The Development Digest | 29 August 2025

We are pleased to provide you with our weekly development sector update – ‘The Development Digest’. This update will cover:

• JLL Q2 Australian Apartment Market Overview: Hot Topic - Downsizers
• APDA Event: Beyond the Blueprint – Unlocking the Next Wave of Development
• JLL Report | Melbourne Resilience: Powering the Future of Melbourne
• Review of the Owners Corporations Act 2006
• Headlines of the Week

JLL Q2 Australian Apartment Market Overview: Hot Topic - Downsizers

Downsizers are having an upsized influence on apartment development. While there has been a slowdown in the commencement of new major apartment projects across Australia, there has been  one apartment development type that has remined resilient with off-plan sales allowing for development to kick off. This has been the boutique and luxury apartment development. One of the drivers of this type of development is the 'downsizer'.

Key findings include:

• Recession-resistant sales - Downsizer-focused developments maintain strong off-plan sales while major apartment projects have slowed, providing developers with a reliable revenue stream during market uncertainty
• Exceptional completion rates - Downsizers deliver a 96.3% off-plan transaction success rate in NSW, significantly reducing developer risk compared to other buyer segments
• Premium pricing potential - Downsizers are less price-sensitive and often purchase larger units, allowing developers to achieve higher margins on well-designed products
• Untapped market locations - Downsizers prefer middle and outer suburban areas with lower land costs but less apartment competition, creating development opportunities in underserved markets
• Flexible development timelines - Downsizers will wait up to two years for completion, giving developers extended planning horizons and opportunities for customised, premium-priced floor plans 

APDA Event: Beyond the Blueprint – Unlocking the Next Wave of Development

The JLL team were proud to take part in the most recent APDA event, with panellists Sam Tarascio (Salta Properties), Cressida Wall (Former Commissioner for Economic Growth and Better Regulation), Peter Loukas (State Manager, HMC Capital) and Henry Vuu (Co-Head of Real Estate Equity, Qualitas).

Key themes explored included:

• Rethinking how we build: new approaches to speed, cost-efficiency, and sustainability
• The growing role of AI in development and design workflows
• Creative financing strategies, including preferred equity, to reactivate stalled projects

There was also a wonderful opportunity to recognise the extraordinary career and achievements of Sam Tarascio Snr, Founding Director of Salta Properties.

JLL Report | Melbourne Resilience: Powering the Future of Melbourne

On the 21st of August, JLL Melbourne welcome over 100 key clients and presented our latest report “Resilience: Powering the Future of Melbourne” which examines whether current Victorian market challenges are structural or cyclical. With Melbourne set to become Australia's largest city over the next decade, constrained supply and improving fundamentals create compelling opportunities for investors.

Our JLL Melbourne Resilience Report shows that whilst there are challenges, opportunities are emerging; Build-to-Rent is gaining momentum, student accommodation demand exceeds supply, hotels are outperforming expectations, retail transaction volumes are robust, industrial remains the tightest east coast market, and office demand is showing early signs of revival.

Below we outline six key takeaways from the report:

• Strong occupier demand recovery: Melbourne CBD office market recorded 46,360 square metres of positive net absorption in the first half of 2025, with occupier demand surging after an extended downturn.
• First positive rental growth in nearly three years: Prime CBD assets achieved their first quarter of positive net effective rental growth in 11 quarters, whilst secondary CBD effective rents have stabilised.
• Quality assets outperforming: The best CBD assets are filling up fast, with 28% of Melbourne CBD office assets recording positive effective rental growth over the last 12 months, particularly well-located Eastern Core and Collins Street properties.
• Declining vacancy from peak levels: Office vacancy continues to decline from the 2024 peak, supported by supply constraints that are creating a more favorable landlord environment.
• Demographic tailwinds supporting long-term demand: Melbourne is projected to become Australia's largest city by 2035 with 840,000 new residents expected over the next 10 years, ranking third globally for population growth behind only Delhi and Toronto.
• Attractive investment timing: Current office yields offer compelling opportunities for investors with higher return hurdles, as limited future supply pipelines suggest an improving outlook for existing assets.

