Brisbane

As the saying goes, the bird who dares to fall is the bird who learns to fly.

But that’s not always the case in Australia’s high-risk property development sector—particularly in these turbulent times.

The Aviary, one of inner-city Brisbane’s biggest developments, is the latest major project to fail to take flight, succumbing to the prevailing headwinds of soaring construction costs and volatile market conditions.

It is understood the approved $450-million mixed-use precinct at Toowong—about 5km from the CBD—has been abandoned.

Touted as a “visionary new town centre set to become the beating heart of Brisbane’s inner-west”, speculation about the development has been rife with its cleared site sitting dormant for months.

“My understanding is it’s over … the building prices are so high it’s no longer viable,” an industry source told The Urban Developer.

An off-the-plan buyer in The Aviary’s sold-out 25-storey luxury apartment tower confirmed the development’s demise, saying he had been informed the project “was being cancelled” and all contracts were being terminated and deposits refunded.

“A real pity. It had great potential … I suspect there will be many more such projects doomed to failure.”

The Urban Developer also has been told The Aviary’s developers—State Development Corporation and White & Partners, the investment arm of the founders of Australia’s largest real estate group Ray White—are in the process of quietly offloading the shovel-ready site.

According to a local property industry insider, the prime 9000sq m holding fronting Sherwood Road and High Street is already under contract.

“We’ve been asking and we’ve been told that it's under due diligence to someone,” they said.

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However, parties involved in the deal remain tight-lipped. The buyer has not been disclosed or whether they intend to proceed with the approved development.

The Urban Developer attempted to contact State Development Corporation founder and managing director Ross McKinnon for comment but at the time of publication there had been no response.

The high-profile Brisbane project joins a growing list of major off-the-plan developments across the country being dumped before they get out of the ground in the face of multi-million cost blowouts.

A crippling barrage of escalating construction costs, labour shortages, rising inflation and interest rates is putting the crunch on projects, making an increasing number no longer feasible to be delivered.

In an early sign of what was to come, Daydream Property’s sold-out $140-million, 76-apartment Alegria residential tower project at Palm Beach on the Gold Coast was cancelled in June last year due to spiralling costs.

The following month, Melbourne’s most prolific high-rise developer Central Equity abandoned plans to build a $500-million luxury apartment tower at Surfers Paradise.

It blamed “turmoil” within the Queensland building industry for its decision to shelve its 56-storey, 486-apartment Pacific One tower development on the beachfront at Garfield Terrace.

Only a couple of days later, developer Sirona Urban pulled the pin on its $165 million luxury residential tower 28 Lyall in South Perth, citing surging construction costs and a dire shortage of labour for the decision.

The 38-storey, 98 apartment development near the Swan River in South Perth, a joint venture with Singapore-listed property giant Chip Eng Seng, would have been one of the tallest residential buildings in Perth.

In April this year, developer Keylin mothballed the $140-million apartment tower in its Oria development at Spring Hill on the Brisbane CBD doorstep despite holding sales contracts for more than 80 per cent of its 121 units.

Its shelving came just six months after the other half of the twin-tower development, which was to house the city’s first Movenpick Hotel, was scrapped.

‘Catalyst for revitalisation’

Across the road from the landmark Toowong Village—a retail and commercial complex built in the mid-1980s—The Aviary had been heralded as a catalyst for revitalisation, creating a lifestyle destination that would “reshape” Toowong and “change Brisbane’s western suburbs”.

The precinct’s scheme was designed by Nettletontribe and inspired by lauded US outdoor shopping mecca The Grove in Los Angeles.

It was to have comprised a 150-apartment tower, 30 curated retail spaces anchored by a Harris Farm Markets grocery outlet, a 20-level office tower, cinema and an outdoor dining quarter.

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The Aviary was given the green light by the Brisbane City Council in October 2020. Construction was initially scheduled to start the following year and completion was slated for later this year.

The last construction update posted on the development’s website in March 2022 noted it was “anticipating the builders commencing on site in the third quarter [of 2022]”.

“The development team is working closely with a builder and will provide more detail on the successful building company construction commencement date in the near future,” it said.

In early 2019, State Development Corporation and White & Partners paid Stockland $40 million for the Toowong site—then a 1.3ha amalgamation. Later the following year, the new owners carved off a 4000sq m portion occupied by a five-level office complex in a $25.15-million deal with an offshore investor.

“It’s disappointing The Aviary isn’t going ahead but at the end of the day the apartments were going to cost more to build than they had sold them for,” the industry insider told The Urban Developer.

https://www.youtube.com/watch?v=ZGAfKelQM10

“At the moment, if you’re not selling your units for about $14,000 per square metre the project’s not going to proceed … you’ve got no chance of getting it up.

“I think when they first went to market they were only $8000 per square … and they bumped it up a bit after going back to the buyers with price increases but it was still not enough to make it viable.”

The off-the-plan buyer who spoke to The Urban Developer says he put down a deposit on a $2.9 million, three-bedroom “sky villa” in The Aviary two years ago.

Since then, he says the developers had asked for a couple of extensions and incremental price increases, starting with an initial rise of about 15 per cent.

“But with the extra delays the cost escalations have gone even higher.

“And I think that's what killed them in the end. They just delayed it so long, with all the cost escalations they couldn't build to that price and make a decent profit out of it.

“I’m disappointed, certainly,” he says.

“To be fair, however, the time for development is not easy. We can all understand that. It's naive to think otherwise. It's a struggle for all these guys to try and make something happen.

“So, I didn’t begrudge paying extra from what we signed on for. That’s all fine, the costs have gone up … it’s just a fact of life, isn’t it?”

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Labour rate nation’s highest

Brisbane now has Australia’s highest hourly building labour rate, according to the latest construction market report by quantity surveying firm Turner & Townsend.

As a result of skilled labour shortages and strong infrastructure investment in preparation for the 2032 Olympics, Brisbane’s construction wages have overtaken Sydney and Melbourne, reaching an average of $100.42 per hour.

This compares to Sydney’s $98.30, Melbourne’s $96.80, Adelaide’s $91.20 and Perth’s $87.15.

Overall, however, Sydney is the most expensive city in which to build with an average total cost of $4439 per square metre followed by Perth’s $3962, Brisbane’s $3854, Melbourne’s $3823 and Adelaide’s $3585.

But according to Turner & Townsend property head Matt Billingham, with the ongoing challenges facing the industry and sheer volume of work expected to hit the Queensland capital's market during the next few years, Brisbane was at risk of becoming the country’s most expensive city in which to build.

“Brisbane’s market is impacted as a direct result of major investment in public infrastructure projects across health, transport and in preparation for the Olympic Games,” he said.

“It will be some time before high labour costs dissipate and the return of immigration eases shortages. With the housing slowdown, labour is shifting to major infrastructure and renewable projects as well as developments that are being planned for the Olympics in 2032.”

Given the uncertainty as well as economic and market turbulence continuing to batter the development sector, there is another avian-related saying with perhaps some more fitting words of wisdom.

A bird in the hand is worth two in the bush.