High-value projects populate Perth pipeline

It's shaping up to be a big year in property development, with work to start on several of the highest value projects in WA history.

A series of large-scale residential and commercial projects are expected to get under way in Perth this year with a development pipeline nearing $2 billion in value.

While the overall number of apartments expected to start construction across Perth is expected to fall in 2020 compared to 2019, the collective value of major projects will be a significant boost for the local construction sector.

Market analysis by Urbis and Business News identified 10 projects likely to start in 2020, with a collective end value of $1.3 billion, in addition to $560 million of commercial projects.

Highlights include Far East Consortium's $300 million Perth Hub, Blackburne's $280 million One Subiaco and Edge Visionary Living's $350 million Canning Beach Promenade proposal in Applecross.

Those developments add to a near $1 billion of apartment buildings currently under construction but expected to be completed by the end of the year.

Projects nearing completion include Fragrance Group's $200 million NV on Murray Street, Norup + Wilson's $193 million The Precinct in Applecross, and Edge Visionary Living's $140 million Eden West.

Urbis director David Cresp said the number of apartments expected to start this year was a continuation of a three-year downward trend and reflected challenging market conditions, but the value of the projects indicated the emergence of several new precincts across Perth.

"There are some key projects that are going to start this year; things like Perth Hub will see a start of the residential development at Perth City Link, which will bring more people into the city and is very positive," Mr Cresp told Business News.

"All of these projects are part of larger precinct plans, the Canning Bridge precinct is coming along well and there are a number of projects happening there.

"In Subiaco, while One Subiaco is not officially a part of Subi East it really is the kick-off of development in that part of the city – it is certainly a key project.

"Part of the challenge of Subiaco is that such a key site sat vacant for so long.

"Having that key corner site activated will really help the revitalisation of Subiaco, which is starting to happen."

Blackburne's One Subiaco is expected to help kickstart a new era of development in the near-city suburb. Image: Blackburne

The One Subiaco project is the showpiece of what is shaping up for the most active year in Blackburne's development history.

Managing director Paul Blackburne told Business News construction would likely start at One Subiaco in late April or early May, with the announcement of a head contractor imminent and the developer having notched up around $140 million in apartments sales.

Mr Blackburne said he was also in final negotiations with a buyer for a $17 million penthouse at One Subiaco.

"Subiaco has shown that the market is not dead, or quiet or slow, or all those words that people use, the market just expects value," he said.

"If you can deliver really high-quality product in the right spot at a low price, then there are a lot of people out there wanting to buy apartments.

"It's just really hard to get the prime sites, you really have got to take a thin margin and price them well, that's how they work. If you get all the one percenters right then they sell well.

"We've come into the new year with a mindset that we don't think it's ever going to return to the easy days of the boom where you would just sell out everything you release, but if you work really hard, give people value for money and keep the price down and the quality up, then it sells."

As well as the apartments, Mr Blackburne said there was considerable interest emerging in the retail component at One Subiaco, after an expressions of interest campaign was launched by leasing agency Metier late last year.

"We got more than 50 expressions of interest from various craft breweries, some gourmet grocers, restaurants, cafes, bars, small shops, and we've selected the preferred operators in each category," he said.

"We're looking to enter into agreements for lease with them within the next 30 days.

"There's some really well-known, well-established companies that are going to do something unique in that town centre of Subi.

"We thought it would be tough in retail, but because it's such a unique spot and it's got $280 million of apartments above it, the interest was a lot stronger than what we anticipated."

Mr Blackburne said his company was also aiming to start construction on the first $63 million, 93-apartment stage at Karrinyup Shopping Centre, which Blackburne is developing in collaboration with centre owner AMP Capital.

Blackburne recently reached practical completion at its $143 million Essence development at Claremont Oval, while the developer is formulating plans for a $200 million project to be built at a prominent Stirling Highway site in Claremont it acquired towards the end of last year.

Mr Blackburne said his company's growth over the past few years was in contrast to the wider economy in Western Australia and came on the back of the adoption of a new strategy several years ago.

"We moved three or four years ago into new markets, in areas where it's undersupplied and to do a new type of product in larger, higher end apartments," he said.

"We've actually had increases in revenue and increases in profit in the last few years. It's been challenging and difficult and we've really had to work very hard and take lower margins, but 2020 is probably our most exciting year yet.

"We've got $700 million in projects in the pipeline to be released in the next 12 months."

Another developer lining up for a bumper year in 2020 is Edge Visionary Living, which has $230 million in projects expected to finish this year in its Arthouse and Eden West apartments.

In addition to Canning Beach Promenade, buildings scheduled to get under way this year for Edge include its $138 million Orchard Terrace in Subiaco and the $58 million Eden East.

Edge Visionary Living managing director Gavin Hawkins said there was also a possibility that marketing could launch for its $165 million Lumiere project in South Perth, pending a satisfactory result at the State Administrative Tribunal in the first quarter of the year.

"Effectively we'll have two completions, two or three launches, a couple of construction starts, so it's a busy period for us, which is good," Mr Hawkins told Business News.

"We've just really focused on the sales side of our business.

"Our in-house sales team are very service-focused, it's kind of our mantra, and in a tough market it's incredibly important for our buyers to have a really good experience through the sales process.

"That, and having assets in very good locations."

Similar to Blackburne, Mr Hawkins said his company's success was largely due to a shift in strategy several years ago.

"I think we've addressed the needs of downsizers earlier than some in terms of the size of products in the market and having larger apartments," he said.

"We were doing that three or four years ago when perhaps others weren't, so that's helped our sales record in getting these things up and running."

Mr Hawkins was also increasingly upbeat of further sales success in 2020, particularly as the state government's 75 per cent stamp duty rebate for off-the-plan apartment sales was starting to stoke interest in apartments, not only for owner-occupiers but also investors.

"The stamp duty rebate has been really significant," he said.

"Funnily enough not just for those projects that are pre-construction. It has obviously been a huge benefit for those projects, particularly as overseas sales have picked up … but I think it's got people re-examining all projects, whether they are pre-construction and the rebate applies, but we've noticed it's also flowing over to our projects that are under construction.

"It's clearly an advantage if the project is pre-construction, but the rebates have got people talking property again and there is a flow-on effect to projects under construction.

"It's been really positive, it would be great if it applied to both under construction and pre-construction, but we think the overall benefits have been significant."

In the commercial office sector, Business News identified $560 million of new buildings that will start this year, adding to the $35 million new headquarters for ABN Group under construction in Leederville.

The highest value office project is Chevron's $360 million Elizabeth Quay headquarters, where contractor Multiplex is expected to start work within months.

ASX-listed developer and funds manager Dexus is also expected to start work on its $200 million demolition and redevelopment of Carillon City and its associated office tower before the end of 2020.

"In the construction market at the moment, any major project kicking off is very positive," Urbis's Mr Cresp said.

"Some of the shopping centre developments have been existing things, but some of that is happening and some of it's been deferred. so an office building kickoff is very positive."