Apartments thrive on community buy-in

Article by Claire Tyrrell

Source: Business News

Apartment developers take a risk when they commit to a build, but in some areas the road to construction is rockier than others.

When Paul Blackburne announced his intention to build on the site of Subiaco’s former Pavilion Markets, critics believed his plan would join a host of failed proposals for the location.

The Blackburne Group founder and managing director was intent on reshaping the forgotten space with a 24-storey apartment complex and commercial district.

Blackburne Group’s $280 million One Subiaco project was proposed amid a wave of change at the City of Subiaco, which was formulating a new masterplan for the area.

Victorian businessman Andrew Abercrombie bought the 5,451 square metre site for $35.67 million in 2007, before Blackburne Group’s 2018 purchase for $25 million.

Mr Abercrombie’s plans to redevelop the area were opposed by the City of Subiaco, before former state planning minister John Day gave the plans the tick of approval.

By the time the state government gave the Victorian businessman the green light for the apartment development, however, the property market had crashed.

Sirona Urban abandoned plans to purchase the land a year before Mr Blackburne submitted his plans to council, partly due to concerns the council would reject any changes to the approved application.

In 2019, a joint development assessment panel signed off on Blackburne’s proposal, paving the way for the ground-breaking project.

Mr Blackburne told Business News the site had been subject to a decade of planning proposals, but none were viable for development.

“It became a blight on the landscape and people were keen to see something happen there,” he said.

“We thought that market was moving towards larger, higher-end apartments, so we redesigned it to reduce the number of apartments and take it from 16 levels to 24 levels.

“There’s huge pent-up demand for larger, higher-end apartments, mostly from local-owner occupiers in the baby boomer market.”

Parallels can be drawn between One Subiaco and other projects where developers have brought major apartment projects to accommodate local downsizers.

These include Edge Visionary Living’s $84 million Arthouse development in Joondalup and Bode Property’s $16 million One Iluka Beach development, both in Perth’s northern corridor.

Developers can face several barriers to entry as community views, local government sentiment and planning regimes vary across different suburbs.

Meeting demand

As Blackburne Group’s $380 million The Grove apartment project in Claremont nears construction, the developer will have two major projects under way in Perth’s western suburbs.

A history of community aversion to high rise in the area and a hesitancy among some local government authorities to support such developments increased the risk, according to Mr Blackburne.

“When you buy the land, you don’t know with certainty what can be done on it,” he said.

“There’s a logic that says, in a major site like a town centre like Subiaco or Claremont, there should be a good quality apartment project with the ground floor open to cafes, bars, restaurants and activity.

“But the planning laws in many local councils are extremely outdated and aren’t suitable for what the demands are.”

Mr Blackburne acknowledged the planning system had improved markedly in recent years with the introduction of the JDAP system, which delegates the decision-making process on developments to state government appointed and independent experts and two councillors.

“[However] it has still got a long way to go, to ensure good-quality density and good-quality new developments in the right locations,” he said.

“There is a lack of supply to fill the huge demand in the western suburbs apartment market, because most people who have the money to invest in the land aren’t prepared to take on the risk of doing a development.

“It is a difficult enough process anyway.”

With both projects, Blackburne Group managed to get The Grove and One Subiaco proposals through a JDAP at the first hearing.

But as Mr Blackburne explained, that required a scrupulous process of navigating the market and ensuring the benefits of the project were explained to council and community.

“We put a lot of time, a lot of energy into that to make sure it ran well, which most people just can’t do or don’t have the ability to do,” he said.

“It shouldn’t be so difficult … we’ve been able to do it, but for most people it’s just too difficult.” Australian Apartment Advocacy founder Samantha Reece said the strong demand for One Subiaco demonstrated the attraction of high-end apartments.

“Research demonstrates that people are looking for this housing choice,” she said.

Construction of One Subiaco began in late 2020 and the development is on track for completion this December.

City of Subiaco Mayor David McMullen said the council’s revised planning scheme meant Subiaco was well placed for investors to deliver high-quality developments.

