Market Overview - VIC
Hamish Burgess Colliers Director, Development Sites | Residential
WithDevelopment Site experts operating across all regions of Melbourne and with specialisations in each of the aforementioned sub-markets Colliers has been able to achieve landmark transactions to each of these buyer types. Q. Who have been key investors over the last 18months and have you seen a shift fromprevious years? A. There has been a great deal of activity from institutional AgedCare and Retirement Living developer/operators. Activity from these players in the Development Sitemarket increased by 105%from2020 to 2021 moving from $140million to $287million in sales respectively. By value of transactions, we saw that private local developerswere the predominant buyer profile in themarket in 2021 with 53%of transactions being acquired bywell-backed local groups. This confirms the notion that there is a lot of privatemoney in themarket looking to invest in theMelbournemarket. Therewas also a strong increase in activity from institutional buyers, based both locally and offshore. Thiswas largely due to a re-weighting of interest to the Melbournemarket given its strong performance across the board and demonstrated resilience through the past two years of Covid-19 disruption. Q. What is your secret to achieving the exceptional results that you have? A. We firmly believe that asset class specialization is integral to our success and that of our clients. By being focused on a particular asset classwe can give our clients tailored and expert advice that is up to date and forward thinking in response to the trendswe arewitnessing in themarket. For example our newestablishedNational Build ToRent platformhas lead the market in both thought leadership and transactions in themarket placewhich has resulted in a 68%market share for agency brokered transactions to Build ToRent buyers inMelbourne. In theMetroDevelopment sitemarket in 2021 our specific focus on premium sites lead to amarket share of over 50%whichwas a direct result of being able tomatch the right buyers to the right sites depending on their pipeline, which l ed to a number of premiumoff-market transactions such as 52Golf Road Oakleigh South for $33.5million, 27 Driscolls RoadKealba for $35million and 62-94 Jacksons Road, Mulgrave for $30.08m. Q. What are some of themost significant or rewarding projects that you’ve been involved in andwhy? A. We find all our projects extremely rewarding as it is a great feeling towork with clients to achieve exceptional results together. A recent and extremely rewarding project would have to be the sale of 699Park Street toMirvac. The prestigious Park Street sitewill be an incredibly special project and one that we are excited to see come to life. It is rewarding in the sense that it will become aMelbourne landmark andColliers are glad to have played a role in seeing it come to fruition.
Q. Howdoes the property market in VIC compare to other states at the moment andwhat are some key trends that are occurring? A. FromaDevelopment Site perspective, we have just come off an extremely active year in 2021 with peak levels of activity across all regions of Melbourne including theCBD/Fringe, Metro andGreenfieldmarkets. With over $2.9billion in sales across the established areas of Melbourne for major site sales ($10million+) with have seen a return the level of activity seen in previous boomyears of 2017 and 2018. TheVictorianDevelopment Sitemarket is being viewed favorably by develop- ers in other states, especially fromNewSouthWhales, as our residential market is perceived as being attractive in value compared to Sydney. This has led to a number of major private Sydney based developersmaking acquisitions and has certainly peaked the interest of many of themajor institutional developers who are actively expanding their pipelines in Victoria. Q. What sectors aremost in demand? Throughout theCity-Fringemarket we have seen amajor resurgence in 2021 off the back of strong competition from the nowestablishedBuildToRent (BTR) players, particularly for the large scale permitted sites. Activity for development site sales toBTRdevelopers increased by around 97%from2020 to 2021 jumping from$196million to $387million in transactions respectively. Within the Inner Metromarket traditional established and blue ribbon residential LGAs have been viewed highly favourably as a shortage of existing projects were absorbed and limited newsupply of development sites came tomarket. Aside froma lack of supply in these core Inner Metro areas themost notable factor influencing the high demand fromdevelopers has been a surge in the median house price of more than 20%for most of the suburbs in these areas. TheOuterMetromarket is seeing robust bidding takingplace predominantly for large scale infill development sites, specifically those suited to amediumdensity townhouse product. Major private, institutional and retirement developers have been competing actively in thismarket in 2021 as they look to the underlying strength and confidence inMelbourne’s suburban residential market. Q. What do you see as the biggest challenges that face buyers and sellers in todays market? A. One of the biggest challenges facing developers in the current market is a lack of premiumsites being available compared to the depth and levels of demand that exist. This factor has underpinned the achievement of strong prices, especially for themost significant sites in each of the sub-markets where competition for strategic andmajor opportunities remains intense due to scarcity of site availability. The biggest challenge for sellers in the current market is being able to find the right developer at the right point in their pipeline to that suits their property. Given themarket is so dynamic at present with strong competition and activity between Residential, BTR, AgedCare, Retirement andHealthcareDevelopers it is imperative that sellers position their properties suitably to capture the atten- tion of this broad and deep development sitemarket.
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