Frankston's Dual Approach: Luxury Boom Meets Retail Vacancy Challenge

Frankston, a bayside suburb, is currently undergoing a significant transformation. Luxury apartment development is surging along the Nepean Highway, with projects like the 14-story Solene tower contributing to approximately 1000 new homes across five major developments. Frankston Mayor Sue Baker stated these developments aim to alter perceptions of the area and foster civic pride.

A Tale of Two Frankstons: Development vs. Vacancy

Despite this wave of new construction, Frankston's central activity area faces a stark contrast: a high retail vacancy rate. A 2025 audit identified 96 long-term vacant commercial properties, representing a substantial 23 percent of all retail spaces.

Council's Dual Strategy: Penalties and Incentives

In response to the vacant shops, the Frankston City Council is contemplating a bold move: tripling property rates for landlords of long-term vacant shops, potentially commencing in July.

Simultaneously, the council has approached the state government with an ambitious proposal to declare Frankston's commercial center Victoria's first "special economic priority area." This comprehensive package of incentives aims to stimulate growth and includes:

• A three-year land tax holiday for new developments that incorporate affordable housing.
• A significant reduction in payroll tax rates for businesses, dropping from 4.85 percent to 1.215 percent.
• Residential stamp duty concessions for off-the-plan unit and townhouse purchases.

Economic Forecasts and International Precedents

The council's preliminary business case suggests that this state government package, while costing about $32 million in foregone tax revenue over three years, could yield substantial returns. The proposal projects a $4 return in revenue for every dollar spent, the creation of over 1100 jobs, an addition of 550 apartments and townhouses, and the development of 63,000 square meters of new commercial and industrial space. The council points to successful similar economic zones implemented internationally in places like Dubai and Shenzhen.

Industry Reactions and Community Concerns

Property consultant Richard Jenkins described differential rates as a "blunt instrument" for filling vacant shops, arguing for the necessity of additional incentives given evolving consumer behavior. Michael Crowder, a director at a commercial and industrial real estate agency overseeing 26 of Frankston's vacant properties, expressed skepticism about the "special economic priority area" proposal gaining government approval. Crowder also stated that a 300 percent differential rate would be "counter-productive" for property owners, many of whom are self-funded retirees.

The Frankston Business Chamber has urged the council to postpone the differential rates proposal. They advocate for broader consultations, citing underlying social and economic issues as key contributors to the high vacancy rates.

In a comparable initiative, the City of Port Phillip introduced a 400 percent rate increase for disused retail and vacant properties in June 2024, which led to 13 of those properties being activated in 2024-25.

A Victorian government spokesperson did not directly comment on Frankston's proposed "special economic priority area." However, they highlighted ongoing efforts to unlock housing and investment in metropolitan activity centers through new planning controls and targeted concessions.