Planning changes set in motion
Retailers in street shopping strips and apartment developers may be the big losers under far-reaching changes to Victoria's planning laws that take effect this week, planners and estate agents say.
The changes - which delete nine existing zones, replace them with five new ones and alter 12 others - came into effect on Monday.
They resulted in the former business 1, 2 and 3 zones being rolled into a Commercial 1 zone and the old business 3 and 4 zones becoming a Commercial 2 zone.
As well, local councils will have 12 months to implement the three new residential controls - growth, general and neighbourhood zones.
The radical shift in the state's planning emphasis may have unforeseen consequences, consultant Urbis said.
The new residential zones had the potential to significantly constrain development and the two commercial and other zone changes will allow anchor tenants in retail strips to shift to alternative locations, director Sarah Emons said.
Larger tenants, such as a supermarket, that attract foot traffic to other shops in a retail strip such as Glenferrie Road will now be able to move around the corner and set up shop in an alternative location, such as Burwood Road, a move previously restricted.
"Glenferrie Road is probably going to be fine but for Centre Road, Bentleigh, where there's one supermarket, if that relocates, the viability of the rest of the strip will come into question," she said.
Other key effects include:
■Allowing retail development in industrial sites.
■Removing floor-space caps on shopping centres to allow unlimited retail expansion.
Geoff Underwood, the head of the committee that overhauled the planning laws, said the intent of changes was to open up retail competition but also to limit where that could occur.
The new residential zones will likely favour residents opposed to large-scale apartment developments.
They have the "potential to significantly constrain residential development", particularly if local councils seek to maximise their use of the most restrictive neighbourhood residential zone, Ms Emons said.
Future residential development activity was likely to become concentrated in specific areas, Jones Lang LaSalle's James Kaufman said.
"There will be large chunks of suburban Melbourne where you will not be allowed to build apartments any more," he said.
That would push up the value of sites with existing permits and suppress values of surrounding locations, he said.
"The value of sites where you can do multi-unit developments will go up, and the value of sites where you can't because it's designated single dwelling or two units, might go down or, more likely, won't have growth in value. That is a huge change."
Boroondara mayor Jack Wegman said the council would protect areas of neighbourhood character.
"We'd be very keen to make sure those were protected when the new zones are introduced," Cr Wegman said.
"We're being realistic, we're not going to wrap it up [the municipality] in cotton wool as there are some areas that can take more intensive development."
The new residential growth zone will offer certainty to councils, the development industry and communities about what areas are identified and accepted as those for substantial change, Planning Minister Matthew Guy said.
Another key beneficiary of the zone changes will be smaller supermarkets. Under the new regulations they can set up in big-box retail precincts and industrial zones as long as they are under 1800 square metres and near major roads.
"It's the Aldi amendment. It really does suit that small-format store," Jones Lang LaSalle director Stephen Bolton said.
Mr Underwood said the floor space requirements of major supermarkets were generally larger than 2000 square metres.
Aldi did not respond to BusinessDay for comment on the zone changes.
Frequently Asked Questions about this Article…
The changes to Victoria's planning laws came into effect on a Monday and delete nine existing zones, replace them with five new zones and alter 12 others. The overhaul rolled former Business 1, 2 and 3 zones into a Commercial 1 zone and converted the old Business 3 and 4 zones into a Commercial 2 zone. Local councils have 12 months to implement three new residential controls (growth, general and neighbourhood zones).
The commercial zone changes make it easier for larger retail tenants to relocate, which could weaken traditional street shopping strips. Consultants warned anchor tenants such as supermarkets that previously were restricted in movement may now shift to alternative locations (for example from Glenferrie Road to Burwood Road), potentially undermining the viability of strips that lose their key foot-traffic draws.
The reforms remove floor-space caps on shopping centres, allowing unlimited retail expansion in those centres. The intent, according to the committee head Geoff Underwood, is to open up retail competition while limiting where that competition can occur — but it also means established shopping centres could grow much larger without former space limits.
The three new residential zones (growth, general and neighbourhood) are likely to favour residents opposed to large-scale apartment development and could significantly constrain residential development if local councils adopt more restrictive neighbourhood controls. Jones Lang LaSalle's James Kaufman said development activity is likely to concentrate in specific areas, with large parts of suburban Melbourne becoming off-limits for new apartments.
The article indicates sites with existing permits for multi‑unit developments are likely to increase in value, while the value of surrounding sites designated for single dwellings or limited units may fall or show no growth. This divergence is driven by the new zoning designations that restrict where apartments can be built.
Smaller supermarkets and small‑format retailers are expected to benefit. Under the new rules, supermarkets under 1,800 square metres can set up in big‑box retail precincts and industrial zones near major roads — a change described by Jones Lang LaSalle director Stephen Bolton as the “Aldi amendment” because it suits small‑format store models. Major supermarkets that typically require more than 2,000 square metres are less likely to benefit from those specific allowances.
Investors should watch several effects highlighted in the article: retail development is now allowed on some industrial sites; floor‑space caps on shopping centres have been removed; smaller supermarkets can enter new precincts; and local councils have discretion in applying the new residential zones, potentially protecting neighbourhood character or allowing more intensive development in selected areas.
Local councils have 12 months to implement the three new residential controls (growth, general and neighbourhood zones). Planning Minister Matthew Guy said the residential growth zone will offer certainty about which areas are identified for substantial change — a timeline investors should monitor because council decisions over that year will influence where future development and value growth are concentrated.
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