BBE 304 – Assignment 1 – Feasibility

Holmesglen
Assignment 1:
North Melbourne
Mixed Use Development Opportunity
Final Report: Feasibility Study – Project Fundamentals (Stage 1)
Bachelor of Building Surveying (BBS15)
BBE 304 – Large-Scale Mixed-Use Development
Prepared By: Group 6 Report For: Ian Leong Due Date: 12/4/2020
Benjamin Piper 100540028
Christeen Jayawardena 100592702
Grace Larsen 100537739
Neena Justine 100305579
Robert Ouko Nyamunga 100532961
Executive Summary
The aim of the report was for Group 6 Consultancy Firm to outline and assess the viability of a proposed
large-scale mixed-use development, based within a North Melbourne precinct.
The Stage 1 report was catered for investors and large-scale project developers. Essentially building a
preliminary framework; encapsulating key objectives, escalating valuable insights, opportunities
potential development solutions.
The firms approach for the North Melbourne feasibility study involves a two-stage process. The first
being an objective analysis and overview acting as a ‘gateway’ or ‘hurdle’ to ensure the fundamental
aspects and client’s objectives may be satisfied. These essentially include market demand, costs and
revenue, site conditions and features, regulatory and community-based aspects that are influential
toward the proposed development.
The second stage will follow with established fundamental feasibility. The scope of the future report
will explore critical success factors and contain well defined development options with accompanying
program and financial studies.
The report diagnosed the site as a corridor – transit orientated – urban renewal precinct. Effectively
allowing construction for approximately 8 storeys, and potentially up to 12 storeys or greater where
significant community benefits can be provided. There was a direct link found between social, cultural
and environmental aspects in that they are equally important for the success of the development.
The report importantly formulated a base case financial scenario, with worked assumptions and
variables gathered from market and economic data. These included assumptions of land acquisition for
approximately $15 million (with land pricing of $2470 per sqm), building footprint (less a conservative
35% open space) and vertical projection (8 storeys).
The base case developed found the North Melbourne site to be provisionally feasible based on the
construction costs applied, improved site land valuation, basic preliminary fees and insurances.
Effectively the base outcome established a total revenue of about $263.8 million, and costs about
$219.6 million. That is, the ability to generate a profit of about 17% (based on a contingency of 10% and
hurdle rate of 20%)
Base Case Outcome Summa
The report also generates an iterative physical mix, conceived from the base case scenario (built with
constraints and some assumptions).
That is, a baseline termed Mix #1 developed with Retail 10%, Residential 55%, and Commercial Office
35%. In effect the baseline Mix #1, is to be utilised and condensed in the Stage 2 future report.
Essentially with the integration of more detailed quantitative data.
Contents
1.0 Introduction……………………………………………………………………………………………………………………….. 1
1.1 Aim: …………………………………………………………………………………………………………………………… 1
1.2 Purpose:……………………………………………………………………………………………………………………… 1
1.3 Scope: ………………………………………………………………………………………………………………………… 1
1.3.1 Details…………………………………………………………………………………………………………………. 1
1.3.2 Inclusions…………………………………………………………………………………………………………….. 2
1.3.3 Exclusions ……………………………………………………………………………………………………………. 2
1.4 Project Methodology and Approach ………………………………………………………………………………. 3
1.4.1 Fundamental Feasibility: ……………………………………………………………………………………….. 3
1.4.2 Stage 1 Evaluation: ……………………………………………………………………………………………….. 3
2.0 Project Team Structure ……………………………………………………………………………………………………….. 4
3.0 Project Objectives……………………………………………………………………………………………………………….. 5
3.1 Client Focused Objectives …………………………………………………………………………………………….. 5
4.0 Site Overview and Constraints ……………………………………………………………………………………………… 6
4.1 Preliminary Desktop Observations…………………………………………………………………………………. 6
4.2 Site Overview and Surrounding Physical Features……………………………………………………………. 7
4.2.1 Sporting and Recreational: …………………………………………………………………………………….. 7
4.2.2 Tourism Attractions / Places of Interest:………………………………………………………………….. 7
4.2.3 Transport: ……………………………………………………………………………………………………………. 8
4.2.4 Education:……………………………………………………………………………………………………………. 8
4.3 Site Constraints……………………………………………………………………………………………………………. 8
4.3.1 Irregular Site Perimeter Shape ……………………………………………………………………………….. 8
4.3.2 Traffic Congestion…………………………………………………………………………………………………. 9
4.3.3 Site Access: Existing and Future Crossings ……………………………………………………………… 10
4.3.4 Established Vegetation Strip ………………………………………………………………………………… 10
4.3.5 Local Neighbourhood Character Settings and Building Scale…………………………………….. 11
4.3.6 Development Approval………………………………………………………………………………………… 12
4.3.7 Demolition of Brownfield Site ………………………………………………………………………………. 12
5.0 Mixed Use Development Principles and Foundations ……………………………………………………………. 13
5.1 Mixed Use Defined …………………………………………………………………………………………………….. 13
5.2 Mixed Use Versus Single Use……………………………………………………………………………………….. 14
5.3 Historic Foundations and Principles ……………………………………………………………………………… 15
5.4 Characteristics of MUD: Realising the Benefits………………………………………………………………. 16
5.5 Mixed Use Categorisation: Diagnosing the Site ……………………………………………………………… 17
5.5.1 Shop Top: Standard …………………………………………………………………………………………….. 17
5.5.2 Shop Top: Heritage or Character…………………………………………………………………………… 17
5.5.3 Strategic Site………………………………………………………………………………………………………. 18
5.5.4 Urban Renewal …………………………………………………………………………………………………… 18
6.0 Mixed Use Development: Navigating the Obstacles & Challenges …………………………………………… 19
6.1 Area Set Out and Utilisation: Conflicting Uses for the Building ………………………………………… 19
6.2 Allocation of Public and Private Space ………………………………………………………………………….. 19
6.3 Allocation of Dedicated Car Parking and Bicycle Lots ……………………………………………………… 19
6.4 Vertical Access and Circulation ……………………………………………………………………………………. 20
6.5 Structural and Architectural Design (Constraints)…………………………………………………………… 20
6.5.1 Functionality………………………………………………………………………………………………………. 20
7.0 Urban Design & Development…………………………………………………………………………………………….. 21
7.1 Design Development ………………………………………………………………………………………………….. 21
7.2 Planning and Environmental Provisions………………………………………………………………………… 22
7.2.1 Land Zoning ……………………………………………………………………………………………………….. 22
7.2.2 Planning Overlays ……………………………………………………………………………………………….. 23
7.2.3 Heritage Overlays ……………………………………………………………………………………………….. 23
7.3 Authority Approvals……………………………………………………………………………………………………. 24
7.3.1 Water Authorities……………………………………………………………………………………………….. 24
7.3.2 Road Authorities…………………………………………………………………………………………………. 24
7.4 Building Regulatory Requirements……………………………………………………………………………….. 25
7.4.1 Regulatory Requirements…………………………………………………………………………………….. 25
7.4.2 The Building Act 1993………………………………………………………………………………………….. 25
7.4.3 Building Code of Australia ……………………………………………………………………………………. 26
7.4.4 BCA and Building Classification …………………………………………………………………………….. 26
8.0 Development Sustainability: Social, Cultural and Environmental Aspects ………………………………… 27
8.1 Social and Cultural……………………………………………………………………………………………………… 27
8.1.1 Social Capital and its Importance ………………………………………………………………………….. 27
8.1.2 Enhancing Social Capital………………………………………………………………………………………. 28
8.1.3 Social Issues……………………………………………………………………………………………………….. 28
8.2 Cultural Diversity ……………………………………………………………………………………………………….. 29
8.2.1 The Importance of Cultural Diversity …………………………………………………………………….. 29
8.2.2 Enhancing Cultural Diversity…………………………………………………………………………………. 29
8.2.3 Key Issues with Cultural Diversity………………………………………………………………………….. 30
8.3 Sustainable Building Development……………………………………………………………………………….. 30
8.4 Sustainability and Community: Objectives…………………………………………………………………….. 31
8.5 Infrastructure and the Environmental Impacts………………………………………………………………. 32
8.5.1 Environmental Impact Assessment ……………………………………………………………………….. 32
8.5.2 Environmental Management Plan…………………………………………………………………………. 34
8.5.3 Construction Management Plan……………………………………………………………………………. 34
8.5.4 Environmental Assessment Requirements……………………………………………………………… 34
8.5.5 Environmental Overlay………………………………………………………………………………………… 35
8.5.6 Environmental Health Impacts……………………………………………………………………………… 35
8.5.7 Environmental Economics ……………………………………………………………………………………. 35
9.0 Macro-Economic Impacts Summary…………………………………………………………………………………….. 37
9.1 Demand Factors…………………………………………………………………………………………………………. 37
9.1.1 Foreign Investment Influence……………………………………………………………………………….. 37
9.1.2 Property Market Snapshot …………………………………………………………………………………… 38
9.1.3 Government Incentive: First Home Buyers …………………………………………………………….. 38
9.2 Economic Outlook- Victoria…………………………………………………………………………………………. 38
9.2.1 Review of Performance Indicators ………………………………………………………………………… 39
9.3 Victorian Construction Sector Outlook …………………………………………………………………………. 41
9.4 Key Market Impacts……………………………………………………………………………………………………. 43
9.4.1 Environmental and Pandemic Events…………………………………………………………………….. 43
9.4.2 Consumer Spending and Investment …………………………………………………………………….. 43
9.4.3 Wage Growth, Inflation and Unemployment………………………………………………………….. 43
10.0 Demographics and Market Profile Summary ………………………………………………………………………… 44
10.1 Population and Housing Snapshot: ………………………………………………………………………………. 44
10.2 Historical Patterns of Development: …………………………………………………………………………….. 45
10.3 Migration and Housing Dynamics: ……………………………………………………………………………….. 45
10.4 Housing Supply: …………………………………………………………………………………………………………. 47
11.0 Melbourne Commercial Market:…………………………………………………………………………………………. 48
11.1 Population and Employment Growth……………………………………………………………………………. 48
11.2 Commercial Supply and Demand: Interest Rates and Vacancy Rates………………………………… 49
11.3 The Concept of Pre-Commitment ………………………………………………………………………………… 51
11.4 The Office Sector: The Emergence of Co-working Arrangements …………………………………….. 51
12.0 Market Analysis and the Mixed-Use Environment…………………………………………………………………. 52
12.1 The Development Market …………………………………………………………………………………………… 52
12.1.1 Market Studies and the Effect of Time…………………………………………………………………… 53
12.2 Community and Economic Demographic Assessment:……………………………………………………. 53
12.2.1 North Melbourne and CBD Data …………………………………………………………………………… 53
12.2.2 Trend 1: Population and Employment Growth ……………………………………………………….. 53
12.2.3 Trend 2: Employment and Education…………………………………………………………………….. 54
12.2.4 Trend 3: Residential Consumer Age Structures……………………………………………………….. 55
12.2.5 Trend 4: Transportation and Motor Vehicles………………………………………………………….. 55
12.2.6 Financial Scenarios – Building Base Assumptions ……………………………………………………. 56
12.2.7 Financial Scenarios – Income Capacity…………………………………………………………………… 56
12.2.8 Financial Capacity and Modelling………………………………………………………………………….. 57
12.2.9 Baseline Residential Scenarios ……………………………………………………………………………… 58
12.3 Industry and Commercial Assessment: …………………………………………………………………………. 59
12.3.1 Critical Questions………………………………………………………………………………………………… 59
12.3.2 Commercial Focus Options…………………………………………………………………………………… 59
12.3.3 Commercial Development Drivers in Focus ……………………………………………………………. 60
13.0 Base Assumptions……………………………………………………………………………………………………………… 61
13.1 Land Acquisition ………………………………………………………………………………………………………… 61
13.2 Preliminaries……………………………………………………………………………………………………………… 62
13.3 Construction Period……………………………………………………………………………………………………. 63
13.4 Building Footprint (Site) ……………………………………………………………………………………………… 63
13.5 Building Footprint (Vertical) ………………………………………………………………………………………… 64
13.6 Building Footprint (Basement) …………………………………………………………………………………….. 65
13.7 Construction Costs……………………………………………………………………………………………………… 66
13.8 Improved Site Valuation……………………………………………………………………………………………… 67
13.8.1 Commercial Rental Rates …………………………………………………………………………………….. 67
13.8.2 Economic Feasibility Summary……………………………………………………………………………… 68
14.0 Large Scale Development: Risk Analysis and Management …………………………………………………….. 70
14.1 Construction Projects: The Nature of Opportunity and Risk……………………………………………. 70
14.2 Risk Concepts:……………………………………………………………………………………………………………. 71
14.2.1 Risk Identification: Defined ………………………………………………………………………………….. 71
14.2.2 Risk Assessment and Quantification: Defined…………………………………………………………. 71
14.2.3 Risk Response Development and Control: Defined………………………………………………….. 71
14.2.4 Risk Management Process:…………………………………………………………………………………… 72
14.3 Risk Classification and Sources:……………………………………………………………………………………. 72
14.3.1 Economic factors ………………………………………………………………………………………………… 72
14.3.2 Financial factors………………………………………………………………………………………………….. 72
14.3.3 Design factors …………………………………………………………………………………………………….. 73
14.3.4 Design documentation factors ……………………………………………………………………………… 73
14.3.5 Physical factors…………………………………………………………………………………………………… 73
14.3.6 Legal Factors………………………………………………………………………………………………………. 73
14.3.7 Project stakeholder – private or public (human) factors ………………………………………….. 73
14.4 Internal and External Risk:…………………………………………………………………………………………… 74
14.5 Risk Quantification: Rating and Ranking ……………………………………………………………………….. 75
14.5.1 Risk Ranking via Matrix Systems: ………………………………………………………………………….. 75
14.5.2 Risk Consequence:………………………………………………………………………………………………. 76
14.5.3 Risk Likelihood:…………………………………………………………………………………………………… 76
14.5.4 Risk Events: Consequence and Likelihood………………………………………………………………. 77
14.5.5 Coding of Risk Events…………………………………………………………………………………………… 77
14.6 Risk Response and Procedures:……………………………………………………………………………………. 78
14.7 Risk Management………………………………………………………………………………………………………. 78
14.8 Risk Management Planning…………………………………………………………………………………………. 79
14.9 Risk Management Techniques: ……………………………………………………………………………………. 79
14.10 Application of Risk Management in Project Activities …………………………………………………….. 79
14.11 Building Management Systems: …………………………………………………………………………………… 80
15.0 North Melbourne Stage 1: Proposed Physical Options…………………………………………………………… 81
15.1 Utilisation of the Base Case…………………………………………………………………………………………. 81
15.2 Market Sectors: Physical Mix ………………………………………………………………………………………. 82
15.2.1 Proposed Mix #1…………………………………………………………………………………………………. 82
15.2.2 Proposed Mix #2…………………………………………………………………………………………………. 82
15.2.3 Proposed Mix #3…………………………………………………………………………………………………. 82
15.2.4 Proposed Mix #4…………………………………………………………………………………………………. 82
15.3 North Melbourne: Stage 1 Fundamentals – Qualitative Assessment ………………………………… 83
15.3.1 Qualitative Rating ……………………………………………………………………………………………….. 83
15.3.2 Residential Fundamentals ……………………………………………………………………………………. 83
15.3.3 Commercial Office Fundamentals …………………………………………………………………………. 84
15.3.4 Retail Fundamentals……………………………………………………………………………………………. 84
15.4 Stage 1 Proposed Physical Options ………………………………………………………………………………. 85
16.0 Conclusion ……………………………………………………………………………………………………………………….. 87
17.0 Recommendations…………………………………………………………………………………………………………….. 89
18.0 List of References ……………………………………………………………………………………………………………… 90
19.0 Appendix………………………………………………………………………………………………………………………….. 98
19.1 Appendix 1: Site Neighbourhood Character and Scale Analysis: ………………………………………. 98
19.1.1 Commencing Boundary Road (from North to South)……………………………………………….. 98
19.1.2 Commencing Racecourse road (from West to East) ………………………………………………… 99
19.1.3 Commencing Flemington Road (from North to South East) ……………………………………. 100
19.2 Appendix 2: Basic Market Competition Analysis…………………………………………………………… 101
19.3 Appendix 3: Types of Mixed Used Development – Case Studies …………………………………….. 102
19.3.1 Vertical Mixed-Use Development ……………………………………………………………………….. 102
19.3.2 Horizontal Mixed-Use Development:…………………………………………………………………… 103
19.3.3 Walkable and/or Courtyard Mixed-Use: ………………………………………………………………. 104
19.4 Appendix 4: Macro Economic Fundamentals……………………………………………………………….. 105
19.4.1 Inflation …………………………………………………………………………………………………………… 105
19.4.2 Gross Domestic Product (GDP) – Growth rate……………………………………………………….. 106
19.4.3 Changes in Unemployment ………………………………………………………………………………… 108
19.4.4 Cash Rate…………………………………………………………………………………………………………. 110
19.5 Appendix 5: Demographic Community Profile……………………………………………………………… 112
19.5.1 Age Structure and Distribution:…………………………………………………………………………… 112
19.5.2 Household Categorisation: …………………………………………………………………………………. 113
19.5.3 Dwelling Structure and Bedrooms: ……………………………………………………………………… 115
19.5.4 Motor Vehicles Owned:……………………………………………………………………………………… 115
19.6 Appendix 6: Demographic Economic Profile ………………………………………………………………… 116
19.6.1 Incomes: ………………………………………………………………………………………………………….. 116
19.6.2 Rental Payments:………………………………………………………………………………………………. 118
19.6.3 Mortgage Payments: …………………………………………………………………………………………. 119
19.6.4 Occupations:…………………………………………………………………………………………………….. 119
19.6.5 Industry: Employment, Output and Growth: ………………………………………………………… 120
19.7 Appendix 7: Residential Market Data………………………………………………………………………….. 122
19.7.1 Median Sales Timelines (2014-2019) …………………………………………………………………… 122
19.7.2 Unit Sales and Rental…………………………………………………………………………………………. 123
Table of Figures
Figure 1: Site Aerial Snapshot (Google Maps, 2019)……………………………………………………………………….. 6
Figure 2: Site Aerial Snapshot (Google Maps, 2019)……………………………………………………………………….. 7
Figure 3: Site Location and Boundary (Google Maps, 2020)…………………………………………………………….. 9
Figure 4: Site Access (Crossings) and Traffic Patterns (Google Maps, 2019) ………………………………………. 9
Figure 5: Established Vegetation Strip (Google Maps, 2019)………………………………………………………….. 10
Figure 6: Local Neighbourhood Settings and Building Scale (Google Maps, 2019) ……………………………. 11
Figure 7: MUD Principle (Rogers 1998 cited by Wardner, 2014)……………………………………………………… 13
Figure 8: Comparison of MUD Features (Cheah and Tan 2005, cited Wardner, 2014)……………………….. 14
Figure 9: MUD Principle (Ferrandi, 2013)…………………………………………………………………………………….. 15
Figure 10: MUD Principle (Wardner, 2014)………………………………………………………………………………….. 16
Figure 11: Site Zoning: Commercial 1 Zone (C1Z) …………………………………………………………………………. 22
Figure 12: Trend Annual Growth Rates (James, 2020)………………………………………………………………….. 39
Figure 13: Wages, CPI and Home Prices (James, 2020)…………………………………………………………………. 40
Figure 14: Residential Building and Other Dwellings Work Done (MBAV, 2020)……………………………….. 41
Figure 15: Dwelling Commencements – Other Dwellings (MBAV, 2020) …………………………………………. 41
Figure 16: Non Residential Building (MBAV, 2020)……………………………………………………………………….. 42
Figure 17: Non Residnetial Building Sectors (MBAV, 2020) ……………………………………………………………. 42
Figure 18: Forecast – Forecast Net Migration – By Age Group (id, 2019)…………………………………………. 45
Figure 19: Net Migration Patterns (id, 2019) ……………………………………………………………………………….. 46
Figure 20: Emplyment Growth: Oxford Exonomics, utilised by Trembath, 2019)………………………………. 48
Figure 21: Melbourne CBD Net Supply and Vacancy (Knight Frank Research, utilised by Burston et al
2019)………………………………………………………………………………………………………………………………………. 49
Figure 22: Economic Indicators: Knight Frank Research, utilised by Trembath, 2019) ……………………….. 50
Figure 23: CBD Office Vacancies: Knight Frank Research, utilised by Trembath, 2019)………………………. 50
Figure 24: CBD Office Take Up: Knight Frank Research, utilised by Trembath, 2019) ………………………… 51
Figure 25: Vehicles Per 1K Population – ABS 9309.0 cited by Wiltshire 2020)…………………………………… 55
Figure 26: Key Development Drivers: Knight Frank Research, utilised by Ciesielski, 2019) …………………. 60
Figure 27: Risk Management Process (NSWT, 2004) …………………………………………………………………….. 72
Figure 28: Hierarchical Risk Breakdown Structure (Tah et al 1993, utilised by Tah and Carr 2001)……… 74
Figure 29: Risk Ranking Matrix (NSWT, 2004)………………………………………………………………………………. 75
Figure 30: Kirrra Apartents (CRC Group, 2020) …………………………………………………………………………….. 98
Figure 31: Serra Apartents (CRC Group, 2020)……………………………………………………………………………… 99
Figure 32: Vertical Mixed Used Developments (Auckland Design Manual, 2020)……………………………. 102
Figure 33: Horizontal Mixed Used Developments (Auckland Design Manual, 2020) ……………………….. 103
Figure 34: Courtyard Open Type Mixed Use Developments (University of Delaware, 2020)…………….. 104
Figure 35: Australia’s Inflation Rate, 2017 – 2024 (Statista 2020)………………………………………………….. 105
Figure 36: Quarterly GDP Growth, Australia, 1991- 2018 (ABS, 2018) …………………………………………… 106
Figure 37: Australian GDP (Real) Growth Rate, 2014 – 2024 (Statista 2020) …………………………………… 107
Figure 38:Industry Value Added by industry – sector & 1991 – 2018 (ABS)……………………………………… 108
Figure 39: Unemployment Rate in Australia, (ABS, 2020)…………………………………………………………….. 108
Figure 40: Unemployment Rate – Australia (ABS), 2020) ……………………………………………………………… 109
Figure 41:Australia’s Unemployment rate from 2014 to 2024, (Statista 2020)……………………………….. 109
Figure 42: Graph of the Cash Rate (RBA), 2020) …………………………………………………………………………. 110
Figure 43: Forecast – Age Structure (id, 2019)……………………………………………………………………………. 112
Figure 44: Forecast – Age Structure Change (id, 2019)………………………………………………………………… 113
Figure 45: Forecast – Household Types 2020 – 2041 (id, 2019) …………………………………………………….. 114
Figure 46: Forescast – Change in Houehold Types (id, 2019) ……………………………………………………….. 114
Figure 47: Bedroom Mix (A) and Dwelling Structure (B) (COM, 2019) …………………………………………… 115
Figure 48: Motor Vehicles Owned (COM, 2019) …………………………………………………………………………. 115
Figure 49: Motor Vehicles Owned (COM, 2019) …………………………………………………………………………. 116
Figure 50: Household Income 2016 COM (COM, 2019) ……………………………………………………………….. 116
Figure 51: Personal Weekly Income 2016 COM (COM, 2019)……………………………………………………….. 117
Figure 52: Personal Weekly Income 2016 COM – High Rise (COM, 2019)………………………………………. 117
Figure 53: Rental Payments Groups (COM, 2019)……………………………………………………………………….. 118
Figure 54: Rental Payments 2016 – High Rise (COM, 2019) ………………………………………………………….. 118
Figure 55: Monthly Mortgage Payments (COM, 2019) ………………………………………………………………… 119
Figure 56: Occupations (COM, 2019) ………………………………………………………………………………………… 119
