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News.com.au
24-05-2025
- Business
- News.com.au
Warning as Melbourne's CBD car parks face financial pressure
Melbourne's CBD car parks are under siege as government levies, work from home and close to 1 million square metres of empty office space put them under growing financial pressure. There are now warnings growing numbers of carparking complexes will be sold off, or even converted into data centres to support the city's growing computing needs as operators search for ways to keep them profitable. New research from Ray White's commercial arm shows the average $64.43 daily rate for a car park in the CBD is now cheaper than it was more than a decade ago, with the figure at $65 in 2013. It is the only major capital to have recorded a reduction in parking costs in the 12 years covered by the research, which also shows operators are also now offering nation-leading early bird discounts of 62.9 per cent in a bid to lure commuters back into the city. It comes as Property Council data shows office vacancy rates sit at a national high of 18 per cent, while hospitality magnate Justin Hemmes has revealed plans to turn a recently sold city council carpark into an entertainment hotspot. Ray White head of research Vanessa Rader said carparking was a key indicator for the health of a city's office market and 'Melbourne is looking pretty bad'. 'I wouldn't be surprised if the city's vacancy rate was more than 18 per cent,' Ms Rader said. 'And for a market that is a bit over 5 million square metres of space, that's about 1 million square metres of empty space.' The analyst said while more car park operators would probably consider selling, they might struggle. 'I don't think they will necessarily transact,' she said. 'The levies are high, the occupancy is low and so are the parking rates, and you have to pay land tax. Who will buy that?' However, alternative uses, such as transforming them into data centres to boost digital security and computing power in the CBD, could become more feasible. JLL head of capital markets in Victoria Josh Rutman handled the recent sale of the City of Melbourne's 34-60 Little Collins St complex to Justin Hemmes Merivale Group and said carpark ownership had become far more challenging as a result of congestion levies. This year the state government has applied a levy on all individual carparking spaces of $1750 across Melbourne's CBD and its immediate surrounds. A secondary catchment faces fees of $1240, with this region to be expanded next year. 'The appeal of them has been that it's low-maintenance and easy to do investment, but costs have changed dramatically and the demand has shifted,' Mr Rutman said. 'So the demand for carpark investments has changed, as it's not viewed in the same light it used to be, particularly with the levies on inner city and CBD carparks.' However, the commercial property agent added that they were also typically in strategic locations that could suit other developments. 'That's what we saw with Little Collins St, a great range of interest from hospitality groups and developers who saw value in that location,' Mr Rutman said. 'But not so much in it as a carpark.' While he didn't believe carparks would immediately disappear, he did note operators looking at buying them today would be pricing their budget for them based on the new, lower, demand levels — and heightened costs. With city planners prioritising bike lanes, a nearly completed metro tunnel about to boost rail access to parts of the city and its fringes, Mr Rutman said it was possible Melbourne could head down more of a New York path — where most residents did not use a car day to day. Colliers director Matt Stagg has specialised in CBD and city fringe car park sales for more than two decades and said the market had been polarised since the Covid pandemic. 'Collins Street, Flinders Street and Spring Street have performed well,' Mr Stagg said. 'But car parks in secondary locations have not.' The agent added that weekday demand now peaked on Tuesdays, Wednesdays and Thursdays — but Monday and Friday volumes remained soft. He said institutional landlords and councils were increasingly viewing city car parks as non-core assets, and many were likely to be sold off in the months ahead. 'Yes, I think you'll see more councils and landlords divest car parks over the next 12 to 24 months,' Mr Stagg said. 'Increased land tax and increased car park levies are eroding the net income.' He said many of Melbourne's car parks sat on highly valuable land parcels and were being eyed for development. However, the agent added that tradespeople, essential workers, and commuters from outer suburbs who couldn't rely on public transport continued to drive demand in key locations, but the days of car parks as cash cows were fading. 'I think if new car parks are going to be built, it'll be in the outer suburbs near train stations,' he said. 'Closer to the city, we're going to see many of them redeveloped.' Mr Stagg said individual car spaces in the CBD, especially in premium apartment buildings or strata offices, were still changing hands for anywhere between $50,000 and $100,000, with off-market sales in top-tier locations occasionally pushing as high as $150,000 per bay.
Daily Mail
21-05-2025
- Business
- Daily Mail
Once-booming city offloads office tower at 80% discount amid urban decline as woke policies backfire
The West Coast city of Portland, Oregon, is being forced to slash the sale price of one of its biggest office buildings after it became overrun with homeless people. Portland, known for its liberal politics, has seen its downtown suffer after a failed attempt at drug decriminalization. The city's office vacancy rate was 35 percent in the first three months of the year, the worst of the top 25 central business districts in the country, according to real estate firm Colliers. Now one of the most telling signs of its downtown decline is the sale of its U.S. Bancorp Tower at a list price of 80 percent less than its previous valuation, The Wall Street Journal reports. The tower, known locally as Big Pink because of its rose tinted stone and windows, is more than half empty. The recent exit of a high profile client laid bare the desperate state of the building and its surrounding area. The technology publisher Digital Trends filed a lease-termination lawsuit claiming its staff were unsafe as the building had been taken over by the homeless population of downtown Portland. The publisher claimed in its lawsuit that the building had 'vagrants sleeping in hallways of vacant office floors... starting fires in stairwells, smoking fentanyl and defecating in common areas.' The building became a 'cesspool of criminal activity and vandalism,' they alleged. Digital Trends follows the exit of the building's namesake U.S. Bancorp, which pulled most of its employees out last year after more than a century in Portland. The 42-story tower is up for sale for $70 million, 80 percent less than its owners -Unico Properties of Seattle and a fund managed by UBS - paid for it in 2015. However, despite the steep discount, even distressed property investors are avoiding Big Pink. 'I don't see a way to get it into the green in the next five to seven years,' one such investor, Jordan Menashe, told the Journal. Big Pink has suffered more than other office buildings in the city as it is located next to a public plaza that became an epicenter of drug use and sales. However, the building's decline is emblematic of the rest of Portland's downtown which, like other cities such as San Francisco, has descended into a doom loop since the pandemic. Big firms cutting back on office space has hurt local businesses who rely on workers' footfall. As they too pull back, the homeless population has expanded, damaging the area's reputation and safety further. Major businesses such as Unitus Community Credit Union and Wells Fargo have both exited Portland in recent years, and others such as Adobe have announced plans to leave. The loss of property-tax collections from the declining value of its downtown offices is putting the rest of Portland's budget under pressure. Last year Oregon was forced to end the state's decriminalized drug laws after overdose rates soared. Portland's new mayor Keith Wilson is also considered to be more pro-business and his district attorney, Nathan Vasquez, tougher on crime. Wilson has offered permits and support for a bridge into Big Pink from a nearby parking garage that would allow workers to get into the building without having to go into the dangerous surrounding streets. 'Right now we're largely focused on retention,' Raihana Ansary, deputy chief of staff to Mayor Wilson, told the Journal.
