north sydney final report base date 1 july ...north sydney final report 2017 v.1 crown valuation...

NORTH SYDNEY

FINAL REPORT

BASE DATE 1 JULY 2017

NORTH HARBOUR CONTRACT

CROWN VALUATION SERVICE

15th NOVEMBER 2017

Version: Version 1.

Report Prepared For: Property NSW.

Report Prepared By: Crown Valuation Service Pty Ltd.

North Sydney Final Report 2017 V.1

Crown Valuation Services Pty Ltd 2

Executive Summary General overview

There was a strong increase in land values in the North Sydney local government area between 2016 and 2017. Many properties in North Sydney have benefited from improvements to infrastructure in the region which are now underway. The most significant of these being the Sydney Metro Project which will include the new Victoria Cross and Crows Nest railway stations.

The strong increase in residential land values has been largely driven by strong ongoing demand for well-located residential properties. This strong demand has continued for all types of residential property including units, attached housing and free standing residential properties.

There was a slight increase to commercial land values in the district. Greater increases in commercial land values occurred for B4 Mixed Use zoned properties which remain in high demand due to potential for the development of residential units.

Residential overview

Residential land values experienced strong increases from 2016 to 2017 in the North Sydney local government area. This has been largely driven by strong demand for well-located residential properties. This strong demand has continued for all types of residential property including units, attached housing and free standing residential properties. Sites that are particularly well located to local centres, CBDs and other amenities remain in high demand.

Commercial overview

There was a slight increase to commercial land values in the district from 2016 to 2017. Greater increases in commercial land values occurred for B4 Mixed Use zoned properties. These remain in high demand due to potential for the development of residential units. There have been a number of sales of older office buildings to developers with plans to undertake residential conversions. Older office buildings within the suburb of North Sydney and Milsons Point have been specifically targeted for conversion.

Properties zoned B3 Commercial Core experienced a lower level of growth to the Mixed Use sites. Land values in this zone were steady or showed a slight increase from 2016 to 2017. Loss of stock occurred over this period due to the acquisition of properties for the Sydney Metro Line Project and the conversion of older office buildings to residential units.

B1 Neighbourhood Centre properties showed steady land values from 2016 to 2017. These sites are typically smaller with less development potential than other commercial zones in the district.

Industrial overview

The industrial zoned properties in the district showed steady values from 2016 to 2017. There are few properties in the district that have traditional industrial uses. Most of the industrial zoned properties have existing residential or office uses.

Version: Version 1. Report Prepared For: Property NSW. Report Prepared By: Crown Valuation Service Pty Ltd. NOTE: This Executive Summary must be read in conjunction with the attached report and the details contained therein.



Table of Contents Executive Summary ................................................................................................................................. 2

Disclaimer - Purpose of this Report ........................................................................................................ 4

District Overview ..................................................................................................................................... 5

State and Local Government Legislation for LGA ................................................................................... 7

North Sydney Local Environmental Plan 2013 .................................................................................... 7

North Sydney Development Control Plan 2013 .................................................................................. 7

Town Planning Amendments .............................................................................................................. 7

Market Overview and Sales of Interest - Residential .............................................................................. 9

Market Overview and Sales of Interest - High Density Residential and Mixed Use ............................. 11

Market Overview and Sales of Interest - Commercial Office ............................................................... 13

Market Overview and Sales of Interest - Retail .................................................................................... 14

Significant Issues and Developments .................................................................................................... 15

Significant Value Changes ..................................................................................................................... 17

Overview of Quality Assurance Processes ............................................................................................ 18

Author & Contractor Identification ....................................................................................................... 18



Disclaimer - Purpose of this Report The purpose of this report is to describe the process and considerations for the 1 July 2017 Valuation of North Sydney LGA. The report has been produced on behalf of the Valuer General.

The land values have been specifically made for rating and taxing purposes. Land values produced as part of this process should not be used for any other purpose without the specific agreement of the Valuer General.

Land values must have regard to specific requirements and assumptions in rating and taxing legislation. Consequently these valuations may vary from market levels.

The land values have been determined using a methodology prescribed by the Rating and Taxing Valuation Procedures Manual. The manual allows mass valuation methodologies that involve assessing large numbers of properties as a group to be utilised where appropriate. Mass valuation methodologies are by their nature likely to be less accurate than individually assessed valuations, however are utilised worldwide for rating and taxing purposes to deliver valuations within an acceptable market range.

Town planning, land use and other market information contained in this report has been compiled based on enquries undertaken during the valuation process. Third parties should make their own inquiries into these details and should not rely on the contents of this report.

