North Sydney Commercial Centre StudyNORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 STUDYBACKGROUND iii...

North Sydney Commercial

Centre Study

Prepared for North Sydney Council & Property Council Australia (NSW)

February 2015

Urbis Pty Ltd ABN 50 105 256 228 All Rights Reserved. No material may be reproduced without prior permission. While we have tried to ensure the accuracy of the information in this publication, the Publisher accepts no responsibility or liability for any errors, omissions or resultant consequences including any loss or damage arising from reliance in information in this publication. URBIS Australia Asia Middle East urbis.com.au

URBIS STAFF RESPONSIBLE FOR THIS REPORT:

Director Clinton Ostwald

Associate Director Chrystal Desange

Consultant Sass Baleh

Job Code SPE0503

Report Number 1 xdisclai mer x

TABLE OF CONTENTS

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015

Executive Summary ..................................................................................................................................... i

1 Study Background ........................................................................................................................... 1

1.1 Study Purpose ................................................................................................................................... 1

1.2 Methodology ...................................................................................................................................... 1

1.3 Study Area ......................................................................................................................................... 2

2 Literature Review ............................................................................................................................. 4

3 North Sydney Office Market Profile ............................................................................................. 11

3.1 Total Stock ....................................................................................................................................... 11

3.2 Additions .......................................................................................................................................... 12

3.3 Withdrawals ..................................................................................................................................... 13

3.4 Net Additions ................................................................................................................................... 14

3.5 Historic Absorption ........................................................................................................................... 15

3.6 Grade of Stock ................................................................................................................................. 16

3.7 Age of Stock .................................................................................................................................... 17

3.8 Building and Floor Plate Sizes ......................................................................................................... 20

3.9 Vacancy Rates ................................................................................................................................. 20

3.10 Major Tenants .................................................................................................................................. 22

3.11 Rents and Yield ............................................................................................................................... 22

3.12 Returns ............................................................................................................................................ 23

3.13 Proposed Developments ................................................................................................................. 24

4 Tenant Sentiment Survey ............................................................................................................. 27

4.1 Survey Methodology ........................................................................................................................ 27

4.2 Description of the Sample ............................................................................................................... 27

4.3 Factors Influencing Choice of Office Location ................................................................................. 31

4.4 Parking ............................................................................................................................................. 32

4.5 Suitability of Locations ..................................................................................................................... 33

4.6 Expectations of Growth ................................................................................................................... 34

4.7 Views of North Sydney .................................................................................................................... 34

4.8 Recommodations for North Sydney ................................................................................................. 35

5 Worker Sentiment Survey ............................................................................................................. 37

5.1 Survey Methodology ........................................................................................................................ 37

5.2 Factors Influencing Work Locations ................................................................................................ 38

5.3 Usage and Views of North Sydney Amenities ................................................................................. 38

5.4 Retail and Spend ............................................................................................................................. 39

5.5 Transportation .................................................................................................................................. 41

5.6 Work Place Location ........................................................................................................................ 43

6 Investor Sentiment Interviews ...................................................................................................... 46

6.1 Survey Methodology: ....................................................................................................................... 47

6.2 Overall Sentiment and Comments ................................................................................................... 47

6.3 Comparison with Other Office Markets............................................................................................ 49

6.4 Future .............................................................................................................................................. 50

6.5 General Comments.......................................................................................................................... 50

7 North Sydney Office Market Comparative Review ..................................................................... 51

URBIS

NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015

8 North Sydney Resident & Worker Profile ................................................................................... 61

8.1 Resident Profile............................................................................................................................... 61 8.1.1 Historical and Forecasted Population Growth ................................................................................ 61 8.1.2 Age Distribution............................................................................................................................... 62 8.1.3 Family Types ................................................................................................................................... 63 8.1.4 Incomes .......................................................................................................................................... 63 8.1.5 Industry of Employment .................................................................................................................. 64 8.1.6 Place of Employment / Journey to Work ........................................................................................ 65

8.2 Employee Profile ............................................................................................................................. 66 8.2.1 Industry of Employment .................................................................................................................. 66 8.2.2 Place of Residences / Journey to Work .......................................................................................... 67

9 North Sydney Office Demand Forecasts .................................................................................... 69

9.1 Employment Projections ................................................................................................................. 69 9.1.1 North Sydney LGA .......................................................................................................................... 69 9.1.2 North Sydney CBD ......................................................................................................................... 71

9.2 Office Demand Forecasts ............................................................................................................... 74 9.2.1 North Sydney LGA .......................................................................................................................... 74 9.2.2 North Sydney CBD ......................................................................................................................... 74

10 Development Constraints Analysis ............................................................................................ 76

10.1 Parcel Size ...................................................................................................................................... 76

10.2 Ownership Fragmentation .............................................................................................................. 79

11 Conclusions & Recommendations ............................................................................................. 83

FIGURES:

Figure 1 – North Sydney LEP 2013 – North Sydney Centre Map Outlining Study Area .............................. 3

Figure 2 – Age of Building Stock Map ........................................................................................................ 19

Figure 3 – Number of Employees ............................................................................................................... 28

Figure 4 – Floorspace ................................................................................................................................. 28

Figure 5 – Floorspace Ratio ....................................................................................................................... 29

Figure 6 – Year in which businesses had first set up in North Sydney ...................................................... 29

Figure 7 – Business Type ........................................................................................................................... 30

Figure 8 – Status of the North Sydney Office ............................................................................................. 30

