Cost blowouts in the construction industry have claimed a new victim on the Gold Coast with Melbourne-based developer Central Equity scrapping plans for a $500 million apartment tower.
A little more than 12 months after announcing plans for Pacific One, a 58-level tower that was to deliver 389 apartments to a tight Gold Coast market, Central Equity is pulling the pin on the project and reassessing its plans.
Pacific One was first approved for development in 2017 and although Central Equity has not detailed the number of apartments sold off the plan, it says sales are not to blame for its decision to withdraw.
“The decision was not a demand side issue, and all deposits will be returned to buyers and prospective buyers,” says the company in a statement.
Central Equity attributes its decision to the ‘malaise facing builders, including staff shortages and supply chain disruption’, which has led to an ‘unprecedented escalation of construction costs for developers, making Pacific One economically unviable’.
“The company feels strongly that it is better to move proactively now, when faced with such economic turbulence,” it says.
Central Equity plans to retain the site located on the corner of Frederick Street and Garfield Terrace in Surfers Paradise despite the latest setback.
In a precursor to what might be in store for future apartment buyers, the company highlights warnings from the industry that unit prices must rise by 20 per cent to cover increased labour and building costs.
The project withdrawal marks a stop-start history for the site owned by Central Equity since 2007. The GFC first shot down the company’s plans for the premium Luxe Private Residences in 2008 and, after expanding the site in 2016, it launched a 47-level project known as The Luxe which also failed to proceed.
“Central Equity commenced P1 planning after the GFC and before COVID, the company grew significantly during that time and they wanted to make a larger project than originally anticipated for the site,” says the company.
“Central Equity has completed 80 high rises, and during that time has dealt with many market factors including the GFC, recessions and rising interest rates. The current post-COVID construction and supply chain issues are unprecedented in the 35 years Central Equity have been in business. They are not simple challenges to adjust to.”
The company says it chose to be ‘proactive’ in cancelling the project rather than ‘risk more issues down the track, for both Central Equity and the buyers’.
Central Equity has been highly active in the Melbourne market over the past 35 years, delivering 80 apartment towers comprising 20,000 individual residences worth a combined $8 billion.
The company says none of its Melbourne projects have been affected the cost pressures confronting its Gold Coast project.
Central Equity says this month it effectively completed a 590-apartment project and has a second tower under construction on a fixed price construction contract, which does not expose these developments to higher construction prices. Central Equity is also developing four major housing subdivisions in Melbourne.
The abandonment of Pacific One comes on the heels of a raft of building company collapses across Australia. The liquidation of Condev Construction earlier this year led to the loss of at least one other project on the Gold Coast, the $140 Alegria boutique development proposed for Palm Beach.
Ray White Surfers Paradise Group, which had been marketing Pacific One, describes Central Equity’s decision as ‘rational and mature’ in the current climate.
“Central Equity are being prudent in holding the site for future development,” says Ray White Surfers Paradise chairman Andrew Bell.
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