“We will never be embarrassed about protecting what makes our city unique, but we are equally not frozen in the past,” he said.

“Big developments can polarise the community, but our council has a balanced track record of approving or supporting developments in a range of scales.

“In some people’s minds, Subiaco seems to retain a legacy reputation as somewhere that can be difficult to develop, but recent experience should prove otherwise as is evident from the significant development activity currently occurring on Rokeby Road.”

Blackburne is part way through $71.5 million and $200 million apartment developments in Karrinyup and has built Rockingham and Ascot apartment developments of $35 million and $55 million, respectively.

Different pathways

Developer Edge Visionary Living utilised the state government’s temporary planning pathway – the State Development Assessment Unit – to get its Ocean Beach Hotel apartment project considered.

The $220 million beachfront project, still in the approvals process, includes 198 apartments, a hotel, restaurant, tavern and small bar at the Ocean Beach Hotel site on Cottesloe’s Marine Parade.

A proposal by Perth developer Gary Dempsey on the same street was approved via the SDAU, after being at the centre of a public debate with the Town of Cottesloe and the community.

The council twice rejected Mr Dempsey’s bid for an eight-storey, then nine-storey apartment complex at 120 Marine Parade, before it was taken to the SDAU.

Mr Dempsey received the green light from the SDAU for a seven-storey development at the site in August 2021, which was subsequently purchased by Perth developer and architect Barry Baltinas, who plans to progress with the approved application.

Edge Visionary Living managing director Gavin Hawkins said the Cottesloe community was surprisingly receptive to his development of the Ocean Beach Hotel site.

“We ran a comprehensive campaign in Cottesloe, and we found that the community is overwhelmingly supportive of new development,” Mr Hawkins told Business News.

Despite not requiring council support, Mr Hawkins said his company underwent an extensive consultation process with the Town of Cottesloe.

“OBH is a significant site, so we want to make sure we get buy-in from them and they have buy-in from us,” he said.

Planning Minister Rita Saffioti said the state government was continuing to work on changes to the planning system to support new complex developments, to ensure it could meet demand for a broad mix of housing options.

The state government is working on a planning reform process and is expected to reveal in coming months whether it will retain a central referring agency for significant projects such as the SDAU.

Fringe projects

Further north, Edge Visionary Living took a significant risk developing the $84 million Arthouse apartment project in Joondalup, completed in late 2020.

The 17-storey apartment tower stands out amid a plethora of low and medium-density housing in the area, being the first of its kind in Joondalup.

While planning authorities including the City of Joondalup welcomed Edge’s concept, the community took some convincing.

“The main hurdle was it was an education process for the local community, because it wasn’t familiar to a lot of the people living in the houses up there,” Mr Hawkins said.

“Also, the concept of buying off the plan was foreign to the vast majority of our potential buyers.” The group started the build with less than 50 per cent pre-sales.

Today, just four apartments of the 164 at Arthouse remain unsold.

Mr Hawkins said a cap on dwelling prices in Perth’s fringes in today’s market would give some developers pause.

“I have absolutely heard developers saying, in those secondary markets, it is very difficult to make the number stack up on a development,” he said.

“You can only push the pricing in a place like Joondalup so far, so construction costs would make it more difficult to do a similar project there today.”

The Arthouse units sold for between $7,000 and $8,000 a square metre, whereas in this market developers require close to $9,000/sqm to make a project viable, Mr Hawkins added.

Subiaco developer Bode Property committed to an apartment project in Iluka, 32 kilometres north of Perth, on the view that the demand would exist.

“Perth’s love affair with coastal living was part of the reason,” Bode Property director Brad Kelly told Business News.

“I guess there was a hunch, from our point of view, that there would be an appetite for apartments, but it certainly wasn’t proved by other projects up in that corridor,” he said.

“[There was] quite a bit of push back from the local community … the main thing being the fact that Iluka has nothing but free-standing housing, there’s not even a villa market up there,” he said.

The $16 million development was complete late last year, with 100 per cent of the apartments now sold.