Transforming Canberra's City Centre - In The City Canberra

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TRANSFORMING
CANBERRA’S
CITY CENTRE
DISCUSSIONPAPER
MARCH 2015
Property Council of Australia
(ACT Division)
Level 1, AMP Building
1 Hobart Place
Canberra ACT 2600
t: 02 6248 6902
f: 02 6248 8210
e: act@propertyoz.com.au
www.propertyoz.com.au
Canberra CBD Limited
PO Box 902
Civic Square ACT 2608
t: 02 6162 4292
f: 02 6162 1189
e: info@inthecitycanberra.com.au
www.inthecitycanberra.com.au
2 | PROPERTY COUNCIL OF AUSTRALIA
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 3
CONTENTS
Background 4
Understanding The Challenge 7
Economic Indicators 7
Commercial Office Market 8
Retail Sector Vacancies 10
The Opportunity For Canberra 12
Lessons From Postcode 3000 13
What Did Postcode 3000 Achieve? 13
How Was The Program Structured? 14
Applying Melbourne’s Lessons To Canberra 16
Broad-Based 16
Refined 18
Specific 19
Innovative 20
Creating A Cultural Precinct In Canberra’s CBD 20
Lessons From NewActon 22
Next Steps 25
Financial 25
Regulatory 26
Technical 26
Market 26
Community 26
People 26
Conclusion 27
Appendix 28
4 | PROPERTY COUNCIL OF AUSTRALIA
Stretching from Braddon in the north to
Constitution Avenue in the South, and from the
Canberra Centre across to the Australian National
University, Canberra’s CBD is currently a place of
great potential – and of missed opportunity. The
city centre currently has a 14.7 per cent office
vacancy rate – and this is predicted to rise over the
next year. This isn’t just a problem for commercial
property owners. Urban blight is emerging as a
serious concern.
At the same time, the CBD’s retail sector streetlevel vacancy rate is 15.9 per cent. The vacant
shops, faded signage and ‘for lease’ signs along
City Walk are visible proof that we must invest
more in our city centre. We can do better.
The size of the opportunity is as vast as the CBD
itself. The CBD is 116 hectares in total, and the 1.5
kilometre walk from the Canberra Centre to the
lake is something many have observed requires a
‘packed lunch’.
Each day, 38,000 office workers make their way
into the city centre, while a further 30,000 people
head for ANU. People come to work, shop,
socialise and do business. The city centre is not
just a another ‘town centre’, but should be seen by
all Canberrans as the principal focus of economic,
social and cultural activities – as well as a great
place to live.
The reduction of the Commonwealth public
service can be measured both in terms of
BACKGROUND
A city without a vibrant centre is a city without a heart –
and Canberra’s city centre is in drastic need of CPR.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 5
people (approximately 6,600 in the ACT) and in
square metres of office space (JLL estimates
a contraction of 92,500 square metres). This
downsizing has an impact on the property
industry, but also on retailers. The average office
worker spends $8.50-$10.50 a day on lunches and
coffees –money vital for the CBD’s economy.
The ambitions laid out in the ACT Government’s
City Plan include more people living in the city
centre, less through-traffic, better connections
across the city and to the lake, and a modern built
environment which fosters a dynamic and vibrant
atmosphere. While we are encouraged by the ACT
Government’s commitment to Canberra’s city
centre, particularly through the establishment of a
new urban renewal portfolio, there is further work
to be done.
So, how do we create a three dimensional city
centre that is unique to Canberra?
Lighthouse public sector projects such as a
convention centre, football stadium and aquatic
centre can act as incentives for more investment
from the private sector. Many CBD areas that hum
with vim and vitality – including the NewActon
precinct, Lonsdale Street in Braddon, Bunda
Street and ANU Exchange – are the result
of private sector vision, energy and capital
investment.
Canberra, with a single government overseeing
state and local council responsibilities, innovative
local business groups, and an intelligent, informed
community, should be a dream jurisdiction for
investors. And yet, this is not always the case.
Development in Canberra is hindered by onerous
red tape, taxes, fees and charges – all of which
have the perverse effect of slowing investment,
employment and productivity. The size of
our population compared with our dispersed
geography is a great challenge, and we are
hindered by a reluctance to embrace innovation.
6 | PROPERTY COUNCIL OF AUSTRALIA
The price of doing nothing is great. Currently,
the hallmarks of our city centre are transport
bottlenecks, empty streets, boring building
façades and ageing infrastructure. What should
be the engine room of our city is, in reality, a
provincial town centre.
Canberra CBD Limited and the Property Council
of Australia both represent passionate people and
major stakeholders in our city who want Canberra
to be the best city it can be for the community and
the nation.
On 28 November 2014, the Property Council and
Canberra CBD Limited brought together people
with an interest in the city centre – from planners
and public servants, retailers and restaurateurs
to building owners and designers – to explore how
we create new landmark addresses, attract more
residents into the CBD and rejuvenate our tired
existing buildings. We want to work with the ACT
Government and its agencies to achieve:
• A city with a shared vision – developed by
government in consultation with business,
industry and the community and embraced by
all.
• A city that is planned – and managed by an
integrated strategic master plan that considers
transport, infrastructure, retail and commercial
opportunities and community and recreational
facilities and provides certainty for investment.
• A connected city centre – where working is
easy.
• A city that drives the economic wellbeing of
Canberra – and a centre that feels like a Central
Business District where people can work, rest
and play.
• A unified city with a focus, heart and soul –
where the centre is easily identifiable, where
there is no division or definition between City
East and City West, and where there is a strong
relationship with the Australian National
University and Canberra Institute of Technology.
• A city with architecture befitting the nation’s
capital – with the Sydney and Melbourne
buildings playing a central role and a lively
Northbourne Avenue which signals the city
centre.
• A city developed over time – with a short,
medium and long term development plan,
prioritised actions, staged upgrades and ‘visible
early action’’, such as uniform pavement
treatments.