The Valuer General disclaims any liability to any person who acts or omits to act on the basis of the information contained in this report.

More information on the valuation process is available from the Property NSW website at www.PNSW.nsw.gov.au/valuation

http://www.pnsw.nsw.gov.au/valuation



District Overview Location North Sydney is situated on the Lower North Shore which forms part of the northern shore of Sydney Harbour. The area is surrounded on two sides by water, with Middle Harbour to the north and Sydney Harbour to the south. It is bounded to the east by Mosman Local Government Area with Lane Cove and Willoughby Local Government Areas to its west and north respectively. North Sydney contains a number of Harbour suburbs including McMahons Point, Kirribilli, Neutral Bay and Cremorne.

The North Sydney Council Local Government area covering approximately 11 square kilometres, incorporates a Central Business District for commercial use and two high-density mixed use centres being St. Leonards and Milson’s Point. The population for North Sydney Council is forecast to grow to significantly by 2031. The municipality includes the following suburbs:

North Sydney Crows Nest Neutral Bay Cremorne Cammeray

Kirribilli McMahons Point Wollstonecraft/Waverton St. Leonards

Extract of Valmap showing the North Sydney LGA boundary.

North Sydney is an older established area with a mix of housing types including single dwelling homes, semi’s and terraces. The district is made up of varied types of residential development. The district is an affluent area with expensive harbour-side properties and large single residential dwellings. It also comprises a growing number of high-rise developments constructed from the 1970’s onwards and a mixture of low-rise units and townhouses spread throughout the district. The dwelling density is higher than in most other parts of Sydney and is increasing with ongoing development for higher density housing particularly in mixed use developments with a high proportion of residential units. The majority of the district’s residents already live in high density housing being flats in blocks of three

http://en.wikipedia.org/wiki/Clifton_Gardens%2C_New_South_Wales



storeys or more. Much of the remainder of the area’s population resides in medium density developments such as townhouses, semis and terraces. Only a relatively small proportion of the population lives in detached housing.

North Sydney has commonly been seen as an area where young professionals move for employment, living in couple households, however this is diversifying with more children being born and an increase of families and family housing types in the area.

As well as its residential population the North Sydney district provides employment for a large volume of people that live outside the area. The industries employing the highest number of people are:

Professional, Scientific and Technical Services

Health Care and Social Assistance

Manufacturing

Administrative Services

Retail and Wholesale Trade

There are also a number of educational institutions which draw in a large student population, of which significant numbers live outside North Sydney.

Number of Properties Valued This Year North Sydney comprises a mix of zones. The zoning predominantly provides for a mix of residential housing which makes up 85% of the entries in the district. Of the remaining properties 10% have commercial zoning. A total of 10,411 properties have been valued as at the 2017 Base Date.

The total land value determined as at 01/07/2016 is $22,496,316,852.

The total land value determined as at 01/07/2017 is $25,066,543,886.

Local Government Year: 2016. The change in land values from 2016 to 2017 has been + 11.43%.

Property Type Zone Codes Number

of entries

2017 Total Land Value

Prior Local Gov’t Valuation

(2016)

Change From

Prior LG Valuation

Residential ('E4','R2','R3','R4','Z') 8,819 $19,422,207,300 $17,433,567,420 11.41%

Commercial ('B1','B3','B4') 1,040 $4,751,551,621 $4,204,996,727 13.00%

Industrial ('IN2','IN4') 65 $123,070,000 $122,469,000 0.49%

Infrastructure ('SP1','SP2') 27 $563,426,070 $536,284,650 5.06%

Environmental ('E2') 232 $24,500,660 $23,041,220 6.33%

Public Recreation

('RE1','RE2') 228 $181,788,235 $175,957,835 3.31%

Total 10,411 $25,066,543,886 $22,496,316,852 11.43%



State and Local Government Legislation for LGA Development within the North Sydney District is guided by a combination of the North Sydney LEP and DCP 2013. The LEP sets out relevant guidelines such as zoning, minimum lot size and maximum permissible building heights in maps that cover the whole district. All development is assessed and must comply with this planning legislation. There is no broad summary for these documents and maps with details, including relevant amendments found at the New South Wales Government’s NSW legislation website www.legislation.nsw.gov.au.

The Greater Sydney Commission Act 2015 commenced on 27 January 2016. The GSC Act enables the Minister for Planning to create Sydney Planning Panels. A Sydney Planning Panel is taken to be a Joint Regional Planning Panel (JRPP) under the Environmental Planning and Assessment Act, 1979. The Sydney Planning Panels will “determine regionally significant development applications (generally development with a capital investment value of more than $20M) within the Greater Sydney Region (as defined in the GSC Act) and consider pre-Gateway (rezoning) reviews.” It is noted that these are the same functions as the current Joint Regional Planning Panels.

