The property tax proposal dividing Frankston residents

It was a scene staged to show a suburb on the rise, literally and figuratively.

Frankston Mayor Sue Baker and two directors from Pace Development Group stuck three shiny, gold-coloured shovels in the dirt and posed for photos at a “sand turning ceremony” at the site of a 14-storey luxury apartment tower that will rise over the Nepean Highway.

Dubbed Solene, the $91 million building – which will include a rooftop infinity pool overlooking the bay, gymnasium and a private residents’ lounge – will be built on the site of the former Frankston Cinema, which closed in 2014.

Melbourne’s property sector is in the midst of a blossoming love affair with Frankston.

Baker said Solene was just one of five major apartment projects with about 1000 homes currently taking shape along the Nepean Highway which “are really going to alter perceptions of us and help with building civic pride” in Frankston.

But as developers fall for the suburb’s scenic waterfront, many other parts of the bayside suburb remain under-loved.

A 2025 audit identified 96 long-term vacant commercial properties, accounting for 23 per cent of all retail spaces in the central activity area – one of the highest retail vacancy rates in Melbourne.

In an attempt to combat the issue and put pressure on landlords to find tenants, council is currently weighing up tripling property rates from July for landlords whose shops are left vacant long-term.

Property consultant Richard Jenkins, who has advised multiple Melbourne councils on activating struggling retail strips, said differential rates were “a fairly blunt instrument” for filling vacant shopfronts.

“You need to have a carrot as well,” he said. “As we know, consumer behaviour has changed. The shift is generational … and there’s lots of landlords who are challenged by the new circumstances.”

The “carrot” Frankston City Council plans to offer is turning the suburb’s commercial heart into a Dubai-style tax haven for investors.

In a proposal recently pitched to the state government, which has already named Frankston one of 10 metropolitan activity centres across Melbourne, the suburb’s commercial centre would be declared Victoria’s first “special economic priority area”.

The pitch includes a three-year land tax holiday for new developments that include affordable housing, deep reductions in payroll tax rates for business (from 4.85 per cent to 1.215 per cent), and residential stamp duty concessions for off-the-plan unit and townhouse purchases.

The package would cost the state government about $32 million in foregone tax revenue in its first three years, but would ultimately generate $4 in revenue for every dollar spent, and create more than 1100 jobs, 550 extra apartments and townhouses and 63,000 square metres of new commercial and industrial floor space, according to the council’s preliminary business case.

Speaking at the construction launch of Solene, Baker said the economic incentives would make Frankston more attractive to developers in a time when Melbourne’s apartment sector is struggling to make projects stack up.

“It’s a tough economic climate for everybody at the moment. So this idea was created to start a conversation about additional incentives which could be attractive to all sorts of developers – private, social, affordable – to come and talk to us about opportunities within Frankston,” she said.

Special economic priority areas with friendly tax regimes for business and investors have been introduced in places such as Dubai, Shenzhen and Bristol overseas, but not yet in Australia.

Commercial and industrial real estate agency director Michael Crowder, who manages 26 of the 96 identified vacant commercial properties in Frankston, said the special economic priority area was a proposal unlikely to gain favour with the government, and that hitting owners with a 300 per cent differential rate would be “counter-productive” at a time when the council is trying to encourage new development.

“A lot of these clients have owned these properties for 30 to 40 years. A lot of them are elderly. A lot of them only own maybe one or two investment properties so they’re not rich,” Crowder said.

“They’re self-funded retirees who need the income, they desperately need their properties to be leased.”

The Frankston Business Chamber has urged the council to press pause on its differential rates proposal and consult more widely with landlords.

Chamber chief executive Bernadine Geary said there were underlying social and economic issues contributing to Frankston’s high vacancy rates.

“We’ve had some calls from some of the owners who’ve actually had vacant properties for a number of years … the reasons they’re saying that their properties are vacant are not for want of trying,” she said.

The City of Port Phillip introduced a 400 per cent rate increase for 67 disused retail and vacant properties in June 2024. Thirteen of those were activated in 2024-25, the council said.

A Victorian government spokesperson did not directly address questions about the proposed “special economic priority area”.

“We’ve already done significant work to unlock housing and investment in these areas, including new planning controls and targeted concessions that support development,” the spokesperson said.

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