A number of landmark office towers are set to disappear from the Sydney skyline to make way for hotels and apartments as the boom in multi-residential construction continues and foreign investors continue to pour money into local high-rise developments.
According to Fairfax reports, more than eighteen of the city’s largest commercial buildings including Gold Fields House, Hudson House and the former and the former Coca-Cola Amatil building at Circular Quay will make way for luxury apartment redevelopments as foreign developers from Singapore and China lead an investment charge to turn old office blocks into new multi-residential complexes within the heart of the CBD.
The Ausgrid Tower at 570 George Street, for example, was bought by Far East Organisations and will be turned into apartments; in January, Chinese outfit Dalian Wanda paid $415 million for Gold Coast Fields House.
"This is not typical," City of Sydney chief planner Graham Jahn is quoted as saying in the Australian Financial Review. "Cities die for this amount of commercial interest."
Around Australia, Sydney is leading a push to convert older office stock into newly furbished luxury apartments as corporate tenants adopt new work styles and achieve more output with reduced commercial space requirements.
In November, Jones Lang LaSalle indicated the city had seen more than $1 billion worth of stock purchased with the intention to redevelop or convert the site to residential use.
Whilst the inevitable withdrawal of stock – 325,000 square meters, according JP Morgan analysts - may not be a welcome development from the viewpoint of corporate tenants at a time when Sydney already has the lowest office vacancy rates out of any major CBD market in Australia, however, it is largely expected to be offset by the coming on to the market of more than 300,000 sqm of space associated with three new towers at Barangaroo and three new towers within the CBD.
Indeed, last November, industry research firm BIS Shrapnel warned that the market would ‘mark time’ over the next two years as the new additions offset rising demand brought about by stronger white collar employment growth , with vacancies only set to tighten further beyond 2016 when the growth in new stock recedes.
Moreover in contrast to the JP Morgan estimates, BIS reckon a more realistic estimate of the likely value of conversions over coming years will be 130,000 square meters as existing leases across multiple tenancies prevent a number of these conversions from going ahead.
Whatever the volume of conversions that may eventuate, however, Jones Lang LaSalle head of office investments Rob Sewell says the Sydney CBD is increasingly becoming a place to live as well as do business.
"We have had generations where the Sydney CBD was just a place where you went to work," he told the AFR.
"At night and on weekends it was dead. Now, though, Sydney is playing catch up with international cities such as New York, London and Hong Kong and is finally coming to life."