North Sydney Local Environmental Plan 2013 North Sydney LEP 2013 is the principal legal document for controlling development and guiding planning decisions made by Council to facilitate new development that is compatible and appropriate with the preferred role and character of an area. The LEP has been created to comply with the State Government’s Standard Instrument (Local Environmental Plans) Order 2006, which requires local councils to implement a ‘Standard Instrument’ LEP. The State Government created the Standard Instrument LEP to streamline the NSW Planning system.

North Sydney LEP 2013 was applied on the 13th September 2013.

North Sydney Development Control Plan 2013 North Sydney DCP 2013 supports the implementation of the provisions to North Sydney Local Environmental Plan 2013. It contains detailed provisions on all aspects of development not covered under North Sydney LEP 2013. The DCP provisions are not legally binding, however they are given weight in the assessment of all development applications.

North Sydney DCP 2013 was adopted by Council at its meeting on 2nd September 2013 and it came into force on 13th September 2013. It supersedes all other development control plans previously adopted by Council. The DCP applies to all subject to North Sydney LEP 2013, which generally applies to all land in the North Sydney Local Government Area.

North Sydney DCP 2013 identifies all of North Sydney's planning controls in two ways. Firstly, it focuses on general issues such as residential development and cultural resources. Secondly, it is based on localised planning issues derived from the Area Character Study.

Town Planning Amendments There have been numerous amendments since the application of the existing North Sydney LEP and DCP. These have been considered in determining land values in the district. The most recent amendments that have occurred since prior general valuation in 2016 are listed below.

NS LEP 2013 - Amendment No.16 - 31-33 Albany Street, Crows Nest: On 25 November 2016, Amendment No.16 to NS LEP 2013 was made and came into force. Amendment No.16 amends the planning controls applying to the site of 31-33 Albany Street, Crows Nest to increase in the height control from 13 metres to 26 metres and introduce a floor space ratio (FSR) control of 4.27:1.

http://www.legislation.nsw.gov.au/



NSLEP 2013 - Amendment No. 17 – Special Events including markets as ‘Exempt Development’: On 22 September 2017, Amendment No. 17 to NSLEP 2013 was made and came into force. Amendment No. 17 inserts a new provision into Schedule 2 – Exempt Development of North Sydney Local Environmental Plan 2013 to identify ‘Special events (including markets)’ as a form of ‘exempt development.’

NS LEP 2013 - Amendment No.18 - Building Height: On 17 February 2017, Amendment No.18 to North Sydney Local Environmental Plan 2013 (NSLEP 2013) was made and came into force. Amendment No.18 relates to amending building height controls under the NSLEP2013. In particular, the amendments include: correcting the Height of Buildings Map to be consistent with the Department of Planning and Environment’s guidelines for preparing LEP maps; removing the maximum building height control from a number of road reserves such that no height limit applies consistent with Council’s approach to the application of maximum building height controls; removing the maximum building height control from the public reserve Mater Gardens at 194 Pacific Highway, Wollstonecraft such that no height limit applies, consistent with Council’s approach to the application of maximum building height controls; imposing a maximum building height of 8.5m at 124 Alexander Street, Crows Nest consistent with Council’s approach to the application of maximum building height controls to land zoned SP2 Infrastructure; imposing a maximum building height of 10m at 74 McDougall Street, Kirribilli consistent with Council’s approach to the application of maximum building height controls to land zoned IN4 Working Waterfront; and deleting subclauses 4.3(2A) and 4.3(2B) in their entirety

NS LEP 2013 - Amendment No.19: On 28 April 2017, Amendment No. 19 to NSLEP 2013 came into force. Amendment No. 19 specifically: Removes all lot references where Strata Plans are mentioned throughout the LEP, with the exception of Clause 21 to Schedule 1; Removes all references to Company Titles wherever mentioned throughout the LEP, and replaced with the underlying Deposited Plan information; Corrects the legal descriptions to heritage items within Schedule 5.

NS LEP 2013 - Amendment No.20: On 5 May 2017, Amendment No. 20 to NSLEP 2013 came into force. Amendment No. 20 specifically: Replaces the Heritage Map Sheet 002 with a new map that removes the references to nine heritage items that were previously formally removed from Schedule 5, prior to the LEP’s commencement.