• A 24-hour, dynamic and vibrant city – that
is accessible to all and which offers a range
of employment and residential choice,
reinvigorated strip retail footage, state-of-theart services, public and private transport options
day and night and a centre that allows freedom
of pedestrian movement.
• A city with coordinated governance and
management – between the ACT and federal
governments, in particular the National Capital
Authority, and other relevant ACT government
agencies.
• A city with one clear vision – which is mindful
of the other town centres and identifies policy
outcomes and how they will be achieved.
• A city with modern and flexible planning
controls – including sensible height restrictions.
• A city centre that is a tourism destination –
pavements and furniture that are of exceptional
standard accompanied by a high quality cleaning
regime and year-long events program.
We must commit to working together to create
new landmark addresses that attract people at
many different stages of life, to rejuvenate our
tired existing buildings and to make employment
in the city an attractive and competitive
proposition. This discussion paper looks at how
to re-invigorate our CBD to deliver outstanding
economic, social and environmental results for
the community as a whole.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 7
ECONOMIC INDICATORS
A sluggish ACT economy has an impact on the
vitality of Canberra’s city centre.
According to ACT Treasury, the estimated resident
population of the ACT at 31 March 2014 was
385,573 persons. For the year ended 31 March
2014, the ACT population rose 1.4 per cent, below
the national growth rate of 1.7 per cent.
‘Public administration and safety’ continues to be
the largest industry in the ACT with a 30.7 per cent
share of current price Gross State Product (GSP)
in 2013-14, followed by ‘construction’ (10.1%) and
‘professional, scientific and technical services’
(8.3%).
Downsizing of the Commonwealth Public Service
has had a clear impact on Canberra’s economy,
with unemployment trending upwards. However,
the workforce participation rate is the second
highest in the country, and unemployment, as for
the fourth quarter of 2014, remains low (4.6%).
Canberra continues to have the highest number of
people with tertiary qualifications and the highest
median household income of all major cities.
The ACT’s GSP, the ‘value added’ by the ACT
economy, rose 0.7 per cent in real terms in
2013–14, below the national GDP growth rate of
2.5 per cent.
ACT Treasury’s Retail Trade report (September
2014) found that retail turnover in the ACT
increased by 1.9 per cent in seasonally adjusted
terms, compared with a national increase of 1.2
per cent.
Year-on-year comparisons find increases in
retail turnover for ‘clothing and soft goods’,
‘food retailing’ and ‘other’ retailing. Conversely,
UNDERSTANDING
THE CHALLENGE
8 | PROPERTY COUNCIL OF AUSTRALIA
decreases were recorded in ‘cafés, restaurants
and takeaway food services’, ‘household goods’
and ‘department stores’.
Of significance, Canberra was ranked Australia’s
most liveable city in the 2014 ‘My City’ survey,
conducted by Auspoll on behalf of the Property
Council of Australia.
COMMERCIAL OFFICE
MARKET
The commercial leasing market in Canberra is
challenging. The CBD vacancy rate increased
from 11.5 per cent to 14.7 per cent in the last
six months, according to the Property Council of
Australia’s January 2015 Office Market Report
(Figure 1). This is due to 20,014 square metres
of supply additions. Net absorption was -8,857
square metres. Withdrawals totalled 5,148
square metres. The recent downsizing of the
Commonwealth public service has resulted in
an increase of sub-lease availability and a rise in
vacancy.”
More detailed information on office vacancies can
be found at the Appendix.
0%
5%
10%
FIGURE 1 CANBERRA OFFICE VACANCY BY PRECINCT
15%
20%
Ja n95
Ju l95
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CIVIC (CBD)
SOURCE: PROPERTY COUNCIL OF AUSTRALIA
NON CIVIC
CANBERRA REGION
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 9
0
50000
100000
150000
200000
250000
300000
D Grade
C Grade
B Grade
A Grade
TuggeranongWodenAirportNorthbourne
Corridor
CityParliamentaryBelconnen
SOURCE: PROPERTY COUNCIL OFFICE MARKET REPORT 2015
FIGURE 2 CANBERRA STOCK PROFIT
10 | PROPERTY COUNCIL OF AUSTRALIA
RETAIL SECTOR
VACANCIES
Canberra CBD Limited’s Street Level Activity
Report (December 2014) highlights the significant
challenge of street level vacancies throughout
the city centre. A total of 110 vacant units (of
689 identified city centre units) were recorded,
representing an overall vacancy rate of
15.9 per cent.
