With its mix of office, residential, retail and hotel space, Sydney’s World Square is a perfect example of the blending of zoning areas. Photo: Steven SiewertIt’s being called the Manhattanisation of our cities, with a mix of apartments, offices, international shops, a vast array of restaurants, new cinemas and laneway bars and cafes.
There will remain a serious side with office towers being given a new lease of life. But amid the suits will be a thriving metropolis. The increasing level of high density living will alter, forever, the fabric and pulse of the city.
INTERACTIVE – Sydney CBD office blocks marked for residential conversions
And it is occurring across the country. Melbourne, which has the tallest building in the country, led the charge with small bars and late-night eating. It embraced city living a decade ago and is now converting older buildings into new apartments.
Being a planned city, Melbourne has the advantage of zoning areas and that has extended out to the Docklands, which is a vibrant mix of offices, retail, apartments and eateries.
Where once an old run-down office block stood, it will be replaced with a swanky new and very high apartment block and the surrounding areas will more likely be home to a school, medical centre, 24-hour supermarket and an array of cafes, bars and late-night eateries.
Supermarket chains are vying to get into the action with smaller convenience shops dotted in and around the new apartment buildings.
In Sydney’s centre, Woolworths already has a smaller-format store in Crown Street, Woolloomooloo, which will be used as the template for the concept.
In Melbourne, the German-owned Aldi discount supermarket chain has been seeking a new site in the southern quarter of the CBD to complement its sole city outlet at 501 Swanston Street. Aldi has joined a push by Coles, Woolworths, IGA, EzyMart and 7 Eleven towards establishing smaller-format outlets in prime CBD locations to cater for office-block-conversion dwellers living in the central city.
Leif Olson and Zelman Ainsworth, of CBRE retail services, have said that in Sydney and Melbourne the supermarkets were expected to focus on leasing the retail space under or near the new apartment towers.
“World Square [in Sydney] is the perfect example of cohesion between office (90,000 square metres), residential (770 apartments), a hotel of 420 rooms and retail (16,000 sqm). It is the No. 1 shopping centre in the country, per square metre per annum of turnover, with the No. 1 Coles in the country per square metre of turnover, and Neil Perry’s burger project has been an outstanding success,” Mr Olson said.
It will be akin to the heaving cities in Asia, where streets are busy long into the night.
Of course, the traditional businesses of finance, law and banking, will remain, but they will also be occupied at all times of the day and night, as the city becomes even more global.
Michael Cook, group executive and head of capital transactions, commercial development and leasing at Investa Office, says Sydney is on the cusp of becoming a truly international city.
“Every year the city gets better. The City of Sydney Council is supporting the move and is making sure all aspects of the changes are being done in a sustainable way that will endure for many generations.”
Mr Cook said the city will be clustered into distinct areas, but also connected through retail, services and new transport infrastructure.
“Once George Street is made into a pedestrian zone, there will be the commercial to the north and western corridor, led by Barangaroo South. Bridge Street will become eat street, Pitt Street Mall will be fashion, and Martin Place will be the home to some of the best office towers in the country.”
These include the $750 million tower at 60 Martin Place, owned by Investa, the new 20 Martin Place, being developed by Pembroke, and 5 Martin Place, owned by DEXUS and Cbus.
GPT Group and QIC are spending heavily to update the retail core of the MLC Centre, which will be an attraction for overseas and local retailers, possibly including the New York Eataly or even a Marks & Spencer outlet.
It is expected that these retail hubs and the nearby Westfield Sydney could look at staying open longer at night to cater for the new residents who may want to eat dinner after work. But before the gains, there will be some pain. as the city turns into a construction site.
Andrew Ballantyne, national director, strategic research, at JLL Australia, said conversion of office space to residential uses is an emerging theme across Australia’s CBD markets.
“The Sydney CBD market is a prominent participant in this trend. Support drivers are historically low residential mortgage rates; a long-term undersupply of dwellings in the Sydney metropolitan area; rising office market vacancy and declining effective rents, particularly in secondary grade buildings; and rising levels of offshore interest in the Sydney residential market on both the supply side (as developers) and the demand side (as investors),” Mr Ballantyne said.
“The growth in Manhattan’s residential population and the increased enrolment at educational institutions has fuelled the growth of the educational sector in the existing office market. With high vacancy rates, an ageing office stock, and a growing residential population, is Sydney set to follow the Manhattan trend?”
The 2008 economic recession resulted in a significant increase in Manhattan office vacancy rates, he said, which opened the door for tenants outside the financial, insurance, real estate, and professional services sectors that historically dominate the Manhattan office market.
“The increase in vacancy rates combined with the decrease in effective rents appealed to the education sector tenants in particular, while the population in the under-14 age category doubled, in line with an almost doubling in the number of residential units to more than 27,800, in Lower Manhattan between 2000 and 2010.”
In Sydney 19 office buildings across the city are earmarked for conversion to residential. These range from Gold Fields House at Circular Quay, to the mammoth Greenland Centre at 115-119 Bathurst Street. In between there is the York & George tower at 383 George Street and the proposed Mirvac/Coombes Family’s new site at 505 George Street, above the cinemas.
These recent acquisitions of many office buildings for conversion to residential, serviced apartments and/or hotel use is reducing the amount of office space in Sydney, which favours landlords.
Vince Kernahan, national director of capital markets and investment services at Colliers International, said since the residential market kicked in 2013 about 299,250 square metres of office space is slated for permanent removal.
“This equates to 6.03 per cent of the total office stock in Sydney and is almost equivalent to the total office component at Barangaroo [323,700 sqm],” Mr Kernahan said.
According to the City of Sydney’s Sustainable Sydney 2030 document, it is aiming to ensure “every resident will be within walking distance to most local services including fresh food, childcare, health services and leisure, social, learning and cultural infrastructure”.
The City of Sydney’s residents aged 0-17 are expected to increase 80.6 per cent by 2036. As a result, there is particular focus on the city’s educational infrastructure.
The continuous growth in the population residing in the CBD will correspond with a higher cost of living, meaning that parents will need to work and will require early childhood education and care (ECEC).
“Therefore, the ECEC sector will require substantial expansion to cater for the expected population as it currently proves to be a critical issue for the City of Sydney,” Mr Ballantyne said.
The demand for the high-rise living is being driven to a large extent by Chinese-based developers, who have led the charge in buying the older properties and converting them into apartments.
“Offshore interest is at unprecedented levels. Singaporean and Malaysian interest has traditionally been strong, however the low Australian dollar and lack of land availability, particularly in Singapore, is seeing a new wave of interest,” Mr Kernahan said.
“Since July 2013 we have experienced a spike in activity from these countries. Chinese developer demand is only just starting, but will surpass all other buyer groups in the short term, particularly as high net worth Chinese look to move money offshore and Chinese state-owned enterprises are encouraged to diversify and venture abroad.”
This story Administrator ready to work first appeared on Nanjing Night Net.