NSLEP 2013 - Amendment No. 21 - 1-11 Cowdroy Avenue & 22 Stratford Street, Cammeray: On 28 July 2017, Amendment No.21 to NSLEP 2013 was made and came into force. Amendment No.21 rezones 1, 3, 5, 7, 9 and 11 Cowdroy Avenue and 22 Stratford Street, Cammeray from E4 Environmental Living to R2 Low Density Residential. In addition, it amends Schedule 1 - Additional Permitted Uses to permit ‘dual occupancies (detached)’ with development consent on land at 11 Cowdroy Avenue, Cammeray.



Market Overview and Sales of Interest - Residential Residential zoned land comprises some 85% of the properties valued in the North Sydney local government area. The Total Residential Land Value increased 11.41% or from $17,433,567,420 at prior General Valuation in 2016 to $19,422,207,300 in 2017. The overall increase in the total value of residential land is in line with the increase in residential value levels based on 2017 sales evidence.

To date 197 residential sales have been analysed to determine and provide verification of land values. These sales are analysed to provide an analysed and land value adjusted to 1st July 2017. The added value of improvements are also analysed to enable the accurate determination of land values - the paired sales approach being the preferred methodology. Sales in close proximity to the relevant base dates have been preferred. Analysed sales are also used to support the grading across components. It is important to note that within North Sydney’s residential market there are numerous sub markets with unique features. These sub markets have varied characteristics and will exhibit varied market characteristics and levels of growth. For this reason a broad range of sales evidence is analysed. Analysed sales reports are provided to Property NSW on a consistent basis throughout the year. North Sydney’s residential housing market is part of the lower north shore broader residential market. This region experienced very strong growth between mid-2013 to 2016. The district comprises some of Sydney’s more affluent residential markets. The North Sydney district comprises some of Sydney’s most expensive property. This includes waterfront homes, properties with expansive harbour and city views and large residential sites that are situated within Sydney’s ring of inner suburbs. Some of the highest recorded residential sales were $9,380,000 for 3A WARUNG ST, MCMAHONS POINT, $8,900,000 for 15A LOWER WYCOMBE RD, NEUTRAL BAY and $8,110,000 for 15B SHELLCOVE RD, KURRABA POINT. These properties are improved waterfront properties or enjoy extensive harbour views.

Crown Valuation Service sales data shows a 17.92% increase in median sales price since prior general valuation in 2016.

CVS data indicates 261 residential sales occurred between 1/7/2015 to 01/07/2016 with an average sale price of $2,660,623 and a median sale price of $2,120,000.

CVS data indicates 250 residential sales occurred between 1/7/2016 to 01/07/2017 with an average sale price of $3,032,744 and a median sale price of $2,500,000.

In 2017 purchasers are continuing to value properties that are well located in relation to transport, employment and amenities. A number of suburbs within the North Sydney district fulfil these market requirements. Properties in the North Sydney local government area have been advertised as being “two sets of traffic lights” or “a short train ride to Sydney CBD.”

Smaller attached housing has become more popular with the Sydney market in recent years. Throughout the district much of the well-located attached housing is zoned R3 Medium density allowing slightly greater development densities than those subject to R2 Low density zoning. The lower price bracket within the North Sydney District typically includes attached housing on small sites of less than 200m². This market experienced some of the district’s strongest growth with the popularity of smaller dwellings in good locations continuing into 2017.



Markets where these smaller attached dwellings are located include:

Crows Nest

St Leonards

Kirribilli

Mc Mahons Point

Neutral Bay

Cammeray

The district includes many waterfront sites and large properties with extensive views. Elevated or well-located sites in the district can benefit from water views of Sydney Harbour or Sydney and North Sydney CBDs. These sites are suitable for the development of a prestige trophy homes. The dwellings built or renovated on these sites are typical of top end prestige residences with the highest quality fitout. Waterfronts in the district have shown slight to moderate increases in the past year. Similarly larger residential properties often with desirable views have shown steady increases in value. Throughout the district there are E4 - Environmental living zoned sites in waterfront or fringe locations which are considered of some environmental importance. These sites are generally larger in size with more restrictive zoning than the R2 or R3 zoned residential properties in the district. These properties showed strong increases in values over the past year. There is very little undeveloped land remaining across the district. Therefore it is in–fill developments and demolitions that provide most of the supply of residential land for new development. Residential building approval statistics are used as a leading indicator of the general level of economic activity, employment and investment. The number of building approvals for houses remains low with high number of development approvals for other developments, including residential units. This is indicative the current types of development within the LGA. Typically there are few new standard homes being built however numbers of development approvals for redevelopment to higher densities and renovation of existing homes are at historically high levels.

