Market Overview - VIC
VIC Market Overview from Jesse Radisich JLL Director
Q. What are the key market trends occurring throughout 2021 in your region? A. In the development site space, we have seen strong demand and activity across the board throughout 2021. The build-to-rent market has continued to evolve, andwe are seeing very aggressive bidding and pricing fromBTR groups on inner-city sites that offer the appropriate scale for their business models. In the build-to-sell space, some extraordinary and record setting results have occurred this year, and experienced developers are demonstrating a real willingness to push the boundaries in terms of their project revenues and other metrics if they feel the location and site characteristics warrants it. Q. What have been the fundamental drivers of demand amongst buyers? A. The robust residential market throughout 2021 has spurred confidence from residential developers, particularly as the gap between apartment and house values has continued to widen. Location is always the fundamental driver of value for a development site, but if there is an element of ‘X-Factor’ a site offers, then experienced groups who see the potential upside are demonstrating that they are willing to pay for it. A lack of development site supply throughout the year has resulted in heightened competition across fewer opportunities. Q. Reflecting on recent transactions, what has been the profile of buyers and has this shifted from previous years? A. Local developers are extremely active in their pursuit of well-located sites, and given the widespread drop in acquisition activity throughout the 2020 lockdown periods, many groups are finding themselves scrambling to secure new sites to fill their pipelines. Off-shore groups remain very much in themarket and have demonstrated they are willing to consider locations that traditionally wouldn’t have been on their radar. We saw this in action at our recent development site auction in Brunswick, where two Chinese development groups fought it out to secure the site after the rest of the market and the other bidders fell away. A JLL sale process on behalf of Australia Post in Fitzroy earlier this year saw an extraordinary 32 initial offers submitted, underscoring the immense depth of interest for high quality city fringe locations and culminating in experienced developer Piccolo securing the highly sought-after site. Q. What types of assets are most in-demand given the current environment? A. We are seeing the strongest demand for city-fringe sites that are suitable for sub 100 apartment projects where there is very limited supply of sites, as well as sites that provide scope and characteristics for a very high-end, luxury product. This was demonstrated through our recent transaction of a site on Burke Road, Camberwell, where the eventual buyer is planning apartments up to 650sqm in size and at an average end sale rate of circa $17,500/sqm– apartment product and rates previously unheard of in Camberwell or Melbourne generally. With a consistent lack of suitable opportunities, inner-Melbourne townhouse sites remain at the top of the list for many development groups and the JLL team is currently handling two large-scale townhouse sites that have attracted significant interest. Q. Howwould you evaluate the impact of the past eighteen months in your local market? A. The biggest impact to themarket was the uncertainty and inability to physically move freely and conduct business during the lockdown periods.
With lockdown conditions now removed and the residential market having performed very strongly throughout the year, there has been widespread optimismand confidence throughout themarket. Q. What are your expectations for the commercial property market over the next twelve months? A. Demand and buyer depth for quality sites with continue into 2022. Secondary sites will continue to transact but aremuchmore price sensitive. If we as Victorians and Australians are fortunate enough to enjoy a clear run in 2022, we anticipate it will be a very busy and productive year ahead for the property market. Many landowners and developers are positioning themselves to capitalise on the strong selling conditions and typical lack of competing properties on themarket early in the new year, and our team is looking forward to presenting some fantastic opportunities tomarket in early 2022. Melbourne continues to be a key focus for development groups based locally, nationally and offshore. Following the numerous lockdowns and tough periodMelbourne has endured, there has been every reason for buyers to shift their focus away from theMelbournemarket. Buyers are speaking through action, with a strong belief that the fundamentals and drivers that havemadeMelbourne so great are still there to be enjoyed. There is clear confidence inMelbourne’s growth prospects andwe firmly believe that we will continue to see strong results throughout the Melbournemarket into the new year. Q. Talk us through the most significant deals you have transacted thus far in 2021. A. Two of themore significant development sites we transacted this year were 50-52 Queens Road, Melbourne, a 6,966sqm landholding and former hotel which was sold on behalf of a listedMalaysian group, and 346-350 Macaulay Road, Kensington for circa $50,000,000, which comprised a 6,337sqm site with approval for 424 apartments in an evolving location. The Kensington site was sold on behalf of prominent developer UAG, who had acquired the site a few years ago and since obtained the planning approval. As quite a newly formed team in themarket, we have been fortunate to have acted on behalf of some very important clients throughout 2021 across the development site sector, including Australia Post, Angle, Crema Group, Lechte Corporation, CDL, VicTrack andmany private developers and landowners. As quite a newly formed teamwithin the JLL business, we are continuing to innovate and come upwith new and creative angles and solutions for our valued clients, andwe have seen some exceptional results for our clients who have entrusted us to represent them throughout the year. We are excited for what the new year holds for the growth of our JLL team across the development site space.
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