Highlights

  • Melbourne's Lord Mayor has warned that Lendlease's proposed development near a key CBD gateway precinct would impose excessive amenity costs on the city.
  • Lendlease (ASX: LLC) is rebuilding its pipeline of "investible assets" as it shifts towards managing property funds instead of owning completed developments.
  • The planning dispute comes during the company's multi-year turnaround, which includes exiting overseas development, selling offshore assets and reducing debt.
  • First-half FY2026 results, released on 23 February 2026, showed a statutory operating loss of about A$200 million, while funds under management remained near A$48.7 billion.
  • Lendlease securities were trading around A$2.84, at the time of writing, remaining down roughly 46 per cent year-to-date, with incoming chief executive Nick O'Neil scheduled to begin on 10 September 2026.

A planning clash over one of Melbourne's most sensitive gateway precincts has put embattled developer Lendlease back in the spotlight. Melbourne's Lord Mayor has argued the amenity cost of the proposed development is too high, even as the ASX-listed group works to sell assets, rebuild its development pipeline and progress its corporate turnaround.

A Planning Fight Over a Prized City Site

Melbourne's civic leadership and one of Australia's largest property developers are once again at odds over a major redevelopment proposal.

The dispute centres on the scale of a proposed project near one of Melbourne's key gateway precincts, with concerns focused on how additional building height could affect public amenity through increased overshadowing.

Overshadowing refers to the shadows that tall buildings cast over streets, public squares and open spaces. In heritage-sensitive parts of Melbourne, protecting sunlight in public areas is a significant planning consideration.

The debate is not about whether redevelopment should occur, but rather whether the balance between investment, housing and employment outweighs the impact on public spaces.

Lendlease's best-known proposal in the area is Gurrowa Place, located at the southern end of the Queen Victoria Market precinct. Publicly available planning documents describe a three-tower mixed-use development incorporating office space, build-to-rent apartments and student accommodation reaching up to 53 storeys, with an indicative project value exceeding A$600 million.

Protecting the surrounding public spaces from excessive overshadowing has remained one of the project's key planning considerations.

Why Lendlease Needs More Investible Assets

The reference to "investible assets" sits at the centre of Lendlease's broader strategic transformation.

Rather than owning large numbers of completed developments on its own balance sheet, the company is increasingly positioning itself as a property investment manager.

Under this model, Lendlease develops projects, transfers completed assets into investment funds backed by institutional investors, retains a minority co-investment stake and earns ongoing management fees.

That strategy depends on maintaining a continuous pipeline of high-quality developments.

Projects such as Gurrowa Place provide the type of completed assets needed to seed future investment funds. Delays, downsized approvals or project cancellations can therefore reduce the pool of assets available for future funds under management.

In its first-half FY2026 results announced on 23 February 2026, Lendlease reported funds under management of approximately A$48.7 billion and around A$2.9 billion of co-investment capital.

Management also highlighted approximately A$12 billion of future development opportunities as part of its longer-term pipeline, underlining the importance of securing planning approvals.

A Turnaround Still Under Strain

The Melbourne planning dispute comes during one of the most significant restructurings in Lendlease's recent history.

Beginning in 2024, the company announced plans to simplify its operations by exiting international development activities, selling offshore assets, reducing costs and concentrating on Australia as both a developer and investment manager.

Since then, overseas assets have progressively been sold while international development exposure has been reduced.

Those disposals have come at a cost.

During 2026, Lendlease agreed to sell its Milan development rights below carrying value, resulting in a post-tax operating loss of around A$175 million and highlighting the challenges facing global commercial property markets.

Higher interest rates have increased financing costs while placing pressure on commercial property valuations, making asset sales more difficult.

For the six months ended 31 December 2025, reported in February 2026, Lendlease recorded a statutory operating loss after tax of approximately A$200 million.

Group gearing stood at 25.8 per cent, with management maintaining its objective of reducing gearing to around 15 per cent by the end of FY2026 through planned asset sales.

No interim distribution was declared, while a proposed securities buyback remained conditional on achieving the company's gearing target.

Leadership is also changing.

Chief executive Tony Lombardo announced in February 2026 that he would leave the business after leading the strategic reset.

Nick O'Neil, previously head of Australian real assets at AustralianSuper, is scheduled to commence as chief executive on 10 September 2026, bringing significant institutional funds management experience that aligns with Lendlease's evolving business model.

What It Means for Lendlease — and for Melbourne

For Lendlease, the planning dispute extends beyond a single development.

Extended approval processes can delay new projects, increase holding costs and slow the creation of the investible assets needed to support the company's funds management strategy.

For a business seeking to demonstrate the effectiveness of its Australia-focused turnaround, successful execution in its home market has become increasingly important.

For Melbourne, however, the priorities differ.

The city continues to require new housing, investment and employment opportunities while balancing the protection of heritage precincts and valued public spaces.

The debate reflects a broader planning challenge faced by many Australian cities—how to accommodate growth while preserving the character and amenity that make central urban areas attractive.

A Balanced View

Both sides present legitimate arguments.

Supporters of the development point to construction employment, additional housing supply, student accommodation, retail activation and the longer-term economic benefits generated by new investment.

Opponents argue that heritage values, important sightlines and access to sunlight within public spaces are difficult to replace once lost, and that planning decisions should prioritise long-term public benefit.

Timing also adds another dimension.

Lendlease is pursuing its turnaround while managing asset sales, debt reduction and a leadership transition.

At the same time, planning authorities remain focused on ensuring redevelopment proposals satisfy long-established planning principles regardless of broader corporate objectives.

Ultimately, the outcome of this proposal may become an important indicator of how successfully Lendlease can deliver its Australia-focused strategy while navigating increasingly complex urban planning requirements.

What Investors May Watch Next

  • Planning outcome: Whether the City of Melbourne and the Victorian planning authorities approve, amend or reject the proposal, including any conditions relating to building height or overshadowing.
  • Asset sales and gearing: Progress towards the company's asset disposal program and its target of reducing gearing to around 15 per cent.
  • Development pipeline: FY2026 results, movements in funds under management and the addition of new projects capable of supporting future investment funds.
  • Leadership transition: The strategic direction under incoming chief executive Nick O'Neil after he assumes the role on 10 September 2026.
  • Security performance: Lendlease securities were trading around A$2.84, at the time of writing, remaining about 46 per cent lower for the year, with investors watching whether improved execution supports sentiment.