Year (ending June 30) Houses Other Total

2016-2017 13 1,029 1,042

2015-2016 17 413 430

2014-2015 38 205 243

2013-2014 89 1,089 1,178

2012-2013 95 368 463

2011-2012 55 260 315

2010-2011 44 721 765

2009-2010 74 200 274

Source: Australian Bureau of Statistics, Building Approvals.

The North Sydney district’s residential property markets have seen significant value growth in the last three year period. Since prior general valuation in 2016 growth has slowed and is expected to be more subdued in the coming year.



Market Overview and Sales of Interest - High Density Residential and Mixed Use There are currently 1,572 R4 - High Density residential zoned sites across the North Sydney District. Additionally there are 763 B4 - Mixed Use zoned sites that allow a residential component. Traditionally and prior to the introduction of the B4 - Mixed Use zone much of a commercial zoned property’s value came from its retail or commercial potential. Increases in demand for residential units has seen the residential component of these sites value increase.

Since the last general valuation in 2016 there has been continued strong demand for development sites and new apartments located in close proximity to commercial business centres and transport infrastructure. This has been driven by local demand with investors and overseas buyers also prominent in the market. Units continue to sell well off the plan prior to the completion of these developments. An example of this was Aqualand’s $200 million worth of apartment sales at its Lavender Bay development. The first stage of the 20 storey tower comprising 72 apartments reportedly sold within two hours. This included an $8 million sale price reflecting a rate of $55,000 per square metre for a sub-penthouse.

Through continuing changes to planning the volume of land that allows higher density and mixed use redevelopment has increased in recent years. This can be seen in locations well located to commercial centres such as St Leonards/Crows Nest precincts, Walker Street and along the Pacific Highway just north of the North Sydney CBD. These areas have and will continue to benefit from the announcement of significant infrastructure and transport upgrades. Strong developer interest in mixed use and residential density sites is such that the market now shows little discount for large residential development sites.

Site sales for amalgamated density developments are not necessarily applicable to single holdings as they may not meet all the criteria required for higher development such as minimum lot size or minimum street frontage. In some cases once a development application has been approved there are subsequent modifications to the approved development that increase the allowable floor space. Some sales of interest from properties zoned R4 High Density include:

1-3 PREMIER ST, NEUTRAL BAY: Sold for $16,875,000 in February 2016. Improved sale of a two adjoining properties to be redeveloped as 13 x 3 bedroom luxury apartments set across two buildings.

7 RODBOROUGH AVE, CROWS NEST: Semi-detached dwelling sold for $2,150,000. 41- 49 ATCHISON ST, CROWS NEST: amalgamated development site sold for

$13,920,000. Analysis shows potential 37 units. 9 HARRIETTE ST, NEUTRAL BAY: Dual occupancy dwelling sold for $2,420,000. 8A MERLIN ST, NEUTRAL BAY: Modern end terrace affected by traffic noise sold for

$2,095,000. 9 COLINDIA AVE, NEUTRAL BAY: Brick and tile unit block comprising 7 x 1 bedroom units.

Sold for $5,595,000 or $799,285/unit. 116 HIGH ST, NORTH SYDNEY: Heritage listed large dwelling sold for $6,075,000. 7 EATON ST, NEUTRAL BAY: Resale of a semi-detached dwelling. $1,408,000 in mid-2015

and $1,775,000 in mid-2017.



There has been a number of sales from the B4 - Mixed Use zone over the past year. Some of the notable sales include:

19-33 CHANDOS ST, ST LEONARDS: 21/09/2017. Sale price - $48,100,000

83 ALEXANDER ST, CROWS NEST: 03/07/2017. Sale price -$14,515,000

160 PACIFIC HWY, NORTH SYDNEY 22/05/2017. Sale price -$10,100,000

168 WILLOUGHBY RD, CROWS NEST: 24/03/2017. Sale price - $16,250,000

27-55 FALCON ST, CROWS NEST: 14/03/2017. Sale price - $30,500,000

39-47 ALBANY ST, CROWS NEST: 10/02/2017. Sale price - $22,000,000

40 FALCON ST, CROWS NEST: 18/11/2016. Sale price - $6,860,000

166-174 MILITARY RD, NEUTRAL BAY: 16/11/2016. Sale price - $25,300,000

The conversion of older office towers into residential apartment blocks on the back of strong demand

for residential units has continued into 2017. Larger B4 - Mixed Use zoned properties in Milsons Point

and within the suburb of North Sydney have been specifically targeted for conversion. There have

been a number of significant sales in the Milsons Point mixed use precinct. There is now development

approval for residential conversion of the last large scale office building in the precinct to residential

units. This will be undertaken by Aqualand who acquired the property at 61 Lavender Street for $140

million with development approval for 135 apartments. There has been a number of resales in Milsons

Point showing strong price growth over recent years such as:

30 ALFRED ST S, MILSONS POINT sold for $25,625,000 on the 02/08/2013

then more recently sold for $55,000,000 on the 23/11/2016.