Figure 57: Industry Ranked by Employment – Jobs (Geografia, 2020)……………………………………………. 120
Figure 58: Industry Ranked via Economic Output (Geografia, 2020)……………………………………………… 120
Figure 59: Industry Ranked by Growth Trend (Geografia, 2020)…………………………………………………… 121
Figure 60: Median Sales Timeline 2014-2019 (REIV, 2019)…………………………………………………………… 122
Figure 61: Metro Median Sales House and Unit (REIV, 2019)……………………………………………………….. 122
Figure 62: Unit Sales and Rental Data (REIV, 2019) …………………………………………………………………….. 123
Table of Tables
Table 1: Sustainability and Community Objectives……………………………………………………………………….. 31
Table 2: Forecast – Poulation, Households and Dwellings (id, 2019) ………………………………………………. 44
Table 3: Base Acquisition Case …………………………………………………………………………………………………… 61
Table 4: Preliminary Expenses Estimation……………………………………………………………………………………. 62
Table 5: Construction Period – Large Scale Projects ……………………………………………………………………… 63
Table 6: Building Footprint Estimation………………………………………………………………………………………… 63
Table 7: Vertical Footprint – Case 1 ……………………………………………………………………………………………. 64
Table 8: Vertical Footprint – Case 2 ……………………………………………………………………………………………. 64
Table 9: Basement Footprint – from Case 2…………………………………………………………………………………. 65
Table 10: Construction Costs Estimate………………………………………………………………………………………… 66
Table 11: Improved Site Valuations…………………………………………………………………………………………….. 67
Table 12: Cark Park Valuation Estimate ………………………………………………………………………………………. 67
Table 13: Commercial Rental Rates…………………………………………………………………………………………….. 67
Table 14: Base Case Outcome Summary……………………………………………………………………………………… 68
Table 15: Base Case – Sellable Land Improvement Estimate………………………………………………………….. 69
Table 16: Risk Consequence Evaluation ………………………………………………………………………………………. 76
Table 17: Risk Liklhood Evaluation ……………………………………………………………………………………………… 76
Table 18: Risk Rating Evaluation – Qualitative Approach ………………………………………………………………. 77
Table 19: Risk Rating Evaluation – Qualitative Approach (+ Coding) ……………………………………………….. 77
Table 20: Risk Level Coding ……………………………………………………………………………………………………….. 77
Table 21: S1 Fundamentals – Qualitative Analysis………………………………………………………………………… 83
Table 22: S1 Fundamentals – Residential Analysis………………………………………………………………………… 83
Table 23: S1 Fundamentals – Office Analysis……………………………………………………………………………….. 84
Table 24: S1 Fundamentals – Retail Analysis ……………………………………………………………………………….. 84
Table 25: Forecast – Household Types 2020 – 2041 (id, 2019)………………………………………………………. 113
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
Page | 1
1.0 Introduction
1.1 Aim:
This preliminary report will outline and assess the viability of a large-scale mixed-use development.
(The final supplementary report will provide a comprehensive investigation and analysis of the
proposed development)
1.2 Purpose:
The preliminary report will make recommendations for developers planning large scale mixed used
developments. The report will provide a framework encapsulating proposed objectives, an outline of
potential solutions, as well as feasibility recommendations.
1.3 Scope:
1.3.1 Details
The data used to form this report was based upon:
– A site located in North in North Melbourne (3051), within the City of Melbourne (COM)
municipality, 3km from the Melbourne CBD
– The boundaries (Flemington, Racecourse and Boundary Roads, 159.2m, 126.5m and 96.1m)
form a right-angled triangle lot.
– The site is contained on a single consolidated title (0.6 ha, equivalent to 6073 m² from the lot
map provided).
– Initial planning approvals consider mixed use development (Final planning applications will be
required confirming the layout and envelope)
– The site has outstanding and accessible transport networks (established and existing PTV –
Trams 57 & 59 and Craigieburn Train Line) as well as proximity to the city link and bike paths.
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
Page | 2
1.3.2 Inclusions
The report encompasses the key elements for project feasibility. That is, all issues contributing to
success or failure and based upon:
– Site constraints and implications
– Regulatory and planning provisions summary
– Demographics and market analysis (macro and micro economics)
– Social and cultural elements affecting large scaled and mixed-use developments
– Risk identification, a framework and mechanisms for analysis and management
– Sustainable development principles and pillars (economic, social, cultural and environmental)
– Mixed use and development considerations (infrastructure, transport, services, amenities, local
resources)
– Worksite development relevant for large scale development (environmental and impacts
assessment, management plans, demolition, materials, waste, pollution and contamination,
preservation of established trees and neighbourhood character, water conservation)
– Project considerations (procurement and contractual methods)
– Draft of development options (scope and mix) with financial considerations
1.3.3 Exclusions
The report will NOT consider the following aspects:
– Site construction (the physical construction process and methodologies, installations, fittings
and finishing of building materials or building elements)
– Development of project documentation (architectural and structural concepts and plans, design
drawings, specifications and schedules)
1.3.3.1 Future Advice
A future report (pending fundamental feasibility) will investigate the following aspects:
– Comprehensive stakeholder analysis (detailing power – influence and relationships and their
impact on the North Melbourne development.
– Procurement methods (suggested project delivery and contractual structure)
– Detailed project schedule, and financial studies (cashflow, estimated returns)
– Stakeholder identification and detailed analysis (while a very important development and risk
aspect, there is little value providing until Stage 1, feasibility hurdle is passed)
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
Page | 3
1.4 Project Methodology and Approach
The firms approach for the North Melbourne feasibility study involves a two-stage process. The first
being an objective analysis and overview. That is, acting as a ‘gateway’ or ‘hurdle’ to ensure the
fundamental aspects and client’s objectives may be satisfied. Essentially the market demand, costs and
revenue, site conditions and features, regulatory and community-based aspects must be favourable
toward the proposed development.
The second stage will follow where fundamental feasibility is granted. In effect and where applicable,
full feasibility and analysis of critical success factors will be contained in a future report. The scope of
the future report (if applicable) should contain well defined development options with accompanying
program and financial studies.
1.4.1 Fundamental Feasibility:
– Project definition (formulating and defining elements of the inquiry, performing evaluation
research)
– Establishment of key project and client objectives
– Collection of project data (site analysis, site and project constraints, demographics, regulatory
provisions, macro and micro economics, market segment analysis, preliminary risk analysis)
1.4.2 Stage 1 Evaluation:
– Identification of relevant constraints, potential issues and influences, themes, trends and
patterns.
– Process of determining strengths or weaknesses of site / project from statistics and numerical
(quantitative data) including macroeconomics, market segments and demographics
– Establish a ‘benchmark’ or ‘base case’ incorporating financial variables and assumptions.
– Deliver subjective and value judgements of a ‘base case’ in conjunction with macroeconomic,
market and community research (basic analysis of numerical and statistical data)
– Escalate a range of proposed development options, that should be explored further via future
financial analysis (with estimated returns) in conjunction with full risk analysis.
Recommendations provided are designed to eliminate options that should NOT be pursued. Stage 2
evaluation will further advance the short-listed options determining their level of feasibility, while
providing more strategic advice in terms of high value opportunities and levels of risk exposure.
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2.0 Project Team Structure
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3.0 Project Objectives
3.1 Client Focused Objectives
1. To establish if the North Melbourne site is economically and socially suitable for large-scale mixeduse building(s)
2. To determine if the North Melbourne site can effectively integrate employment and housing with
retail facilities and community spaces.
3. To distinguish relevant development aspects that satisfy local planning guidelines; ensuring the
building scale, form and height are congruent with the site and existing neighbourhood settings.
4. To highlight all necessary development provisions attributing to expenses and financial obligations.
5. To extract valuable insights from market, micro and macro-economic data relevant for financial
forecasting.
6. To escalate the most effective and compatible physical options, maximising the return on
investment.
7. To diagnose a range of compatible commercial and retail activities suitable for high-density mixeduse buildings.
8. To provide strategic risk mitigation and management advice.
9. To highlight the greatest and most sensitive risks relevant for the development.
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4.0 Site Overview and Constraints
When considering a mixed-use development there are many obstacles and challenges that need to be
resolved. Identifying these challenges at the feasibility stage is essential as it can highlight where
potential for risks and issues will arise.
Some of the obstacles and challenges with mixed use developments surround issues like site
constraints, understanding the demographics, and the social and cultural factors.
Figure 1: Site Aerial Snapshot (Google Maps, 2019)
4.1 Preliminary Desktop Observations
– Traffic from Racecourse, Boundary and Flemington Roads
– Traffic flowing from City Link (easterly impact)
– Public interaction and noise from Flemington Bridge Station (Upfield line)
– Public interaction and associated noise from Trams (57 and 59)
– Public commission housing (located 2-3 blocks West and South)
– Overbearing concrete roads, tram tracks, rail and car network infrastructure.
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Figure 2: Site Aerial Snapshot (Google Maps, 2019)
4.2 Site Overview and Surrounding Physical Features
4.2.1 Sporting and Recreational:
– Royal Park and Debney’s Park adjacent to location
– State Netball and Hockey Centre
– North Park Tennis Club
– F45 and Anytime Fitness outlets adjacent to location
– Ross Straw Field (Baseball, cricket)
– Manningham Street Soccer Grounds
4.2.2 Tourism Attractions / Places of Interest:
– Melbourne Zoo
– Urban camp Melbourne Cooperative (Royal Park)
(Country and city lifestyle experiences for school sporting groups and community – cultural,
educational and recreational)
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4.2.3 Transport:
– Flemington Bridge Station (Upfield Line) located approximately 280 m, some 4-minute
estimated walk.
– Access to established public transport options: Tram 57 (Racecourse Road), 59 (Flemington
Road, Mount Alexander)
– Ease of access and entry to City Link and Tullamarine freeways
– Close to light industrial developments and major regional centres, Geelong, Ballarat and
Bendigo.
– Close to major hospitals
4.2.4 Education:
– University of Melbourne, some 2.8 km walk (38 Minutes), or 19 Minutes travel time via Tram 59
+ Walk.
– Victoria University, some 4.0km by foot (51 Minutes), or 31 Minutes travel time via Tram 57 +
Bus 404 + Walk.
4.3 Site Constraints
A site constraint refers to project limitation or restriction. Site constraints will differ from location to
location and it is important to identify these in the feasibility study as they could be detrimental to the
financial and physical success of a project.
There can be a range of constraints which exist on a site and these include, topographic and geology,
weather, environment, transport, services and legal constraints.
4.3.1 Irregular Site Perimeter Shape
Having an irregular shaped site can add additional costs to the design of the project. To ensure the
design utilises every square metre of the site the cost of the design may be higher. As the site is
irregular, trying to find a carbon copy of this project is difficult, so the design will need to be bespoke.
Bespoke designs add costs to architectural and engineering consultancy fees.
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4.3.2 Traffic Congestion
This site is located in a very busy area of Melbourne and is situated on 3 main roads including Boundary,
Flemington and Racecourse road. This project will create extra demand on the current flow of traffic,
intersections and pedestrian safety during both the whole lifecycle of the project. This significant site
constraint means that detailed community and stakeholder engagement with authorities such as Vic
Roads is required to ensure their specific requirements are met.
Figure 3: Site Location and Boundary (Google Maps, 2020)
Figure 4: Site Access (Crossings) and Traffic Patterns (Google Maps, 2019)
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4.3.3 Site Access: Existing and Future Crossings
A primary objective of Mixed Used Developments is to provide active open spaces. The access and
egress of vehicles can become variably essential for some commercial operations.
The site currently has several crossings positioned on Racecourse and Flemington Roads. These may be
retained (effectively meaning the development will be constrained to directing car traffic via these), or
otherwise other crossing locations will be nominated (revised) during planning, and concept design.
4.3.4 Established Vegetation Strip
Figure 5, following illustrates the existing nature strip, with established and mature trees. A further site
and design constraint is thus imposed upon the development. The development may compliment the
vegetated strip with adequate building setbacks and landscaped spaces.
Although it must be realised that the strip will have implications on the total building footprint at
ground level. It only follows that there is likely less sellable land available to develop (improve) and
generate revenue from.
Figure 5: Established Vegetation Strip (Google Maps, 2019)
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4.3.5 Local Neighbourhood Character Settings and Building Scale
Figure 6, shown following provides an aerial snapshot of the proposed North Melbourne development
site. It is a transit-oriented location with a mix of residential and light to medium commercial business.
Adjacent developments as featured in the Appendix Section 19.1, include the Kirra and Serra
Apartments. Respectively they are 8 and 6 storeys.
The development of the base case should reflect integration with planning and regulatory requirements
for building form and scale. The projects viability will also heavily depend on the allowable scale and
density, in terms of vertical floor space and capacity.
Figure 6: Local Neighbourhood Settings and Building Scale (Google Maps, 2019)
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4.3.6 Development Approval
This site has been offered with initial planning approval for a mixed used development however the
final application needs to still be submitted to gain approval for the development. Although our
development application will follow strict planning requirement guidelines and adhere to current
legislation, issues can still arise and our development proposal can be rejected. Acknowledging this can
happen is important so a plan is in place for the next course of action.
Usually if changes are required and these changes are unreasonable or fall outside of the planning
requirements, the matter can be escalated to a tribunal or similar. It is very important to note that this
process can add delays and significant costs to the project.
4.3.7 Demolition of Brownfield Site
This Brownfield site has many existing structures including an existing petrol station, car wash and
other buildings that inherent heritage overlays. Each of these buildings poses concern when considering
demolition.
The petrol station and car wash are concerning from an environmental prospective. Petrol stations have
underground tanks that have been used to hold petroleum and fuel lines (Abyss Demolition 2020).
Specialist demolition is required which will have a specific focus on the environmental impacts. Similar
demolition applies to the car wash, specialist environmental demolition needs to be considered (Abyss
Demolition 2020).
The demolition of existing buildings is also required. As these buildings are older, an asbestos report
should be completed prior to demolition. Secondly there is a heritage overlay and it specifies that a
permit is required to subdivide the land, demolish or remove a building and construct or carry out
works that include; domestic services, solar energy, rainwater tanks, fences, pools, pergola, decks etc.
More details on these are provided later in this report.
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5.0 Mixed Use Development Principles and Foundations
5.1 Mixed Use Defined
A mixed-use development (MUD) is defined as a project that features that is a collection of at least
three substantial revenue-producing components occupied together concurrently which helps the
community, i.e. residential, retail and commercial use (ICSC,2006). In more detail it is defined as
creating a unique environment where occupants have the flexibility to access various uses which
contribute to social capital and economic growth. A major highlight of MUD is the recent adoption of
flexible zoning within planning schemes allowing various activities and land uses to integrate and
coexist.
Large-scale MUD should exhibit the following characteristics:
– Have a coherent plan for the project development;
– Components must be specific and significant rather than just land developed for convenience
facilities;
– Walkable and eco-friendly;
– Sustainable development.
Figure 7: MUD Principle (Rogers 1998 cited by Wardner, 2014)
Figure 7 illustrates the principle of densification in MUD, in that a ‘compact model’ reduces travel,
minimises environmental impacts, while building social networks through leisure activities. Further
benefits are also realised with shared infrastructure between users.
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Scientific studies advocate for pedestrian-friendly urban neighbourhoods in that they encourage social
capital and welfare of the community.
People who live, work and entertain in the same place form relationships with the neighbours and form
an integrated community. Socially people feel more comfortable and connected which builds support
networks through trust and mutual understanding.
5.2 Mixed Use Versus Single Use
Figure 8: Comparison of MUD Features (Cheah and Tan 2005, cited Wardner, 2014)
Figure 8, previous highlights the array of difficulties experienced with MUD from inception to operation.
It is important to note the ‘increased amount if major issues’ such as coordination, financial exposure
(risk), and multitude of stakeholders.
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5.3 Historic Foundations and Principles
The concept of mixed-use developments stems back to ancient medieval villages of the 5th to 15th
centuries. The cities were typically positioned around sloping terrain and hilly regions close to cliffs,
rivers or lakes. Further the perimeters were protected by high boundary walls and natural barriers for
fortification.
Figure 9: MUD Principle (Ferrandi, 2013)
These early civilisations were based on systems that incorporated four rules; compactness (density),
mixed-uses, efficient trades and production with limited transportation networks.
The concept of land zoning introduced through regulation effectively saw the separation of land uses,
to control the location industrial, and commercial activities in relation to urban centres. Hence the
urban sprawl effect eventuated, as documented by many recent planning critics. Another issue
originating from zoning was the concept of land owners selling land for inflated prices, that is well
above the perceived market value.
Local governments and town planners realised the overabundance and unforeseen side effects of urban
sprawl. Namely, these were excessive energy consumption, traffic issues due to a greater number of
vehicles on road, pollutions (such as noise, air, water) damage of land resources, health issues,
inefficiency of infrastructure, deforestation, and climate change through increased carbon emissions.
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5.4 Characteristics of MUD: Realising the Benefits
The key benefits of mixed-use developments include as follows:
– Cost efficiencies: it generally offers shared parking lots which helps to reduce extra land or
building used for parking spaces;
– Affordable housing: this system enables home owners to buy in low-income and affordable
range of housing within the range of all necessary amenities;
– Both commercial and residential use: it provides an opportunity to building both residential and
commercial use development at the same location/building which may previously allowed only
for one type of use.
– Convenience: it allows a mix of convenience by providing both residential and commercial
hubs;
– Reduced traffic pollution: as occupants live, work and entertain at the same location traffic will
reduce drastically which means less traffic pollution.
Figure 10: MUD Principle (Wardner, 2014)
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Figure 10 identifies the main characteristics of the MUD model. These include the concept of ‘density
(compactness), level of permeability, social interactions’ according to a site or precincts physical
settings and location. The graphic derived conceptually by Rowley 1996, cited by Wardner 2014
describes the mixed-use model based upon several features. These are:
