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Internet shopping shapes apartment developers’ plans

Michael Duster is managing director of Oliver Hume, Australia’s largest privately owned real estate agency. Photo: Pat ScalaColdrooms, temporary storage and management rights will be the next battleground among apartment developers wanting to attract and retain tenants in new buildings, according to the head of Australia’s largest privately-owned real estate services business.
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Michael Duster – managing director of Oliver Hume Real Estate, Australia’s largest seller of land, new homes and apartments – said building management was key to attracting tenants.

Mr Duster has overseen the 60-year-old Oliver Hume’s transformation from a small, Melbourne-based agency to Australia’s largest privately owned real estate services business by sales volumes with an estimated $200 million annual turnover.

In 2004 the business diversified into land subdivision and apartment syndicates under its property funds management arm, Oliver Hume Property Funds.

Last year the fund launched a 15-level apartment in North Melbourne’s Flemington Road called The Principal. About half of the 162 apartments have pre-sold and construction is due to start in the middle of this year.

Another 115-unit project in Cheltenham, called Ilixir, has 80 per cent sold.

Other apartments in planning include one in Roden Street, North Melbourne, and a luxury complex of 20 residences at 535-541 Royal Parade in Parkville, on the site of the Parade Inn on land purchased for $12.4 million in October 2014.

The high-end Parkville properties were expected to sell for between $2 and $4.5 million.

Mr Duster said Oliver Hume was moving into building management to cater for tenants’ fast-changing expectations of the services needed in modern apartment buildings, particularly with the advent of online shopping.

Home delivery of parcels or grocery shopping was now normal and tenants wanted someone to be available to accept goods from couriers and provide storage or cold rooms, he said.

Oliver Hume would also manage rentals in the building, apartment resales, setting up portals for booking theatre rooms, spas, cars and bikes dedicated to a building.

“We’re doing that to make our buildings more competitive from a tenant point of view,” he said.

When Mr Duster started at Oliver Hume 35 years ago, as a 21-year-old sales cadet, it “was a small, two-office operation that would have been lucky to sell 1000 properties a year if that,” he said.

Since then he has built an 85 per cent stake in the business, which last year sold just over 6000 properties in 90 residential land or high density projects across Australia’s eastern seaboard.

The property fund arm has a separate board of managers.

“Through our agency we will identify projects, buy an asset and bring it onto our corporate balance sheet and then divest it through the syndicate,” he said.

Returns to the pool of 300 investors on the books average between 13 and 38 per cent, according to unverified results published by the company.

The prospects for Australia’s apartment market have clouded after recent Chinese government moves to suppress capital flowing out of the country. Analysts at broker CLSA have warned that the market was on the verge of a sharp decline.

Mr Duster said, if that occurred, pockets like the outer suburbs would be hardest hit.

“There is no question a correction is coming in the apartment business. I think there will be a soft landing. I don’t think there will be a hard landing,” he said.

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