Pessimism in Perth’s commercial property sector and the alarming office vacancy rate won’t stop development at Elizabeth Quay, according to the Metropolitan Redevelopment Authority.
And while MRA chief executive Kieran Kinsella said it was unfortunate the complex construction works were driving tourism and hospitality customers from Barrack Square, the inlet and public space should be completed before the end of the year – a six-month delay from the original schedule.
Mr Kinsella said everything else at the quay remained on track, including two large-scale office developments. However, this assertion runs counter to speculation on St Georges Terrace that oil and gas giant Chevron wants to back away from its commitment to build a tower up to 36 storeys to house its Perth workforce.
Mr Kinsella said he expected building to start on Far East Consortium’s Ritz-Carlton hotel and luxury apartment towers early next year, while also flagging a late-2016 start for Chevron.
“What we hear on the grapevine from consultants and people seeking to get the construction contract means that, as far as we can see, the project is alive and well,” Mr Kinsella said.
“From what I understand, Chevron is spending significant dollars in making sure they can get the project up and out of the ground.”
Chevron paid $64 million for its plot in November 2013, while Mr Kinsella said he expected total land sales at the quay to exceed the $170 million target set when the $453 million project was launched.
The other office development is slated for lots five and six, at which the MRA is working with international commercial landlord Brookfield Office Properties to facilitate a two-tower development.
Mining giant Rio Tinto had been strongly rumoured to anchor the project, but in recent months Rio has also been linked to a second tower at Bishop’s See, while there has also been speculation it will simply stay put at its Central Park base.
While acknowledging the two-tower development would be a significant challenge, with Perth’s office vacancy rate tipped to hit 23 per cent next year, Mr Kinsella said he remained confident Brookfield would be able to make a deal happen with a suitable anchor tenant.
“Given the Brookfield balance sheet and their capacity to create these sorts of office towers, Brookfield is probably one of the safest bets we could take,” he said.
“They are going to work for the next 10 months on making sure that they get their design for the site completed and up to specification and continue to seek tenants for those buildings.”
Next month, the MRA will launch a sales campaign for lots nine and 10 at Elizabeth Quay, where Mr Kinsella expects to attract another internationally renowned hotel operator.
Mr Kinsella told Business News that although a hotel was not mandated for the site, it would be the most likely outcome following extensive pre-sales market testing in Malaysia, Singapore, Hong Kong and in the eastern states.
However, Mr Kinsella said the MRA would hold onto the final plot at Elizabeth Quay, lot four, until office market conditions improved.
Another hotel at Barrack Square, a DoubleTree by Hilton proposal, was given the green light earlier this month following negotiations with the MRA, after developer SKS Group sought to increase the scale of the previously approved hotel to 19 storeys.
SKS Group director Francis Foong told Business News the MRA had sought changes to the design of the hotel, which posed risks for the project’s certainty.
But Mr Kinsella said the MRA made no apologies for pushing for the best possible outcome on what he described as an iconic site.
“Making sure that it’s the best building it can be within our powers as a planning authority has been our mission,” he said.
“But we’ve got to a place where I think all parties are satisfied.
“All of the outstanding issues were resolved and there was a satisfactory commercial compromise reached to make sure the project will continue if they choose to.”
