Project Overview
Client
Government Local
Property Type
Mixed Use (Retail, Commercial and Residential Redevelopment Potential)
Reason for Service
Sale and leaseback valuation and redevelopment assessment
Preston Rowe Paterson as engaged by the City of Sydney to undertake an economic and valuation analysis of a major CBD redevelopment precinct at Circular Quay.
The assignment aimed to assess whether proposed planning controls, including increased height and floor space transfer mechanisms, would generate sufficient economic incentive to facilitate site amalgamation and deliver the intended urban design outcomes.
The engagement formed a critical component of a broader Urban Design Study aimed at delivering a transformative planning outcome, including multiple high-rise towers, a new central public domain, improved pedestrian connectivity, and the redistribution of floor space across development blocks.
Overall, the instruction required a comprehensive, evidence-based assessment to support public sector decision-making, ensuring that the proposed planning controls were underpinned by robust economic justification and capable of delivering sustainable, market-supported urban regeneration over time.
Summary of Scope of Services
The instruction required:
- Independent economic analysis of planning controls
- Preparation of indicative market valuations under multiple scenarios
- Highest and best use assessments across individual sites and aggregated development blocks
- Feasibility-based valuation modelling (existing use, redevelopment in isolation, and inclusion within development blocks)
- Forward market projections and value relativity analysis
- Advisory on the effectiveness of floor space transfer mechanisms
- Identification of planning policy levers and incentives required to enable redevelopment
Asset Overview:
The subject asset comprises a prime mixed-use redevelopment precinct located within the Circular Quay core of the Sydney CBD, bounded by Alfred, Pitt, Dalley and George Streets. The site represents one of the most strategically significant development opportunities within Sydney, incorporating a complex assemblage of commercial office, retail and residential uses across multiple landholdings with fragmented ownership.
The broader urban design proposal envisages a high-density redevelopment outcome including multiple towers, a central public square, and integrated pedestrian linkages, supported by the redistribution of floor space across defined development blocks.
The precinct’s scale, location and ownership complexity position it as a critical catalyst for CBD regeneration and urban activation within one of Australia’s most prominent waterfront commercial districts.
Key Issues
The engagement required resolution of several complex valuation and planning issues:
Fragmented Ownership Structure
- Development Block 1 comprised multiple landowners
- Amalgamation required alignment of commercial outcomes across disparate parties
Planning vs Market Reality
- Base controls under Sydney LEP 2005:
– Height limit: ~110 metres
– Base FSR: 8:1 (up to ~12.5:1 with incentives) - Proposed scheme:
– Increased heights (up to 200 metres)
– Floor space redistribution across blocks - Required testing of whether planning uplift translated into realisable land value uplift
Post-GFC Market Conditions
- Analysis undertaken in a subdued market environment
- Weak demand, elevated incentives and development risk
- Key issue: redevelopment land value generally below existing improved values
Incentive Mechanism Testing
- Whether height alone was sufficient to:
– Trigger site amalgamation
– Deliver the intended urban outcomes
Valuation Methodology
Preston Rowe Paterson applied a rigorous, multi-layered valuation approach including:
Multi-scenario valuation framework assessing:
- Value as improved (existing use)
- Land value under standalone redevelopment
- Land value within development blocks
Feasibility-based residual land valuation, incorporating:
- Capitalisation of income to determine gross realisation
- Full development cost modelling (construction, finance, incentives, profit and risk)
Development block aggregation analysis across differing ownership structures
- DB1 (multi-ownership, most complex)
- DB2 (single ownership – Mirvac)
- DB3 (single ownership – Valad, residential focus)
Forward market modelling
Adjustments for:
-
- Rental growth
- Yield compression
- Reduced incentives
- Improved feasibility outcomes
This engagement demonstrates Preston Rowe Paterson’s expertise in:
- Detailed residual land value modelling across multiple development and planning scenarios;
- In-depth understanding of CBD market cycles and their impact on redevelopment feasibility;
- Strategic assessment of ownership fragmentation and its influence on site amalgamation outcomes;
- Provision of evidence-based policy recommendations to enhance planning effectiveness; and
- Development of forward-looking valuation insights to support long-term urban renewal strategies.
Outcome
The outcome reinforced Preston Rowe Paterson’s ability to support government clients in complex planning environments through robust methodologies, independent analysis, and actionable strategic advice.
The engagement provided the City of Sydney with:
- A quantified understanding of value relativity across multiple planning scenarios
- Evidence-based confirmation that:
– Planning uplift immediate economic viability
- A clear roadmap of:
– When redevelopment becomes viable (market recovery)
– How to accelerate viability (targeted incentives)
We Deal with the Mainstream & Specialise in the Complex for all asset classes