Many factors affect street level activity in
Canberra’s CBD. These include consumer
confidence, an increase in online retailing, the
impact of discount retailers, substantial increases
in rates, increases in electricity and other
operating costs, and the ripple effect of public
service downsizing and consequential empty office
space in the city.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 11
STREET NAME OCCUPANCY NO. VACANCY NO AND %
Mort Street, Braddon 36 3 – 8.33%
Lonsdale Street, Braddon 61 6 – 9.83%
Girrawheen Street, Braddon 3 0 – 0%
Elouera Street, Braddon 12 2 – 16.66%
Torrens Street, Braddon 19 4 – 21.05%
New Acton Precinct 11 1 – 9.09%
Marcus Clarke Street, City 18 4 – 21.05%
London Circuit, City 30 7 – 23.33%
Allara Street, City 15 1 – 6.66%
Binara Street, City 2 0 – 0%
Akuna Street, City 8 2 – 25%
City Walk, City 32 6 – 18.75%
Petrie Plaza, City 16 2 – 12.5%
Ainslie Avenue 17 2 – 11.76%
Garema Place, City 57 7 – 12.28%
Baileys Arcade, City 26 7 – 26.92%
Bunda Street, City 20 6 – 30%
Northbourne Ave, City 12 2 – 16.66%
Alinga Street, City 4 1 – 25%
Moore Street, City 14 3 – 21.42%
Rudd Street, City 4 2 – 50%
Barry Drive, City (Excluding
ANU)
12 2 – 16.66%
Waldorf Apartments, City 11 4 – 26.36%
Sydney Building, City 30 12 – 40%
Melbourne Building, City 36 7 – 19.44%
Glebe Park Apartments, City 5 0 – 0%
ANU, City 36 0 – 0%
Farrell Place, City 6 0 – 0%
Gordon Street, City 3 0 – 0%
University Avenue, City 10 0 – 0%
Centrepoint, City 6 14 – 233.33%
Hobart Place, City 7 2 – 28.57
579 110
TABLE 1 STREET LEVEL ACTIVITY DECEMBER 2014
SOURCE: CANBERRA CBD LIMITED STREET LEVEL ACTIVITY REPORT (DECEMBER 2014)
12 | PROPERTY COUNCIL OF AUSTRALIA
Re-lifing and conversion of these buildings can
be a driver for positive economic, social and
environmental outcomes for the city. The city wide
benefits potentially include:
• Attracting investment in CBD commercial and
residential property
• Driving down the overall commercial office
vacancy rate, fast-tracking the viability of new
premium developments in the CBD
• Encouraging residential development that
expands the resident population, night economy
and vibrancy in our CBD and fringe precincts
• Increasing the diversity of residents in the CBD
– from students to those in retirement
• Improving design outcomes and street activation
in the city – unlocking pockets that are currently
‘dead’ outside normal business hours
• Promoting innovation and creativity across the
city
• Maximising the use of existing infrastructure
and delivering on long-term sustainability
priorities
• Building on Canberra’s green credentials by
recognising and valuing the embedded carbon in
existing structures
• Minimisation of commuters’ reliance on the
motor vehicle
• Securing a safer city through more after-hours
passive surveillance and pride from those
residing in the city
• Increased work and economic activity in the
CBD for the contractors and service providers
who will undertake the conversions
• More bespoke residential, commercial and retail
offerings suited to international investors and
visitors – including students
• Redesigned laneways so that rear loading is
more efficient, with land sales reactivating areas
while raising revenue for the ACT Government
• Rehabilitation of the city, and its fringe
precincts, as Canberra’s central, vibrant hub.
To achieve this, the ACT Government in concert
with industry, needs to build a package of
incentives, promotional programs and support
services to encourage the rehabilitation of parts of
the CBD and fringe.
THE
OPPORTUNITY
FOR CANBERRA
The secondary office buildings in Canberra’s CBD and
older buildings in selected fringe precincts represent an
opportunity for the city.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 13
Like Canberra now, Melbourne’s secondary space
problem was particularly acute, with an average
vacancy rate of around 26 per cent over the
decade and a peak secondary vacancy rate of 30.2
per cent in 1993.
One of the program’s major successes was
facilitating the conversion of obsolete office
buildings to new uses – fast-tracking the
withdrawal of these buildings from the office
market.
More than 500,000 square metres of space was
withdrawn from the market over the period of
the Postcode 3000 project. Without this program,
it is unlikely the total Melbourne CBD office
vacancy rate would have fallen from 25.8 per cent
in 1992 to 7.5 per cent in 2000.
The broader citywide impacts of the program are
also impressive. The program is credited with
achieving a:
• 3,311% increase in apartments in the CBD
between 1992 and 2002
• 830% increase in residents between 1992 and
2002
LESSONS FROM
POSTCODE 3000
What did Postcode 3000 achieve in Melbourne?
Postcode 3000, a project initiated by Melbourne
City Council in the early 1990s, helped to transform
Melbourne’s CBD from an ageing commercial district
with a high vacancy rate into a vibrant city centre.
14 | PROPERTY COUNCIL OF AUSTRALIA
• 275% more cafés and restaurants between 1993
and 2004
• 98% increase in night time pedestrian traffic
between 1993 and 2004, reflecting the growth
of bars and cafés and a safer, more welcoming
environment
• 71% more public space on streets and in
squares between 1994 and 2004
• 62% more students in the CBD between 1993
and 2004
• Doubling of pedestrian traffic in the Bourke
Street Mall between 1993 and 2004 from 43,000
people per day to 81,000.
Importantly, these outcomes were achieved while
still retaining and growing the core commercial
functions of the CBD.
HOW WAS THE PROGRAM
STRUCTURED?
The program provided financial incentives,
technical support, street level support and
promotion to underpin private sector investment
in the renewal process.
The Melbourne City Council has made it
abundantly clear that the financial cost to council
was minimal, particularly in the context of the
outcomes that were delivered.
Below is a brief outline of the different
mechanisms used in the Postcode 3000 project:
FINANCIAL INCENTIVES
• Fee relief
- No open space fees for residential
development
- Performance based refunds on planning fees
• Reassessment of local government rates for the
period of construction
TECHNICAL SUPPORT
• Building and Planning Support Service Centre
– provided specialist advice and support for
building conversions and new development in
the CBD
• Streamlined approvals
• Guidelines to promote and support building
recycling and innovative conversion
• Market analysis reports
STREET LEVEL SUPPORT
• Capital works at street level to support
development
• Resolution of parking issues
CITY LIVING PROMOTIONS
• Public relations and media program
• Project newsletters
• Information packs and advice for key groups
• Demonstration projects.
Significantly, the City of Melbourne was able to
undertake this project without raising residential
or non-residential rates. (See Figure 3 overleaf).
The built form outcomes were equally impressive.
Just one example is the transformation of
the Telstra building on the corner of Russell
and Little Collins streets. Renowned architect
Nonda Katsalidis redeveloped the tired art deco
telephone exchange into a luxury apartment.
building Fender Katsalidis were later instrumental
in the development of the NewActon precinct in
Canberra.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 15
0
‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13
2
4
6
8
10
12
14
C in $
FIGURE 4 CITY OF MELBOURNE RATES HISTORY 1996-2013
CIVIC (CBD)
SOURCE: POSTCODE 3000: A CASE STUDY IN GOVERNMENT AND BUSINESS WORKING TOGETHER
A Grade
FIGURE 3 TRANSFORMATION OF TELSTRA EXCHANGE
TO HERO APARTMENTS
16 | PROPERTY COUNCIL OF AUSTRALIA
Therefore it would appear an opportune time
for industry and government to jointly explore
the potential for a coordinated approach to the
conversion of older office accommodation.