52 ALFRED ST S, MILSONS POINT sold for $77,950,000 on the 04/02/14

then more recently sold for $110,000,000 on the 27/06/16.

Smaller sites of six to eight units are typically analyse to show rates of $250,000 to $380,000 per unit. The larger high density and mixed use development sites typically show unit rates of $220,000 to $300,000 per unit. Unit developments around the Harbour with views can command over $1,000,000 per unit and often comprise smaller boutique developments. The density and mixed use sites across the district have seen strong increases over the past three years with growth slowing into 2017. Since prior general valuation in 2016 there has been moderate to strong increases in these markets.



Market Overview and Sales of Interest - Commercial Office The North Sydney office market which includes Milsons Point is New South Wales’s third largest office market after being overtaken by Macquarie Park. Other competing markets to the North Sydney CBD include Crows Nest/St Leonards and Chatswood. The total commercial land value shows restrained growth from prior general valuation in 2016.

There has been slight increases to land values for North Sydney’s office properties to reflect the relevant sales evidence. Tightening of yields, rental growth and lowering incentives have indicated a strengthening office market in the district.

All commercial office sales are analysed by Crown Valuation Services as they become available. With only 139 properties zoned B3 - Commercial Core in the North Sydney District the volume of sales evidence is limited. Since the prior base date in 2016 sales include:

132 ARTHUR ST, NORTH SYDNEY: Sold for $70,000,000 on the 20/09/2016.

54 MILLER ST, NORTH SYDNEY: Sold for $52,300,000 on the 18/10/2016.

6-8 FALCON ST, CROWS NEST: Sold for $3,410,000 on the 18/01/2017.

146 ARTHUR ST, NORTH SYDNEY: Sold for $78,000,000 on the 17/02/2017.

88 WALKER ST, NORTH SYDNEY: Sold for $21,175,000 on the 08/03/2017.

2 ELIZABETH PLZA, NORTH SYDNEY: Sold for $79,000,000 on the 08/03/2017.

1 PACIFIC HWY, NORTH SYDNEY: Sold for $115,000,000 on the 21/09/2017. *Reported

657 PACIFIC HWY, ST LEONARDS: Sold for $22,150,000 on the 11/08/2017. *Reported

165 WALKER ST, NORTH SYDNEY: Sold for $56,000,000 on the 22/06/2017. *Reported

116 MILLER ST, NORTH SYDNEY: Sold for $134,000,000 on the 06/07/2017. *Reported

Strong developer interest still exists on the fringe of the North Sydney CBD and the Crows Nest/St Leonards commercial precinct where properties maybe redeveloped or converted to include residential units. There is now development approval for residential conversion of the last large scale office building in Milsons Point to residential units. This will be undertaken by Aqualand who acquired the property at 61 Lavender Street for $140 million with development approval for 135 apartments. These conversions and redevelopments continue to result in the withdrawal of commercial office space from the market North Sydney Market.

Acquisitions for the Sydney Metro Project appear to have been completed. There will be numerous properties within the North Sydney CBD that will benefit from the new Victoria Cross Station set to be completed in 2024. This is resulting the upgrading of older office stock around the new station. The acquisitions and conversion to residential units has reduced levels of office stock in the North Sydney Local Government area. Vacancy rates across North Sydney and within the Crows Nest/St Leonards centre have improved over the past three years. The combined vacancy in the broader north shore office market is now sitting at levels not seen for many years. This is consistent with the solid demand and shrinking stock. Sales volumes for smaller strata offices has increased since the previous year.

The first major CBD office development for six years was completed in 2016. This is 177 Pacific Highway adding approximately 40,000m² of new space to North Sydney’s office market. This is now reported to be fully leased. Other proposed development include:

100 Mount Street is DA approved for 40,100m² of office space with staged completion of the

development in 2018.

1 Denison Street proposes a redevelopment including 60,000sqm tower.

Zurich has proposed demolition and construction of a 29-storey tower at 118 Mount Street.



Market Overview and Sales of Interest - Retail The retail market in the North Sydney local government area is primarily located along the strip retail precincts of Military Road, Neutral Bay to Mosman and along Willoughby Road & the Pacific Highway in and around Crows Nest.

