Most would expect a rezoning process converting a site from industrial use to a higher use, whether that be residential use or mixed-use, will result in a significant uplift of value, and that certainly is the case. However, not always is the timeframe aligned with what the developer’s expectation might be.
“One of the main examples of a substantial rezoning has been Fishermans Bend – over 200 hectares land with the stroke of a pen by Matthew Guy was rezoned in 2012 from industrial to capital city, ultimately the same zone as applies in the Melbourne CBD, and now the government is going through the process of determining height controls, development contributions, end uses, parks, schools and a lot of other outcomes to ensure that the end development of that precinct has good sustainability,” he said.
Robb said some of the main impediments to the rezoning process is the overlying council or state government control mechanisms or rezoning of sites.
He added that other issues can be ground contamination and issues with sites that limit their ability to move towards more sensitive uses, or at least until remediation has occurred.
“Also another barrier can be existing industrial occupiers that want to continue their use on-site – that would typically be perhaps of the manufacturing ilk, where there’s a significant investment on-site, and the cost is too prohibitive to relocate relative to the value uplift, particularly if it’s not achievable in a very short period of time.
“One of the big barriers for rezoning particular for industrial to medium residential is the council’s view that it’s a loss of employment, but if you consider what current industrial facilities of an older ilk are being used for that are no longer suitable for current users, that’s predominantly for overflow storage and there’s very few employees in that instance.
“If you transition that large land parcel of that ilk into a mix of uses, into residential and others, there’ll certainly be significant employment within the commercial outcome and some of the more sensitive (uses), whether they be retail or childcare outcomes, that well and truly outweigh the current employment within those older facilities,”
“It’s probably fair to say that most would expect a rezoning process converting a site from industrial use to a higher use, whether that be residential use or mixed-use, will result in a significant uplift of value, and that certainly is the case. However, not always is the timeframe aligned with what the developer’s expectation might be.
“There’s a number of examples where rezoning was mooted almost 10 years ago, and those sites are yet to be rezoned, and ultimately throughout the revaluation process we see significant uplifts in holding costs and particularly land tax, which limits the ability of the site in its current form to attract industrial occupiers, even if for block storage or secondary storage, predominantly because of the costs of holding costs and more particularly land tax,”
Robb said the best example in Brisbane of a significant site’s regeneration is Hamilton North, which is a combination of government and private ownership, which has seen the start of a transition thorough towards high-density residential and other more sensitive uses and a shift away from its historic industrial use.
“Over time we expect that areas of Australia TradeCoast and Eagle Farm might follow a similar path once the appropriate demand and existing supply has been absorbed,” Robb concluded.
This article was originally published in the Australian Property Journal.