Eight storeys is the bar for profitability when it comes to development in the Nelson Bay CBD, a study has found.
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The finding forms part of a feasibility study linked to building heights in the Nelson Bay discussion paper that more generally looks at the CBD’s prosperity – due for release next week.
Development has stagnated in the CBD and property data reveals the median price for units in the Bay has been in decline since 2005, when it reached a high of $445,000.
While Tomaree Ratepayers and Residents Association points to the global financial crisis, developers have told Port Stephens Council it’s building heights.
This has prompted a review of the Nelson Bay Town Centre and Foreshore Strategy 2012. And the discussion paper reviews economic factors the council said was missing from earlier conversations.
“We’re looking at a sweet spot of eight to 10 stories,” the council’s Development Services group manager Mike McIntosh said.
“That doesn’t mean there will be blanket development at that height. We acknowledge there’s a desire to maintain that natural amphitheater and it’s important to emphasise this is a discussion paper.”
The council commissioned the feasibility study last year based on five sites across the CBD based on a 20 per cent return on developer-investment. Four of those properties met and achieved that criteria at eight storeys with parking above ground level. But slumped when excavating earth for car parking. Modelling for an eight storey building on council’s Donald Street-west site, with car parking above ground, reveals a profit margin of about 25 per cent. But with car parking below ground it’s about 10 per cent.
Donald Street-east only approaches 20 per cent at 17 storeys with car parking above ground.
“We’ve got heights set around the five storeys but we can’t develop at that height and expect people to get that 20 per cent return,” Mr McIntosh said.
“It’s important for the banks to be able to loan money for these developments.”
TRRA feared the Donald Street-east would need 21 storeys to achieve a 20 per cent profit margin. Mr McIntosh said the five sites were simply a gauge.
“Fair enough, TRRA shares a concern that the Donald Street-east site would have to be higher,” he said.
“For a developer [car parking] is a massive impost especially if you go underground.
“And as a community we don’t want to be looking at car parking at ground level, it can be ugly. These issues are all linked.”
Tomaree Ratepayers and Residents Association president Dick Appleby said the discussion paper was the “second rising” of the Nelson Bay strategy.
“There’s a perception that building heights has put the handbrake on and that it’s gone nowhere in four years,” he said.
“It isn’t building heights, it’s the global financial crisis that killed it.”
Mr Appleby acknowledged the public parking impost on developers but said it was an oversimplification if council suggested there needed to be a trade-off.
“The parking has got to come from somewhere,” he said.
“If the only way to get out of this is to build an 18 storey development then we’ll have to review it very closely.”
The draft Nelson Bay discussion paper goes on public exhibition from February 13 when the council will seek feedback on measures designed to boost the CBD.
The discussion paper – Progress of the Nelson Bay Town Centre and Foreshore Strategy – identifies six key themes and 21 ideas to “form a better strategy”.
The council has scheduled two information sessions:
• 4-6pm Thursday, February 23 at the Ngioka Centre (Corner of Victoria Parade and Dixon Drive, Little Beach, Nelson Bay)
• 4-8pm Friday, March 10 at the Sacred Tree Markets, d'Albora Marinas.
To provide input on future plans for the town, visithaveyoursayportstephens.com.au from February 13 to March 13 or visit the admin centre in business hours.
