The western corridor of Sydney’s CBD is on the cusp of a major resurgence, with residential and hotel conversion in the core and mid-town areas, combined with the development of Barangaroo, set to drive commercial growth.
Bordered by York Street to the East and Liverpool Street to the South, the area is home to Darling Park Towers 1, 2 and 3. The development of King Street Wharf and the various buildings along Shelley Street over the last decade brought the area to the forefront; however, in recent years it has been overshadowed by a number of large scale projects within the mid-town precinct.
Cameron Williams, National Director of Office Leasing at
Colliers International said there has been significant investment in the mid-town area over the last three to four years.
“However, we feel the pendulum is now swinging back to the western corridor as ‘the Hub’ between the CBD and the Barangaroo development,”he said.
Office vacancy in the western corridor fell by four percentage points to reach 6.3 per cent in the six months to July 2014. National Director of Office Leasing at Colliers International, John Paek, suggested the positive vacancy figures were the result of several factors.
“The western corridor is home to several large financial organisations including American Express, Commonwealth Bank of Australia, ING, Macquarie Bank and Westpac,” Mr Paek said.
“These larger tenants occupy a substantial amount of floorspace. However, in recent times, the area has attracted many tenants from the north shore, who have taken advantage of the favourable leasing conditions in the western corridor as vacancy has tightened and incentives have dropped in North Sydney.”
The appeal of the precinct is also elevated by its architectural beauty, with its heritage streetscapes and beautiful facades.
“Our coffee and small bar culture has driven the activation of several laneways along York Street, which is adding to the attraction of this area,” said Mr Williams.
“Residential and hotel conversions, including the highly popular York and George development, are bringing an added vibrancy to the western corridor. In fact, every asset class is performing well in the precinct.”
However, agents believe one of the key factors which will drive future growth in the precinct is the vast quantity of residential and hotel conversion taking place in both the fringe and mid-city markets.
“Vacancy in the fringe market is at 7 per cent, and as residential development in the fringe continues, the squeeze for commercial space is on,” said Mr Williams.
“The recent sale of the former Tabcorp building is a prime example. This 10,000 square metre building will be withdrawn from the office market for residential conversion, contributing to the lack of supply in the fringe market.”
Similarly the mid-town precinct is also experiencing unprecedented levels of conversion. Research from Colliers International has identified around 89,000 square metres of commercial office stock currently located in the mid-town precinct which may be withdrawn for residential/ hotel use over the next five years and there is potential for over 200,000 square metres to be withdrawn over the next 15 years.
“Given the rental profile of commercial tenants in mid-town precinct, combined with the ease of access to the western corridor, we believe this will continue to drive demand in the western corridor, establishing long term growth for this precinct. Building owners will benefit from repositioning their assets in order to drive long-term returns.”