Southgate traders left in the dark over major redevelopment as developers go “silent”

Southgate traders say their futures have been left in limbo as any talk of a $470 million redevelopment of the shopping and dining complex – if it goes ahead – falls silent.

The state government announced its approval last December for a rejuvenation project of the Southgate complex which would create a “world-class” precinct.

Under the plans, the existing three-level complex would be partly demolished to make way for new bars, restaurants, and shops within a new five-storey podium, as well as a 26-storey office building, which would be complemented with riverside parkland.

But with no news as to when or if the development, by Hong Kong-headquartered real estate fund manager and investment firm ESR Cayman Limited, would kick off or whether traders would keep their leases, business owners have felt increasingly uncertain about their livelihoods and left in the dark about what would happen next.

“It’s a very complicated situation and I don’t know what they’re doing,” a Southgate business owner, who asked not to be named, said.

“I don’t know in this current market whether they’re going to redevelop it or not. Leasing signs are going up, it’s very confusing.”

The owner said since the COVID-19 pandemic had begun, the developer had “been silent” – leaving traders in a “terrible situation”.

When the complex was shut down during extended lockdowns, the business owner believed the developer had used this time thinking it “was all going to die in a heap and they wouldn’t have to worry about talking to anyone”.

While the owner said they had a lease until 2024, they were not feeling confident, saying “Of course it’s apprehensive.”

Business uncertainty comes as Southgate experienced a change of hands earlier this year after ESR, a leading Asia-focused real estate services and investment company, bought ARA Management Asset Ltd – which has a subsidiary ARA Australia, a Singapore based property developer and previous owner of Southgate – in a US$5.2 billion deal, creating the third-largest real estate investment manager worldwide.    

ESR did not respond to multiple requests for comment before deadline about the redevelopment plans and whether community consultation would be held.

As previously reported by Southbank News, it is not known how or if the recent sale would impact ARA Australia and its redevelopment plan for Southgate.

The City of Melbourne’s Deputy Lord Mayor Nicholas Reece said, “I would encourage ESR to continue working with businesses at Southgate and to give them certainty and to allow them to run prosperous businesses for as long as possible.”

However, with more shops closing during the week and lease signs going up in the complex, uncertainty is growing.

A long-standing business owner, who also spoke on the condition of anonymity, said there had been no consultation with traders, which they described as being “a nightmare for all of us”.

“It is a huge stress. They’re saying pay your full rent but we’re about to knock it down. What’s my future look like?” they said.

The owner said they had reluctantly signed a lease until 2029 as a “demolition clause” meant they “can just turf us out” without notice.

“It’s almost unconscionable to sign a lease for period of time but ‘I can throw you out if I want to’,” they said.

The trader questioned where the development stood and “what type of consultation or communication has there been with the tenants, locals, and stakeholders?”

“The answer is the landlord doesn’t know, and I don’t mean that in a bad way, they just don’t know what they’re doing.”

With the economic market having also “shifted enormously” in recent months, the business owner said they would be surprised if the project got off the ground at all.

“There’s no builders, there’s no materials, costs have gone through the roof, and when you build an office tower, you look around and they’re empty everywhere,” they said.

“I don’t think it’s going to happen. I don’t know how they make a business case for spending a billion dollars when they don’t know what it’s worth when they finish building it.”

“You’ve got to wipe the whiteboard clean and start again. Is there a business case for this development or not? I don’t think there is – not that I’m privy to the details or feasibility study but all the big pieces have moved in the wrong direction.”

The owner added they had noticed about four of the more than a dozen food court shops open in late September, as there’s “no certainty about their leases going forward so they’ve left. It’s pretty sobering.”

Other businesses told Southbank News they haven’t “heard anything” since early this year, with one noting “when the ownership changed, a decision at that time was in limbo”.

Executive officer of the Yarra River Business Association Tim Bracher said it was “very excited” about the transformation proposed by ESR and “it offers to be a sounding-board for the company on behalf of the business community generally”.

“However, we would also urge ESR to directly engage with those businesses most affected as soon as possible, to end the uncertainty and speculation around the precinct at the moment,” he said.

Southbank Residents’ Association president Tony Penna said he would not “hold my breath” with ESR engaging with the community.

“They certainly haven’t reached out to us. We haven’t heard from them. I’m not aware of any additional changes or anything new to that development,” he said.

“It’s unlikely a developer will come to us with changes. We don’t rate on their radar.

“We would like it but there’s only ever been one developer that has reached out to us independent of anything and that’s Beulah.”

Beulah is the developer behind STH BNK by Beulah – a $2.8 billion project that will deliver Australia’s tallest tower to the island site encompassing Power St, City Rd and Southbank Blvd currently occupied by the BMW showroom.

“They reached out to us long before I think they put their plan together. They engaged with us and said, ‘what do residents need, what do they want?’” Mr Penna said.

President of residents’ group Southbank 3006 David Hamilton said ESR could perhaps “take a leaf out of” the Melbourne Arts Precinct Transformation project after its team leaders held a community forum this year.

“It would be a learning experience for them,” he said.

In a statement last year, an ARA spokesperson said it had conducted “a number of stakeholder meetings and focus groups to date which have helped to inform our initial design and planning considerations”.

The development has been mired in controversy.

ESR Australia manages Southgate, but the owners of the complex are listed as Suntec Real Estate Investment Trust and Peninsula Investment Partners – both of which ARA Management Asset Ltd used in the purchase of Southgate in 2016. •