– Grain (level of integration – fine, medium or course)
– Sharpness (level of transition – uses are defined as sharp or blurry)
– Density (level of compactness – in horizontal and vertical realms)
– Intensity (level of development use – retail: neighbourhood to regional shopping)
– Diversity (level and mix of components)
5.5 Mixed Use Categorisation: Diagnosing the Site
Literature research from Atkins 2005, identifies various models or types of mixed-use developments,
these include (via classification):
– Town centre planned mixed use
– Vertical mixed use
– Historic building adaptive mixed use
– Corridor high density residential mixed use
– Neighbourhood mixed use
Commonly other authors have also described various built forms in categories or classifications as
follows: activity centres, heritage zones, neighbourhood centres or strips, health precincts or districts,
education precincts or districts, innovation and technology precincts or districts.
5.5.1 Shop Top: Standard
Generally, 3-5 storeys, consistent with scale and neighbourhood character. Can include residential
above in tower / podium form with setbacks to manage overshadowing, siting, and overlooking.
5.5.2 Shop Top: Heritage or Character
Suitably recognised in heritage or character areas. Generally, 3-4 storeys, matching heritage and
neighbourhood character.
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5.5.3 Strategic Site
Generally, 5-6 storeys and as many as 8 or more with special consent / approvals. Generally, 2 – 3
storey street front podium, with towers above and basement car parking.
5.5.4 Urban Renewal
Generally, 8 storeys but often 12 storeys with exemptions / community benefits.
In a higher scale tower / podium form with basement care parking. Involves greater integration with
urban precinct.
(Adapted from GECC, 2018)
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6.0 Mixed Use Development: Navigating the Obstacles & Challenges
6.1 Area Set Out and Utilisation: Conflicting Uses for the Building
The combination of various market segments can lead to several different activities disrupting the
others within the building and /or neighbourhood. For example, a bakery that is requiring starting early
might lead to noise and disruption for residential tenants.
Further difficulties can arise with maintenance and improvements. That is, establishing effective
contractual and tenancy arrangements between the differing uses that prevents ongoing and future
issues.
6.2 Allocation of Public and Private Space
Vibrant and active Mixed Used Developments require integration and use of laneways and courtyards.
The irony arises as a perceived benefit also serves as a project constraint. Ultimately, the site must
appeal and attract visitors (for commercial transactions) while balancing safety, security and privacy of
residents and tenants.
6.3 Allocation of Dedicated Car Parking and Bicycle Lots
A further conceptual clash arises with car parking requirements. A key objective for mixed use
development entails decreasing traffic congestion, and sustainability though reduced carbon emissions,
although many commercial activities see customer preference for motor vehicles.
Residential tenants though will commonly facilitate travel via bicycle which are congruent with the
planning objectives and directions.
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6.4 Vertical Access and Circulation
Access, egress and movement is recognised as a building design and regulatory (BCA) issue. Although
project planners, designers and quantity surveyors will be familiar with elevators, escalators, fire escape
stairs and their effect on sellable floor space. Particularly, they are necessary for large scale
developments and are an expense that cannot be directly sold or leased.
6.5 Structural and Architectural Design (Constraints)
The Structural and architectural design must cater for commercial, retail and residential aspects.
Difficulties arise when catering the buildings form and function and satisfying performance
requirements as contained in BCA Volumes 1, 2 and 3.
6.5.1 Functionality
Construction costs are most accurately derived from detailed designs. During project conception and
feasibility there will be many uncertainties to be resolved flowing from the desired purpose (activity).
The BCA details mandatory performance provisions relating to structural adequacy, health, safety,
access and amenity. Large-Scale Mixed-Use Buildings (LSMUB) must effectively incorporate the
following:
– Access – floor layout and security (restrictions)
– Ceiling heights
– Thermal comfort, (HVAC)
– Functionality and operations specifically driven by buildings services (mechanical, electrical, fire
and vertical transportation)
– Lighting (natural and artificial) as required for specialised functionality needs
– Signage
Essentially, each use (activity) and consequent classification triggers an array of differing performance
requirements. Complications thus will flow throughout the entire project lifecycle. Especially during
concept and feasibility (design and construction).
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7.0 Urban Design & Development
Over the last 20 years Melbourne has experienced significant growth due to overseas investment and
migration. To support this growth, urban design and development aims to use and reuse valuable land
and create spaces that are practical, safe, convenient, economical successful and socially equitable
space. Urban design should embrace and pursue local identity whilst giving a sense of connection, place
and cultural belonging. Urban design refers the systematic approach to areas such as suitable
architectural design, creation of open space and landscape design and ensuring adequate and safe
public infrastructure (Planning Institute of Australia 2020).
Strict planning provisions are needed to ensure that controls are in place to guide this much needed
development as well as support environmental, social, economic sustainability for future generations.
Planning provisions can ensure things like is adequate separation of buildings whilst maintaining
important spaces such as public spaces and landmarks (Planning Institute of Australia 2020).
7.1 Design Development
The planning and design stage of a mixed-use project is used for establishing a clear vision of the
project. This vision needs to ensure it has the shared vision of all stakeholders and partners, have an
effective master plan and incorporate a clear and thorough costed delivery structure which protects the
project goals.
The planning and design stages for a mixed used development can throw up some significant
challenges. There are certainly more challenges in the planning and design stages for mixed use
developments than any other development such as a residential building. The main reason for this is
the complexity of community negotiations that are required. There can be resistance from certain
parties which can lead to lengthy and expensive delays in the project.
An article was published in Age about residents rejecting more large developments. Oliver Hume was
knocked back by the state planning tribunal for 200 apartments in an 8-storey heritage listed Don Kyatt
Warehouse (The Age 2020). This demonstrates one example of the many road blocks that surface as a
result of a planned large-scale mixed-use development.
In mixed used projects it is a requirement that consultation with all stakeholders and partners is
thorough carried out. Ensuring the various regulatory agencies is aware and has a clear understanding
of the project requirements.
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7.2 Planning and Environmental Provisions
A planning scheme relates to the policies and provisions for the use, development and protection of
land. A planning scheme can set out a range of things including how tall a building can be. Each
municipality will have its own planning scheme that they govern, and each planning scheme can be
different to the next. This site is governed by Melbourne Planning Scheme and City of Melbourne is the
local municipality for this site (State Government of Victoria 2020).
7.2.1 Land Zoning
This site is subject to a number of zone and planning requirements which are required under the
Victorian Planning and Environmental Act 1987. This is governed by Department of Environment, Land,
Water and Planning (DELWP) but the application for development is submitted to the local municipality
(Tract Consultants, 2013).
Figure 11: Site Zoning: Commercial 1 Zone (C1Z)
Commercial Zone 1 encourages mixed use retail, office and high-density residential developments. It
has the following provisions; retail and office (including shopping centres) are allowed without a
planning permit and residential use is allowed (with some exceptions) without a planning permit.
There is no mandatory requirement around height requirements, setbacks and neighbourhood
character (Tract Consultants, 2013).
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7.2.2 Planning Overlays
The City of Melbourne is responsible for the planning scheme for this parcel of land.
This site is subject to the following overlay requirements;
– Heritage Overlay (HO953)
– Public Acquisition Overlay (PAO)
– Design and Development Overlay (DDO)
– Other overlays in the area that don’t directly affect this land
– City Link Project Overlay (CLPO)
– Development Contributions Plan Overlay (DCPO)
– Environmental Audit Overlay (EAO)
– Incorporated Plan Overlay (LPO)
– Land Subject to inundation Overlay (LSIO)
7.2.3 Heritage Overlays
This land is subject to a Heritage Overlay (HO953)
Heritage overlays look to protect and retain heritage significance in the built environment. A developer
can have considerable constraints on them to develop land that are usually un- challengeable. It is the
developer’s responsibility to assess the heritage overlays that pertain to the piece of land and workout
the associated costs and its viability. Heritage listings can be viewed as a positive and don’t always have
to be a constraint. As an example, substantial changes are allowed provided aspect of the heritage
façade is kept. These heritage elements can add value and character to a building making it more
attractive (NSW Heritage Office 2004).
The overlay specific to this site, specifies that a permit is required to subdivide the land, demolish or
remove a building and construct or carry out works that include; domestic services, solar energy,
rainwater tanks, fences, pools, pergola, decks etc.
External paint controls apply, no internal alterations or tree controls apply. It is not included on the
Victorian Heritage register under the Heritage Act 2017 and there are no prohibited uses. It is not an
aboriginal heritage place either.
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7.3 Authority Approvals
Various authorities will have a large impact of this development as their assets will be affected during
and upon completion of this project. The types of authorities which can be involved in this project are
water, road, gas and electricity authorities.
7.3.1 Water Authorities
The rural water corporation is southern rural water and Melbourne Water are responsible for the inside
drainage boundary. Both of these suppliers are important stakeholders of this project.
7.3.2 Road Authorities
The state road authority governing this project is Vic Roads and they are responsible for the main
arterial roads surrounding the site. Vic Roads play an important role in ensuring that traffic and
congestion is managed during construction but is also managed in terms of extra foot and road traffic
that is brought to the area following the completion of the project. There are also smaller roads which
are owned by the local municipality, City of Melbourne who govern the council roads. Both of these
stakeholders will be important to the success of the project.
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7.4 Building Regulatory Requirements
Given the currently zoning of the North Melbourne site is Commercial Zone 1, development of a mixeduse building is encouraged for things like office, retail and high density residential.
7.4.1 Regulatory Requirements
Building legislation was not mentioned as part of the Australian Government role and responsibilities so
therefore it is considered state responsibility.
There are 8 different states and territories which make up the Commonwealth and each of them are
responsible for building control and therefore there are 8 different legislations that deal with building.
The single commonality between each state a territory and that is the National Construction Code.
In Victoria the building legislative framework comprises of the following:
– Building Act 1993
– Building Regulations
– Building Code of Australia
– Australian Standards and other Codes
(ABCB, 2020)
7.4.2 The Building Act 1993
The Building Act 1993 role is to set out legislative framework for the regulation of building construction,
building standards and maintenance activity in Victoria. The Building Act established the Building
Commission and four statutory bodies to administer the Victoria’s building regulation system (Victoria
Building Authority 2020).
The four statutory bodies are building advisory council, building regulations advisory committee,
building practitioner’s board and building appeals board (Victoria Building Authority 2020).
(Building Act 1993 (Australia)
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7.4.3 Building Code of Australia
Australia has adopted one National Building Code which is called the National Construction Code. This
code is incorporated into each state and territory respective Building Act.
Building Code of Australia sets out the minimum standard of the design and construction of buildings in
Australia. It is a uniform of technical requirements for buildings and structures (Australian Building Code
Board 2020)
Australian Building Code Board is the governing body that develops the Building Code Australia and it
has input from all states and territories for the minimum standard requirements (Australian Building
Code Board 2020). The final document is produced and is called the National Construction Code.
7.4.4 BCA and Building Classification
The most relevant National Construction Code related to this site is Volume One. Volume one contains
the requirement for all Class 2 to 9 buildings. As this building is mixed use, it is subject to a number of
classifications as most parts are equal to or higher than 10% of the floor area of the building. The
relevant Classes are Class 5, 6 and 7a (Commonwealth of Australia and States and Territories of
Australia 2020)
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8.0 Development Sustainability: Social, Cultural and Environmental Aspects
8.1 Social and Cultural
Understanding of demographics and the social and cultural factors which can influence mixed use
developments is unique to each project and city. As cities grow and develop, land becomes scarce and
the need for large-scale mixed-use development becomes more important. There is a demand to
ensure there are adequate retail, office accommodation and parking for growing communities (United
Nations Educational, Scientific and Cultural Organisation 2020).
The use of this land is important as it can utilise already established transport links and other services
making it easy for commuters and occupants to get to and from their locations. Over the last decade
there has been a dramatic increase in the amount of mixed-use developments. However, whilst mixed
used development is an excellent use of scarce land there are also important social and cultural factors
which need to be considered during both the planning and construction to ensure the project is
sustainable for future generations (United Nations Educational, Scientific and Cultural Organisation
2020).
8.1.1 Social Capital and its Importance
Social capital is defined as the relationship between people who live and work together in a particular
society and having these relationships function well. Social integration can be hard to measure but
when neighbourhoods are working well there is a level of trust within the community (Metropolitan
Design Centre 2007).
Community engagement can mean that social capital is working well. This can be for a number of
reasons including the development layout including access to needed services and facilities, ensuring
affordability, universal access, adaptability and diversity. There also must be educational and
employment opportunities available to its residents.
This site hosts a multicultural community that has a wide range of the matured population, young
professionals and growing families. The mixed used development needs to be inclusive off all these
demographics. This is important because not only will these populations not want to invest in the
development but also for this to be a liable development during its entire lifecycle (Metropolitan Design
Centre 2007).
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8.1.2 Enhancing Social Capital
To ensure this development is catered to the local demographic the following suggestions are being
made;
– Previous research has shown that living in a pedestrian friendly neighbourhood that provides
residences access to a range of land uses enhances the social connection. Having access to
facilities and services without having to get into a car increases the chances of social
interaction.
– Mixed use facilities can be vertically integrated by having office and retail at the bottom and
residential up high or have a spread of residential, retail and office within walking distance of
each other.
– Being able to access facilities by foot also enhances social capital as we are able to relate and
feel they have similarities with other residents.
– Having appropriate housing choices available is important to social capital. Higher level of home
ownership can lead to high levels of social capital however this may not be affordable to young
families. Introducing young families can significantly add to social capital as it gives the
development an equal spread of the community, it is important to have a mixture of
everything.
– Communities are enhanced by creating social environments. Urban design and planning that
incorporates parks, vegetation and gardens to connect people.
8.1.3 Social Issues
Social capital can have a direct effect on the health outcomes of its residents. If there are ongoing
issues within a community this can lead to public and police issues. These community-based problems
will have a direct effect on the health of the community.
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8.2 Cultural Diversity
Today most people live in large cities due to the convenience of transport and essential services. Large
communities often attract a mix of people from diverse backgrounds for the same reasons. Having a
population with such social and cultural diversity means the community has access to a wide range of
important things such overseas investment, skilled workforce, education and knowledge that it may not
have had otherwise. This has made migration necessary and beneficial to its local residents
(Metropolitan Design Centre 2007).
8.2.1 The Importance of Cultural Diversity
Cultural diversity and having mutual respect is important as it can have a direct effect on the health and
wellbeing of the community (Creative City Network of Canada 2008).
Cultural diversity should be met with holistic strategies to remove barriers which may exist. Cultural
diversity should not isolate people; it should unite individuals and societies. It enables people to share
heritage and experiences that can have dramatic influence on the prosperity of a great future (Creative
City Network of Canada 2008). Cultural diversity is not new, it has formed part of the evolution of
humans and an important part of us evolving has derived from humans being culturally diverse (United
Nations Educational, Scientific and Cultural Organisation 2020).
8.2.2 Enhancing Cultural Diversity
– Local municipalities can play an important role in ensuring cultural diversity is being
implemented and adhered to in a community. This can be provided through cultural
infrastructure such a wide variety of things including the preservation of heritage and
traditions, dealing with issues around adapting to change, ensuring facilities are made available
for exhibition, arts and presentations and supporting new ideas and voices.
– Provision of infrastructure such as recreation, arts and facilities ensure communities feel
inclusive.
– Supporting culture that is innovative and enable people to develop and flourish using their
creative potential to improve liveability
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8.2.3 Key Issues with Cultural Diversity
Throughout the world there have been a number of communities who have been negatively impacted
by cultural segregation, particularly if there is unemployment or social exclusion. This can create a
division of cities which can lead to communities that have “well off area” and deprived
neighbourhoods. These examples highlight the importance of continual effort to ensure cultural
diversity is set as an important effort to keep communities together.
8.3 Sustainable Building Development
Sustainability in the built environment is a broad term as it can refer to social inclusion, cultural
diversity, economic sustainability and importantly the environmental protection.
Developments and buildings should be built with environmental sustainability in mind and long-lasting
materials. Buildings should be well built and insulated, with high performance in acoustics and thermal
factors. These initiatives will achieve high-energy ratings and deliver sustainable environment for its
occupants. Sustainable materials and sustainable construction – reduce, reuse and recycle. Water
conversation should also be considered. Simply ways to ensure the conversation of water is through
adding energy efficient fitting and fixtures throughout the building. Dual low flow toilet cisterns and low
flow shower heads can make a dramatic effect.
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8.4 Sustainability and Community: Objectives