Preliminary examination by the Property Council
and Canberra CBD Limited has identified
four tiers of incentive packages that could be
developed for Canberra. These are:
1. Broad based – conversion or redevelopment of
existing sites.
2. Refined – limited to the conversion or creative
reuse of existing buildings.
3. Specific – tailored to achieve a specific social or
built form outcome.
4. Innovative – promotes and rewards innovation
and creativity.
Each of these is described in more detail on
the following pages. Most incentives could be
achieved by negotiation now.
BROAD-BASED
DESIRED OUTCOME:
To fast-track the redevelopment and activation of
underutilised sites in the CBD and selected fringe
precincts.
SPECIFIC PARAMETERS
• No specific preference for reuse of existing
structures vs complete redevelopment
• No specific preference for the type of use.
POSSIBLE ACTIONS AND INCENTIVES:
• Reduced taxes, fees and charges
• Planning innovation (creative rather than
restrictive height and setback rules)
• Stamp Duty concessions where consolidation of
sites occur AND there is redevelopment within
2-3 years
• Streetscape improvements
• Promotional activities
• Advice and support services.
APPLYING
MELBOURNE’S
LESSONS TO
CANBERRA
The Canberra city and parts of the fringe are facing many
of the same challenges that Melbourne confronted in
the 1990s: in particular, an oversupply of lower grade
commercial building stock.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 17
EXAMPLE OUTCOME
FROM A BROAD BASED
INCENTIVE PROGRAM
DEMOLITION AND REDEVELOPMENT
An assessment of a secondary grade office
building in the Canberra CBD has determined
that it is not appropriate for adaptive
conversion to another use due to the structural
features of the building.
The only suitable solution is the demolition
of the building and redevelopment of the
site. However, such an outcome is unlikely
to be achieved because of the inability of the
development to generate a return that meets
financing thresholds.
The risk to Canberra:
• The site remains inactivate for a long period
of time with little or no investment on the
site. The result would be lower amenity and
lower levels of investment in the city as well
as an inactive site.
How could a broad based incentive program
make a difference?
• Lower government costs such as
development assessment fees and
infrastructure charges coupled with targeted
planning concessions could tip the balance
in favour of the project proceeding.
18 | PROPERTY COUNCIL OF AUSTRALIA
REFINED
DESIRED OUTCOME:
• To fast-track the redevelopment and activation
of underutilised existing buildings in the CBD
and selected fringe precincts.
SPECIFIC PARAMETERS
• A stated preference for the upgrade, reuse or
conversion of existing structures
• No specific preference for the type of use.
POSSIBLE ACTIONS:
In addition to the broad based actions and
incentives the refined program could include:
• Access to environmental upgrade agreements
• Tailored guidelines to provide information for
building owners on how to upgrade or convert
an existing building.
• Engage a planning consultant to provide
technical support to assist in navigating the
challenges associated with building codes,
planning controls and community engagement.
EXAMPLE OUTCOME
FROM A REFINED
INCENTIVE PROGRAM
UPGRADE TO A HIGHER QUALITY OFFICE
BUILDING
An assessment of a secondary grade office
building in the Canberra CBD has determined
that its location means that its highest and
best use is to remain an office building. The
building is also not completely vacant, with
the existing tenant’s lease not expiring for
some years. However, significant investment is
required to bring the building up to an A Grade
standard to make it viable as an office building
for the long-term.
The most suitable solution is to ‘gut’ the
building and invest in entirely new facilities and
services to lift the amenity and environmental
performance. However, such an outcome is
unlikely to be achieved because of the inability
of the owner to generate a return that meets
financing thresholds to undertake the work.
Specifically the cost savings that will be made
as a result of the improved environmental
performance of the building (ie lower electricity
costs) will flow to the tenant, not the owner
who has made the investment. This is known
as a split incentive.
The risk to Canberra:
• There continues to be little or no investment
in the building. The result would be lower
amenity and lower levels of investment in the
city.
How could a refined incentive program make a
difference?
• Other Australian cities have embraced
‘Environmental Upgrade Agreements’ as a
means of overcoming this split incentive.
EUAs are a financing mechanism whereby
the local government plays a role in fairly
apportioning the costs and savings of the
investment between the tenant and the
owner.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 19
SPECIFIC
DESIRED OUTCOME:
• To fast-track the redevelopment and activation
of underutilised existing buildings in the CBD
and selected fringe precincts.
SPECIFIC PARAMETERS
• A stated preference for the upgrade, reuse or
conversion of existing structures
• Targeted towards a specific type of use – for
example student accommodation or retirement
villages.
POSSIBLE ACTIONS AND INCENTIVES:
In addition to the broad based and refined actions
and incentives, the specific program could
include:
• Targeted financial incentives for particular use
types
• Targeted planning or other concessions.
• Tailored guidelines and market analysis to
support and promote the community and
market’s understanding of the converted use.
EXAMPLE OUTCOME
FROM A SPECIFIC
INCENTIVE PROGRAM
STUDENT ACCOMMODATION
An assessment of a secondary grade office
building in the Canberra CBD has determined
that it may be appropriate for conversion to
student accommodation due to proximity to the
university and other services.
However, the building has a significant amount
of basement car parking that is needed
for a commercial building, but not student
accommodation. In essence, the basement car
parks have little value to someone looking to
convert the site into student accommodation.
Writing off the value of the basement car
parking is not a viable solution for the owner
as it would have serious implications for the
valuation of its portfolio and its associated
financing arrangements. Therefore the
conversion does not proceed.
