‘No demand’: Urban designer rejects push to convert empty offices into apartments

Melbourne’s glut of empty CBD offices and apartments could be used to revive the inner city’s ailing creative sector, which has left the area in droves over the past 20 years, according to a leading urban designer.

Hodyl and Co managing director Leanne Hodyl, who conducted a built form review of the CBD for the Victorian government, said there was more empty office and student apartment accommodation in the city than there was demand for either.

Could Melbourne’s city office towers be converted to apartments? Planners are not so sure.Credit:Jason South

Ms Hodyl poured cold water on previous proposals to convert empty office space into residential accommodation, saying without international students there was little call for more apartments.

“There’s definitely not a high demand for apartment living in the city at the moment, we’ve lost international students, we’ve lost immigration, obviously. So there’s actually not a demand – you could convert them, but I don’t know who would be moving in.”

Office vacancy rates hit 13.2 per cent in March, according to Macquarie.

And more than a year after international borders shut and much of Melbourne’s thriving international student population was forced to abandon the city, apartment vacancies are also high.

Leanne Hodyl says empty offices could be transformed into creative hubs.Credit:Darrian Traynor

A one-bedroom flat in the CBD recently sold for $180,000, 30 per cent less than its owners paid for it 15 years earlier.

NSW chief economist Stephen Walters this week called for empty offices to be converted into residential apartments in Sydney – in a similar push to those undertaken in London and New York – to reinvigorate that city’s CBD.

But there is little industry appetite for retrofitting office buildings into apartments, which the Property Council estimates could cost 20 to 30 per cent more than ripping down office buildings and creating purpose-built apartments.

Property Council chief Danni Hunter says repurposing commercial offices into apartments is too costly.Credit:Paul Jeffers

The council’s Victorian executive director, Danni Hunter, said the government and opposition had sought industry advice about the idea, but “I just don’t think there’s much appetite for it”.

“If you were to refit, things like ceiling heights and plumbing add a lot of cost – the expense comes from having to retrofit the entire building,” she said.

Simon Stockfeld – the Victorian regional development director for property and funds investment company Charter Hall – also had little appetite for the idea.

“We’re pretty bullish on offices and occupancy of offices in Melbourne and we don’t think there’s a great requirement to convert offices,” he said.

“We’re seeing a really strong trend to go back to the office.”

Ms Hodyl said modern offices had large “footprints” between lifts and windows, which would make conversion into residential use impractical given the need for windows and light in residential buildings.

Centralised toilets, kitchens and and kitchenettes would also require significant retrofitting to align them with new apartments, she said.

Rental apartments in Victoria are required to adhere to minimum standards governing a range of aspects including kitchens, structural soundness, windows and lighting, ventilation and heating.

“You can pretty easily convert hotels and student accommodation into longer-term apartments, but I’m not very excited by it as a solution because we don’t actually have really high vacancy rates for residential in the city,” Ms Hodyl said.

Two “really exciting” alternatives could be transforming student accommodation into affordable or crisis housing, and using spare office space to rejuvenate the city’s diverse cultural creatives, she said.

“Over the last 20 years a lot of our creative artists, studio spaces, jewellers and whatever have had to move out of the city because it got too expensive.

“And so actually I think the real opportunity here is … to bring some of that life back into the city, which is more diverse; so it’s not just the residents and retail and entertainment, it’s a real richer fabric to the city level, there’s different people back in, and it would be really super exciting.”

Urban designer Andy Fergus said relaxed rules in London that have allowed commercial sites to be transformed into residential spaces with few restrictions have led to poor outcomes for those living there. “These new residential conversions … basically become like an illegal boarding house-type arrangement in terms of the standards, so they fall between the cracks,” he said.

“If they were to be assessed against residential dwelling standards, there is no office building built in recent history that could be converted into an acceptable standard of apartment because the floor plans are too deep to achieve an acceptable standard for living. Research has shown that this experiment in deregulation has yielded neither affordability nor acceptable standards of living.”

He called for landlords sitting on empty office spaces to consider dropping rents to make them available for artists and people in the creative industries.

    “I think we have the opportunity of a lifetime to recapture Melbourne’s suffering creative sector, which has been priced out of the central city in the past decade,” he said.

    “We need to think strategically about how we’re going to use those spaces to enable a range of positive social and economic outcomes from them.”

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