Strong interest in Fremantle waterfront site despite ‘challenges’

A development site for sale that overlooks Fremantle’s port and has DA approval for an apartment complex is attracting “good interest”. But while strong demand for apartments in the port city may help to lure developers, rising construction costs and supply chain issues could deter them, experts say.

The site was once the home of Fremantle Foundry Engineering Co, which repaired and maintained ships at Fremantle dock for more than a century before relocating south.

The northerly facing 2010sqm site at 1 Beach Street, owned by a group of Perth-based private investors, is now cleared and under mixed-use zoning allows for the immediate development of a 72-unit building over six levels.

It’s a short walk from the Fremantle CBD and train station as well as retail and hospitality amenities.

The property has expansive views via a 39m frontage to Beach Street and offers easy access to Perth via the Stirling Highway. Picture: realcommercial.com.au/for-sale

Derek Barlow, associate director of metropolitan investments in Western Australia for CBRE, is managing the sales campaign, with expressions of interest closing on 6 September.

While he won’t divulge a price guide, he said there has been a “good levels of interest” so far from local groups, ranging from small to large developers, and a handful of institutional and international groups.

“The enquirers are mixed-use residential developers — build-to-sell and build-to-rent — which is ultimately the highest and best use of the site,” he said.

Boom time for Freo

Mr Barlow said the port city is undergoing “somewhat of a renaissance” after experiencing various challenges to development in recent years.

“Fremantle has historically been characterised by old investment, and a lot of properties have been in the same hands for generations. A lot of the heritage-listed West End properties are maintained on a reactive basis and look tired,” he said.

“For retail and commercial space, this means leasing becomes harder and units stay vacant for longer, which has been a trend on the Fremantle high streets for a long time.”

Now, he said, Fremantle is on a strong growth trajectory with new investment entering the market, old families selling their assets to investors and syndicates, and “high quality new retail and hospitality changing the streetscapes”.

Fremantle is undergoing a period of gentrification. The port city is absorbing investment from local, intrastate and international investors. Picture: Getty

Senior economist at PropTrack Eleanor Creagh said there are “many projects set to reinvigorate the Fremantle region currently in the works or in planning stages, alongside a vision for longer-term redevelopment of the inner harbour and other developments to revive the coastal city”.

Some of Perth’s most influential property groups have already invested. Hesperia recently acquired the historic Woolstores building with plans to develop a mixed residential and commercial precinct, while Andrew “Twiggy” and Nicola Forrest plan to build a six-storey boutique hotel in the heart of the city.

Lack of apartments peaking investor interest

Tony Gorman, director of valuation in WA at Acumentis, agrees Fremantle “has certainly started to take shape over the years”, with an undersupply of apartments fueling demand from developers.

“There has been some momentum to see some high-quality buildings, increase that density and bring a bit of life back into Freo.

“We have very low rental vacancies at the moment. We need to increase supply and place some downward pressure on rents. New development is very much welcomed.”

He said a site the size of the Beach Street property in Fremantle “is quite rare”.

“Plus it’s a vacant piece of land that isn’t constrained by having to integrate with older heritage buildings, which comes at significant cost and challenges to developers.”

Waterfront appeal

Perth-based David Cresp, director of property economics and research at Urbis, said the Beach Street property’s waterfront location will appeal to local developers who are seeking “high quality development sites”.

Ms Creagh said demand for waterfront and coastal real estate has always been strong but is now at a premium.

“Since the onset of the pandemic, with many placing a higher value on lifestyle and quality of life, demand for waterfront property has boomed.

“With respect to development opportunities and returns, this is an attractive feature of any project profile.”

But Mr Gorman warns that the site doesn’t necessarily enjoy a tranquil waterside setting.

“Let’s be frank, this is a working port and developers need to work with these challenges to get the product right. Fortunately, in Western Australia we have the talent to do this.”

Supply chain issues, increased costs a possible deterrent

But the biggest “challenges” for developers, Mr Gorman said, are labour shortages, supply chain issues and rising construction costs.

“Construction and labour costs have escalated so significantly that developers who are likely to see the merits of sites with such a profile will also have caution in this environment.”

Fremantle is Western Australia’s largest and busiest general cargo port. Picture: realcommercial.com.au/for-sale

Mr Cresp said higher sales prices in waterfront locations could make the project more viable, which will help offset higher construction costs.

Mr Barlow believes strong migration to Western Australia is set to ease labour costs, and cost escalations could decrease throughout 2023 as private and government infrastructure projects globally reach completion and the demand for materials and commodities eases.

“Projects reaching completion by the end of the year in WA will also improve builder and sub-contractor availability, with a lot of groups now looking to fill empty pipelines for the start of 2023,” he said.