The risk to Canberra:
• There continues to be little or no investment
in the building. The result is a lower amenity
and lower levels of investment in the city. The
city would miss the opportunity to promote
an important and in demand accommodation
type.
How could a specific incentive program make a
difference?
• Planning restrictions prevent the owner
operating a commercial car park in the
building basement. As part of a specific
incentive program, the ACT Government
may allow the owner to operate the car
park as a commercial operation provided
the building was converted to student
accommodation. This would be no cost to
the ACT Government, but would significantly
alter the project’s viability.
20 | PROPERTY COUNCIL OF AUSTRALIA
INNOVATIVE
DESIRED OUTCOME:
• To promote innovation and creativity in the
redevelopment and activation of underutilised
existing buildings in the CBD and selected fringe
precincts.
Possible actions and incentives:
In addition to the broad based, refined and specific
actions and incentives, the Innovative program
could include:
• A grant, award or incentive for an upgrade or
conversion that incorporates innovative design,
building techniques or community facilities.
EXAMPLE OUTCOME
FROM AN INNOVATIVE
INCENTIVE PROGRAM
PUBLIC SPACE
An assessment of a secondary grade
office building in the Canberra CBD has
determined that it may be possible, through
redevelopment, to provide increased
community access to existing or new public
transport facilities or parklands through
the site. This would have the advantage of
activating the site, as well as providing greater
levels of public amenity.
However, the increased activation of the
site and associated retail and commercial
opportunities do not generate sufficient
commercial returns to warrant the investment.
The risk to Canberra:
• There continues to be little or no investment
in the building. The result would be lower
amenity and lower levels of investment in the
city. The city would also miss the opportunity
to improve access for residents.
How could an innovative incentive program
make a difference?
• The ACT Government could invite proposals
from owners who believe aspects of a
possible redevelopment would provide a
social, economic or cultural dividend to the
city’s residents beyond the base value of an
upgraded building. If it is deemed to be a
worthwhile investment in the city, the ACT
Government may provide a grant, award or
other incentive to promote the work.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 21
We must reprioritise our city as more than a
‘central business district’ but also as a cultural
precinct.
Canberra’s heart can become a crucible of
creativity and entrepreneurship. Canberra’s
city could be teeming with activity – vibrant
commercial spaces, pop up galleries and retailing,
food trucks, public art installations, child-friendly
play spaces and urban greenery.
With the exception of Glebe Park, City Hill,
Veterans Park and Latin America Plaza, green
space is limited in our city centre. We need to
identify more opportunities for pocket parks that
will offer amenity to future residents. And we need
to make better use of existing public realm areas.
Our region has a rich community of artisans,
craftspeople and growers who could temporarily
occupy vacant spaces for their creative
enterprises and help us breathe new life and
purpose into our older and valuable city buildings.
Other buildings can be repositioned as
‘incubators’ for budding entrepreneurs and startups, drawing on the hotbeds of innovation at our
universities and CSIRO.
We need to attract a broader demographic of
people into our city – to live, work and play.
Building a compact, diverse, walkable, fine grain
and human scale city requires innovation and
commitment. The solutions we find for Canberra
will be unique to Canberra.
Great cities are defined by their public realm.
It is the parks and public transport, street
patterns and buildings, walkways and waterways
that define a city’s character and capture the
imagination of its citizens.
As former Mayor of Bogota, Enrique Penalosa
says “public space is for living, doing business,
kissing and playing. It can’t be measured by
economics alone. It must be felt with the soul.”
CREATING A
CULTURAL
PRECINCT IN
CANBERRA’S CBD
A vibrant city is important to the image, status and future
success of not just Canberra, but of the nation.
22 | PROPERTY COUNCIL OF AUSTRALIA
WHAT HAS THE
MOLONGLO GROUP
ACHIEVED?
In less than a decade, a forgotten corner of
Canberra’s CBD has been transformed into one of
Australia’s most memorable new neighbourhoods.
ANYTHING BUT ORDINARY
Molonglo Group was determined “not to be
ordinary” when it laid out its vision for NewActon,
which was to be a place of outstanding quality and
design, world-leading environmental sustainability
and a destination with a thriving social and
cultural life. The 2.5 hectare site provided the
scope to create a ‘place’ rather than a building.
Molonglo Group’s Managing Director, Nectar
Efkarpidis says “we’re not developers – we’re
custodians building public assets.” This required
a collaborative approach with architects, interior
designers, landscape architects, engineers,
artists, artisans and creatives, marketing agents,
key tenants, builders and regulators, as well as an
ongoing management approach.
LESSONS FROM
NEWACTON
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 23
A MIXED-USE
MASTERPIECE
Molonglo Group has used mixed-use development
to act as a ‘microcosm of urban life’, recognising
that the space between the buildings is as
important as the buildings themselves.
The precinct embraces what the Molonglo Group
calls “the philosophy of public occupation”,
attracting everyone from five star travellers to
office workers, residents to restaurant goers, and
cyclists to cinema buffs. People come to work and
play, buy and sell, interact and exchange ideas.
Surprises and delights are around every corner.
NewActon blends old and new to create not just
a precinct, but an experience. The hotels, for
example, weren’t designed solely for hotel guests;
the commercial buildings aren’t just the preserve
of office workers. The precinct encourages
everyone to enjoy the spaces.
ACTIVITIES, ARTS AND
CULTURE HUB
Molonglo Group’s Nectar Efkarpidis argues that
“the sign of a great city or great precinct is the
strength of its cultural and artistic life. Arts and
culture are economic drivers for success.”
Embracing Charles Landry’s philosophy that “the
creator of the space is the curator of the space,”
art gives life to the precinct, and is both playful
and thought-provoking.
A full-time events manager and cultural
coordinator drives an innovative arts program
that includes poetry slams, contemporary art
exhibitions, innovative concerts and multi-arts
festivals. This program, together with the cafés,
bars, restaurants and cinemas, attracts people
day and night.