Table 1: Sustainability and Community Objectives
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8.5 Infrastructure and the Environmental Impacts
As cities go through significant change due to the construction of large infrastructure it has to be
recognised that large developments will have a profound impact on the environment and the
surrounding community. These effects are seen through the whole lifecycle of the project.
To ensure the community and environment are protected from the effects of developments there are
particular measures that should be carried out during the feasibility stages. The absence of information
to foresee and plan for environmental issues can contribute a significant amount of time and difficulty
to the achievement of the project development. Therefore, it is important to recognize the
environmental issues involved within a potential development site which can have an impact on
proposed uses and site layout. The future challenges can be minimized by using building technology
and design if they are identified early in the process of development.
Environmental Assessment (EA) or Environmental Impact Statement (EIS), environmental data are
collected before the project design stage of the feasibility study. Environmental management plans
(EMPs) are designed to provide specific protections and controls that can be used to reduce
environmental impact.
8.5.1 Environmental Impact Assessment
An environmental impact assessment identifies the environmental consequences of a project. It’s
important these impacts are known during the feasibility study so that a plan or policy can be put in
place to address these. An environmental assessment will strategically look at the high-level issues for
the purpose of assessment is to evaluate the impacts and decide if the project is viable. The
Environmental Assessment should include a detailed description of the environment and what will be
impacted, identification of each stage of the project and the issues which may arise and then based on
this a description of the best methods or way to approach the development.
Some of the key areas which were noted as part of the Environmental Impact Assessment for the North
Melbourne Mixed Used development were;
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8.5.1.1 Biodiversity, Flora and Fauna
The project should not disturb the biodiversity, flora, fauna, and it should protect landscapes. This is
important to protect and not interrupt the endangered species or their habitats or ecologically sensitive
areas around the location. There is established vegetation strip which should be retained so fauna is not
being disrupted by the project.
8.5.1.2 Ground Water and Water Sources
The land requires the creation of new, or the restructuring of existing Water quality and resources,
public authorities. These requirements cannot decrease or increase the quality or quantity of
freshwater and groundwater.
8.5.1.3 Waste Production: Reuse and Recycle
The project needs to address how to reduce and maintain waste production, recycling of the project.
These waste products cannot affect solid, urban, agricultural, industrial, mining, radioactive or toxic
waste to the environment. The treatment, disposal or recycling need to be properly executed
according to the state requirements.
8.5.1.4 Noise and Air Quality
Roadside noise data should also be obtained to guarantee the building is designed with sufficient
resistance qualities. Air quality is also one of the factors to be considered for this building as it is located
and surrounded by heavy traffic and busy area that accumulated by studying Air quality data in this
area.
8.5.1.5 Emissions and Pollution
Operating costs and conduct of business /small and medium-sized enterprises within the proposed site
plan should not produce any emissions of acidifying, photochemical or harmful air pollutants that might
affect human health and buildings or lead to deterioration in the environment such as soil or water
resources nearby.
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8.5.2 Environmental Management Plan
An environmental management plan is detailed once the Environmental Impact Assessment is
formalised and completed. This is a site-specific document that is developed to ensure the project
follows particular practices. The environmental management plan is usually drawn up once the project
is formally approved.
8.5.3 Construction Management Plan
In order to ensure the worksite will not be a disruption to the health and safety of the community it is
important that a construction management plan is produced. A construction management plan aims to
minimise the impact of construction activities to the community, including residents, pedestrians using
the footpath and commuters travelling through the area.
8.5.4 Environmental Assessment Requirements
According to the planning scheme Section 34.01-2, VC 100 states that ‘the emission of noise, artificial
light, vibration, smell, fumes, smoke, vapor, steam, soot, ash, dust, wastewater, waste products, grit or
oil must not detrimentally affect the amenity of the neighbourhood’. (Melbourne Planning Scheme,
2020)
Additionally, Section 13, VC 148 of the planning scheme cites that the Planning should reinforce
community resilience and safety by implementing an environmental management and risk
management strategy to policies and procedures. Planning should also target at preventing or reducing
natural and man-made environmental hazards, environmental destruction and conflicts over facilities.
Planning should make sure that construction and risk reduction does not interfere harmfully with
important natural procedures. Planning should prepare for the consequences of climate change and
address them. (Melbourne Planning Scheme, 2020)
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8.5.5 Environmental Overlay
Environmental Audit Overlay (EAO) is applied to land recognized, known or relatively suspected of
contamination to which certain obligations under the Environment Protection Act 1970 have not been
fulfilled. EAO 45.03, VC 148 states that an environmental audit certificate must be issued for the land in
compliance with Part IXD of the Environmental Protection Act 1970, or An environmental auditor
appointed under the Environment Protection Act 1970 shall make a statement according to Part IXD of
that Act indicating that the land’s environmental conditions are suitable for sensitive use prior a
sensitive use such as housing use, child care centre begins, or before construction or construction of
buildings and works in connection with a sensitive use. (Melbourne Planning Scheme, 2020)
8.5.6 Environmental Health Impacts
Environmental health impacts can be challenging to reconcile issues around noise, smell and hygiene
with mixed used developments. The environmental health impact can be the result of an organisation
activities, products or services that creates issues for its residents. The impacts could be to do with
emissions to the air, water, hazardous waste and nuisance concerns. Environmental health impacts
should be considered during the feasibility studies and not after as usually that will be too late to rectify
any concerns.
8.5.7 Environmental Economics
Environmental economics is a section of the economy that focuses on the financial impact of
environmental policies. Environmental economics allows users to develop suitable environmental
policies and to analyse the effects and validity of existing or proposed policies. (V. Greiman, & R.
Warburton, 2009)
There are many interconnections between the economy and the environment: the environment offers
the economy with resources and behaves as a sink for emissions and waste. Natural resources are
important inputs for production in so many industries, while production and consumption are also
accountable for pollution and other environmental pressures. Poor quality of the environment in turn
negatively impacts economic growth and well-being reducing the amount and quality of resources, or
through impacts on health, etc. Environmental policies can reduce negative environmental feedback
from the economy. Effectiveness whether they generate a benefit to society or net costs to society is
the subject of debate and depends on how they are designed and implemented. The main processes
which connect the economy and the environment are qualitatively known. (OECD, 2019)
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Environmental economists evaluate the benefits and costs of specific economic policies, which further
include operating theoretical tests or research of potential economic implications of environmental
damage. The strategy to environmental economics can be either prescriptive or incentive based. Its
transnational nature and its impact on different moving sections of a society are the two key problems
experiencing by environmental economics. (Investopedia, 2019)
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9.0 Macro-Economic Impacts Summary
Large Scale Development Projects (LSDP) not only seen as an opportunity for growth but to establish
the competitiveness of the city. (Wagner, 2014). They can accommodate urban regeneration systems,
and energy infrastructure, transportation, city groups, industrial corridors, modern cities, science, and
technology parks, innovation districts, and sports infrastructure. All contributing to the national and
state economy, either directly or indirectly.
9.1 Demand Factors
In general, demand is an economic concept that refers to the consumer’s interest in buying products
and services and the willingness to pay a value for a particular product or service.
After six years of sharp house price rises, Australia’s property market is now significantly cooling with
regulatory and finance controlling measures following the Royal Banking Commission. Stricter
regulations have been imposed on borrowers and investors as well as higher taxes on foreign
investment in the property market. Sydney and Melbourne are the locations that had the biggest
decline in the year 2019.
9.1.1 Foreign Investment Influence
Residential market activity and capital growth has previously been stimulated in part from foreign
investment (homebuyers), who accounted for more than 20% of property purchases each year.
Nevertheless, demand through foreign investment is now dropping dramatically, the strike by stricter
regulations in both Australia and China, which is the highest source of foreign demand.
The impact of strict regulations has been worsened by the introduction of capital controls in China at
the beginning of 2017, restricting Chinese citizens ‘capacity to get money out of the economy,
particularly for property purchases overseas.
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9.1.2 Property Market Snapshot
During the late part of 2018 and through 2019, the real estate market in Australia has been in a steady
decline. There was a rebound late in 2019, however, and experts predict Australia’s property market
will rise by 2.5 percent to 5 percent by 2020. Many market analysts predict residential housing rates to
recover from 2020-21, backed by strong population growth and continuing low-interest rates.
9.1.3 Government Incentive: First Home Buyers
Federal and state incentives for first-time homeowners also targeted to raise demand for new dwellings
and, to enhance the construction industry over which Australia depends heavily. The government
stated the implementation of The First Home Loan Deposit Scheme, additionally to the First
Homeowners Grant.
The scheme enables low-income and middle-income producers to make a down payment as low as 5%
for entering the market. This applies to eligible applicants, who take out principal and interest- ownerloans. This is relevant for the suitable applicants who carryout owner-occupied loans on principal and
interest basis.
9.2 Economic Outlook- Victoria
Infrastructure investment by government, business investment, and domestic consumption is
forecasted to be the main drivers of State growth in 2019-20. A significant level of engineering
construction activity will promote business investment in Victoria. In 2020-21, private engineering and
commercial construction are projected to rise by 4.6 percent. Commercial construction operation worth
a total of $12 billion is being carried out in Victoria, with another $21 billion project pipeline going
through various planning stages.
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9.2.1 Review of Performance Indicators
CommSec quarterly analyses eight key performance indicators. These are ‘economic growth, retail
spending, equipment investment, unemployment, construction work done, population growth housing
finance and dwelling commencements’ (James, 2020).
Figure 12: Trend Annual Growth Rates (James, 2020)
Victoria nationally retains the best performing economy although, economic growth is marginally in
decline. Victorian state economy has benefitted from high rates of population growth and strong
employment, especially in the construction sector.
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Figure 13: Wages, CPI and Home Prices (James, 2020)
A review of the performance indicators revealed the following insights for Victoria:
– Retail spending was 14.9% above decade average levels (2019 Q4), retail spending is derived
from ‘strong population growth, low unemployment, rising home prices and infrastructure
building’. (James, 2020)
– Equipment investing was positive 10.2% above decade averages.
– Victoria ranks second behind the ACT with unemployment at 4.8%.
– Victoria ranks the highest for total real value of work completed (residential, commercial and
engineering), with work done 26.2% above the decade average.
– Population growth for Victoria in absolute terms is at about 2.05%. Growth indicates the health
and other driving forces of the economy. These are retail spending and housing demand.
– Housing finance as reported by James 2020, crucially measures real estate and finance activity
in conjunction with housing construction. Victoria narrowly hold 4th position (up 31.1% on
decade averages) behind ACT, Tasmania, NSW (33.8%, 33%, and 32.3 % respectively) In annual
terms Victoria housing finance commitments were ranked second behind NSW (17.2%) with
12%.
(Adapted from James, 2020)
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9.3 Victorian Construction Sector Outlook
The outlook for Victoria appears to be mixed within the building and construction industry. While
infrastructure development will continue housing markets and residential building will decrease activity
(MBAV, 2020). Forecasts by MBAV include a decrease in total construction of 6.5% between 2019-2020
and 7.9% in 2020-2021. Although, after a period of recovery optimistically 2022-23-24 will see a positive
shift in construction growth.
Figure 14: Residential Building and Other Dwellings Work Done (MBAV, 2020)
Figure 15: Dwelling Commencements – Other Dwellings (MBAV, 2020)
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Figure 16: Non Residential Building (MBAV, 2020)
Figure 17: Non Residnetial Building Sectors (MBAV, 2020)
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9.4 Key Market Impacts
9.4.1 Environmental and Pandemic Events
The summer bushfires and drought events have negatively affected the economy in terms of GDP
output (both directly and indirectly) and disaster relief spending on a state and national basis.
As the corona virus pandemic unfolds, the local and global economy is rapidly declining, consumer
sentiment is rather shaky with the Australian economy vulnerable. Generally, property markets are
slower to react to events due to trailing data being acquired. While auction numbers and clearances
remain relatively steady (at the time of writing), it is expected the market will suffer the effects in due
course with social distancing and public movement and access being limited to essential activities.
Current projects however are still active, but many challenges are expected as the situation develops.
Local tourism revenues will have huge ramifications, with travel bans and lockdown procedures. That is
currently as well as into the short to midterm future.
9.4.2 Consumer Spending and Investment
Consumer spending and investment is low, (while the cost of finance is also low) With the Cash rate at
0.25, the RBA has made previous cuts from 0.75, and 0.5 to encourage investment and consumer
spending.
APRA’s imposed limitations on investor lending (in terms of interest only loans) have effectively
tightened up and in decline. Further household debit levels (private debit) sitting at 189% of household
disposable income (CBRE, 2019) poses a risk to the Australian economy. Previous years of residential
property growth, heavily increased mortgage borrowing and repayment obligations.
Banks and lending institutions will maintain stringent lending upon commercial and residential
developments, especially those deemed higher risk.
9.4.3 Wage Growth, Inflation and Unemployment
Wage growth has been reasonably stagnant, with Inflation rates expected to remain low for an
extended period. Housing affordability has been flagged in Sydney and Melbourne (Godber, 2020),
where ‘dwelling prices have grown above wage price inflation’. Unemployment is also expected to rise
previously with marginal slowdowns in the private building sector and more recently due to the COVID-
19 pandemic.
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10.0 Demographics and Market Profile Summary
10.1 Population and Housing Snapshot:
Currently city of Melbourne municipality accommodates a population of about 190, 000, covering
approximately 38 km². Encompassing the CBD and surrounding historic and developed suburbs.
Population growth is expected to increase annually at an average of about 4.76% to around 293 000 by
2031. Hence, an increase of over 66 700 households is forecasted (.id, 2019), with the number of
persons remaining constant at an average of two persons per household (.id, 2019).
Table 2: Forecast – Poulation, Households and Dwellings (id, 2019)
The common signals and key indicators utilised for development of property and infrastructure
are derived from community profiles, economic profiles and population forecasts.
Demographic, spatial studies, and trending analysis used collectively can highlight future
projections (supply and demand relationships). That is, indicating which proposed
development options could be viable and should be at least conceptually pursued.
Successful residential market summaries extract what variables are driving population change
for respective and target regions (local, municipality, state). Specifically, relationships between
population growth, migration, dwelling structures, household types and age structures in
conjunction with economic and public variables. Which include income, employment,
education, transport options and preferences.
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10.2 Historical Patterns of Development:
Planning mechanisms introduced such as zoning, have seen a transfer of residents and industry from
the CBD into what is described as a ‘sprawling affect’. Whereas recent planning motives have focused
on redevelopment, in fill development, urban gentrification, of warehouses and offices on dated
commercial and industrial parcels of land.
Ironically the development and function of the city and suburbs surrounding the CBD has somewhat
reverted to its origins as a ‘residential and commercial area’ with commerce, some light industry and
residents shifting between CBD, urban middle, fringe and suburban locations.
Current planning trends are relying on densification with the proliferation of mixed used developments
to solve residential housing demands from population growth and migration patterns (consisting of
regional, national and international migration).
10.3 Migration and Housing Dynamics:
Melbourne and suburbs surrounding the CBD, serve as an attraction for ‘tertiary education (Melbourne
University and RMIT main campuses, La Trobe, Victoria University satellite campuses) as well as
employment’ opportunities.
Housing demographics, migration patterns and cycles intrinsically characterise local development
demand. Young professionals, and those forming households often migrate to ‘inner and middle
suburbs’ in order to access larger and semi-detached or traditional detached dwellings.
Figure 18: Forecast – Forecast Net Migration – By Age Group (id, 2019)
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Figure 18 illustrates the significance of those aged between (20-30) and (30-39). Particularly, the
concentration of positive and negative net migration respectively.
The City of Melbourne performs a unique housing role to ‘singles, students and young professionals’
(noting many are without children). Fundamentally, the ‘tertiary student market’ is vital for the
Victorian and National economy. It only follows that constructed housing is typically high density
(smaller single- and two-bedroom apartments) mostly rented (almost two thirds of households) and
owned by investors.
Figure 19: Net Migration Patterns (id, 2019)
Thus, many developers, investors, real estate and construction professionals are aware of the ‘volatility
in the housing market’ over the next decade. Some influential takeaways for example include the
following:
– Supply and demand, development within the realms of the investor market.
(Essentially a dependence on tertiary students as tenants).

