Reformed zones for Victoria – who will be the winners and losers?

July 25, 2013 / By  

On the 1st July 2013, Planning Minister Matthew Guy began the rollout of new planning zones for all Victorian councils. The planning reform which has removed nine existing zones, created five new controls and altered 12 others, are some of the biggest changes since the late 1990’s.

The former Business 1, 2 and 5 zones have been replaced by Commercial zone 1, with the old Business 3 and 4 zones consolidated to a new Commercial zone 2 – both coming into effect immediately. Three new residential zones have replaced the old controls, and councils have 12 months to implement these residential zones into their local planning schemes. So what are the consequences and opportunities the state may face?

The new commercial zones seek to deregulate retail and commercial development and will allow investment in a much wider range of locations. The main effect of these changes will create a more competitive retail environment. Under the Commercial 1 zone, previous permit requirements for commercial and retail uses have been removed, combined with all floor space caps for shops and offices. The new Commercial 2 zone does not enforce maximum floor area restrictions for an office and allows use for small scale supermarkets and unrestricted retail (up to 1,800 sqm) without a permit. Industrial zones 1-3 will remain, but with changes to provide more flexibility for retail and office uses, including the removal of the default office floor space area restriction (500 sqm).

The redefinition of zones provides for opportunities and consequences. New commercial zonings positively allow for an increase in the supply of land for commercial use, consolidating the number of commercial controls and the removal of floor space caps encourages business and commercial property development. The zones will allow for greater opportunity and competition for the retail sector, offering more flexibility for retailers to meet current and future needs. The change to Industrial 3 combined with the new Commercial 2 zone allows for supermarkets and unrestricted retail (up to 1,800 sqm) without a permit to set up in alternative locations previously prohibited. However, this could put smaller retailers at risk, notably those who rely on anchor tenants to attract foot traffic. By allowing a neighbourhood centre to arise anywhere there is Industrial 3 or Commercial 2, could somewhat dilute rental and asset prices of traditional neighbourhood (centres). By providing opportunity for anchor tenants to move to areas where they can capture discounted rental levels on what has traditionally been larger format land parcels, could result in a negative impact on land values in some areas, and could increase in values in others.

The new residential controls – Neighbourhood, General and Growth zones aim to establish more certainty for where different types of development should occur and provide development opportunities – notably in Growth zones. Nevertheless, this will have opposing impacts for property values and impact on property development – now to be concentrated in specific areas only. Consequently, councils have 12 months to implement the new zones into their local planning schemes. Prolonged delays in the approval process will increase developers’ holding costs and the feasibility of certain schemes. Furthermore, those that fail to meet the timeline for the new zones will have their suburbs made General zones by default.

The reformed zoning in Victoria requires occupiers and residents to ensure they seek clarity on changes to warrant the best outcomes for the State’s planning system and local economies. Measures have been drafted by Matthew Guy with his proposed “VicSmart” – a new streamlined assessment process for straightforward planning applications, to help ensure everyone benefits.

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