Mercato shopping centre must lease airspace for use of over-footpath balcony in Byron Bay

The owners of the centre have asked for a 20-year lease, with options to extend it four times, but the council is concerned the current valuation may be too cheap.

Mercato On Byron. 98-116 Jonson St, Byron Bay NSW 2481

A balcony that overhangs council-owned land in Byron Bay has left the owners of a shopping centre liable to pay for the “airspace” occupied by shop space.

Mercato on Byron’s development approval allowed for a terrace balcony over the road reserve of Jonson Street.

Although the shopping centre was completed in 2019, the matter of its owners entering into an airspace lease with Byron Shire Council was only considered at the council’s May ordinary meeting.

The property and the neighbouring old Woolworths site recently sold to a fund headed by the Mustaca and Pelligra Families.

Mercato on Byron Pty Ltd had requested an airspace lease of 20 years, with an option for that to be extended four times, according to a report that went before the council.

The Mercato shopping centre on Jonson St in Byron Bay.

Councillor Cate Coorey called on her colleagues to defer their decision until a new valuation could be obtained.

The staff report a valuation which established an initial lease rent of $44 per square metres, or $6200 in total, a year.

Ms Coorey said she had concerns about the method of determining this value and the “broader terms” of the lease.

“I am somewhat concerned this is a little low,” she said.

“I understand it's based on the Valuer-General’s report.

Mercato On Byron. 98-116 Jonson St, Byron Bay NSW 2481

“I would like to have a further valuation on this.

“It’s a balcony hanging over the footpath, it’s commercial lettable space.

“I think we’re denying ourselves what would be a market return on our space to give someone a commercial advantage.”

Councillor Alan Hunter and mayor Michael Lyon moved an amendment to Ms Coorey’s motion, including her call for a new valuation but with the added plan to approve the lease if the new rate was no more than 10 per cent greater than the existing figure.

Most councillors supported this.

Councillor Jan Hackett expressed concerns about increasing the rate, saying she feared the property could become “a white elephant” because it was “still half empty”.

If the new valuation is similar, the council’s general manager Mark Arnold will be authorised to enter into an airspace lease for a fixed term of 20 years.

The initial rent is set to be increased by CPI annually and if the if the lease is not renewed after that time, the shopping centre owners must demolish the structure above the road reserve and would bear the cost of those works.