Favourable outcomes including profits and ROI will ensure developments continue rather than
pursuing investments in other sectors)
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– Economic policy and consumer regulation.
(Including taxation, planning conditions, commitments to infrastructure and development
contributions, services and facilities)
10.4 Housing Supply:
Recent construction of the Melbourne Metro rail tunnel is ‘expected to significantly increase
development in the North Melbourne – Kensington area’. A further driving component of housing
supply stems from the requirement of ‘purpose-built study housing’. That is, non-private dwelling
accommodation, located in areas north of the city within proximity to RMIT and Melbourne University
while being accessible to transport links, facilities and amenities.
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11.0 Melbourne Commercial Market:
11.1 Population and Employment Growth
‘Unprecedented employment growth has largely driven demand for office space, despite the
headwinds of local and global economies’.
The state’s economic growth has been trending downward since 2018. A slowdown of discretionary
spending attributed partially by slow wage growth and downturn in property markets. That being said,
population and employment growth in Melbourne has exceed National averages. Further infrastructure
spending is at record levels reports (Trembath, 2019).
Figure 20: Emplyment Growth: Oxford Exonomics, utilised by Trembath, 2019)
Importantly while employment growth is forecast to slow during 2020, ‘office employment is predicted
to grow by 12% over the next 5 years (2019-2023). Essentially, more than 25 000 new white-collar jobs
will need to be housed in office tenancies (Trembath, 2019) Consequently, office demand and
development over the medium term will be healthy especially from ‘professional and administration
sectors’.
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11.2 Commercial Supply and Demand: Interest Rates and Vacancy Rates
The RBA have continued to cut interest rates (with weak wage growth, low inflation, high household
debit), the current cash rate at the time of writing is 0.25%. Lower income growth has restricted
consumer spending. Housing investments have also declined though 2019 with market downtown
(property correction) occurring.
Lower interest rates will also drive demand for commercial assets (with high yields and fixed income
streams). Burston 2019 (Knight Frank research consultant), reports the lower interest rates ‘increase
the relative value of commercial property assets’.
Vacancies around the end of 2019 were at a ‘low rate of 3.3% and a supply of around 590 000 sqm due
to be delivered between 2020-2021’ (Burton 2019). Although office vacancies rates are predicted to rise
with new waves of development, in the Melbourne CBD to around 7.7% around 2021. Thus, investors
and developers, with the higher expected supplies should recognise the increased risks over the horizon
by closely monitoring trends.
Low vacancy rates, with supply has delivered surging rents some 17.6% between 2018-19 FY for prime
rents at $507 per sqm. Secondary rents increased by 10.8% to reach $386 per sqm (Trembath 2019).
These growth rates also placed ‘upward pressure’ on fringe rents.
Figure 21: Melbourne CBD Net Supply and Vacancy (Knight Frank Research, utilised by Burston et al 2019)
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Property owners are focusing on increasing building density (shifting with occupier preferences)
reflecting a need to increase asset efficiency. The proliferation and rise of ‘co-working spaces and
activity based working arrangements has contributed to such a preference (for denser office work
spaces).
Figure 22: Economic Indicators: Knight Frank Research, utilised by Trembath, 2019)
It is also highlighted by Trembath 2019, that Melbourne has had ‘the lowest CBD vacancy rates for all
capital cities spanning the last two years’. This has been attributed to a shortage of quality and well laid
out spaces.
Figure 23: CBD Office Vacancies: Knight Frank Research, utilised by Trembath, 2019)
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11.3 The Concept of Pre-Commitment
Another important consideration explained by Trembath 2019, is the ‘level of pre-commitment activity,
within the Melbourne CBD by legal and finance tenants’. For example, these included DLA Piper,
Ashurst, King &Wood Mallesons, Minter Ellison, Gadens and Norton Rose Fullbright.
Other larger finance and investment funds corporations ANZ, QBE, Macquarie Bank, Australian Super,
CBUS, Vanguard and NAB have committed to CBD commercial spaces.
11.4 The Office Sector: The Emergence of Co-working Arrangements
Millennials and Gen Z workers have taken a distinct appeal to coworking arrangements. Overseas
organisations WeWork and JustCo have taken advantage of recent opportunities with respect to
flexible commercial tenancies (in the corporate sector).
Figure 24: CBD Office Take Up: Knight Frank Research, utilised by Trembath, 2019)
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12.0 Market Analysis and the Mixed-Use Environment
12.1 The Development Market
Mixed Use Development (MUD) is probably the most remarkable planning ‘buzz word’ being adopted
by many industry practitioners. Other substitutes include ‘new urbanism’, ‘placemaking’, ‘sustainable’,
‘green communities’ ‘twenty-minute neighbourhoods or communities’ and live-work-play communities.
Intrinsically MUD is typically suited to ‘mature communities’ where transportation, amenities, services
and infrastructure exists, with some valuable opportunities in terms of market supply needs (whether
absent or in under supply).
The commercial energy and level of transactions is what makes MUD attractive, in conjunction with
appropriate levels of convenience and security. That is, creating an environment or urban quality that is
attractive, liveable and memorable (Rabianski et al 2009, cited by Wardner, 2014) A great deal of
diligence though should be exercised, rather than instigating as an immediate response to sites or
precincts for ‘revitalisation, densification or remedy transportation issues’ (Wardner, 2014)
Well-designed mixed-use developments (MUD) are indeed great densification tools because they utilise
space in the form of building footprints, and scale in both vertical and horizontal realms more
effectively. The appeal to surrounding neighbourhood boosts interactions providing economic
advantages to developers, investors and building owners.
While optimal sites come with greater acquisition costs, additional value premiums and future revenues
generated are considered to exceed returns compared to single use developments. In a US scenario
(Avalon and Atlanta) real estate economist Ryan Mcullough, (cited by McLinden 2018) describes how
mixed use ‘rent premiums are 15-25 % above expectations in given trade areas’.
High performing mixed-use buildings effectively harmonize full time occupants and visitors. Successful
retail is the foundation of high-density MUD (Yager, 2015). Based on this requirement, retail
components or ‘success factors’ as suggested by Atkins, 2005 include ‘development attributes, store
attributes and target customer attributes’. That is, drawing upon the supply, process and demand
variables forming the market mechanics.
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12.1.1 Market Studies and the Effect of Time
Complex large-scale mixed-use developments are generally carried out over protracted schedules. The
variable of time itself, provides such an opportunity for market forces and fluctuations to not only
influence economic outcomes but the entire viability of a project.
A market study and investigation forms one of the essential elements as a precursor to economic,
budgeting, cash flow modelling and or analysis. Site (locations) and projects exist within particular
(macro and micro) market environments. It only follows that the absence of a fitting market or without
suitable conditions there can be no project.
12.2 Community and Economic Demographic Assessment:
12.2.1 North Melbourne and CBD Data
The location of the North Melbourne site is positioned surrounding suburbs of Flemington, Kensington,
Parkville (within the Melbourne municipality) and Travancore (Moonee Valley municipality). Some of
the data collected is based on the 2016 census, collected by the ABS. With several metrics and
indicators collected, it was evident that some of the data principally are skewed toward the Melbourne
CBD boundary, Docklands, South Wharf and South bank which are geometrically and physically
different to North Melbourne. For example, the number of student residents, unemployment
proportions in micro pockets, the nature and composition of commercial and retail business as
compared to the aforementioned areas.
12.2.2 Trend 1: Population and Employment Growth
Opportunities are to be maximised by taking advantage of emerging trends, representing best value.
For example, COM is experiencing great population and employment growth. It is clear that
relationships between industries (with their occupations) as well as relevant local domestic production
can highlight future demands for market sectors. This translates into a demand and need for both
commercial floor space (for firm and employee occupation) as well as in a residential and housing
(household) capacity.
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Considerations should be made surrounding the economic constraints on the demand side of the
equation (relative to each market sector) When considering residential we are looking at median
household incomes, median sale prices and median rental prices, comparing these to what products
and rates are to be achieved. For the commercial sector median sales and median rentals are also key
components. The sales and rentals respectively can also be measured at a nominated rate per square
metre.
12.2.3 Trend 2: Employment and Education
Geografia data reported by COM, 2019 states unemployment in COM at December 2017 at 4.1% with
Greater Melbourne (GM) at 6.0% while national unemployment at the time of writing is 5.2%
(November 2019). In addition, COM mapping displays various micro pockets with unemployment rates
ranging well above the state and national average. These were double digit figures as high as 47%.
While housing demand and supply will remain a key issue. A primary objective is developing suitable
options that are to be transacted by the most likely market segment. Whether, by firm or organisation,
couple or individual. And importantly those options are developed at competitive market rates while
delivering an acceptable return on investment.
It has been identified that the data acquired reflects a large concentration of students, as well as
pockets of public housing. Thus, data surrounding employment, income and disposable wealth will be
skewed in principle because of several conditions.
– Not working and unemployed = about 30-35%
– Employed = about 45-50% (Full time = about 30-35%, with Part time = about 15%)
(Geografia, 2019)
(Directly correlating with the proportion of low-income households about 30% – having a weekly income
less than $650)
Students have a primary focus on tertiary education and studies, not on generating income or working
in full time arrangements. Those living in public housing are less privileged, possess lower levels of
education, are often recent immigrants and are generally unemployed, under employed or employed
only on a small capacity.
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12.2.4 Trend 3: Residential Consumer Age Structures
A preliminary segmentation of the residential market reveals that ‘independent youth’ (couples, singles
and home sharers under the age of 35) will be the most likely residents. Although, most first home
purchases are made in Australia on average between 31-33. Hence it is very likely that most dwellings
are tenanted households (rented).
COM Geografia data confirms this, as 64% of high-rise residents in fact rent their place of residence
(compared to 23% owned). This is also typical for other residents (not in high rise apartments greater
than 4 storeys) with 66% of households renting and 30% owned outright or with a mortgage.
12.2.5 Trend 4: Transportation and Motor Vehicles
Transport options will be tested with population growth, particularly in the capital cities. Hence
proximity to public transport will continue to feature in property and development markets. Essentially
car ownership has marginally plateaued with ‘fewer young people obtaining driving licenses and
purchasing cars’. Figures provided on Domain reported passenger vehicle registrations per thousand
people were 509 in 2001, 579 in 2016, and remain steady since (Wiltshire, 2020). The trend has
continued with use of public transport and the proliferation of ride sharing and car sharing services.
Figure 25: Vehicles Per 1K Population – ABS 9309.0 cited by Wiltshire 2020)
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Conceptually as population growth increases and approaches an urban centres capacity, issues such as
‘congestion, cost of parking’ (Wiltshire, 2020) with subdued wage growth and increased living expenses
see private car ownership as far less attractive. And certainly, less economically viable.
Essentially there will be in increased market need for apartments in established and mature suburbs.
Which provide several public transport options.
12.2.6 Financial Scenarios – Building Base Assumptions
Financial stress is reported to be experienced when a household effectively commits more than 30% of
their weekly income to rent or mortgage payments (rent or mortgage stress) For example, when
referring to North Melbourne and COM the median household incomes are $1276 and $1354
respectively (COM, 2019) We are assuming that the 2016 data is reasonably accurate because wage
growth has been subdued over the past 2-3 years up to the time of writing.
Further, median sale prices of units are $577 k and $ 639 k (for NM and COM) with median weekly rents
of $470 and $430 (REIV, 2019). Thus, via calculation, 30% of median weekly household wages equates
to about $383 and $460 (NM and COM). But this data includes all residents including many students
that may not work or be considered as under employed and marginally employed. (This includes
clusters in North Melbourne, Carlton and Parkville, where there are several with public and student
housing surrounding)
12.2.7 Financial Scenarios – Income Capacity
About 30-35 % of residents effectively work under 35 hours per week and thus are not classified as fulltime workers. But, when reviewing the personal weekly income of workers (omitting others), another
scenario occurs. In fact, within the working cohort there is a large spread of those earning between
$1000 and $3000 weekly. That is 13%, 11%, 11%, 8%, and 16% (some 59%).
As a potential outlier there is 12% of people earning $3000 or more weekly. Through basic collective
conglomeration a proposed average individual income (NOT household) could equate to $1500 weekly
(consisting of 13%+11%+11%+8%) some 43% of the work force. It is realised that a weekly income of
$1500 is somewhat realistic for professionals but NOT for students. Essentially though, the concern is
for young professionals (singles and couples) or investors in a position to purchase apartments. Young
professionals or independent youth will purchase as a Primary Place of Residence (PPOR) whereas
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investors facilitate the needs of students (whether local or international) or individuals migrating
temporarily or permanently.
Another more conservative case would consider $1000 – $1749 brackets (13%, 11% and 11%, some
35%), producing an average weekly individual income of $1375. This may be viewed as more realistic
reflection of the average weekly income, for the average professional employee (based in metropolitan
Melbourne).
12.2.8 Financial Capacity and Modelling
A review of the average weekly income in lieu of, the median income, produces a capacity of about
$1500 * 0.3 = $450 for mortgage or rental payments – Case 1
$1375 * 0.3 = $412.50 for mortgage or rental payments – Case 2
A purchase of $577 000 (median unit price) requires a loan of $461 600 (with deposit equal to $ 115
400) over 30 years (into a CBA home loan rate calculator) for P&I at a rate of 3.07%, with 20% deposit
gives weekly repayments of $454 per week. That is, effectively very close to the Case 1 – 30% ideal
financial capacity situation as adjusted to the average weekly income of an individual.
Case 2, while more realistic, shows a difference of – $41.50, below the 30% ideal financial capacity
situation.
A mortgage could be assumed to be serviced by couples with dual incomes (having the additional ability
to save for equity, or otherwise be gifted with funds equivalent to 10-20% equity) Thus, there is
potential scope to apply a more conservative approach then Case 1 or 2, to increase target market
purchasers, via reduction of the assumed weekly average income and application of dual incomes.
Although, in effect market considerations should be reflective of household income NOT individual
incomes.
Ultimately, it can be seen that current market constraints exist between $1276 – $1354 (median
household income NM and COM) and an adjusted or approximate personal weekly income. This could
be in the vicinity of $1354 to (potentially $1375 * 2) $2750. That is a gap of about $1396 representing
the variance between the whole municipality (including unemployed, unemployed and underemployed)
and the individual incomes of the full-time working population.
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12.2.9 Baseline Residential Scenarios
The following baseline price points for apartments have been stated indicatively for testing in a baseline
model.
– 1 bed = $445 000 – about 55 sqm, (High Rise Proportion = 25%)
Serviceability: Rent = $380 Mortgage Repayment = $350 / Week
– 2 bed = $720 000 – about 90 sqm, (High Rise Proportion = 60%)
Serviceability: Rent = $550 Mortgage Repayment = $566 / Week
– 3 bed = $1085 000 – about 135 sqm, (High Rise Proportion = 15%)
Serviceability: Rent = $775 Mortgage Repayment = $853 / Week
Assuming a 20% deposit, P&I over 30 years, Interest Rate of 3.07%, Stamp Duty and Legal – N/A
Average price of apartments per sqm in North Melbourne = $8024 (Lee and Walker, 2016)
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12.3 Industry and Commercial Assessment:
12.3.1 Critical Questions
1. Would the NM site be able to serve as a health care and social assistance precinct?
Most jobs are undertaken (27 489) within hospitals, but there may be opportunities for medical
and health care services or social assistance.
2. Would Financial and insurance services be drawn to NM out of the CBD and surrounds?
3. While information media and telecommunications is positioned highly with economic output
and employment, it ranks lowly as a ‘growth industry’, mainly due to declining jobs between
2010 and 2018 (about 36k reduced to about 26k)
4. Education and training when examined by sub sector is dominated by tertiary education
facilities. Would the NM site be suitable and sustainable for education and training?
5. Retail trade appears to be very risky, with the number of jobs on the increase, but floor space
rather volatile and in a state of decline.
6. Arts and recreation services appear to generate low economic output ($2.2b), with 25856 jobs,
but is a mediocre growth industry. Floor space occupied appears very volatile. There are
potential risks with gambling establishments as sub sectors. Further creative arts and heritage
provide limited economic output. The site may not be suitable for sporting facilities though.
12.3.2 Commercial Focus Options
1. Professional, scientific and technical services is positioned as the top growth industry, third in
economic output ($16.6 b) and first for employment (84064 jobs provided). Floor space in sqm
occupied has increased rapidly with iterative succussions.
2. Accommodation and food services similarly is positioned second for growth industries, third for
employment (48 132 jobs provided) but is ranked 8th for economic output (about $7.6b) .
3. Public administration and is positioned 5th as a growth industry, while being mediocre for
economic output ($4.7b), but is also 5th as industry of employment (41980 jobs)
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12.3.3 Commercial Development Drivers in Focus
Figure 26: Key Development Drivers: Knight Frank Research, utilised by Ciesielski, 2019)
Figure 26, as detailed by Ciesielski, 2019 reflects the most likely drivers influencing commercial
developments based on current (known) economic and market conditions and forecasted future
conditions. It can be seen that population growth, mortgage lending rates, capital growth, and
predicted sales volumes are highly influential. Other such as infrastructure, lending, and rents are
moderate drivers, while construction costs (viewed potentially as stable) and project finance are less
evasive influences.
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13.0 Base Assumptions
13.1 Land Acquisition
Table 3: Base Acquisition Case
(Data derived from property firms publicly available on Colliers, Savills, Knight Frank, CBRE, Rawlinson’s, Domain,
Real Estate.com, Commercial Real Estate.com)
The site at North Melbourne perhaps could be assumed to be previously purchased circa 2016. Thus,
with analysis of other relative commercial sites, the land price or rate utilised (assumed) is $2470 per
square metre.
It should be noted that valuations of land are subject to zoning provisions and can largely vary
depending on allowable building densities. Further, as highlighted commercial land parcels are very
sensitive to overall lot sizing where the price per sqm can effectively triple in smaller parcels (2000-
3000 sqm) as compared to large parcels 6000 – 7000 sqm with prices found ranging from around $2200
per sqm to $6700.
Several other sites have also been found to have sqm rates between $6000 – $8000 per sqm but were
small lots some 200 – 450 sqm, while considered prime locations.
Base Acquisition Case
68-102 Alfred St, North Melbourne
Land Size (sqm) Purchase Cost Rate ($ / sqm) Year
6677 15000000 2246.52 2016
87-105 Racecourse Rd, North Melbourne