24 | PROPERTY COUNCIL OF AUSTRALIA
BLENDING OLD AND NEW
The buildings were not designed and built to
prescriptive standards simply to meet quick
planning approvals. Creative titling was required,
particularly on the Nishi building.
The new buildings in the precinct - NewActon
East, South, Nishi and the Gallery – do not mimic
the old. Instead, despite their varying heights and
styles, the new buildings join the heritage Hotel
Acton in a ‘conversation’.
It is the integration between building uses and
the spaces between those buildings makes the
precinct worthy of the national 2014 Australia
Award for Urban Design for a completed largescale project. This isn’t NewActon’s only accolade,
either. Hotel Hotel was named Australia’s best
boutique hotel in 2014 by Gourmet Traveller
magazine, and recently attracted the attention of
the New York Times.
NewActon, which was created through private
sector vision, investment and effort, is a
lighthouse example of the potential of our city
centre. We can create places that encourage both
lingering and bustling, that embrace both physical
and intellectual pursuits, and that balance the old
and the new. The Molonglo Group has created a
memorable neighbourhood – and we need more
of them.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 25
This paper has outlined some preliminary options
for consideration. However more detailed analysis
and refinement would be needed to ensure the
final program was well designed and effective.
The Property Council and Canberra CBD Limited
recommend consideration of the following:
FINANCIAL
Financial constraints, such as taxes, fees, charges
(particularly the Lease Variation Charge) affect
our ability to revitalise the CBD.
The lease variation charge (LVC) largely prohibits
the adaptive reuse of redundant C and D
Grade commercial offices, and unless the ACT
Government adopts a more realistic taxation
policy, these sites will continue to deteriorate and
detract from the liveability of the city centre.
The charge adds significant costs to new
development which are ultimately passed on
to the purchaser – with negative effects on
affordability. Contrary to the Territory’s policy
to increase urban density, LVC focuses new
development into greenfield areas or vacant sites
in established areas where development is more
cost-effective.
The Territory’s forecast revenue from the LVC
has plummeted – indicating that the volume of
redevelopment has been dramatically reduced.
Similarly, a report prepared in 2012, The ACT
Lease Variation Charge Implications for housing
affordability, development and growth in
Canberra, found that in the first year following
introduction of LVC the number of development
applications processed in the ACT fell by 56 per
cent. We believe this decline will continue unless
swift action is taken.
Reviewing the methodology for the purpose of
LVC, and removing complications, is an essential
step in our transformation of the CBD. We urge
the ACT Government to:
• Create a remission category for new City
developments where for the first 2 years LVC
will be nil and subsequently the remission rate
is 50 per cent
• Apply LVC at the end of the development
pipeline
• For codified variations – apply a 75 per cent tax
remission (i.e. 25 per cent LVC)
• For non-codified variations – apply a 25 per cent
tax remission and allow the full opportunity
costs to be taken into account in assessing
the before and after values (i.e. offsetting for
existing improvements, demolition and onsite/
offsite works).
NEXT STEPS
The opportunities associated with the evolution of the
Canberra CBD and selected fringe precincts are limitless
– provided the right suite of incentives, promotional
programs and support services are developed, and
private sector investors come on board.
26 | PROPERTY COUNCIL OF AUSTRALIA
REGULATORY
The ACT Government should consider establishing
a renewal commission or corporation to
coordinate city centre revitalisation and ensure an
integrated approach to redevelopment.
By incorporating public and private sector
expertise, renewal commissions or corporations
help resolve bureaucratic and structural
impediments to transform specific precincts.
A statutory CBD Development Authority would
be responsible for creating master plans,
coordinating infrastructure and whole of
government activity, and accommodating growth.
It would encourage investment and facilitate
public finance opportunities. It would also educate
the Canberra community about the benefits of
renewal and change.
The CBD Renewal Authority would drive solutions
for potentially slow developments, including on
height restrictions, set back requirements and
plot ratios, land acquisition, site consolidation and
water, gas and electrical infrastructure demands
and cleaning.
Given the ACT Government’s commitment to
redeveloping the Canberra city centre, a renewal
commission or corporation is an ideal vehicle
for capturing and delivering the best ideas and
governance in an efficient and effective way.
TECHNICAL
A range of technical challenges and opportunities
must be understood and resolved to facilitate the
potential reuse of existing buildings. Innovative
approaches to design and redevelopment require
a range of technical issues to be addressed,
including:
• Heritage requirements
• Building code requirements (particularly around
balconies, depth of apartments, fire services)
• Planning requirements.
In particular, we must balance the need to provide
high-quality public transport with the need for
adequate car parking. While the Property Council
and Canberra CBD Limited support the vision
for a more pedestrian-focused central city, the
provision of adequate car parking is essential to
support the commercial, retail and residential
parts of the city. For the city to grow there must
be sufficient, publicly-accessible car parking for
long and short stay car parking. More flexible use
should be encouraged for existing car parking
spaces, such as the availability of underutilised
car spaces within existing commercial buildings.
MARKET
Further investigation into the market drivers that
will affect the success of the program is required.
Issues needing further analysis may include:
• The demand for targeted use types such as
student accommodation or retirement living
• The suitability of specific precincts or locations
for particular uses
• The dynamics and impacts of international
investment in the residential and commercial
sectors.
COMMUNITY
Revitalisation of our city’s heart must align with
the community’s expectations. Issues requiring
further analysis may include:
• Existing strategies and plans, such as the City
Plan
• Community engagement opportunities,
particularly with schools and the Canberra
Institute of Technology, and with places of
worship
• Communication strategies.
PEOPLE
We have a wealth of clever, creative people in
the nation’s capital who are passionate about
revitalising our CBD. This can be complemented
with experts from other successful projects, such
as the Postcode 3000 project in Melbourne.
