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Property developer Mirvac has won the bid to develop a landmark $2 to $3 billion commercial and residential precinct at the eastern gateway to Melbourne’s CBD.

But the design and timing of the controversial project known as Treasury Square remains in doubt due to post-pandemic economic conditions and the complexity of the site, including building above busy rail lines.

The Treasury Square site is located on the southern side of Flinders Street next to the rail corridor, and spans the area between Exhibition and Flinders streets, and Wellington Parade South.Credit: Joe Armao

In 2019, the state government triggered a race among developers, and an outcry from East Melbourne residents, when it announced its plan to sell vacant VicTrack land in the south-east corner of the city to help pay for transport projects.

An indicative design of the site, which was released to the market in 2020, showed three monolithic glass-clad towers of about 20 storeys.

At the time the government said developing the site – which is south of Flinders Street and opposite Treasury Gardens – presented an opportunity for new offices, hotels or apartments in the heart of the city.

However, Melbourne City Council raised concerns about the “anomaly” of Treasury Square being the only developable site within Melbourne, Southbank and Docklands not covered by dedicated urban design controls, which set out rules for building heights, setbacks and other design features.

An indicative design of Treasury Square, which was released to the market before Mirvac won the bid.Credit:

Some East Melbourne residents and urban design experts also warned the development could overshadow neighbouring Birrarung Marr and block views from across the Yarra River into the CBD.

In 2020, the government narrowed the shortlist of bidders to Mirvac and the superannuation backed Cbus Property and then no more was said about the scheme.

A well-placed industry source speaking on the condition of anonymity confirmed that Mirvac had been selected as the preferred bidder.

Mirvac and Cbus refused to comment.

Site-owner VicTrack confirmed that some changes to the original scheme would be required as further technical assessments of the site continued and planning conditions were applied, but said it was still intended to be a landmark development.

“We continue to work with the preferred bidder and our transport partners to develop this prime site into a new commercial and residential precinct,” a VicTrack spokesperson said.

“As the development is proposed to take place above a busy rail corridor, there are a range of complex technical issues being resolved as part of the design process.”

The government acknowledged COVID-19 had impacted the Melbourne CBD property market but stressed that the east end of the CBD was a highly sought after location. It would be one of the few above-rail developments in Melbourne.

Design of the precinct is expected to take up to 12 months to finalise and will then be subject to approval from the minister of planning.

Industry insiders said it could take as long as 10 years for building to be completed.

The project is technically difficult because a deck will need to be built over the rail yards and transport and other infrastructure moved.

Building over active rail lines is complex, and the cost has long been a stumbling block for development with successive governments abandoning plans to deck the Jolimont railyards as part of the proposed Federation Square East project.

Melbourne Deputy Lord Mayor Nicholas Reece.Credit: Jason South

John Denton, former state architect and founder of architectural firm Denton Corker Marshall, said Treasury Square was a challenging site to develop. “It’s problematic because it’s an incredibly messy site to try and do anything on – there is so much complexity,” he said.

Deputy Lord Mayor Nicholas Reece said it was critical that any development didn’t detract from such a highly visible and important gateway location for the city.

“It’s hard to overstate the importance of that site for Melbourne – it’s absolutely vital that we get it right,” Reece said.

He said Treasury Square had fallen through the cracks of the planning system because it was owned by VicTrack.

There is no building height limit for Treasury Square other than a requirement that there be no overshadowing within 15 metres of the Yarra River’s north bank.

The council wrote to the state government in 2021 asking it to urgently apply urban design controls to Treasury Square, which would require detailed design of facades, active frontages, and public links through to the Yarra. It says the government has not applied these controls.

“Treasury Square exists without the normal planning rules and built form controls that operate in other parts of the city,” Reece said.

“It’s important that the state government get those rules finalised before they proceed with any commercial agreement for the sale and development of the site.”

The state government said the existing controls on the site included mandatory overshadowing controls that protected Birrarung Marr and the Yarra River and influenced the height and scale of any development.

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