Over recent years there has been a significant increase in the number of mixed use developments in the district. That is, ground floor retail or commercial space with residential units above. The increase has been driven by a changes in planning controls and the strong demand for modern residential apartments close to transport, work and recreational opportunities. As previously stated the sites that offer mixed use or a residential development upside have performed better than traditional smaller retail shopfront sites. Sales of sites considered more traditionally retail in nature are subject to the more restrictive B1 - Neighbourhood zoning. There are only 139 B1 - Neighbourhood Centre entries scattered across the district. The objectives of zone are:

To provide a range of small-scale retail, business and community uses that serve the

needs of people who live or work in the surrounding neighbourhood.

To encourage active street life while maintaining high levels of residential amenity.

To encourage development for the purpose of shop top housing.

Crown Valuation Service analyse all sales within the B1 Neighbourhood sales as they become available. Due to the small number of entries all market sales in this zone are of some significance. Since 2015 sales of interest in this zone include:

467-473 Miller Street Cammeray: A number of adjoining lots purchased between late

2014 and mid-2015 to be amalgamated for redevelopment.

107 West, 125 & 125B Falcon Street, Crows Nest: Sold for $3,500,000 in late 2015. 67 Union Street, McMahons Point: Sold for $1,625,000 in mid-2016. The property

sold previously for $840,000 on the 06/04/2010.

131-135 Blues Point Rd, McMahons Point: Sold for $8,910,000 in late 2016 and early

2017 in two transaction. Purchased by the same purchaser.

451 Miller Street Cammeray: Sold for $1,095,000 in late-2016. Shopfront with two

bedroom apartment above.

Market evidence has shown that demand remains strong for well-located retail premises, particularly those that have potential for mixed use development. The value of mixed use developments has increased on the back of strong demand in the residential unit market. This feature of the current market is most obvious on larger sites located on the fringe of established retail centres. The district’s B1 zoned land values have not increased at the same rate as B4 zoned sites which are preferred by the market.



Significant Issues and Developments

Sydney Metro Project: The most significant development affecting the area is the Sydney Metro Project which will deliver two new stations to the North Sydney local government area, being Crows Nest and Victoria Cross. The Sydney Metro Project will deliver two new stations to the North Sydney local government area, being Crows Nest and Victoria Cross. The project will deliver seven new metro stations, at:

Crows Nest

Victoria Cross

Barangaroo

Martin Place

Pitt Street

Central Station (new underground platforms)

Waterloo

The NSW Government have acquired a number of properties for the construction of the rail line and the new Stations. These acquisitions have also accounted for reduced levels of office stock in the North Sydney Local Government area. It is therefore not surprising that vacancy rates across the North Sydney and within the Crows Nest/St Leonards centre have improved over the past three years. The combined vacancy in the broader north shore office market is now sitting at levels not seen for over a decade with consistent demand and shrinking stock.

Early works will continue at both the Victoria Cross and Crows Nest Station sites. Blues Point is to be the location of a 2,100m² construction site at the waterfront. This is to be an entry point for the tunnelling. Reportedly around 8,000 tonnes of spoil will be brought to the surface at Blues Point.

Priority Growth Area St Leonards and Crows Nest: The NSW Department of Planning and Environment has identified St Leonards and Crows Nest as part of a Priority Growth Area/Precinct. Department of Planning and Environment is liaising with North Sydney, Lane Cove and Willoughby City councils to undertake a strategic planning investigation of the St Leonards and Crows Nest Station Precinct. The precinct includes the suburbs of St Leonards, Greenwich, Naremburn, Wollstonecraft, Crows Nest and Artarmon. In an Interim Statement released on 4 August 2017 by NSW Department of Planning and Environment. The document provides a draft vision, objectives, guiding principles and character statements. These expected to guide development and infrastructure delivery over the next 20 years in this area.

North Sydney Centre Review: North Sydney council have been undertaking a Centre Review on North Sydney’s CBD. It is a comprehensive planning review of the central business district and its growing mixed-use periphery. The review reportedly “aims to identify and implement policies and strategies to ensure that the North Sydney retains and strengthens its role as a key component Sydney's global economic arc, remains the principle economic engine of Sydney's North Shore, and becomes a more attractive, sustainable and vibrant place for residents, workers and businesses.” The studies informing the overall Review will include:

Traffic and Pedestrian Management study Land Use and Strategic Vision Public Domain Review Late Night Trading and Small Bars study

Capacity and Built Form study Promotion and Marketing study Events and Activity review

http://www.northsydney.nsw.gov.au/Building_Development/North_Sydney_CBD/North_Sydney_Centre_Review/Late_Night_Trading_Review



Western Harbour Tunnel and Beaches Link: On 16 March 2017 The NSW Government is proposed to build the Western Harbour Tunnel and Beaches Link, extending from Westconnex at Rozelle to Balgowlah via an interchange in North Sydney. The Western Harbour Tunnel will connect to WestConnex at the Rozelle Interchange, cross underneath Sydney Harbour between the Birchgrove and Waverton areas and connect with the Warringah Freeway at North Sydney. Preliminary plans indicate there will be a surface interchange in the vicinity of the Warringah Freeway and Falcon Street/Military Road.