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 27
The Property Council and Canberra CBD Limited
believe there is value in further exploration of a
tailored program to promote the redevelopment,
upgrade and/or reuse of underutilised commercial
sites in our city centre.
The success of the Postcode 3000 project in
Melbourne in the 1990s is evidence that such
a program can work. Similarly, investment in
our cultural capital, as seen in NewActon and
elsewhere, can deliver dividends.
Our CBD faces many challenges – but we have the
opportunity to convert those challenges into an
outstanding legacy for the citizens of Canberra.
CONCLUSION
28 | PROPERTY COUNCIL OF AUSTRALIA
APPENDIX
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 29
JLL has tracked the Canberra market since 1978.
Over this time (1978 to 2014), the demand for
office space has been relatively stable. Average
net absorption under a federal Labor government
was 32,300 square metres, compared with 33,100
square metres under a Coalition government.
However, excluding the record high year for net
absorption in 2007 (192,200 sqm), the average
under the Coalition was much lower, at 23,200
square metres per annum.
A contraction in demand (defined as reduction
in occupied space) over a 12 month period in
Canberra is unusual. Between 1978 and 2014, JLL
only recorded two occasions when net absorption
was negative over a calendar year (2000 and 2001).
Over 2014, JLL recorded negative 31,485 square
metres of net absorption in Canberra. 2014 will
represent the third occurrence of negative net
absorption over a calendar year in Canberra
(Figure 5). A contraction in demand and the
completion of new office product has pushed the
vacancy rate higher.
OFFICE MARKET
VACANCY RATES
-50,000
0
50,000
100,000
150,000
200,000
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
FIGURE 5 CANBERRA NET ABSORPTION, 1978-2014
SOURCE: JLL RESEARCH
SQM
30 | PROPERTY COUNCIL OF AUSTRALIA
A number of development projects in the city
centre are under construction and scheduled
to reach practical completion over 2015 (Table
2). Of the 10 projects JLL is currently tracking,
seven are under construction and will add 19,970
square metres of office space to the market over
2015. A number of development projects have
plans approved or submitted. However, many of
these planned office projects will not commence
construction until a significant level of precommitment is achieved.
With the exception of one small pre-commitment
to 10-12 Lonsdale Street in Braddon, all of
the space under construction in Canberra is
speculative construction. Furthermore, a number
of projects in Canberra have development
approval. In the short to medium-term, however,
it is unlikely these projects will commence without
significant pre-commitment.
PROJECT CONSTRUCTION
TYPE
COMPLETION
YEAR
DEVELOPMENT
STAGE
OWNER NLA
50 Blackall Street Full Refurb 2015 Construction MAB
Diversified
Property
Trust
4,727
10-12 Lonsdale Street New
Development
2015 Construction Max Profit
Pty Ltd
1,745
216 Northbourne Avenue Partial Refurb 2015 Construction UNSW 1,200
63-67 Constitution Avenue Full Refurb 2015 Construction Hindmarsh
Group
1,200
63-67 Constitution Avenue New
Development
2015 Construction Hindmarsh
Group
1,500
Gozzard Street (Efkarpidis
St)
New
Development
2015 Construction KDN Group
Pty Ltd
9,000
Keltie Street Partial Refurb 2015 Construction Westfield
Group / The
GPT Group
600
Section 96 New
Development
Mooted DA Approved QIC 37,000
68-72 Northbourne Avenue New
Development
Mooted DA Applied Walker
Corporation
Pty Ltd
52,000
Gozzard Street New
Development
Mooted DA Approved Undisclosed
Private
Investor
2,250
Total 111,222
TABLE 2 PROJECTS UNDER CONSTRUCTION 2015
SOURCE: PROPERTY COUNCIL OFFICE MARKET REPORT JULY 2015
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 31
As a result, JLL forecasts vacancy will remain
elevated over the course of 2015. The vacancy
rate in Canberra is above average for all grades
of office product. However, the composition of
vacancy is skewed more towards B and C Grade
assets (Table 3).
While the A Grade vacancy rate in Canberra’s city
centre is 13.0 per cent, this is skewed by sublease availability. In contrast, the vacancy rate
for the B and C Grade sector (17.1% and 22.6%)
is significantly higher than the broader Canberra
market (Table 3).
We need policies and programs that encourage
upgrading or conversion of existing buildings to
new uses to promote growth in the areas of the
CBD that need it. Changes to the LVC system
that stimulates activity in the market and drive
economic activity are now urgently required.
TABLE 3 VACANCY & NET ABSORPTION BY GRADE FOR CANBERRA CBD
SOURCE: JLL RESEARCH
0
50,000
100,000
150,000
200,000
250,000
300,000
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
FIGURE 6 CANBERRA COMPLETIONS & DEVELOPMENT
PIPELINE 2006-2017
SOURCE: JLL RESEARCH
SQM
Planning
Under Construction
Completions
GRADE TOTAL VACANCY DEC
14 (%)
NET ABSORPTION,
6 MONTHS TO DEC
14(SQM)
NET ABSORPTION, 12
MONTHS TO DEC 14
(SQM)
A 12.98 -8,114 -5,669
B 17.1 -2,475 -13,792
C 22.6 -2,928 -12,024
D 13.0 -68 162
Total 15.1 -13,517 -31,485
32 | PROPERTY COUNCIL OF AUSTRALIA
LESSONS FROM THE PAST
The last time the city precinct had an extended
period of double digit vacancy was in the mid1990s. Vacancy was above 10 per cent for three
successive years in the city precinct (1996, 1997
and 1998). This was broadly a demand-side event
precipitated by the Howard Government’s 1995-96
Budget.
Deloitte Access Economics states that total ‘public
administration and safety’ employment in the
Canberra city and Barton precincts was 19,380
workers in December 1996. After contracting
in 1997 and 1998, it took until December 2000
before the previous peak in public administration
employment was recaptured.
