Adrian Pozzo, like everyone else, was busting to get back to normality. Based in Melbourne, the Cbus Property boss was more resigned to lockdown than Sydney folk; you could tell by a certain tone in his voice.
Nevertheless, the man who currently manages a $4 billion development pipeline is upbeat and very much buoyed by the enthusiasm of Sydney buyers for the company’s premium apartment offering on the site of the old David Jones store at 111 Castlereagh Street. And other projects.
Sales are going well; they would have been even better if people could feel free about inspecting the display suite.
The Fifth Estate (in a rare outing) attended the launch of the project just before the current lockdown and we can confirm loads of luxury finishes and top end design. The selling agent at the time was suggesting stratospheric selling prices and we thought, wow, this must be at least partly unexpected.
Surely no-one could have guessed what would happen to the resi market during Covid, given all the numbers are worked out maybe a few years in advance.
Pozzo, speaking by phone in a tight sandwiched-in time slot last week, said in fact the penthouse and two sub-penthouses had together achieved a $66 million sale price with the penthouse fetching more than $30 million.
That’s a pretty good sales figure, from the vendor’s perspective that is, and it equates to $70,000-75,000 a square metre, but nowhere near the $112,540 a square metre achieved at the Sirius building, where the penthouse fetched $35 million. Sirius by the way is a former social housing apartment block that the state government wanted to demolish at one stage, leaving no doubt a bitter pill-sweet pill in the mouths of the passionate bunch of people who wanted the place saved.
By way of comparison most ordinary housing projects tend to play out at between $2500 to $3000 a square metre with $5000 a square metre considered the luxury end (for mere mortals) according to a regional architecture awards jury The Fifth Estate was recently honoured to be part of.
Other projects are going well too.
“We’ve got one apartment [left to sell] in 17 Spring Street [in Melbourne] out of 73.”
The company was about to launch a new venture at South Yarra in Melbourne called Como Terraces with 39 residences in joint venture with Sterling Global when Covid hit the second time.
“When Melbourne shuts, they shut everything,” Pozzo says.
In Brisbane at 443 Queen Street, which is on the river front, there are 264 apartments with about 20 left.
“They’ve gone gangbusters since Christmas. Brisbane’s gone mad”.
NSW has also been successful with the big project at Randwick in the city’s east at the Newmarket development.
When stage one was released three years ago almost all were sold on the first weekend of opens. And people have been buying again since Christmas with 70 sales from the total of 120 so far.
But it’s 111 Castlereagh that attracts all the glamour.
“You sit there, and you think there is a lot of money around; some very wealthy people,” Pozzo says.
But it’s not easy to capitalise on this appetite. Delivering a suitable product is a bigger challenge than normal in an upmarket. Especially one as steep as this.
Right now, why would anyone sell a healthy development site at today’s prices when the holding costs are 1-2 per cent? The longer they wait the bigger the sale.
It’s a very different scenario to the days when the interest rates were 15 per cent, he says.
Development opportunities are not there, and people are thinking two to three times before they start a project. There’s also concern about another possible Covid variant.
“When you think about it, it could take between 12 months and three years to get approvals and designs and then another two to three years to build. It’s not a conveyor belt.”
The company is planning ahead 3-5 years but there’s nothing new actually coming through at present.
But he points out the housing market is not a single entity. “When people say the market is oversupplied it is in Docklands but it’s not in East Melbourne.”
The future is still not set is rosy certainty. When lockdown ends, Pozzo expects, “we will all come out guns blazing because we can smell the fresh air, but it won’t be as fast paced as before.”
There is the shifting sentiment to consider.
Especially in the office market.
At the company’s major office project at 435 Bourke Street on the corner of Queen Street, which has yet to commence, Pozzo’s team is about to reimagine the entire building.
The new drawings by Bates Smart, likely to be submitted by the end of November, will deal with expectations of post Covid world and emerging customer preferences.
It will end up being a completely “new generation office”, Pozzo says.
He won’t give much away just yet, but think of more “wellbeing, for want of a better word”….and “whatever we need to draw people back to the CBD”
“Fun,” we suggest.
This building will have amenities such as gardens either at the top or the middle of the building. People might work on Level 10 but they may be able to go to Level 12 where there will be no façade for some fresh air and might be filled with greenery and outdoor couches.
“It will feel like being in a different place.”
It’s not about making the tenant happy, he says it’s about making the employees happy. They’re the ultimate customers.
Certainly, a coffee shop is no longer going to cut it. But of course there will be end of trip facilities, bigger and brighter than before; he’s not sure about a pool, just yet.
The concept of interesting public spaces too has already taken hold with the company’s 447 Collins Street building part of the Collins Arch precinct that includes a new park developed in collaboration with the City of Melbourne and which can be an auditorium, an art space or anything else that people may want.
Everyone’s working together, more than ever – property owners, local councils and advocacy groups to figure out how to entice people back to the city, Pozzo says
If you make it entertaining people will want to come in for three days a week and maybe more, the thinking goes.
There’s no question of strong sustainability in the office assets, but what about the luxe end of the resi sector? How do the high flyers factor in sustainability which has a core notion of simplicity and absence of overindulgence about it?
Pozzo says the wealthy want it all – luxury finishes (such as what seems like 100 shades of marble) plus triple glazed windows and energy efficiency.
“People at the top end of the market are looking at that too,” Pozzo says; sustainability helps the sale process, he says, but they will quickly ask what else.
In future apartments, Pozzo’s team is trying to work out how to go gas free.
“In offices it’s potentially not difficult. Offices are pretty easy where we are the owner of the building, compared to apartments that we sell.”
The apartments at 443 Queen Street in Brisbane are the nation’s first 6 star Green Star design and As Built apartment complex.
“You can get flow through breezes front to back. It’s not often you will need to put on the aircon. Most likely buyers there are locals who are used to open air that will flow right through the apartment.”
The building is actually comprised of two separate buildings where the separation allows breezes to flow through.
What about build to rent? Long term ownership can make a stronger case for better sustainability inclusions because of the same factors that attract tenants to six star buildings.
But this company is not involved in BTR. Nor is Pozzo enamoured of co-living.
The notion of tiny private spaces where people during lockdown were forced to work on their bed, makes him uncomfortable. We should not encourage that way of living, he says.
As for what’s next on the sustainability radar, Pozzo nominates the standouts as materials and embodied carbon.
“As a developer, we should be telling people through the supply chain what we want. And they will price the materials accordingly.”
Which is not necessarily a problem. “Looking at commercial office in the first instance, if it costs more today it will wash itself through the long term hold.
“A lot of tenants are listed and for them climate change is most important.”
When NABERS and Green Star came along it was flight to quality, Pozzo says. “So, materials and the usage of materials will go the same way.”
Someone has to pick it up as a long term hold.
“We see ourselves as leaders. And as long term holders of commercial property.
“As custodians of superannuation funds, the responsibility is to manage funds for 40-45 years. The members are wanting a consistent return and state of the art buildings, be they 6 star Green Star or next generation materials that will provide a return.”