How North Sydney's planning changes will affect commercial real estate: Knight Frank

GUEST OBSERVATION

It is clear to anyone that following significant rejuvenation, North Sydney CBD is still in a phase of substantial transition, led by the anticipated arrival of the Sydney Metro in 2024. The one thing the area needs to continue to evolve into a desirable, vibrant and well-functioning CBD is exceptional public space and more of it. Done well, these spaces will dramatically improve the vibrancy, safety, amenity, value and appeal of the CBD for all – from residents, visitors and students to workers and investors. 

Over the past six years, North Sydney Council has been working on strengthening the role of the North Sydney CBD as the principle economic engine of the North Shore. Following an audit by the Council of the public domain in 2015 and with funding from the NSW Government in 2018, Stage 1 of the North Sydney CBD Public Domain Strategy (PDS) ‘Place Book’ has been released. The PDS is specifically targeted at realising a more engaging and resilient CBD that offers a greater range of activities and unique public spaces for workers, residents and visitors alike. 

Over the next 20 years, the North Sydney CBD worker population is forecast to grow by more than 30% to over 80,000, with the residential population growing beyond 7,000. This growth will see more than 1,000,000 square metres of floor space by 2036. 

As the commercial and residential populations increase, so must the provision of additional public space.  

The ‘Place Book’ (Stage 1) is the initial ideas phase of the PDS and explores the future potential of public domain in the North Sydney CBD. It focuses on improving quantity, quality, connectivity and the interaction of cars, pedestrians, and cyclists of the public domain. More than 16,000 square metres of new public space has been proposed, in addition to upgrades to almost 21,000 square metres of existing public space. 

Major projects include:

• Creating a new 6,500 square metre public plaza by pedestrianising the section of Miller Street between Pacific Hwy and Berry St that is directly outside the new Victoria Cross Metro Station. This will include a ‘scramble intersection’ allowing four-way crossing and the return of east-west (two-way) traffic on Berry Street between Pacific Highway and Miller Street;
• Transforming Miller Street into a ‘Civic Spine’ through a suite of public domain upgrades between St Peters Park (south of Blue Street) and St Leonards Park (adjacent North Sydney Oval);
• Creating a new 1,200 square metre Post Office Plaza, which will involve redesigning the intersection of Miller Street and Pacific Highway (removing small and dangerous refuge islands) and incorporating scramble crossing;
• Converting the under-utilised deck of the tramway viaduct into a 3,500 square metre public space, similar to Sydney’s ‘Goods Line’ and New York City’s ‘Highline’; and
• Upgrading Berry Street with 5,000 square metres of improved footpaths and squares, in addition to a new architecture offering incorporating shops and on street dining.

Council is also in the final stages of finalising its Ward St Precinct Masterplan, which will seek to create significant commercial floorspace in the precinct, as well as providing significant new public spaces.

Most of these projects are expected to be delivered in the next five years by 2024 to coincide with the opening of the Victoria Cross Metro Station. The tramway viaduct has a 10 year delivery plan. 

We expect the Council’s and proposed upgrades will instill confidence that the changes to North Sydney will continue to contribute the evolution strengthening of the CBD. 

We have seen the transformation of North Sydney translate through the commercial property market in a number of ways, including: 

• Attracting new tenants into North Sydney from the Sydney CBD and surrounding suburban markets such as Chatswood and Macquarie Park. New commercial developments, including 100 Mount Street and 1 Denison Street, have signed tenants such as Nine Entertainment, who was originally based in Artarmon. 
• Increasing the amenity for existing tenants. North Sydney is already home to a number of global brands, such as Coca Cola, Vodafone, Sony and Genworth, that have, and will continue to, benefit directly from these improvements.
• Enhancing capital values for existing land owners. Greater amenity and demand for office space has led to average prime gross face rents have increasing by 3.6% in the year to July 2018. This growth has translated into higher capital values for North Sydney landowners, with $1.26 billion ($10 million plus) of transactions occurring in the same period, according to Knight Frank Research.   
• Institutions such as Charter Hall, Investa, Dexus, LGS and Mirvac are taking a real interest in the planning changes occurring in North Sydney and the impact this is having on their properties. 
• With North Sydney now considered an extension of Sydney CBD, a number of high net worth offshore buyers have purchased in the precinct. For example, the recent sale of 80 Mount Street attracted strong offshore interest due to its ideal location providing opportunities for the owner to integrate ground floor retail refurbishments into existing public spaces. 

The proposed upgrades to the public domain in North Sydney CBD will stimulate future developments and attract new investment, vastly improving the streetscape and benefiting all those that utilise the space. 

Angus Klem is Partner, Head of North Sydney, at Knight Frank. He can be contacted here.