The quest for a housing solution intensifies, urging local and state governments to rethink zoning regulations and unlock conversion opportunities.
According to the January 2024 Office Market Report, CBD vacancies nationwide jumped from 12.8 to 13.5 percent, with non-CBD areas seeing a similar rise from 17.3 to 17.9 percent. While traditional office demand declines, there’s a robust appetite for high-end, boutique-style workspaces as employers advocate for a return to the office.
Major CBD office towers are currently selling at a 20 percent discount from their peak values, a trend likely to continue as vacancies grow, profits dwindle, and refinancing becomes stricter. Property owners are increasingly intrigued by alternative uses for these assets.
Transforming abandoned office buildings into residential apartments emerges as a solution to Australia’s housing crisis. However, office structures differ significantly from residential spaces, often presenting challenges in meeting housing design needs. This often results in elongated apartments with limited light and ventilation, crucial for comfort and well-being.
Developers have the opportunity to address these challenges by integrating light wells and atria into these buildings, enhancing their residential suitability. The Quay Quarter Tower (QQT) exemplifies innovative retrofitting, undergoing a transformative redevelopment from 2018 to 2021, significantly altering its structure and appearance. Through imaginative architecture and technical skill, deep retrofitting offers a sustainable approach to improving housing standards for individuals and the environment.
In another development, 338 Pitt Street in Sydney is poised to green-light nearly 600 new apartments and 158 hotel rooms, expanding the city’s residential offerings.
Consideration of location is paramount, as access to amenities such as transport, retail, hospitality, and green spaces is crucial. A peri-urban office park, for instance, maybe less suitable for conversion due to its lack of surrounding infrastructure.
Finally, acquisition costs for struggling offices in metropolitan areas remain prohibitively high for conversion, necessitating a nearly 50 percent reduction for conversion to be financially viable.