Land Size (sqm) Purchase Cost Rate ($ / sqm) Year
2137 14120000 6607.39 2016
36-58 Macaulay Rd, North Melbourne
Land Size (sqm) Purchase Cost Rate ($ / sqm) Year
3068 20350000 6632.99 2019
North Mebourne Case Purchase Cost Rate ($ / sqm) Year – Est
6073 15000310 2470 2016
6677 Alfred St
604 diff
Therefore Rate at NM Dev Site is Greater than Alfred St but proportionally accurate
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13.2 Preliminaries
The preliminaries utilised for basic analysis included demolition, with inclusion of fees and insurances.
These included the following:
– Stamp duty (previous land transfer for site)
– Professional and Legal fees (Architects, Structural Engineer, Services Engineers, Building
Surveyor, Environmental Scientist, Quantity Surveyor, Specialist Consultants, Solicitor and
Property Consultants)
– Contract works
– Public liability
– Building permit
– Planning permit
Table 4: Preliminary Expenses Estimation
Preliminaries Rate / Amount Office Building,
Demolition 92.3
Two Storey – RC slab, brick
walls, metal roof Rawlinsons pg 205
Professional Fees 0.1 Rawlinsons pg 866
Stamp Duty $ 825,017.00 SRO
Insurances
Contract Works 0.0015
Public Liability 0.0005
0.002
Fees
Building Permit 6.42 $ 27,275
Planning Permit 0.00125 $ 96,250
$ 123,525
Fees & Insurances $ 277,525
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13.3 Construction Period
Table 5: Construction Period – Large Scale Projects
13.4 Building Footprint (Site)
The building footprint for the site, has been established from the enclosing perimeter and site area
provided. Municipal and state planning regulations and guidelines stipulate urban developments, the
requirement for open and landscaped areas. The NM development will also require public access via
street crossings (driveways), laneways, footpaths, that is paved surfaces. Thus, a sensible benchmark
would be in the vicinity of 20-25 % open area. From the calculations below, very conservative figures
have been applied. These are Case 1 (30%) and Case 2 (35%) for total ground level open area.
Effectively the available building footprint, forms the basis for the vertical floor space available as
shown following. Considerations must also include provision for vertical access (stairs, elevators, ramps
and the like), public shared space as well as common walls. These essentially include all the land that is
not put to market (unsellable land)
Table 6: Building Footprint Estimation
Construction Period Value Documentation Construction Project
Total
Multi Storey Office Units 150 – 200 M 51 – 77 111 – 136 162-221 Rawlinsons pg 837
Complex Projects 75 – 150 M 68 – 85 128 – 170 196-225 Rawlinsons pg 837
Item % sqm
Lot / Site Area 100 6073
Building Footprint Case 1 70 4251
Building Footprint Case 2 65 3947
Sellable Land (Ground Level)
Sellable Land (Ground Level)
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13.5 Building Footprint (Vertical)
Following from the site building footprints, two case have been developed with the original Case 1
(25%) and Case 2 (30%) total ground level open area.
In the vertical scenarios provided, the calculations assume the building can be a maximum of 8 levels,
that is from Ground to level 7 (total of 8). This is particularly important when formulating base
economic feasibility for several reasons.
Specifically, the surrounding buildings (Serra and Kirra apartments) are constructed to 6-8 levels.
Planning requirements involve satisfying provisions such as maintaining neighbourhood character,
building scale and form, street interface and boundary wall heights, setbacks and separation of upper
levels for siting and overshadowing.
Table 7: Vertical Footprint – Case 1
Table 8: Vertical Footprint – Case 2
Further, issues will also arise during the planning and development application stages in terms of
objections to the development. Notably the scale, coverage, size or number of storeys. As an insurance
policy it would be shrewd to nominate a concept design that is say 12 storeys in total but base the
feasibility upon 8 storeys. In reality, it would have diabolical impact upon the development if feasibility
was based upon construction of 12 storeys and permission was given only for 8 storeys.
Case 1 Rate $ per sqm sqm ttl Level Indicated % Adj Calculation Adj Notes
Commercial – Retail 3613 Level G -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & shared sqm)
Commercial – Retail 3613 Level 1 -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & shared sqm)
Commercial – Retail 3613 Level 2 -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2763 Level 3 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2763 Level 4 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2763 Level 5 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2763 Level 6 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2763 Level 7 (8) -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
TOTAL 24656
Case 2 Rate $ per sqm sqm ttl Level Indicated % Adj Calculation Adj Notes
Commercial – Retail 3355 Level G -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & shared sqm)
Commercial – Retail 3355 Level 1 -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & shared sqm)
Commercial – Retail 3355 Level 2 -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2566 Level 3 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2566 Level 4 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2566 Level 5 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2566 Level 6 -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
Mix Comm+ Res 2566 Level 7 (8) -35% Bf Podium -20%, Vert & Shrd sqm – 15% (Allowance for vertical access & shared sqm)
TOTAL 22895
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Thus, 8 storeys will be utilised as an input for feasibility, and 12 storeys should be nominated during the
concept design and development application stages. It only follows that during stakeholder
engagement and negotiations with planning and regulatory authorities, the developer will be in a
position to negotiate down to say 8 – 10 storeys. The public perception and those potentially opposing
the development will be satisfied with a perceived modification. Importantly though for the developer
and investors, the project will still be feasible with the input of the ‘vertical buffer’.
13.6 Building Footprint (Basement)
The building footprint of the site has been applied from the more conservative Case 2 scenario. Some
further investigation will be required during a future report as well as during potential concept design
to explore the nature of parking arrangements.
The objectives for MUD entail creating a more active lifestyle for the residents, effectively reducing the
reliance of travel by car. Although, this is perhaps more a principle that works in concept but NOT in
practice. Essentially retail and commercial operations within developments have attached requirements
for parking and access via the BCA and local planning. The particular use whether medical, retail,
consulting practice or other will indeed trigger a minimum number of parks and disabled access parks.
So, in effect there is somewhat of a departure between the planning objectives flaunted by local
councils in terms of reducing car traffic and traffic movements, but in reality, they are a commercial and
regulatory necessity. At least in the near future, they will remain as a necessary evil, so to speak.
Table 9: Basement Footprint – from Case 2
While referring to future concept designs, it would be advantageous to eliminate parking from the
ground or street level for several reasons. The first is to increase the amount of available land for retail
and commercial use, while at the same time ensuring there is an abundance of open and landscaped
area (servicing the objectives of MUD with attractive, inviting and liveable precincts).
Basement Rate $ per sqm sqm ttl Level Indicated % Adj Calculation Adj Notes
Designated Basement 3355 B1 -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & travel area)
Designated Basement 3355 B2 -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & travel area)
Designated Basement 3355 B3 -15% Bf Vert Acc + Shrd -15% (Allowance for vertical access & travel area)
TOTAL 10066 Based on Case 2
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The other purpose of placing the parking within the basement ONLY, ensures it is essentially out of sight
and out of mind for those within and around the development. This design feature would perceptually
minimise the impact and movement of cars within the development.
Further, while the construction, engineering and design costs for the developer will indeed be
proportionally increased, there will be opportunities to increase the sellable land, below the
development and should be seen as an opportunity. Again, the base case has assumed 3 levels will be
attached to the development, but if a further 1-2 levels could be added there will be additional scope
for increased profits.
13.7 Construction Costs
Table 10: Construction Costs Estimate
Construction Costs
Residential – Apt
$ per sqm 2280 2460 Med std finish Rawlinsons 13.3.1.2
$ per sqm 2845 3070 High std finish Rawlinsons 13.3.1.3
$ per sqm 3170 3415 Prestige std finish Rawlinsons 13.3.1.4
Individual Balcony $ per sqm 550 930 Med std Rawlinsons 13.3.1.6
$ per sqm 655 1090 High std Rawlinsons 13.3.1.7
Commercial – Office $ per sqm 2985 3215 Finished floor lettable type Rawlinsons 9.1.3.1
2785 3000 Sheel and core lettable type Rawlinsons 9.1.3.2
Fitout $ per sqm 1075 1150 Medium Quality Rawlinsons 9.1.5.2.1
Fitout $ per sqm 2315 2485 High Quality Rawlinsons 9.1.5.3.1
Parking $ per sqm 1580 1705 Two levels Rawlinsons 10.1.2.2
Commercial – Retail
$ per sqm 2420 2605 Department store Rawlinsons 14.3.1.1
Multi Unit – High Density – Multi Storey
City – Department Store – 3 to 4 Storey
RC construction, mech ventilation, fire sprinklers, landscaping, minimal
facilities, no lift
7-20 Storey, Std Finishes & Facilities, AC, Med speed lifts, fire sprinklers
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13.8 Improved Site Valuation
Table 11: Improved Site Valuations
Table 12: Cark Park Valuation Estimate
13.8.1 Commercial Rental Rates
Table 13: Commercial Rental Rates
Sellable Rate Indicative Unit Description Ref
Range (Inner Melb)
Residential – Apt 139400 per Apt Unit 50000 225000 Site Value – Sales Rate Knight Frank Ciesielski, 2019
10000 $ / sqm 8300 14500 New Apartment Value Knight Frank Ciesielski, 2019
Car Park unit $ 45280 Addition on Apartment Secret Agent 2014
unit $ 40000 80000 Commerical Purposes Pallisco 2015
Range
Sell Cost $
Park Rate 45000
2778 rate per sqm
16.2
sqm
Rental Rates Unit Description Ref
Commercial – Office
City Fringe
$ per sqm
per
annum
320 450 Prime net face Rawlinsons pg 882
City Fringe
$ per sqm
per
annum
250 310 Secondary net face Rawlinsons pg 882
Unit Description Ref
Commercial – Retail
$ per sqm
per
annum
320 450 Retail Strip Rawlinsons pg 882
$ per sqm
per
annum
450 600
Neighborhood Shopping
Centre
Rawlinsons pg 882
Range
Range
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13.8.2 Economic Feasibility Summary
Table 14: Base Case Outcome Summary
From the established base case, the development shows great potential based on the rates and
assumptions. There are a range of variables that affect the modelled base scenario. The most influential
are the costs of construction and the improved or sellable value of the land.
The base case has returned an investment of 17% profit, based on basic revenue / expenses. Referring
to the final sellable land, it can be seen that for commercial, residential and parking the required /
necessary increase required is 4.38, 2.87 and 3.05 times that of the construction costs.
Essentially these variables will be have to be reviewed to ensure accurate forecasting and closely
monitored through the project lifecycle. The worst scenario to be realised in the future would be a twofold risk / cost factor. That is, where construction costs increase while sellable land values decrease.
Total Revenue $ 263,858,186
Total Revenue +GST $ 290,244,004
Land Acquisition Costs $ 15,000,310
Stamp Duty $ 825,017
Interest Expenses TBC
Demolition Costs $ 560,538
Construction Costs $ 76,999,909
Basement Parking $ 8,902,600
Retail G-L2 $ 27,236,266
Res L3-L8 $ 40,861,042
Professional Fees $ 11,549,986
Fees & Insurances $ 277,525
Sub Total $ 166,387,866
Contingency $ 16,638,787
O/H & Risk (Hurdle) $ 36,605,331
Total Costs $ 219,631,983
Sub Total + GST $ 241,595,182
Project Profit Ex GST $ 44,226,202 17%
Project Profit INC GST $ 48,648,823 17%
Base Case Development Outcome
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From the base calculations it becomes clear that the commercial, residential and parking items would
have to be sold or retain value of $11 000, $8500 and $2700 effectively primarily return the expected
profits as well as be worth the risk for the developer to proceed.
Other crucial matters for consideration include the contingency and hurdle rates applied to the base
calculations. These are 10% for the contingency and 20% for the hurdle rate. The contingency has been
applied as a percentage and NOT as a lump sum figure. Due to the size of the development potentially
some further costings for risks and uncertainties should be priced to ensure they will NOT exceed a sum
of $16.5 million (based on 10% of project expenses).
The hurdle rate includes costs of overheads, debit and financing of 12% and a risk element of 8%, totally
20%. The project is extremely risky with the economic variables being reasonably volatile.
Table 15: Base Case – Sellable Land Improvement Estimate
Physical Item Sub Total Cost Modelling Model % Increase Sell Price $/sqm
Commercial $ 27,236,266 $ 119,243,355 438% 11000
(Office / Retail)
Sub Total Cost
Residential Apt $ 40,861,042 $ 117,436,638 287% 8500
Sub Total Cost
Parking $ 8,902,600 $ 27,178,193 305% 2700
(Basement)
$ 76,999,909 $ 263,858,186 AVG
TOTAL SUM 343%
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14.0 Large Scale Development: Risk Analysis and Management
14.1 Construction Projects: The Nature of Opportunity and Risk
The construction industry is ‘plagued by risk, consistently suffering from poor project performance due
to a lack of formal risk management procedures’ (Tah and Carr, 2001). Industry stakeholders and
projects are fragmented, complex and dynamic in nature. Hence failings are increasingly common,
especially where risks are not adequately dealt with and where approaches are ‘incomplete and
inconsistent’. Further, when communication is conducted poorly, project participants will not share a
collective understanding of potential threats. It only follows that sound decisions and actions cannot be
executed, creating a chain reaction of undesirable effects. That is, cost escalation and delays.
Those managing and controlling projects must intervene and implement ‘effective mitigating strategies,
measures and responses’. Simply decisions must be made with accurate and coordinated information
or details. Otherwise, implications will arise where project information is erroneous, ambiguous
(uncertain) or incomplete. NSWT 2004, describe how risks may also arise through limited knowledge,
experience or expertise, uncertainty relating to the future, or though changes in relationships between
parties’.
The concept of risk and risk management (while risk is not always explicitly mentioned or declared),
remains as a ‘central theme’ amongst construction planning in an attempt to ‘recognise and prepare for
a range of possible future outcomes’ (NSWT, 2004)
Construction projects (especially large scale and mixed use) serve to escalate the scope and magnitude
of risks (with potential for negative consequences). For investors and developers, large scale projects
are a means of wealth creation, through the monetisation of a physical asset or assets. Key project
stakeholders essentially are interested in the economics of a project transaction. That is, if it is in fact
feasible and in effect attractive enough to proceed given the risks involved.
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14.2 Risk Concepts:
Risk broadly refers to the possibility of ‘harm or damage, financial loss or loss of value’ attributed by a
‘action or inaction’. Essentially, an expected future outcome is not achieved but is replaced by another
event. Hence outcomes may be ‘seen or unforeseen’ (effectively planned or unplanned). Risk is
measured by the consequences (of harm) and the likelihood of the event or outcome occurring.
Risk exposure conceptualises the ‘possibility of economic, financial or social loss or gain, physical
damage or injury, or delay’ (NSWT, 2004) Risk impacts directly influence the a project or firms ‘goals
and objectives’.
The principle of risk identification and management is to capture, resolve and respond to the array of
project related risks. Fundamentally, project risks are intended to be minimised, marginalised or
completely removed, such that positive outcomes are maximised while minimising or removing the
likelihood and consequences of adverse events.
Many authors, project management and project stakeholders have articulated methods or processes to
deal with risk management. Although, the commonly found and key mechanisms include in the
following subsections:
14.2.1 Risk Identification: Defined
Determining which risks are likely to affect a project and documenting the scope of each element.
14.2.2 Risk Assessment and Quantification: Defined
Evaluating risks and risk interactions to assess the range of possible project impacts.
14.2.3 Risk Response Development and Control: Defined
Defining opportunities for enhancements and managing changes in risk across the project life cycle.
(Adapted from Turnbaugh, 2005)
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14.2.4 Risk Management Process:
Figure 27: Risk Management Process (NSWT, 2004)
14.3 Risk Classification and Sources:
Another common element of risk management entails the determination, documentation and
evaluation of ‘risk categories’. That is, the source of the risk and the manner in which the risk translates
into an event.
Risk sources, factors or categories can also conversely define the elements for realising success. If
effectively, collectively realised and achieved. For example, project feasibility can be attributed to
many factors but within each lies an element of risk. If in fact it can be identified and measured, only
then can it be managed or controlled. Thus, success or risk can emanate from:
14.3.1 Economic factors
Market supply and demand will ultimately determine whether investments can produce acceptable
returns.
14.3.2 Financial factors
Large-Scale Mixed-Use Developments – LSMUD require lengthy life cycles and are often difficult to
finance due to the amount of capital and equity required, staging of development, presenting many
challenges in comparison to Single Use Development SUD.
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14.3.3 Design factors
The development of precincts, site or master plans involve a complicated process. The design solution
or response must satisfy a range of aspects including but not limited to regulatory provisions and
guidelines, zoning, planning overlays, aesthetics, neighbourhood character, creation of a theme or
experience, fitness for purpose, structural integrity and performance and so on
14.3.4 Design documentation factors
Design errors, omissions and ambiguities can generate poorly designed projects scopes, leading to
various scope changes. Poorly coordinated design drawings can also create a range of problems
including inaccurate estimates and schedules, under or over unitisation or resources, delays and
variations, the need for redesign as well as rectification, reduction of quality or workmanship.
14.3.5 Physical factors
The site location – location – location, lot size, topography, access and egress, connectivity to
transportation, pedestrian convenience and circulation, quality of infrastructure, latent conditions such
as contamination, existing or old utilities, water table, rock formations and old foundations, excessive
fills, highly reactive soils
14.3.6 Legal Factors
Stemming from the procurement path and contractual arrangements, each party has obligations and
responsibilities to perform under the contract. Contract provisions and terms are designed to allocate
risk, generally to the party that is best suited to deal with the risk.
14.3.7 Project stakeholder – private or public (human) factors
Project stakeholders can include many firms, organisations, community and government bodies or
individuals – both private and public. Opposition to a project in effect will trigger a range of
consequences.
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14.4 Internal and External Risk:
Internal risks include elements that the project team can control or influence. These include ‘scope,
terms and conditions, control protocols, production costs’. Whereas ‘external risks are those that are
beyond the control or influence of the project team’ These include economic conditions, political or
regulative intervention. (Turnbaugh, 2005). External risks however, must be continually monitored in
order to forecast and manage their effects.
Figure 28: Hierarchical Risk Breakdown Structure (Tah et al 1993, utilised by Tah and Carr 2001)
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14.5 Risk Quantification: Rating and Ranking
Risk quantification encompasses a firm specific evaluation procedure, established to measure the
potential for risk. The evaluation procedure will also capture or classify the risk under a designated
table, matrix system, score card or the like.
14.5.1 Risk Ranking via Matrix Systems:
Figure 29: Risk Ranking Matrix (NSWT, 2004)
To establish the risk rating:
1. Use the consequence table to determine of the impact of risk occurring (affecting feasibility
and or level of viability where applicable)
2. Determine the likelihood of the risk occurring.
3. Use the final table to determine the risk rating given the likelihood and consequence.
4. Repeat steps 1-3 for each risk generated or identified.
5. The final risk rating will be the items that produces the highest risk.
NOTE: A quantitative approach will be explored in future feasibility report (FA2)
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14.5.2 Risk Consequence:

Table 16: Risk Consequence Evaluation
14.5.3 Risk Likelihood:

Table 17: Risk Liklhood Evaluation
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14.5.4 Risk Events: Consequence and Likelihood

Table 18: Risk Rating Evaluation – Qualitative Approach

Table 19: Risk Rating Evaluation – Qualitative Approach (+ Coding)
14.5.5 Coding of Risk Events

Table 20: Risk Level Coding
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14.6 Risk Response and Procedures:
Prevention, mitigation, transfer or avoidance is accomplished by eliminating the cause of the risk or
otherwise significantly reducing a threat and its occurrence by transferring to another party.
(Total elimination is not always feasible or possible, thus processes or procedures may be adopted to
optimise control – delivering more favourable outcomes)
Acceptance involves absorbing the consequences in the event where a risk materialises. Contingency
plans can also be modelled or simulated and executed where required.
14.7 Risk Management
The general application of risk management can be applied throughout the project lifecycle. However,
the process should commence during inception, feasibility and funding.
It should be recognised that ‘uncertainty and risk levels are at their highest’ during the early project
phases. Especially when ‘project objectives and performance criteria are vague’ (del Cano and Pilar de
la Cruz, 2002). Importantly as details are refined and iteratively clarified ‘uncertainty and risk levels will
decrease during the course of the project’.
For example, there is a great deal of realisation and development occurring between inception and
feasibility through to the basic / conceptual design. Moving through to detailed design to construction,
the level of risk and uncertainty continues to decrease. What becomes clear though, is that project risk
management principles and techniques are of great importance during early project stages and become
effective through:
– Forming cost estimates, alternative scenarios or contingencies
– Following future project stages (planning, developing responses)
– Integration in consequent stages (construction, commission and handover)
– Integration into ALL construction activities
– Coordination and implementation by ALL project stakeholders (whether risks are internal or
external)
For large scale and complex projects, it is advised that a risk and process manager is appointed to
articulate, implement and supervise a holistic risk management plan. That is, with the assistance with
other consultants including risk analysts, designers, contractors and other relevant project stakeholders
(forming a risk management team)
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14.8 Risk Management Planning
A Risk Management Plan (RMP) requires a systematic and structured approach that formally documents
all aspects regarding identification, quantification, response (implementation and contingencies),
accountability and control (management of obligations, development and execution).
14.9 Risk Management Techniques:
– Scenario planning
– Contingency planning (and allowance)
– Sensitivity analysis
– Cost estimation and budgeting
– Stakeholder and community consultation
– Value engineering – management study
14.10 Application of Risk Management in Project Activities
1. Scope definition and control
2. Project control and management systems
3. Cost control and management methods
4. Schedule control and management
5. Change control and management
6. Resources control and management
7. Document control and management
8. OHS control and management
9. Quality assurance, control and management
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14.11Building Management Systems:
Building and Construction Management Systems (BMS) are integrated systems incorporating browser
and mobile cloud-based platforms. Capabilities include an array of project management activities,
facilitating total integration and synergy over a project’s lifecycle. For example, top construction and
management software systems include Procore, BuilderTrend, Aconex and Smartsheet. The systems are
marginally configured to suit various building and management disciplines but incorporate the
following:
– Scheduling (Gantt charts, work breakdown structures, task allocation)
– Financial management (purchase orders, budgeting, time sheets, variation processing)
– Resource management (Human Resources – HR, materials delivery)
– Stakeholder interaction and management (Customer Relationship Management – CRM,
collaboration),
– Documentation management (drawing revision handling, Request For Information RFI), Building
Information Management – BIM virtual collaboration, product warranty, field reporting,
checklists and inspection forms,
– OH&S (Safe Work Method Statements – SWMS, Material Safety Data Sheets – MSDS, High risk
work provisions, plant machinery and equipment registers, site induction, personnel log in / out
monitoring.
Integrated systems deliver much more foresight, visibility, control and accountability over the realms of
large-scale projects encompassing many firms and individuals. The project elements built into the
systems deal with risk factors.
The functionality, interaction and handling of project information amongst firms and individuals largely
increases success, while providing ample opportunity to collaboratively identify, analyse, manage and
resolve project risks.
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15.0 North Melbourne Stage 1: Proposed Physical Options
15.1 Utilisation of the Base Case
From the base case scenario, the site was established to have 6073 sqm available. The Building
footprint at ground level was estimated to be 3974 sqm (from Case 1) in conjunction with 30% open
space applied (site constraint). Thus, it is assumed that a maximum of 3613 sqm is available for each
floor plate level.
Further in the vertical scenario is was assumed that retail would occupy at least the ground and first
floor levels of the potential buildings (a planning constraint for mixed used buildings, minimum 10%
commercial – retail.). It is possible and assumed that a third level would be utilised by retail. That gives
G, L1 and L2 (offering 3613 sqm), totalling 10 840 sqm.
Referring to the site scale and neighbourhood analysis, it was also assumed to adopt a building height
equivalent to 8 storeys. That is, G and L1-7. But from levels L3-L7 (5 levels) at podium and setback
(planning guideline – constraint), would require a further reduction of the useable floor space by an
assumed 20%. Thus, the ground level building footprint would be reduced some 35%. For L3-L7, this
equates to a usable floor space of 2566 sqm (over 5 levels) gives 13816 sqm.
The proposed North Melbourne development also assumed basement parking would be provided (a
design and planning constraint). It was also assumed that 3 levels would be included, although further
in depth analysis would need to examine the mix and regulatory requirements particularly with
commercial activities.
Essentially, for the base case 3 levels were utilised B1-B3 with a floor plate size, of the more
conservative Case 2 (a reduction of 5% area – to accommodate laneways and services) produces 3355
multiplied by 3, which gives (10066) sqm.
So, in summary G – L2 (10 840), L3-L7 (13816), B1-B3 (10066). That totals 34722 sqm in total.
Effectively, it should be recognised through the site and neighbourhood analysis and regulatory
provisions that some base constraints will flow through from Stage 1 (basic analysis) and physical
options through to our final and strategic options in a future report (containing Stage 2).
The basic outcome will produce 10 840 sqm plus 13 816 sqm (omitting the basement parking (10066)
giving 24 656 sqm of floor space. Thus the residential side of the equation (based on preliminary
assumptions) would be some 50-60% from 13816 over 24656 (= 56%).
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15.2 Market Sectors: Physical Mix
From the base assumptions, constraints and market data some options for future analysis include
residential with commercial. Recognising commercial will potentially be split into further sub sections of
retail, office and hotel.
In Stage 1, a rather hybrid or blended approach (based on qualitative and some quantitative data) has
been adopted. Thus, the mix will indeed require iterative assessment with detailed quantitative data
(during Stage 2) in a future report.
Although it would be beneficial will the data collected to propose some product mixes as follows.
15.2.1 Proposed Mix #1
Retail = 10 %, Residential = 55 % Commercial Office = 35 %
(G-L2 Commercial, L3-L8 Residential podium, Retail Commercial Min 10%)
15.2.2 Proposed Mix #2
Retail = 20 %, Residential = 35% Commercial Office = 45 %
(G-L2 Commercial, based on Mix 1, with increase in Retail and Commercial Office) Stage 2, should
examine the financial effect of reducing residential by 20% and utilising as commercial.
15.2.3 Proposed Mix #3
Retail = 15 %, Residential = 25 % Commercial Office = 30 % Commercial Hotel = 30 %
Stage 2, should examine the financial effect of reducing balancing the residential / commercial office
(proportional) and addition of commercial hotel.
15.2.4 Proposed Mix #4
A future Stage 2 report has the scope to adjust the aforementioned mixes, after some detailed and
quantitative assessments.
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15.3 North Melbourne: Stage 1 Fundamentals – Qualitative Assessment
15.3.1 Qualitative Rating

Table 21: S1 Fundamentals – Qualitative Analysis
15.3.2 Residential Fundamentals

Table 22: S1 Fundamentals – Residential Analysis
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15.3.3 Commercial Office Fundamentals

Table 23: S1 Fundamentals – Office Analysis
15.3.4 Retail Fundamentals

Table 24: S1 Fundamentals – Retail Analysis
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15.4 Stage 1 Proposed Physical Options