The downsizing of the public sector affected the
Canberra city office market for a decade. Over the
10 years to 2014, audited net absorption in the
CBD was essentially zero (-2,000 sqm). However,
vacancy was largely concentrated in lower quality
grades of office product. Vacancy for B Grade
assets peaked at 19.1 per cent in 1997, while C
Grade vacancy moved above 30 per cent in 1997
(Figure 7).
The weak demand resulted in a period of limited
new supply and the withdrawal of older style
office stock for refurbishment or redevelopment.
Completions were 24,970 square metres in the
city centre between 1997 and 2005. The high
vacancy factor in secondary grade assets resulted
in a number of withdrawals. Over the same period
withdrawals were double the level of completions
(49,700 sqm) in the city precinct (Figure 8).
The risks today are similar to those faced in the
mid-1990s. However, no two real estate cycles
are the same and the Canberra CBD office
market has some notable differences to the
mid-1990s. In the mid to late 1990s, sub-lease
availability was largely unchanged in Canberra.
Federal government departments retained excess
space which allowed them to grow headcount
over the 2001 to 2003 period without leasing
additional space. In this downturn, the public
sector has taken a more strategic approach to
real estate portfolio management. The public
sector has consolidated operations and released
excess space to the market. As a result, sublease availability has increased. Any headcount
expansion over the medium-term will, therefore,
require additional office space.
0%
5%
10%
15%
20%
25%
30%
35%
FIGURE 7 CANBERRA CITY VACANCY RATE BY GRADE
1993-2014
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
A GRADE
SOURCE: PROPERTY COUNCIL OF AUSTRALIA OMR, JLL RESEARCH
B GRADE
C GRADE
STOCK VACANT
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 33
Workspace ratios are significantly tighter in
the Canberra CBD and Barton than the mid1990s. JLL has calculated the workspace ratio
by taking the white collar employment numbers
from Deloitte Access Economics and dividing
by occupied stock. The main limitation of this
methodology is that it includes the private sector.
However, it provides an insight into workspace
ratio trends across the Canberra city and Barton
precincts.
In 1998, JLL assessed workspace ratios at 30
square metres per person. This ratio compressed
to 21.5 square metres per person in 2003. The
compression in workspace ratios as tenants used
space more efficiently limited the potential for
growth in the market over this period.
In 2014, JLL calculated a workspace ratio of 18.5
square metres per person. An increased efficiency
dividend impact (an annual funding reduction
for Commonwealth Government agencies) and
recent changes to the PRODAC (Australian
Property Data Collection) guidelines, reflecting
the occupational density target for usable area
from 16 square metres per occupied workpoint to
14 square metres, will exert further pressure on
workspace ratios. Significantly, JLL’s calculation
for workspace ratio is based on Net Lettable
Area and includes training facilities, storage and
meeting rooms. As a result, the potential impact
from workspace ratio reduction is less in this
cycle than the mid-1990s.
-100,000
-50,000
0
50,000
100,000
150,000
200,000
250,000
300,000
Ja n93
Ja n94
Ja n95
Ja n96
Ja n97
Ja n98
Ja n99
Ja n00
Ja n01
Ja n02
Ja n03
Ja n04
Ja n05
Ja n06
Ja n07
Ja n08
Ja n09
Ja n10
Ja n11
Ja n12
Ja n13
Ja n14
SOURCE: PROPERTY COUNCIL OF AUSTRALIA OMR, JLL RESEARCH
FIGURE 8 CANBERRA CITY COMPLETIONS &
WITHDRAWALS 1993-2014
SQM
Withdrawals
Completions
GRADE CANBERRA SYDNEY MELBOURNE BRISBANE PERTH
Premium 0 14.8 9.2 9.4 16.9
A 60.0 39.4 51.6 35.8 40.0
Prime 60.0 54.2 60.8 45.2 56.9
B 31.1 29.9 16.1 44.1 26.2
C 8.9 12.3 19.3 8.9 16.5
D 0 3.6 3.8 1.8 0.5
Secondary 40.00 45.8 39.2 54.8 43.1
TABLE 4 OFFICE MARKETS PROPORTION OF STOCK BY GRADE 3Q14
SOURCE: JLL RESEARCH
PRIME VS SECONDARY
STOCK
Canberra has a similar proportion of B Grade and
C Grade office stock as Sydney, Melbourne and
Perth. Brisbane is an outlier in the composition
of office product – Brisbane has a much higher
proportion of B Grade and C Grade stock. With
the exception of Sydney, the vacancy trends are
similar – B Grade vacancy is significantly higher
than A Grade (Table 4).
The other major office markets – Sydney,
Melbourne, Brisbane and Perth – have a more
diverse tenant base than Canberra. Analysis
of the Deloitte Access Economics employment
numbers for Canberra implies that 38.9 per cent
of white collar employment is within the ‘public
administration & safety’ category. However, the
proportion of workers in this cohort is significantly
higher in the Canberra city and Barton precincts
(72.9%).
The B Grade market typically has a higher
proportion of small to mid-sized occupiers
(less than 1,000 sqm) and fewer public sector
occupiers. Small to mid-sized businesses are less
driven by corporate social responsibility agendas
and are more price sensitive to real estate
accommodation costs. As a result, the B Grade
office market in Sydney, Melbourne, Brisbane and
Perth has greater depth to the tenant market for
B Grade office space than Canberra.
34 | PROPERTY COUNCIL OF AUSTRALIA
TRANSFORMING CANBERRA’S CITY CENTRE DISCUSSION PAPER | 35
A CITY WITHOUT A
VIBRANT CENTRE
IS A CITY WITHOUT
A HEART .
Property Council of Australia (ACT Division)
Level 1, AMP Building, 1 Hobart Place, Canberra ACT 2600
www.propertyoz.com.au
Canberra CBD Limited
PO Box 902, Civic Square ACT 2608
www.inthecitycanberra.com.au

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