Review of the Owners Corporations Act 2006

The Victorian Government is currently undertaking a review of the Owners Corporation Act 2006, with a view to exploring the prospect of adjusting the framework for strata apartment buildings to be comparable to that of NSW and QLD, whereby a single or small number of owners cannot impede redevelopment of a landholding if the majority of owners wish to explore this opportunity.

With a critical housing shortage in our state and a significant number of strata apartment blocks in inner city Melbourne, this would be a welcome change for our sector and unlock substantial opportunity.

Please click here to access the Government survey if you wish to support the proposal.

Headlines of the Week 

The Australian Financial Review - RBA unsure how far or how fast to cut interest rates

• The RBA has signalled further interest rate cuts are needed over the coming year but remains uncertain about the pace, with the board agreeing to cut rates by 0.25 percentage points to 3.6 per cent at their August meeting and financial markets expecting two more cuts by February 2026
• The central bank will take a data-dependent approach to future rate decisions, with the possibility of faster cuts if the labour market deteriorates more than expected or if there are adverse global economic events
• The RBA board discussed staff downgrading medium-term productivity growth assumptions from 1 per cent to 0.7 per cent annually - the first such downgrade since the pandemic - though this weaker productivity outlook is not expected to accelerate the pace of interest rate cuts

The Australian Financial Review - Labor speeds up first home deposit scheme

• The Albanese Government has brought forward its expanded first home buyer deposit scheme by three months to start on 1 October, removing income caps entirely and significantly increasing property price limits, with Sydney's cap jumping from $900,000 to $1.5 million
• Labour has announced a four-year pause on updates to the National Construction Code until mid-2029 whilst reviewing how the code is developed, following builder complaints that recent energy efficiency standards increased construction costs and project complexity
• The Government is attempting to meet its target of building 1.2 million homes by June 2029 under the National Housing Accord, after the National Housing Supply and Affordability Council warned in March that federal and state governments are expected to fall 262,000 homes short of the target

The Australian Financial Review - Westfield owner talks up plans to plug housing gap via malls

• Scentre Group, which operates Westfield shopping centres, is accelerating plans to develop housing on its suburban land holdings with over 5000 potential new dwellings in the pipeline, having already received rezoning approval for developments at Westfield Hornsby and Westfield Belconnen.
• The company sees housing development as a "tremendous long-term growth opportunity" and is reviewing all 42 malls it owns across Australia and New Zealand for residential development potential, with CEO Elliott Rusanow suggesting this could deliver "tens and tens of thousands" of potential dwellings.
• The company is already in discussions with local and offshore capital partners to fund potential residential developments, with executives reporting strong investor interest in the residential living sector.

The Australian Financial Review - ADIA exit Lendlease tower project

• ADIA (Abu Dhabi Investment Authority) is planning to exit a Lendlease tower development project as part of its broader capital reallocation strategy to target higher returns.
• The divestment is part of ADIA's three-year plan to sell traditional properties globally, having also sold investments with Logos in industrial property and a 50 per cent stake in Sydney's Darling Quarter.
• There is renewed demand for Sydney premium office space due to limited new tower developments in the pipeline, with the O'Connell precinct project having potential to transform a key part of Sydney's CBD once an anchor tenant is secured.

The Australian Financial Review - Towering office and warehouse manager’s $4b plan for houses

• Charter Hall has outlined plans for a $3.9 billion residential development portfolio, leveraging its extensive commercial property land bank to create housing and mixed-use projects, with major developments including a $3 billion hotel and apartment project at 201 Elizabeth Street in Sydney.
• The residential portfolio forms part of Charter Hall's broader $17 billion development pipeline and includes projects at Westmead near Western Sydney University and in Brisbane near Bowen Hills station within walking distance of 2032 Olympics infrastructure.
• The platform attracted 14 new wholesale funds from Australia, Europe and Asia during FY25, with another 41 investors increasing their investments as direct flows accelerate with falling interest rates.

We hope you have enjoyed another edition of The Development Digest. Please contact our team if there is anything we can assist you with.

Jesse