="">
Mat Oakley, Head of Commercial Research for UK and Europe at Savills, says: “While the link between real estate yields and base rates has become less strong, it is by no means broken. Investors who look across a multitude of asset classes, particularly those searching for long-term secure income, will reach a point where the yield on sovereign bonds becomes attractive enough to prompt them to choose them above real estate. For the foreseeable future, however, prime offices in the world’s global cities will remain attractive, with competition fierce for the best assets.”
Simon Smith, Head of Asia Research at Savills, comments: “With the threat of a US-China trade war easing and the Fed signalling that it is unlikely to raise rates at the time of writing, we have seen a resurgence in demand for prime offices in Asia-Pac after activity weakened in the latter half of 2018. 2019 is therefore unlikely to see any movement outwards in yields.” 
Savills is a leading global real estate service provider offering the full spectrum of services from strategic advice to managing assets and projects and transacting deals. To learn more about Savills, visit <a href="http://www.savills.com.au/" target="_blank">savills.com.au</a>.
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Melbourne leads CBD markets globally in yield compressions for past three years: Savills

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Construction is about to commence shortly on a new health and wellness centre at 101 Collins Street.
The commercial tower, which is managed by AXA Investment Managers – Real Assets, will be home to  two studios with sprung floors and heated ceiling panels, equipped for a range of activities including yoga, pilates, barre, meditation, HIIT and a range of cardio-based classes.
The studios will be located alongside three specialist consultation rooms offering services such as physiotherapy, osteo therapy, chiropractic’s and remedial massage. 
The wellness centre, designed by Australian architects Gray Puksand, will be for the exclusive use of 101 Collins Street tenants.
Construction of the facility is slated to commence in April, with completion expected in October 2019. 
The wellness centre is the second phase of a comprehensive strategic asset plan, said Brett Dillon, Head of Funds Management at AXA IM-Real Assets.
“For almost three decades, 101 Collins Street has held the position as Melbourne’s pre-eminent office address, but we can’t afford to be complacent,” said Dillon.
“Our team is focused on responding to evolving tenant needs, new trends in technology and innovation, so our projects will continue to set new benchmarks in the premium space market.
“Wellness offerings are an essential element of today’s modern workplace, so we are excited to announce that construction will shortly commence on this industry-leading amenity at 101 Collins Street.”
Tenants at the 57-storey 101 Collins include Herbert Smith Freehills, Allens Linklaters, Goldman Sachs, and J.P Morgan.
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