Melbourne's Docklands Comes Back to Life

At last: Docklands slowly comes to life
Mathew Dunckley and Mark Phillips
23 February 2006
Australian Financial Review

Ten years ago, it was a wasteland of empty warehouses that even taxi drivers feared to go near. But today, following $3.7 billion of investment, Melbourne's Docklands is a bustling residential and commercial precinct with a daily population of 32,800.

Docklands is still a work in progress, and some scepticism remains about its prospects as dozens of high-rise apartments sit unsold.

But the more recent transformation has silenced most of the critics who a decade ago voiced doubts about the wisdom of proceeding with the largest urban revitalisation project in Australia.

From the sports stadium, which celebrated its 10 millionth patron in August, to the rows of apartment towers in New Quay and Yarra's Edge, to the acclaimed National Australia Bank HQ in Victoria Harbour, Docklands is taking shape as it moves towards eventually doubling the size of Melbourne's central business district.

"You couldn't stop Docklands today if you tried," says John Tabart, the outgoing chief of VicUrban, which manages the precinct on behalf of the state government.

"It has mixed use and is a high-quality venue. Much of Melbourne doesn't realise that yet."

The connection of Bourke and Collins streets could be just a few years away, altering Melbourne's grid street system in a way never envisaged by the city's original planners and symbolically linking Docklands to the CBD.

Located on partly reclaimed swampland at the west of the CBD, Docklands was Melbourne's original port, operating from the early 1900s until the mid-1990s, made obsolete by the requirements of container ships.

It begins at Spencer Street Station and Batman's Hill - the highest point of early Melbourne - extending to the Bolte Bridge.

Running parallel to each other through the CBD, Collins and Bourke streets have already been extended into Docklands and will eventually meet as the apex of a triangle deep in the Victoria Harbour precinct.

Mark Birrell, who was major projects minister in the first Kennett government when the Docklands vision was formalised, admits to an "ongoing parental interest" in the precinct. "This was a site that taxi drivers would not take you to for fear of the consequences," he says.

"It's [now] become a must-visit place for tourists, and people enjoy the restaurants and literally thousands of people are living there."

Docklands is one of the world's largest urban revival projects.

According to VicUrban's figures, investment at Docklands is running at an average of $500 million a year.

About $3.7 billion of development has been completed or is in construction. It hosts more than 6000 permanent residents, 6500 daily office commuters and averages 15,000 daily visitors, according to VicUrban.

When completed by about 2020, the Docklands development will have in effect doubled the size of Melbourne's city centre.

The doubters remain.

Ten years into what will be a 20- to 25-year project on a 200 hectare site on the western edge of Melbourne's CBD, the pace of development has slowed. Huge swaths of land are still barren, and the precinct has borne the brunt of criticism for the overheated residential property market of the early 2000s.

Little apartment building is planned for the near future as the market still absorbs the 2654 already built and 696 under construction.

At the beginning of October, the vacancy rate for Docklands apartments was 3.5 per cent and average weekly rent was $455, according to VicUrban.

VicUrban says there have been 144 resales of Docklands apartments for an average price of $517,000 and annual capital growth of 5.9 per cent, but 22 per cent have lost value. Forty per cent of sales have resulted in gains of between zero and 5 per cent a year, while 22 per cent lost value.

The area has received a boost in the past two days, with the state government awarding the contract for a $1 billion convention centre on Docklands' doorstep and also announcing in-principle support for a $60 million ice-skating centre at Waterfront City.

The precinct also received a lift last year when ANZ Bank announced it was looking for a new 80,000 square metre campus-style office space to house most of its Melbourne operations.

Victoria Harbour is regarded as a frontrunner for that deal and is "the jewel in the crown", according to Docklands general manager Michael Hynes.

Lend Lease has already taken a gamble on that status by beginning construction of its first residential tower, Dock 5, in the middle of last year at the height of negativity towards Docklands.

Lend Lease Victoria Harbour project director Maurice Cococcia acknowledges that the pace of sales at the project will not match those experienced by MAB and Mirvac who were selling at the height of the boom.

"Most of the developers have probably only been here for six or seven years and in that short period, [to have the current level of development] in a relatively untried and untested part of Melbourne is a great testament to that strategy," he says.

Despite fears in the early days about contamination, the biggest logistical issue has been coping with the Coode Island silt, which he says required more engineering work on building foundations.

Certainly not everything at Docklands has been a success. The $110 million Central City film studios, a private consortium chaired by movie distributor Sino Guzzardi, in the most north-western precinct, opened eight months late in February 2004, $7.4 million over budget and without electricity.

Since then, it has been the setting for the features Hating Alison Ashley, The Extra and the Nicolas Cage feature, Ghost Rider, but the jury is still out on whether the studios will attract enough top local and international productions to be viable. Nevertheless, a $7 million expansion began last year.

For the developers who moved into the early stages of the project, Docklands was a huge gamble.

"It was certainly pioneering territory," says Paul McDonald, chief executive officer of MAB Corporation, which will eventually invest more than $1 billion in its New Quay precinct at the northern end of Docklands.

Tabart says the well-publicised stoushes with unsuccessful developers were the low points of his 10-year reign but he stands by the authority's approach.

"Our agreements have to be hard-nosed business arrangements that require a developer to build at a time when there is no market. They win a bid with a design and a price and a time frame; [if they miss] they can lose their rights over the land."

Now, almost at the halfway stage of the Docklands experiment, all the precincts are ahead of their required development timetables, he says.

Demographer Bernard Salt of KPMG says Docklands' future is assured because of major social changes that are undermining the traditional nuclear family.

"Docklands does serve a niche in the sense that it offers something that has not been offered previously in Melbourne - water-based apartment accommodation adjacent to the CBD," he says.

Damian Trytell, principal of the Mecca restaurant group, says that in just three years, Docklands has become one of Melbourne's leading restaurant and entertainment precincts. His Livebait and Mecca Bah were among the first venues to open at New Quay in November 2002.

"We have generally run 27 per cent above what we budgeted in the early stages of our five-year business plan," he says.

Only one business at Docklands has been forced to close - a nightclub that Trytell says was inappropriate for the precinct.

The Docklands Authority and its successor were required to borrow to fund infrastructure under their establishing legislation - that debt stands at $150 million. Providing that infrastructure was a key to luring private investment, Tabart says.

The first project to use the model was the $400 million stadium. The then Docklands Authority assisted with $65 million worth of bridges and roads.

The roofed stadium - now known as Telstra Dome - is home to the AFL and has given Docklands a strong identity as the western fringe of the CBD through the exposure gained from the close to 10 million football supporters who have passed through its gates.

There is bipartisan political support for the project, although the Liberal opposition continues to criticise the merger of the Docklands Authority with the Urban Land Authority to form VicUrban. VicUrban believes that over 20 years Victoria will make a profit on Docklands.

The opposition's major projects spokeswoman, Louise Asher, says some delays and cost overruns have not affected the Liberal Party's backing of the development.

But there are those who do not share VicUrban's optimism. A professor of architecture at Melbourne University, Miles Lewis, a long-time sceptic of Docklands, says the precinct's shape is an opportunity lost.

The Bolte Bridge bridge was built too low to allow for cruise ships so, for example, unlike Sydney's Circular Quay, tourists cannot be dropped in the heart of Melbourne's new waterfront.

He also describes the building design as "low-rate".

Asked to nominate a positive, Lewis cites the extension of Collins and Bourke streets and the quality of the restaurants.

But Mark Birrell remains an enthusiastic believer in the Docklands and dismisses criticism of the project. "It's just the same thing every year, but they sell, they work and are in the high end of quality.">