By Cara Waters
Ageing office buildings in Melbourne’s CBD could be converted into thousands of apartments under a new proposal by Lord Mayor Nick Reece.
“This is a trillion dollar economic challenge for us, for the Australian property sector and the broader economy,” he said. “What I am going to do is throw everything and the kitchen sink ... in terms of incentives and pathways to try and get the office to residential market going in Melbourne because we just have to.”
Lord Mayor Nick Reece said he wants to turbo-charge office-to-residential conversions in the CBD. Credit: Penny Stephens
Reece said if he is elected as lord mayor in the upcoming council elections he will refund any planning permit and building permit application fees where 100 apartments are created in a former office building. He would also reduce council rates and enable up to a 30 per cent increase in building height in the development.
Converting office buildings into apartments was put on the agenda by the Property Council last year when it identified 86 office buildings in Melbourne’s CBD that were suitable for conversion with design studio Hassell and planning consultancy Ethos Urban.
Retrofitting the buildings would enable the city to meet some of the demand for housing while also reducing embodied carbon.
The idea was seized upon by the state government and included in its landmark housing statement released last year, however property owners of the city’s office buildings had not been consulted and did not back the proposal.
Reece said if the incentives were strong enough he believed property owners would make the switch and the policy could create up to 4000 new apartments in the heart of the City of Melbourne.
“I am planning to significantly increase development incentives to make it irresistible for developers to start looking seriously at office-to-residential conversions,” he said. “In some other cities, you have seen development bonuses of 30 per cent for office-to-residential conversions. That’s what I’m talking about.”
He said he would also call on the state government to waive statutory fees and levies associated with office-to-residential conversion and provide a planning and building assessment service to assist in the conversion. This would include a tailored pre-application service to cut through red tape and an office conversions working group with the state government.
The plan is expected to cost $4 million and would operate in the CBD and Southbank. The council will target five office-to-residential conversions per year.
There would be a first project bonus for a pilot project to retrofit an office building in the central city from the Property Council, Hassell architects, the City of Melbourne and the state government, and a Lord Mayor’s grant for the first five projects, depending on how much upfront embodied carbon is saved.
Appetite for the scheme is likely to be further boosted by falling office property values which have plunged more than 10 per cent in the past six months and could fall further, as high interest rates and the work from home trend take a toll on demand.
Christian Grahame, head of build-to-rent developer Home, said in the last year, Melbourne had only produced one fifth of its long-term housing average.
“It has never been harder to produce housing in inner Melbourne,” he said. “This is a refreshing approach, it is a good suite of initiatives, it is practical and solutions-focused.”
Grahame said it would be good to see the state government come forward with its own suite of planning and tax incentives.
“Office buildings are inherently difficult to convert, as not every existing building is appropriate and the technical complexity is not for every developer,” he said. “This would certainly go some way [to encouraging developers] as they are practical measures dealing with tax, planning and managing of risk.”
Michael Argyrou, chief executive of builder and developer Hickory, said while he did not have any buildings that were currently appropriate for retrofitting, the policy was a great start.
“Adaptive reuse will be a core part of our business going forward, we just haven’t figured out how to make it more viable,” he said. “When a council comes out and makes an aggressive plan about something, then developers respond by having a look.”
Cath Evan, Victorian executive director at the Property Council of Australia, said adaptive reuse projects had the potential to play an important role in boosting housing supply within Melbourne.
“This announcement is an important first step in overcoming the significant feasibility hurdles that these projects face,” she said. “It’s important this action is complemented by state government initiatives, particularly on land tax relief, to support the further potential of office-to-apartment conversion.”
A Victorian government spokesperson said it was already prepared to “fast track” approvals to convert eligible commercial offices and mixed-use properties into apartments.
“It’s just one of a number of levers we’re pulling to ensure 800,000 new homes are built over the next decade – working with councils and developers to make good planning decisions faster and building thousands of social and affordable homes.”
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