But the big players with exposure to North Sydney say the post-pandemic market is turning in favour of their projects because large corporate tenants are putting a premium on quality and amenity for their staff.
“Given the current state of attracting talent, employers will want the best buildings in order to do that and obviously the most sustainable buildings, which the new stock will produce,” GPT’s head of office development, Jamie Nelson, told The Australian Financial Review.
North Sydney is in the midst of an estimated $11 billion-plus expansion. A big catalyst is construction of the Sydney Metro rail line, with Victoria Cross Station scheduled to open in 2024. The line will offer rapid connections to the CBD and to Crows Nest, Chatswood, Macquarie Park and the north-west growth area.
Earlier this year, GPT acquired two adjacent Walker Street sites for an estimated $185 million, giving it control of 1900 square metres in the heart of North Sydney and scope to build a 46,000-square-metre tower.
But that tower – which may not get started until 2028 – and others would not be built unless they had sufficient pre-commitments, mitigating the risk of over-supply, Mr Nelson said. North Sydney’s prime office market was already close to full, and vacancy was a more pressing issue for the rump of B- and C-grade buildings, he said.
“The Metro will have trains at four-minute intervals [in the peak] and is five minutes from the Sydney CBD. So, it’s really a complete repositioning of the North Sydney market to a premium market,” he said.
Rising above the Victoria Cross Station is Lendlease’s latest effort at place-making, a $1.2 billion office tower designed by Bates Smart. Lendlease is also developing a boutique office block nearby, dubbed Blue & William.
Like others with skin in the North Sydney game, Lendlease’s managing director of development, Tom Mackellar, linked the precinct’s transformation with the connectivity provided by the new metro line.
“The renewal of North Sydney is under way and has already attracted a new cohort of creative professionals in tech, media and marketing who are driving demand for premium office developments and high-quality retail and dining destinations,” he said.
In June, Stockland won planning approval for the area’s tallest office tower proposal so far, the 51-storey Affinity Place. The project is still at least two years away from beginning construction.
“We are confident in the demand for workplaces that embrace the latest in design, technology and sustainability and which are adaptable to new ways of working,” Louise Mason, Stockland’s chief executive for commercial property, told the Financial Review.
“It is evident that there’s a current flight to quality, and Stockland is creating just that with its contemporary workplace, Affinity Place.”
Also in the neighbourhood and nearing completion is Billbergia’s super-slim 48-storey office-and-hotel project at 88 Walker Street which cantilevers above the historic Firehouse Hotel.
In another sign of confidence for the market, The Ascott and the Qatar Investment Authority have bought the hotel component of Billbergia’s project, and LaSalle Investment Management snapped up the office floors earlier this year.
Billbergia’s development director, Rick Graf, said that while older buildings would “struggle for market share” in coming years, the amenity included in new towers, including 88 Walker, would help them succeed in the post-COVID-19 market.
“It’s really a strategic opportunity to contribute to the energisation of North Sydney as an activity centre rather than [it being] just a relatively moribund office CBD as it was a couple of decades ago,” he said.