$50b Melbourne suburban rail loop a windfall for developers

$50b Melbourne suburban rail loop a windfall for developers

31 August 2018

Commercial developers could reap a windfall in new retail, office, and residential projects after the Victorian government unveiled its plan to build a $50 billion, multi-decade suburban rail loop in Melbourne, reports The Age.

Billed as “the biggest transport project in Australia’s history”, the suburban rail loop would create 12 new underground rail stations in a 90-kilometre loop from Cheltenham in the south east via Melbourne Airport and onto Werribee in the western suburbs. It would take 30 years to build.

The massive underground rail loop would carry about 400,000 passengers a day and would radically impact where people might live and work as Melbourne grows to become Australia’s most populous city.

Plan Melbourne projects the city will have an extra 1.5 million homes by 2050.

Groups including Infrastructure Australia, Infrastructure Victoria, the Property Council of Victoria and the Urban Development Institute of Australia expressed early but cautious support for the project, but they wanted to see more detailed planning, said The Australian.

CBRE’s Zelman Ainsworth, director of Victoria retail leasing, said the resetting of Victoria’s retail networks will open endless opportunities for landlords and developers to reposition and recreate retail shopping centres and precincts throughout Victoria.

”The new retail network will change the way Victorians travel, live and shop. Retailers are now planning their retail networks around the new railway lines to ensure their stores are well-position to take advantage. It is very exciting that Victoria is now being reset to ensure the transportations networks can handle the anticipated population growth,” Mr Ainsworth said.

”Further, within the train stations, there will be unmatched retail space becoming available, which has never been offered before for lease. The consistent traffic generated by train stations are obvious choices for retailers to secure space.”

”These infrastructure projects have a huge flow-on effect to the building industry and the economy generally,” new business director for Probuild in Victoria Seamus Egan said.

”Looking at the obvious benefits it will in integrate infrastructure to the nodes of retail, residential and office developments.”

Retail landlords Vicinity and Scentre are sitting pretty with at least four major developments ear-marked around Box Hill, Doncaster, Glen Waverley, and Monash in the south.

Probuild is working on the first stage of the residential component of Vicinity Centres $430 million development of The Glen shopping centre, Glen Waverley with Golden Age. There will be more than 500 apartments to be built by 2021.

Vicinity is also in the prime seat with its Box Hill Centre which will have significant residential, commercial and other development in the immediate area surrounding the centre.

The new loop will have a ”dramatic impact on the suburban office market and serious positive effect on transportation and population’,’ says Rob Joyes, the director in charge for Melbourne East & national director capital markets & office leasing at Colliers International.

”Any project that has a mixed-use flavour to it will be a beneficiary of having a connected rail line,” Mr Joyes said.

The developers’ windfall, however, will come at a price. The government will be looking at developers to also make contributions to the land and other value generated by the project, says the AFR.

Developer contributions – or “value capture” or “value sharing levies” – have long been promoted as a way of funding costly new infrastructure but they’ve proved harder to implement than advocates expected, Allens’ head of infrastructure & transport, David Donnelly, said.

Standout examples include London’s Crossrail and the Gold Coast Light Rail, while a proposal by Parramatta Council has been fiercely opposed by developers who argue it would add to the value of new apartments and hasn’t gone ahead.

But Mr Donnelly said Melbourne’s suburban rail loop would be just right for a broad and low levy covering metropolitan Melbourne that collects a small amount from a large number of beneficiaries.

The project is also certain to garner support from the Federal Government.

“Ideally, infrastructure is built in front of the demand rather than trying to catch up,” newly appointed federal Cities Minister, Alan Tudge, said on Monday.

“We are determined to support state governments to really accelerate their infrastructure builds. We are not only spending more federal money on infrastructure than ever before, for the first time the federal government is directly funding mass transit systems.”