HMAS Platypus Sub-Site EOI: The Harbour Trust has been inviting Expressions of Interest to for the Sub Base Platypus in Neutral Bay. The Harbour Trust’s vision “is to create a landmark location for the people of Sydney. The revitalisation of Platypus will open up the fascinating spaces of this former industrial site and integrate it with the neighbourhood.”North Sydney Council at its meeting of 19 September 2016 resolved to “support the general re-activation and adaptive reuse of the HMAS Platypus site.”

Coal Loader Green Roof Project: Due for completion in early November 2017. Completion of the project will see a large publicly accessible green roof spaces on the old coal-loading platform. The green roof project will include;

community ‘urban harvest’ plots (vegetables, fruit trees, aquaculture) irrigated by recycled

stormwater,

a performance space,

extensive seating and

viewing areas, as well as

heritage interpretation of the original coal loading operations.

250,000 litres of collected stormwater will be filtered through ‘raingardens’ established in the

old coal loading chutes and stored in one of the old tunnels beneath the platform.

skylights will be created over the existing pedestrian tunnel



Significant Value Changes SIGNIFICANT VALUE CHANGES FROM PRIOR LOCAL GOVERNMENT COUNCIL RATING VALUATION AND PRIOR BASE DATE 2016 A number of properties have had significant movements in their Land Values in the 2017 valuation program. Property NSW are informed of such changes to values during regular meetings throughout the year. Some values have moved significantly where the variation does not just represent normal market growth but is the result of increases in the development potential of a particular site. Significant value changes often reflect;

Planning changes allowing greater development potential. Fast paced market growth from demand for residential / mixed use development land. Sites where approval has been achieved for development of a scale which is greater than

could be assumed when undertaking a valuation under the Valuation of Land Act 1916 considering the existing planning.

Other significant changes to values are the result of handcrafting through verification or value changes to reflect sales analysis. Significant value changes are listed in the Valuation Analysis Report and have been verified with a Risk Rating of 1 indicating a high value change. A number of B4 Mixed Use zoned properties have seen significant value increases to reflect market evidence from the sale of development sites. There has been continued strong demand for sites with mixed use development potential which has seen site values continue to rise. Often one-off value changes have been brought about when a development site is amalgamated. There were significant increases to a number of properties in Milsons Point. These increases reflect market evidence including a number of resales of showing strong increases. There were also a small number of residential properties that have been subject to site specific increases to reflect sales evidence. These sites have individual characteristics such as heritage listings or small site areas with extraordinary views.

Another site specific adjustment to land value occurred for a property on Willoughby Road that was rezoned on 5 May 2017 to RE1 Public Recreation.



Overview of Quality Assurance Processes PNSW has been provided with a detailed valuation analysis report, which details the quality assurance process of Crown Valuation Service and outlines that the verification process and certifies that land values meet all statistical measures and component data analysis. In addition, a quality statement and lists of high value and high risk properties is also provided in the valuation analysis report. Checks have been undertaken to ensure that all properties have been valued, land values are consistent with each other, land value bases have been correctly determined and all concessions and allowances have been supplied. Additionally, properties that had land values amended through the objection or re ascertainment process were individually examined to reconcile surrounding land values and ensure accuracy of the grading of surrounding land values. Benchmarks and reference benchmarks are core elements of the quality assurance processes and are identified and individually valued in accordance with the Rating and Taxing Procedures Manual Version 7.1.1. Worksheets have been maintained on all properties where calculations are required. We have also ensured that adjustments and assumptions within the market analysis have been based on market evidence and have been fully documented and rationalised.

Author & Contractor Identification This report has been prepared and signed by:

Mark Everitt (AAPI, CPV) Patrick Long (AAPI, CPV)

Contract Services Manager Valuer North Harbour Contract North Harbour Contract Crown Valuation Services Crown Valuation Services 15th November 2017 15th November 2017

north sydney final report base date 1 july ...north sydney final report 2017 v.1 crown valuation...

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