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16.0 Conclusion
The question for developers and investors is about balancing risk and opportunity. The best
opportunities should be selected with the least amount of risk. Although, if NO risks are taken then
there will be little opportunity in terms of generating capital and returns on investment.
The Stage 1 (objective analysis and overview) report assessed the basic and fundamental feasibility
aspects for a proposed Large-Scale Mixed-Use Development (LSMUD) at the North Melbourne precinct.
The report identifies the crucial objectives for the developer and investors. These were relating to site
suitability, economic, social and cultural viability as well as satisfying site regulatory and market
provisions and constraints.
The structure of the Group 6 Firms approach utilised the Stage 1, as a hurdle or gateway to escalate
various opportunities, insights and uncertainties surrounding the development. Essentially, many
constraints, market influences and uncertainties (that may have existed for the client and equally for
consultants), were identified within the report.
For example, some of site constraints detected include the irregular site shape / boundary, the existing
vegetation strip, existing crossings and potential for soil contamination (via previous commercial use).
The report diagnosed the site as a corridor – transit orientated – urban renewal precinct. Effectively
allowing construction for approximately 8 storeys, and potentially up to 12 storeys or greater where
significant community benefits can be provided. There was a direct link found between social, cultural
and environmental aspects in that they are equally important for the success of the development.
Other findings indicated the requirement for various worksite and infrastructure provisions. These
include Environmental Impact Assessment (EIA), Environmental Management Plans (EMP), Construction
Management Plans (CMP), all relevant in order to satisfy local and state planning provisions.
The report also analysed the effect of macro-economic factors, particularly how they can influence
consumer supply and demand, in conjunction with the availability of income (disposable wealth) and
cost of finance. Economic growth was found to be well supported by population growth and migration
as well as increased employment.
The effect of environmental and pandemic events were found to be detrimental to the economy, thus
reducing consumer confidence as well as the desire to invest with unknown and volatile markets and
industries. Essentially while the cost of finance (interest rates) are low, banks and lending corporations
will likely tighten lending restrictions in near to short term.
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The report discusses market factors and insights relevant for the housing, commercial and retail
sectors. Office vacancy rates and supply in Melbourne were found to be low providing scope for ‘time
limited opportunities’ in the near future for development. The report also identifies the age structures,
household sizes and income capacities of residents. Particularly, there were individuals ‘independent
youth – couples and singles, between the age of 20-29, living in large scale 1 – 2-bedroom apartments.
It was identified that large scale developments are highly risky due to the large number if stakeholders
and extended construction schedules. The report outlined the range of sources and methods to
mitigate and manage risks. Essentially, a firm specific framework or management plan formally
addresses which methods and techniques are to be applied during the entire project lifecycle.
Importantly risk management is best commenced during project inception and feasibility. The Stage 2,
future report will utilise senility, cost benefit, estimation and cashflows to comprehensively gauge
ultimate project feasibility.
The report importantly formulated a base case financial scenario, based on worked assumptions and
variables gathered from market and economic data. These included assumptions of land acquisition for
approximately $15 million (with land pricing of $2470 per sqm), building footprint (less a conservative
35% open space) and vertical projection (8 storeys).
The base case developed found the North Melbourne site to be provisionally feasible based on the
construction costs applied, improved site land valuation, basic preliminary fees and insurances.
Effectively the base outcome established a total revenue of about $263.8 million, and costs about
$219.6 million. That is, the ability to generate a profit of about 17% (based on a contingency of 10% and
hurdle rate of 20%)
Further, the report escalated an iterative physical mix, conceived from the base case scenario (built
with constraints and some assumptions). The Mix #1 developed was Retail 10%, Residential 55%, and
Commercial Office 35%. In effect, a benchmark Mix #1, is to be utilised and condensed in the Stage 2
future report. That is, with the integration of more detailed quantitative data. The Stage 1 report also
provided some baseline physical options (1-4) to be further analysed and refined in due course.
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17.0 Recommendations
The following recommendations are directed to developers and investors:
– Utilise insights acquired from market, macroeconomic, site and project investigations as
primary gateways or thresholds for feasibility studies conducted on large (mixed use) projects.
– Decisions should be generated / supported from market analysis (demographic, community,
economic and financial data)
– Decisions and baseline concepts should also be tested against site / project constraints
including physical, regulatory (design – BCA and planning provisions).
– Risks should be exposed as early as possible (during inception and feasibility studies)
– Future concept designs (meeting the developed objectives), should be escalated and utilised for
costings analysis (cost – benefit, returns on investment, sensitivity analysis).
– Economic metrics and applied rates or percentages should be conservative compared to
current and estimated future market rates, not as to optimistically distort economic feasibility.
– The most profitable market opportunities should be selected, as long as the associated risks
may be worthy or alternatively mitigated and reduced to an extent that is acceptable.
– All assumptions should be documented, analysed and testing during finalisation of feasibility
studies.
– Removing the risk out of large scale and complex development projects will be expensive but
valuable for project viability, as expenses may be known and calculated whereas unforeseen
risk events often cannot be calculated.
– Additional specialist and professional services should be utilised such as retail and commercial
(mixed use equivalent) architects, developers and designers.
– Computer systems such as Building Management Systems (BMS) should be utilised for
integrating project activities beginning at feasibility stages. Effectively providing visibility,
control and accountability over project risks and activities.
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19.0 Appendix
19.1 Appendix 1: Site Neighbourhood Character and Scale Analysis:
19.1.1 Commencing Boundary Road (from North to South)
1. Tobin Brothers Funerals (189 Boundary Road)
2. B Braun Renal Care Centre (185-187 Boundary Road)
3. Nova Institute of Technology (187 Boundary Road)
(Offering English language courses)
4. Serra Apartments (185 – 187 Boundary Road)
Comprised of 54 one- and two-bedroom apartments over 3 levels L3-L5
(The project involved refurbishment from existing designed office spaces, leaving the bottom 2
office levels GL and L1)
5. Garvin Trading Company (L6 179 Boundary Road)
Fashion, garment and fabric sourcing and supply services.
6. Kirra Apartments (179 Boundary Road)
(Comprising of 76 apartments over 10 levels (4 parking levels, 2 passenger lifts, and functional
private gym) Specifically, parking levels below, commercial at ground level, 5 levels of
apartment residential, 2 levels set back on a podium).
Figure 30: Kirrra Apartents (CRC Group, 2020)
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Figure 31: Serra Apartents (CRC Group, 2020)
19.1.2 Commencing Racecourse road (from West to East)
1. 7 Eleven Petrol Station (55 Racecourse road)
2. Boundary Road
3. An Art Studio contained on a residential lot
4. Lorne Street
5. GDP Group (41-47 Racecourse Road)
Construction firm, offering services such as remedial works, façade care, working at heights and
access, building maintenance
6. Residential Apartment Tower (33 Racecourse Road)
(At Ground Level: Phase 42 Managed IT services (contained in an 100m² open plan office with
rear parking) Levels L1 – L8 Apartments
7. Care Plus Auto Services (27 Racecourse Road)
(Part lease of lot to Melbourne Kebab Box)
8. Fowlers Preserving Goods Shop (23-25 Racecourse Road)
9. Alchemy Construct (15-17 Racecourse Road)
Offering services in building contracting, engineering, construction management, project
management and design management
10. Residential Housing Lot (13a/b Racecourse Road)
11. F45 Training North Melbourne
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12. Home Industrial Consulting Engineers (407 Flemington Road)
Offering services for site classification and footing design, structural engineering, site features
and level surveying, civil engineering, building damage and forensic investigations, BAL and
wind rating assessments
19.1.3 Commencing Flemington Road (from North to South East)
1. Two consecutive residential lots, Emu lane then a residential lot (98 Flemington Road)
2. Residential apartment complex – consisting of 3 levels (open carport parking under at ground
level, with L2, L3 above)
3. Park Squire Motor Inn and Serviced Apartments (94 Flemington Road)
Consisting of 18 refurbished serviced apartments, 24 renovated motel rooms, 2-bedroom
apartment and 3-bedroom villa.
4. A further row of residential housing (single level) with 78 Flemington Road over two levels.
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19.2 Appendix 2: Basic Market Competition Analysis
1. Queen Victoria Market (2.5 by foot, 3.0 – 3.2 km by car) – 33 minutes, 11 Minutes
2. Woolworths North Melbourne (1.0 km) by foot – 12 Minutes
3. IGA Xpress North Melbourne (1.6 km) by foot – 21 Minutes
4. Highpoint Shopping Centre (6.6 km) by car – 15 Minutes
5. Newmarket Plaza & Chemist Warehouse (1.3 km) by foot – 16 Minutes
6. Bunnings Collingwood (5.6 km) by car – 21 Minutes
7. Bowens Hardware Supplies (1.2 km) by foot – 14 Minutes
8. Dan Murphy Ascot Vale (Mt Alexander Road) (1.7 km) by foot / car – 23 Minutes, 5 Minutes
9. Hoyts Melbourne Central (3.3 km by foot) 44 Minutes
10. Fitzroy Swimming Pool (3.8 km by foot) 50 minutes, (4.7 km by car) – 19 Minutes
11. Cross Fit U (West Melbourne) (2.6 km by foot) – 34 Minutes
12. Myer Melbourne (3.5 km by foot) – 46 Minutes, (5.0 km by car – 18 Minutes, Tram 59 +Walk –
19Minutes)
13. Kmart Moonee Ponds (3.1 km by foot / car) by car 10 Minutes, PT (Tram 59 +Walk) – 14
Minutes
14. JB Hi Fi Elizabeth Street (3.4 km by foot) – 44 Minutes, (4.9 km by car – 18 Minutes, Tram 59
+Walk – 18 Minutes)
15. Country Road Carlton (3.1 km by foot) – 41 Minutes, (3.5 by car – 13 Minutes)
Competition – Points of Interest (POI 1-15 above) have been analysed via input to Google Maps, then
screened via transportation methods (car, PT, foot and combination thereof). The concept of MUD is to
establish 20 minute and walkable neighbourhoods.
Where amenities, facilities or attractions (POI 1-15) are outside a suitable range then a consumer would
tend to shift their preference (demand) to a more accessible option.
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19.3 Appendix 3: Types of Mixed Used Development – Case Studies
19.3.1 Vertical Mixed-Use Development
Vertical mixed-use developments are mostly seen in city centres and more populated areas where
required convenience, accessibility and less land use. High-rise or mid-rise buildings which are seen in
Melbourne and Sydney CBDs are best examples for these types of mixed-use, which is a combination of
different uses within the same building such as in ground floor typically has retail shops, restaurants
and in upper floors might be offices, carparks or residential apartments. The image below is an example
for mixed use development in Wellington, New Zealand.
Figure 32: Vertical Mixed Used Developments (Auckland Design Manual, 2020)
The advantages to vertical mixed-use developments are:
– Public transportation access;
– Street advantage via shops or restaurants;
– Amplified demand for local services;
– Convenient access to amenities and local employment
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19.3.2 Horizontal Mixed-Use Development:
Horizontal mixed-use developments are mostly seen in large block of land where it can able to provide
suitable separation between containing different uses of buildings. For horizontal mixed-use layouts
typically locates well-suited uses sits together with adequate separation between each use. This type of
developments is consisting of single-use buildings (retails/restaurant) within a mixed-use development
zone (such as residential and office) in the same parcel of land. It is commonly seen in suburbs or places
where large parcel of land is available to provide for a complementary and integrated mixed use.
Figure 33: Horizontal Mixed Used Developments (Auckland Design Manual, 2020)
The key advantages of horizontal mixed-use are:
– Seclusion of incompatible uses within the block of land with enough separation;
– Increased demand of local services;
– Increased demand of employment services;
– Promotion street edge commercial and street activities;
It is vital to provide complementary and compatible building uses together, while separating
incompatible uses to maximize the potential of the land.
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19.3.3 Walkable and/or Courtyard Mixed-Use:
Walkable and courtyard mixed use is a combination of both horizontal and vertical types. The benefit of
combining both vertical and horizontal with accessible courtyards is to enhance public interaction and
stimulation of the commercial environment.
Figure 34: Courtyard Open Type Mixed Use Developments (University of Delaware, 2020)
The benefits of this type of mixed-use developments includes the following:
– An abundance of open environments;
– Acoustic and visual shielding between compatible and incompatible uses;
– Courtyard provides provision of functional spaces;
– Increased natural light and air-circulation;
– Increases social and community wellness
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19.4 Appendix 4: Macro Economic Fundamentals
Macroeconomics is a subdivision of economics that investigates how the economy as a whole behaves
in the market systems that function on a large scale. Macroeconomics studies economic-wide concepts
such as inflation, economic growth rate, price levels, changes in unemployment, GDP national income,
tax, exchange rate, etc. LSDP stakeholders cannot control state and national economic environments.
However, they can evaluate conditions in the marketplace before deciding whether to proceed with a
plan or a project.
19.4.1 Inflation
Inflation is typically calculated by measuring the price index inflation rate generally Consumers Price
Index (CPI), which refers to quantitative measures of the rate in which the average price level of a
product or service in the economy increases within a duration of time. It is a steady increase in the
general price level in which the unit of currency purchases less than what it opposed to previous
periods. (Investopedia, 2019)
Costing and price estimations for LSDP must consider inflation (rise and fall) as well as being reflected
within the construction contract. The Figure XXX depicts the Australian inflation rate from 2017 to
2019, with projections to 2024. In 2019, the average inflation rate in Australia was around 1.6% which is
relatively low to 2018. By 2020 the rate has risen to 1.82% and will increase further in the next
predicted 4 years. According to the Reserve Bank of Australia (RBA), Australia’s inflation rate aim is to
maintain 2-3 percent annual consumer price inflation overtime on average. However, these rates will
fluctuate in the future years due to the COVID-19 pandemic.
Figure 35: Australia’s Inflation Rate, 2017 – 2024 (Statista 2020)
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19.4.2 Gross Domestic Product (GDP) – Growth rate
An economic growth rate is a change in the percentage of the value of all production of goods and
services in a nation over a specific period especially in comparison to a previous period. The rate of
economic growth is applied over time to measure an economy’s comparative health. The figures
generally are collected and recorded on a quarterly and annual basis. The economic growth rate mostly
measures the change in the Gross Domestic Product (GDP) of a country. GDP is a very good indicator; it
is a measure that takes into consideration price changes (inflation and deflation) and thus acts as a key
indicator of economic growth.
Figure 36: Quarterly GDP Growth, Australia, 1991- 2018 (ABS, 2018)
Australia is approaching its 28th successive year of annual economic growth, establishing a record for
uninterrupted development among developed economies. Australia’s last recession ended in 1991, and
only three-quarters of negative GDP growth has occurred since. Australia’s recession occurred due to
the dot-com bubble crash, recession across Europe and the Global Financial Crisis due to the
Queensland floods in the years of 2000, 2008 and 2011 respectively. The recent bushfires, the
consequent flooding and the impact of the Coronavirus on all fields of economy are likely to be the
fourth in Q1 2020.
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Figure 37: Australian GDP (Real) Growth Rate, 2014 – 2024 (Statista 2020)
The graph depicts the Australian GDP (Real) growth rate from 2014 to 2024. In 2018, the GDP rate was
at 2.74 percent and had dropped to 1.71 percent by 2019. However, the rate has increased to 2.26
percent by 2020 and will increase gradually in the future.
This summer almost all of Australia has been in the grip of the country’s worst natural catastrophes in
years. The Australian economy and Victoria are doubtful to be immune from the negative
consequences of the fires, floods, and COVID-19 outbreak, however, the full impact is likely to occur
over a much longer period. This follows, for Victoria, the recent bushfires from which affected
communities proceed to recover. The Victorian economy has continued to perform well but the impact
of the virus is lagging with current data releases.
Australia’s economy is 65% of the total GDP largely dominated by the service sector. Figure 3 below
depicts the economic success of recent years based on the various industries, including mining 9
percent, manufacturing 2.1 percent, and construction 9.3 percent of GDP. After Financial and Insurance
services, the construction industry is the second-largest contribution to GDP growth.
Australia is currently experiencing housing shortages due to the population growth levels experienced
within the last few years.
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Figure 38:Industry Value Added by industry – sector & 1991 – 2018 (ABS)
19.4.3 Changes in Unemployment
The unemployment rate is the proportion of unemployed labour – expressed as a percentage. This rate
usually increases or decreases in the wake of changing economic conditions instead of anticipating
them. The unemployment rate can be expected to increase when the economy is in poor condition and
job opportunities are scarce. If the economy improves at a steady rate, and jobs are relatively
abundant, it can be expected to decline. (Investopedia, 2020)
Figure 39: Unemployment Rate in Australia, (ABS, 2020)
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Figure 40: Unemployment Rate – Australia (ABS), 2020)
The unemployment rate can be measured by a calculation made by dividing the number of unemployed
people by all people currently in the labour force, which generates a percentage ratio. According to
Trending Economics 2020, the graph depicts Australia’s unemployment rate from February 2015 to
February 2020. The Australian unemployment rate recorded last 5.10% (Feb.2020), previously 5.3%
(Jan. 2020).
Figure 41:Australia’s Unemployment rate from 2014 to 2024, (Statista 2020)
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The graph depicts Australia’s unemployment rate from 2014 through 2018, with projections up to 2024.
According to Trending Economics 2020, the Australian unemployment rate can decrease in future years.
Australian Bureau of Statistics (ABS), 2020 stated that the employment rate has been increased from
21,100 to 13,010,200 people including both Full-time employment and part-time employment and has
reduced the unemployment from 1,300 to 698,900 people while maintaining a steady Unemployment
rate of at 5.1% within the current period.
However, this can be surge to 15% with1.8 million job losses due to COVID-19 according to the
economics expert Prof. Warren Hogan. (Sky news, 2020) and The ABS is presently tracking the potential
impacts of Coronavirus (COVID-19) on statistics from the Labour Force.
19.4.4 Cash Rate
A cash rate is the interest rate that a central bank like Australia’s Reserve Bank or the Federal Reserve
will charge on unsecured overnight loans to commercial banks. The cash rate is also known as the bank
rate or base interest rate. While commercial banks are free to impose their borrowing interest rates,
the rates they charge on loans and offer on savings appear to be gleaned from the cash rate. Which
indicates central banks can use cash rates, based on the state of the economy, to promote or prevent
consumer spending.
Figure 42: Graph of the Cash Rate (RBA), 2020)
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The graph depicts the cash rate of Australia from 2015 to 2020. The rate had decreased by 1.5% and
maintained the same rate until May 2019 and dropped a further low cash rate of 0.25% by March 2020.
When the central bank lowers the cash rate, banks would also lower their mortgage lending rates and
mortgage rates, and a loan is easier to obtain, and mortgage rates would become more advantageous
for borrowers. Nevertheless, lower cash rates can have an impact on lower returns on savings, as
interest rate payments drop in value. The low rates enforced by central banks in the years after the
2008 financial crisis led most commercial banks to charge low-interest rates on loans offering lowinterest rates on money deposited in interest-based accounts.
In theory, consumers would be encouraged to spend money rather than just saving it, with the cost of
borrowing low and the benefit of saving minimal. This would, in turn, enhance businesses and the
economy.
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19.5 Appendix 5: Demographic Community Profile
19.5.1 Age Structure and Distribution:
Population demographic structures and distribution are all relative and directed by the following
aspects:
– Location (city centres, fringe, regional or rural)
– Available housing stock (attached or detached dwellings, high, medium or low density)
– Supply or pipelines for new development (market demand or saturation)
Typically, it can be seen from Figure 43, that the dominant age structure is 20-24, and 25-29. Further
the largest increase and most common age brackets expected is 25 to 29 (Figure 44)
Figure 43: Forecast – Age Structure (id, 2019)
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Figure 44: Forecast – Age Structure Change (id, 2019)
19.5.2 Household Categorisation:
Household structures and densities (dwelling type) in conjunction with age structures (groups) depict
particular housing markets within a municipality or ‘pocket’ within a of a local city. Referring to Figure
45, the dominant household type in 2020, was lone person households (36.8%), which also is forecast
to increase between 2020-2031 (Figure 46) at the greatest rate of 19 055 households.
Table 25: Forecast – Household Types 2020 – 2041 (id, 2019)
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Figure 45: Forecast – Household Types 2020 – 2041 (id, 2019)
Figure 46: Forescast – Change in Houehold Types (id, 2019)
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19.5.3 Dwelling Structure and Bedrooms:
Figure 47: Bedroom Mix (A) and Dwelling Structure (B) (COM, 2019)
19.5.4 Motor Vehicles Owned:
Figure 48: Motor Vehicles Owned (COM, 2019)
28
48
15
0
10
20
30
40
50
60
Bedroom Mix
2016 COM
Bed 1 Bed 2 Bed 3
3 4
9
3
8
72
0
20
40
60
80
Dwelling Structure – 2016 COM

46
37
11
0
20
40
60
Motor Vehicle
2016 COM
None 1 Vehicle
2 Vehicles
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19.6 Appendix 6: Demographic Economic Profile
19.6.1 Incomes:
Figure 49: Motor Vehicles Owned (COM, 2019)
Figure 50: Household Income 2016 COM (COM, 2019)
27
42
21
0
10
20
30
40
50
Household Income Weekly
Ranges COM
< $650 $650 – $2499 $2500 +
13
14
4
5
6 6
5 5
10
5
3
5
7
8 6 4 2 0
10
12
14
16
Household Income – 2016 COM
$ NILL $1 – $649 $650 – $799 $800 – $999 $1000 – $1249
$1250 – $1499 $1500 – $1749 $1750 – $1999 $2000 – $2499 $2500 – $2999
$3000 – $3499 $3500 – $3999 $4000 +
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Figure 51: Personal Weekly Income 2016 COM (COM, 2019)
Figure 52: Personal Weekly Income 2016 COM – High Rise (COM, 2019)
12
6
9
13
11 11
8
16
12
8 6 4 2 0
10
12
14
16
18
Personal Weekly Income – 2016 (Workers) COM
$1 – $649 $650 – $799 $800 – $999 $1000 – $1249 $1250 – $1499
$1500 – $1749 $1750 – $1999 $2000 – $2999 $3000 +
21
3
5 5 5 5 5 6 7 5 5
3
6
4
5 0
10
15
20
25
Personal Weekly Income – 2016 (High Rise, 4 Storeys + ) COM

$1500 – $1749 $1750 – $1999 $2000 – $2999 $3000+
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
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19.6.2 Rental Payments:
Figure 53: Rental Payments Groups (COM, 2019)
Figure 54: Rental Payments 2016 – High Rise (COM, 2019)
11
24 23
14
0
10
20
30
Rental Payments
Weekly – 2016 COM
$275 – $349 $350 – $449
$450 – $549 $550 – $649
4
3
5 5
7
4
24
17
7
3
5 0
10
15
20
25
30
Rent Weekly Payments – 2016 (High Rise, 4 Storeys + ) COM
$300 – $324 $325 – $349 $350 – $374 $375 – $399 $400 – $424
$425 – $449 $450 – $549 $550 – $649 $650 – $749 $750 – $949
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
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19.6.3 Mortgage Payments:
Figure 55: Monthly Mortgage Payments (COM, 2019)
19.6.4 Occupations:
Figure 56: Occupations (COM, 2019)
3
5
7
8
7
6
12
5
7 7
10
4 4
8 6 4 2 0
10
12
14
Mortgage Monthly Repayments – 2016 (High Rise, 4 Storeys + ) COM
$800 – $999 $1000 – $1199 $1200 – $1399 $1400 – $1599 $1600 – $1799
$1800 – $1999 $2000 – $2199 $2200 – $2399 $2400 – $2599 $2600 – $2999
$3000 – $3999 $4000 – $4999 $5000+
39
14
11 11
8 7 5
0
20
40
60
Occupation – 2016 COM

BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
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19.6.5 Industry: Employment, Output and Growth:
Figure 57: Industry Ranked by Employment – Jobs (Geografia, 2020)
Figure 58: Industry Ranked via Economic Output (Geografia, 2020)
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
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Figure 59: Industry Ranked by Growth Trend (Geografia, 2020)
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
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19.7 Appendix 7: Residential Market Data
19.7.1 Median Sales Timelines (2014-2019)
Figure 60: Median Sales Timeline 2014-2019 (REIV, 2019)
Figure 61: Metro Median Sales House and Unit (REIV, 2019)
BBE 304 – Assignment 1 – Feasibility (Fundamentals) Study
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19.7.2 Unit Sales and Rental
Figure 62: Unit Sales and Rental Data (REIV, 2019)

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