Melbourne’s “build it and they will come” approach construction, which has seen it rank high-up on the global skyscraper index, is starting to suffer some indigestion, with a report in The Weekend Australian claiming that CBD and St Kilda Road vacancies have rocketed and rents plummeted as apartment supply runs well above demand:
According to new data, 20 per cent of apartments on the main boulevard of St Kilda Road are for rent, while in the heart of the city, where 12 per cent of apartments are empty, developers are pulling out all stops to find tenants.
Researcher SQM, which tallies the number of apartments for rent on a range of online portals, has also found rents for all apartments in the St Kilda Road area have dropped 21.2 per cent to an average of $564 a week over the past three years…
St Kilda Road’s apartment indigestion comes as thousands more apartments are under development or planned for the city.
In the CBD, Melbourne developer Brady Group has hung “apartments for rent” signs off the upper reaches of its completed towers. Sources said hundred of apartments were for lease in two of Brady’s towers.
China’s Far East Consortium Upper West Side also has scores of empty apartments in its CBD project.
With Melbourne apartment approvals remaining highly elevated (see next chart), as well plans afoot to develop the third biggest apartment building in the world (by floor area) in Melbourne’s CBD, the apartment oversupply is likely to get worse before it gets better.
And given the long lead times between approval and completion (typically three years for high rise apartments), there is the potential that apartments will still be getting constructed en masse in Melbourne long after the market has turned , exacerbating any downturn.
All of which is great news if you are looking for a place to rent in and around Melbourne’s CBD, with ample choice and relatively low rents likely to remain on offer for a long time yet.
