Developers stung by September's overnight changes, which cut the density permitted on sites they owned in central Melbourne, are reworking their plans to develop hotels, rather than residential towers, on those sites.
BPM founder and director Jonathan Hallinan said his company always intended to develop hotels, but the changes that effectively cut the yield on sites had sped up his move.
"There is an undersupply of hotel rooms in Melbourne," Mr Hallinan told The Australian Financial Review. "One of the things we are looking at is how we can give what is required at the moment, in the hope of some leniency."
Melbourne needs rooms. Demand is likely to grow faster than new supply and the city's average occupancy rate is likely to tighten from 86.3 per cent in the first half of this year to 88.2 per cent by December 2017, Deloitte said in its latest Tourism and Hotel Outlook 2015 report.
In the hotel-deficient Victorian capital, developers are already responding to the need. Last month Singaporean developer Well Smart Investment Holdings won approval to build a 478-room high-rise hotel on Little Lonsdale Street in the centre of Melbourne, after amending the original plans from a mixed-use development to a pure hotel project.
But the interim controls that state Planning Minister Richard Wynne introduced without notice in September are hastening that trend. Last week, hotel developer and operator Pro-invest paid $25 million for a development site in Southbank and head of development Tim Sherlock said the new rules would help hotel developers because their rooms were smaller and density controls affected them less.
Mr Hallinan said BPM was certainly going to be affected by the density controls, "but it's not to say that the plot is unworkable".
He declined to give details about the site on which he is collaborating with the landowner, but said they had changed gears and were planning a hotel for the site.
The state government is seeking a firmer hand in shaping the city's development after years of lax controls that allowed Melbourne – fuelled by local and overseas capital – to build apartments with four times the maximum density allowed in high-rise capitals such as Hong Kong, New York and Tokyo. It also seeks to rein in land speculation that sees developers "flip" sites with approvals for dense developments that may have little regard for their surrounding environment. Singaporean developer Chip Eng Seng doubled its money this way in March.
Not all developers with sites affected by the density rules are changing plans, however. Cbus Property's near-complete plans for its 6000-square-metre site on Collins Street – themselves a revision to an earlier plan that was knocked back – were thrown into uncertainty by the September announcement, but it has resubmitted plans with a request for an exemption from the controls.
Super fund ISPT has also applied for exemption from the rules for a planned tower at a site it owns at 271 Spring Street.
Developer Hume Partners Property, which owns a site at 55 Southbank Boulevard and had developed plans to build a 10-storey wooden extension on the existing office block, was also caught out by the snap change. The company declined to comment.
Mr Hallinan said the new rules could be worked around.
"With property, you can evolve with the challenge," he said. "When you're producing something that is needed, it's more likely to get leniency."
Separately, the planning department on Monday closed a loophole in Mr Wynne's regulations that threatened to draw a raft of existing applications into the new regime.
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