ADVISORY. RESEARCH & STRATEGY. VALUATIONS. PROJECTS. CAPITAL. Charterkc.Com.Au
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charterkc.com.au ADVISORY. RESEARCH & STRATEGY. VALUATIONS. PROJECTS. CAPITAL. - Rhodes is a modest scale suburban office hub offering circa 150,000 sq.m. of commercial net lettable area. Most office accommodation has been developed over the past 15 years and is primarily of a suburban “A” grade standard. The majority of office space is located to the south of the subject property within Rhodes Corporate Park (60%) and additionally within contemporary office developments along Rider Boulevard adjacent to (and within) Rhodes Waterside shopping centre in Rhodes West. There have been minimal new stock additions to Rhodes in recent years. - It appears that the primary reason for the proposed zoning amendment to the subject property is due to new employment targets released by the Greater Sydney Commission subsequent to the initial September 2017 Rhodes East Priority Precinct Investigation Area Planning Report. Accordingly, there is a target for creating 1,200 new jobs within Rhodes East by 2036. The subject property has been earmarked to accommodate the majority of the job targets by Government within a standalone office featuring a GFA of circa 40,000 sq.m. A high rise development would be required to house such a considerable content of office space on the subject property. - Contemporary “A” grade office buildings throughout Rhodes feature NLAs ranging on average between 12,000 – 17,000 sq.m. Rhodes Corporate Park collectively accommodates circa 90,000 sq.m. of NLA however this is held within six buildings (averaging approximately 15,000 sq.m. per building). At least 36,000 sq.m. of office NLA (40,000 sq.m. GFA) is mooted for the subject property under the revised precinct plan. This represents approximately one quarter of current office supply in Rhodes and a NLA more than double the size of many current buildings. New development proposals in the major centres of Macquarie Park and Parramatta feature average respective building sizes of 27,500 sq.m. and 36,000 sq.m. being less than or similar to the proposal for the subject property. Given the vastly superior nature and scale of these locations, the large building scale proposed for the subject property is unlikely to be supportable from a financial feasibility perspective given its location within a non-core commercial hub. - The majority of new office development proposed throughout the broader suburban region is located in the major city centre office precincts of Macquarie Park and Parramatta. This is due to an ongoing undersupply and pent up demand in these markets (evidenced by strong take-up and low vacancy rates), uplifts in planning controls facilitating superior development outcomes (particularly in Parramatta), a preference from particularly large scale corporate and government tenants to be located within these key centres, financial feasibility considerations, superior accessibility based on current and future public transport infrastructure, site availability and retail /lifestyle amenity offered in these major precincts. Although there are land limitations in Rhodes, the area enjoys few of the same marketable features as these core precincts. - The majority of new development proposed in the nearby centres of Sydney Olympic Park and Macquarie Park will be in the form of low to medium rise campus style office buildings featuring large scale floorplates of between 2,000 – 3,000 sq.m. It is this scale / configuration that is most sought after in the market (particularly by corporate entities) and remains a focus for developers. Our understanding is that based on the size and configuration of the subject property, much smaller floorplates of up to 1,500 sq.m. can be accommodated and a high rise structure would be required. As such, provision of floorplates this size would considerably limit demand, rental potential and add substantially to construction cost compared with a typical lower rise campus style building offering a similar floor area. - From a market standpoint it is not considered commercially appropriate to accommodate all proposed commercial office space within one property given the proposed scale far exceeds all other office space throughout the area and user profiles / requirements. A more practical and sound approach would be to locate appropriate scale office accommodation over multiple sites or on sites capable of supporting campus style office buildings with large floorplates as is most sought in the market. The main opportunity with regards to the latter is the Hewlett Packard site at 410 Concord Road which has the scale to support a campus style facility similar in context to Rhodes Corporate Centre. In addition there may be potential to accommodate more market appropriate size and scale office development north of the subject where there is greater width between Concord Road and Blaxland Road. - There is considered additional opportunity to provide office development on additional sites in close proximity to the station. Most appropriately this could include a logical northern extension of the offices located at 3 and 5 Rider Boulevard on the land at 2 – 34 Walker Street. This land forms part of the revised Rhodes East Precinct and is considered very well suited to accommodate appropriate scale office buildings. Such developments could potentially form part of mixed use developments and would reduce the burden of a single site needing to provide an uncharacteristically large office development in isolation. - With specific regard to the subject property, there are potential limitations to staging an office development on the property given the relatively modest size and elongated configuration of the site for such a considerable scale development. As such, subject to a massing exercise and architect / design review, the development would most likely need to be undertaken in a single stage. Given funding requirements from lenders for pre-commitments (and potential difficulties in obtaining finance should pre-commitments not be obtained), the large scale of the project high-rise configuration, the considerable financial outlay to construct a high-rise suburban office building (typically circa 30 - 40% premium over more typical low rise campus style developments) plus the location within a non-core office precinct, the financial feasibility of such a project is considered to be in question. - From a broader context, there is considered ample capacity to achieve the 2036 proposed employment targets which have been established for the entire Rhodes peninsula (along with the 1,200 jobs within Rhodes East). In addition to providing jobs within a proposed facility on the subject property, this is based on identified employment opportunities in the area, including the expansion of Concord Hospital, future employment at the Rhodes Corporate Park and future redevelopment of the Hewlett Packard site. In addition to this, other employment generating opportunities will be in the form of a new school, retail and alternate commercial opportunities. - Based on the additional opportunities to achieve job targets in the area and with consideration to market factors, a 40,000 sq.m. high rise office building with floorplates of circa 1,500 sq.m. is not considered viable for the subject property in Rhodes. Any development of this size is considered too large for a suburban office hub and would offer extensive new supply with very limited demand based on configuration with small floorplates and low parking provision. As such, financial feasibility of a project with these characteristics would be in question. 1. Instructions. ................................................................................................................. 1 2. Subject Property Location & Context. ........................................................................... 2 2.1 Subject Property ............................................................................................... 2 2.2 Location ............................................................................................................ 3 2.3 Surrounding Development ................................................................................. 4 2.4 Transport Infrastructure ................................................................................... 5 3. Employment Analysis. .................................................................................................. 7 3.1 Introduction ...................................................................................................... 7 3.2 Employment and Labour Force .......................................................................... 7 3.3 Industry of Employment .................................................................................... 9 3.4 Employment & Journey to Work in Rhodes / City of Canada Bay ...................... 11 3.5 Employment Targets ....................................................................................... 13 4. Current Office Supply. ................................................................................................ 15 4.1 Introduction .................................................................................................... 15 4.2 Rhodes ............................................................................................................ 15 4.3 Sydney Olympic Park ....................................................................................... 17 4.4 Macquarie Park ..............................................................................................