We’ve all seen the glossy brochures for new apartments with street filled with shops and passers-by. But, according to a new ABC report, many apartments are remaining empty – deadening the feel of the new development.
Australian’s shopping habits have changed which means that while there may be 200 apartments above a new shop, there is still not enough custom to support it.
Many of us order online nowadays rather than physically entering a shop.
And, according to the report, overly-positive local council planning assessors; the conventions of bank loans; and the very residents walking past the vacant shells as they head to work have made things worse.
But value is part of the problem.
According to the report, Karl Fitzgerald, project director at thinktank Prosper Australia, said empty shops are not going to fill up soon, because banks put developers in a “straightjacket” that prevents them lowering rents to attract a tenant.
Retail valuations are often based on the last rent received, so a shop sitting empty is more ‘valuable’ than one that cuts its rent to attract a tenant.
Any rent reduction — even if it lures a tenant — could trigger increased loan repayments, because it changes the loan-to-value ratio (known as LVR) of the property.
“In order to keep the banks happy they cannot reduce those rents,” he explained.
“So they keep them at a higher price and, from there, they wait for the market to catch up to them.”
Prosper Australia’s research — which tallies water meters where not a single litre of water has been used in a year — suggests as much as 36 per cent of commercial space in some suburbs remains empty.
The problem may grow.
Approvals of apartments in four-storey blocks or higher doubled to 4,700 across Australia in the year to January. That is despite overall approvals falling around 1 per cent to just over 200,000.
Melbourne real estate agent David Bourke predicts population growth and non-retail uses, like gyms and services, will eventually gobble up the empty spaces.
He wants developers and councils to be more “proactive and open-minded” about alternate uses for ground floor sites.
Some apartments have used the long-vacant spaces for galleries, childcare centres or to provide services such as gyms for residents.
“Aside from a streetscape perspective, it doesn’t do the development all that well if you’ve got all these vacancies,” Mr Bourke said.
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