Melbourne CBD’s ‘bomb site’ buildings could face wrecking ball

“We’ve got lazy landlords who aren’t investing in valuable sites and helping them realise their potential for the city,” Reece told The Australian Financial Review.

“What we’re doing at the City of Melbourne is looking at every lever that is available to us to ensure that the blight of derelict buildings and sites is removed from the landscape here in Melbourne.”

The push to clean up CBD eyesores comes as Victoria grapples with a crime surge that has pushed figures to their highest in a decade. Retailers and their staff are in the front line, with major chains warning that the situation has especially escalated in Victoria. At the same time, the city has gained a reputation for its well-entrenched work-from-home culture.

The City of Melbourne is keeping a close watch on a dozen or more sites across town that are rundown or show little sign of activity, even if they have been slated for development. The sites’ owners range from local private investors and developers to major global institutions.

Reece said he is “fed up with eyesores, which were targets for graffiti, dumping and anti-social behaviour”.

“It’s disrespectful to our community,” he said. “I am a pro-development mayor, and we are a pro-development council, but these bomb sites are letting the entire property sector down.”

On their side, developers cite surging building costs, planning hold-ups and a market downturn since the COVID-19 pandemic, especially the office sector, as obstacles beyond their control. But the pressure to start building or sell and move on is mounting as state and federal government push hard to achieve ambitious new home targets.

Prominent property player Tim Gurner, who has about $14 billion of projects in the pipeline across the nation and 28 sites in Melbourne, said as a developer there was no benefit in holding back a project he could otherwise start.

“Every delay creates enormous financial pressure, so it’s never in the developer’s interest to sit on a site unnecessarily,” Gurner told the Financial Review.

“The reality is that since COVID, cost escalations, planning delays and rising interest rates have made it harder than ever to bring projects to life in Victoria.”

He said that that the industry needed was a partnership approach, where government looked at ways to support developers in delivering the essential housing supply the market and buyers needed desperately.

“If the right support is in place, developers will always push to build as quickly as possible,” Gurner said.

The City of Melbourne currently has the power to take “whatever action it considers is necessary” – such as erecting barricades or removing materials to ensure buildings are safe, attractive and well-maintained – if it issues a notice to comply and a landlord doesn’t address the notice, according to local law.

The planning committee is due to report back by the end of November on how to boost the council’s power in tackling derelict sites, and whether current laws are effective. It could also consider applying differential rates, levies or charges to the landlords of rundown buildings and sites.

400 William St, Melbourne

Among the sites on the council’s watch list is a 3900-square-metre block on the northern edge of the CBD owned by the Melbourne Institute of Technology, which is headed by Australian-Nepalese entrepreneurs Jamuna Gurung and Shesh Ghale.

The ex-Rich Listers purchased the property at 386-412 William Street for $17.82 million in 2009 but only demolished the former Mazda dealership building in March this year.

While the site had previously been approved for a mixed-use project with an office building and a 290-room hotel, Ghale said Melbourne’s soft office market had prompted a change of direction, with the couple now planning to build a luxury hotel with serviced apartments.

“My wife and myself, we have appetite for the hotels,” he told The Australian Financial Review.

It cost about $2 million a year in land taxes alone to keep the site vacant, Ghale said.

An environmental assessment of the site is in the works, and is projected to take another three to four months. However, he said MIT is committed to the site being at least temporarily utilised once the assessment is finalised.

25-35 Power Street, Southbank

Another site flagged by the council is owned by Singaporean billionaire Michael Kim’s M&L Group, which has gone back and forth with the council for more than a decade over its development plans.

The investment manager and property developer first lodged its proposal to build a 75-storey residential and hotel development at 25-35 Power Street in Southbank in 2013, which was rejected by the City of Melbourne but approved by the state planning minister.

In 2021, it submitted new plans to construct a 52-storey building with a retail section on its ground floor and office space above, which again was rejected by the council based on its width.

An M&L Group spokesperson said the firm had an existing approval to build on the site and had sought an amendment to that approval to enable a greater proportion of residential development, which currently has approval to build an A-grade office building.

“We have been engaging with the Department of Transport and Planning and the City of Melbourne throughout 2025 on the proposed amendment, but do not propose to comment further while the process is ongoing,” they told The Australian Financial Review.

383 LaTrobe Street, Melbourne

Another eyesore in Melbourne is the former Australian Federal Police building on La Trobe Street. Trespassers have broken into the building since it has been vacant and trashed the office, a TikTok video reveals.

Malaysian property developer S P Setia purchased the building at the end of 2023 for about $96.8 million. Apartments are selling in the proposed 72-storey development, which has an estimated end value of about $888 million and will feature 852 units.

But with the project not due to be completed until 2028, the City of Melbourne is trying to accelerate its development.