Melbourne’s Growing Scarcity of Development Sites

Australia, has long been a vibrant hub for real estate development, attracting investors and developers from around the globe. However, there has been a chronic need for more prime development sites within Greater Melbourne, and searching for desirable locations is a highly competitive endeavour. In this article, we highlight the factors contributing to the scarcity of development sites in Melbourne and delve into a case study, “The North Melbourne Corner” in the Arden Precinct, being marketed by Chao Zhang, Partner of Stonebridge Property Group.

Melbourne’s real estate market has experienced a rapid transformation over the past few decades, evolving into a dynamic and cosmopolitan city. As a result, the demand for quality development sites has surged, driven by a combination of factors:

Population Growth: Melbourne has consistently ranked as one of the most liveable cities globally, attracting a steady influx of domestic and international migrants. This population growth fuels the demand for new residential and commercial spaces.

Infrastructure Development: The city’s commitment to infrastructure expansion has heightened the attractiveness of various locations for developers. This includes constructing new train stations and transport networks like the Metro Tunnel,

Urbanization: The trend toward urban living has led to a preference for properties near the central business district (CBD), creating a competitive market for prime real estate in and around the city centre.

Economic Prosperity: Melbourne’s robust economy and diverse job opportunities make it a magnet for businesses and professionals, further fuelling demand for commercial and residential developments.

Yes, development sites abound in the outer rings of Greater Melbourne, but the problem is that new housing in those locations is different from where the demand is.

Development projects need to align with where people desire them.

Many new housing developments are 30-60 km from the city centres,

Recent PropTrack data on dwelling approval locations shows that in Sydney and Melbourne, where 40% of Australians live, a large share of homes approved to be built are more than thirty kilometres from the CBD.

There is a yawning gap between what is being constructed and where people need to live to sustain a living.

Amidst the intensifying competition for development sites, “The North Melbourne Corner” stands out as a uniquely prized acquisition target for property developers.

We interviewed Mr Chao Zhang from Stonebridge Property Group to preview the offering.


Mr Chao Zhang, Partner, Stonebridge Property Group

TAE: What factors contribute to “The North Melbourne Corner” being categorized as a highly prized development site within the Arden Precinct, and how does its location enhance its desirability?

CZ: “The North Melbourne Corner” holds a strategic position at the heart of the Arden Precinct. Its location is directly adjacent to the Arden Train Station, slated to open in 2025. The station will be a crucial link to the CBD via Melbourne University. In addition to this, the area around the station is set to feature a future primary school, a council community hub, a spacious open space, and an upgraded Queensberry Street, transforming it into ‘Urban boulevards.’ Furthermore, neighbouring our site, a substantial office building with over 17,000 NLA is currently under construction, demonstrating the high demand for this location.

TAE: Could you provide more details regarding the construction progress of the Arden Train Station and its expected opening in 2025?

CZ: The Arden Train Station is an integral part of the metro tunnel project, which will establish a direct connection to the CBD through Melbourne University. This station is one of five new stations planned, including Arden, Parkville, State Library, Town Hall, and Anzac. Additionally, the station will play a crucial role in the future railway connection to the airport. Excitingly, construction is progressing ahead of schedule, and there are reports of test trains running in the new tunnel. This project is part of Victoria’s extensive infrastructure initiatives to enhance Melbourne’s connectivity and accessibility.

TAE: What are the key attributes of the 2,017 sqm landholding with triple street frontage, and how do these features enhance its suitability for various development possibilities?

CZ: This landholding’s triple street frontage offers significant design and construction efficiency advantages. With no immediate neighbours and minimal setback requirements, it streamlines the development process. Furthermore, all three sides of the site will benefit from natural light, a precious feature for any tower development. The site’s exceptional views to the west and toward the CBD further enhance its appeal.

TAE: How do buyer segments, such as Build-to-Rent (BTR) investors, local developers, and Asian developers, perceive this development site, and what potential uses do they envision?

CZ: The site’s exceptional connectivity, with access to the Metro Tunnel, the train station, Melbourne University, and the CBD, makes it appealing to many residents and occupants. North Melbourne is a prime destination for Build-to-Rent investors, and it has already attracted notable groups like Hines, BRC, and Sentinel. It offers retail amenities, proximity to the CBD, excellent transportation options, parks, and a vibrant lifestyle, catering perfectly to the desired market of young professionals. Local developers eyeing apartment projects will also benefit from these fundamentals, while Asian developers see the added value of connectivity to Melbourne University as a significant bonus for future residents.

TAE: Could you provide examples of recent transactions in Melbourne’s development site market that highlight the demand for high-quality assets, and what attributes make these assets highly sought after?

CZ: I can cite recent transactions in Melbourne’s development site market that underscore the demand for quality assets. These assets are primarily sought after due to their prime locations, comprehensive amenities, excellent connectivity, and the desirable lifestyle they offer. Quality assets consistently attract investors and developers who recognize the long-term value of such properties.

TAE: How have recent interest rate increases affected larger development assets compared to smaller ones, and what strategies are developers employing to navigate these changes?

CZ: Interest rate increases have impacted larger and smaller development assets, as developers often require project financing. In response, developers are adopting cost management strategies with their builders. Furthermore, a growing trend among more prominent developers is to acquire builder licenses, giving them greater control over project costs and timelines.

TAE: What trends are you observing regarding the demand for development sites across various property types, including shopping centres, industrial properties, strip retail, and office spaces?

CZ: Developers are closely monitoring construction costs to ensure the feasibility of their projects across different property types:

Shopping Centres: Several investors are actively seeking opportunities in this space, considering factors like anchor tenants (e.g., Woolworths, Coles, Aldi) and the potential for smaller retailers.
Industrial Properties: The industrial sector remains robust, with prices growing significantly over the past two years. Banks are favourably inclined toward lending on industrial assets and development sites. However, a slowdown in the growth rate is expected due to rapid expansion in recent years.
Office Spaces: Despite challenges, multiple office projects are underway, such as the one adjacent to “The North Melbourne Corner” site and others in Collingwood, Cremorne, and Richmond. It will take time, but city fringe and CBD office vacancy rates are anticipated to decrease.

The North Melbourne Corner

International Expressions of Interest closing
Thursday 19th October 2023 at 2:00 pm (AEDT)

Stonebridge Property Group
Level 19, 627 Chapel Street
South Yarra VIC 3141

Sydney | Melbourne | Brisbane

M +61 0411 625 068
E [email protected]

To return to the home page, click here. 

We provide a comprehensive commentary on news that matters to the decision-makers of major capital investment in Australia.


Tel: +61 3 8676 0688
Email: [email protected]