Perth apartment developer Finbar Group Ltd has scrapped plans for an apartment tower on Adelaide Terrace to undertake its first office-only project.
Perth apartment developer Finbar Group Ltd has scrapped plans for an apartment tower on Adelaide Terrace to undertake its first office-only project.
The Fairlanes bowling site at 175 Adelaide Terrace was earmarked for an $80 million residential tower of 192 apartments, but with Perth’s CBD office market now the tightest in the world, Finbar has lodged plans with the City of Perth for a 14-storey office building.
Finbar estimates the A-grade office tower, totalling 17,510 square metres of space, will have an end value of $120 million when completed in 2012.
Finbar project director Richard Rimington said the aim was to achieve the highest and best use for the 3,640sqm site, which the developer bought in June last year for $8.5 million.
Designed by architects SS Chang, the new project is aiming for a Green Star rating of between 4.5 and five stars.
“We originally bought the site with a view to doing residential apartments, while also knowing that the commercial market was picking up,” Mr Rimington said.
“It’s not that there isn’t demand for residential apartments, there definitely is, but the value of the office component now far outweighs its value as residential.”
He said residential apartments on Adelaide Terrace were achieving $6,500/sqm, or $8,000/sqm with water views.
But for office space, returns of $8,500/sqm in the Adelaide Terrace area and $10,700/sqm on St Georges Terrace were available, he said.
Soaring office rents in the CBD have also made city fringe locations increasingly attractive to tenants, and Finbar is among the developers to take advantage.
In June 2006, the company bought the Nutrimetics site at 59 Albany Highway, Victoria Park, and is about to start work on a 12,000sqm commercial office building and 75 apartments.
The $110 million joint venture is expected to be completed in the first half of 2011.
Mr Rimington said that, when Finbar bought the Nutrimetics site, its highest and best use was residential, but now the commercial market was starting to take off in the area and demand was strong.
“It is the time now to do commercial. We’re 20 years down the road since the last office development boom, but this time around we’ve got the population growth and the economic growth, which is phenomenal. The demand is really there,” he said.
As a consequence, Mr Rimington said the demand for development sites had intensified and the emergence of more eastern states-based conglomerates and institutional investors in the Perth market was making the task of securing sites difficult.
“Adelaide Terrace and Terrace Road sites are a lot harder to come by. The big players are coming in, building and renting and earning good returns for the super funds,” he said.
Despite the big step into office development, Finbar is not losing its focus on high-density residential projects in Perth, which has been the company’s mainstay since its incorporation in 1984.
It currently has eight apartment projects on its books in the city, and others in Mandurah, Rivervale, and Northbridge.
Mr Rimington said the company had identified four new sites in the Perth metropolitan area for residential projects, and was looking to Mandurah for its next major apartment development.