Figure 9 – Main Triggers for Company’s move to North Sydney ............................................................... 31

Figure 10 – Number of on-site parking spaces .......................................................................................... 32

Figure 11 – Leasing off-site car spaces ...................................................................................................... 32

Figure 12 – Suitability of North Sydney and other locations for your business .......................................... 33

Figure 13 – Anticipated office space needs in five years time (2017) ........................................................ 34

Figure 14 – Anticipated growth of the North Sydney CBD ......................................................................... 34

Figure 15 – Suggested improvements to North SydneyCBD – by category .............................................. 36

Figure 16 – Suggested improvements to North SydneyCBD - specifically ................................................ 36

Figure 17 – Sample Handout ...................................................................................................................... 37

Figure 18 – Reason for working in North Sydney ....................................................................................... 38

Figure 19 – Usage of amenities in North Sydney ....................................................................................... 39

Figure 20 – Rating of amenities in North Sydney ....................................................................................... 39

Figure 21 – Average weekly spend ............................................................................................................ 40

Figure 22 – Average weekly spend Per category ....................................................................................... 40

Figure 23 – Missing facilities at North Sydney............................................................................................ 41

TABLE OF CONTENTS

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015

Figure 24 – Importance of transportation options........................................................................................ 42

Figure 25 – Public Transportation preferences ........................................................................................... 42

Figure 26 – Satisfaction levels regarding working in the North Sydney Area ............................................. 43

Figure 27 – Preferred workplace by ranking ............................................................................................... 44

Figure 28 – Preferred workplace – Reasons behind choice ....................................................................... 44

Figure 29 – Attributes important to the appeal of an office location area .................................................... 45

Figure 30 – North Sydney CBD Parcel Size ................................................................................................ 78

Figure 31 – North Sydney CBD – Strata Ownership Distribution ................................................................ 81

Figure 32 – North Sydney CBD – Combined Parcel Size and Strata Ownership ....................................... 82

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 EXECUTIVE SUMMARY i

Executive Summary

The objective of this study has been to identify the current supply and occupancy of office accommodation by grade; the attractiveness of North Sydney to occupiers; issues faced by developers and investors; North Sydney’s competitive positioning; need for additional office accommodation; and key recommendations that will support the economic vitality of the North Sydney Centre.

The study area as defined by North Sydney Council includes the North Sydney CBD blocks that are outlined in North Sydney Council’s “Area Subject to North Sydney Centre Controls”, which is sourced from the North Sydney LEP 2013. This area is defined as the core commercial precinct of North Sydney and contains the highest concentration of employment generating land uses within the LGA.

The study methodology has been developed and refined in conjunction with North Sydney Council and Property Council of Australia. The project has focused heavily on a broad consultation process supported by economic analysis of office market and employment data for North Sydney. The methodology has been incorporated under the following broad phases.

1. Literature Review

2. Current Local Supply Assessment –

3. Market Research

4. Review of Economic Drivers

5. Regional Review of Competitive Employment Locations

6. Demographic and Workforce Review

7. Employment Forecasts

8. Land Constraints Analysis

9. North Sydney Centre Conclusions and Recommendations

The project has been undertaken through collaboration between our Economic and Market Research, Consumer Research and Town Planning teams.

From the analysis outlined within this report for the North Sydney Centre, we have developed recommendations for North Sydney Council (both statutory and non-statutory actions) that will act to facilitate the strategy and promote the role of North Sydney in the broader economy.

Our conclusions and recommendations are summarised as follows:

ii STUDY BACKGROUND URBIS


STRATEGY IMPLICATION/

DESIRED OUTCOME

RECOMMENDATION CURRENT PERFORMANCE /

RESPONSE

Marketing - Revitalise

the marketing strategy

for North Sydney to

publicise the benefits of

the North Sydney CBD

to existing and potential

tenants, investors,

building owners and

managers.

Increase national and

international exposure.

Key areas to focus on are the following:

The central location of North Sydney CBD within the Global Economic Ark as

well as its identification as a Global Sydney Strategic Centre;

Access to a highly skilled white collar workforce;

Competitiveness of rental levels in North Sydney versus Sydney CBD

locations. (Note: improvement of worker amenity in North Sydney CBD will

create a greater competitive edge in this respect);

Current and future improved accessibility to rail transport, including future

accessibility to workers located in the North West Growth Centre on

completion of the North West Rail Link;

High levels of satisfaction of current workers (based on survey results);

Opportunities for new development including promoting the current proposed

developments that will improve the mix of office accommodation; and

Promote any future public domain improvements.

Underway

A marketing strategy was completed in

2014. The launch of the campaign is

expected on 14th May 2015.

The marketing strategy will highlight

the economic strength of North Sydney

and promote the centre as an area

which offers a good work/life balance.

North Sydney’s competitive edge was

identified by North Sydney Council by

undertaking research with residents,

workers and key stakeholders. The

presentation of North Sydney’s

economic strength was given to a PCA

breakfast on 17th October 2014.

Economic

Development –

Maximising the utility of


as a community

infrastructure asset.

Creating a substantial

improvement to the

ambiance and working

environment of North

Sydney Centre and

therefore increase

traffic in flow

(particularly during

leisure time). In turn,

increasing North

Sydney’s CBD

Creating a dedicated Council resource to actively support key revitalisation

and investment projects – responsible for economic development strategies

and providing advice on the use of the public domain. Based on discussions

with other Local Government’s that operate similar programs, it will be

important for this role to be tied to income generation targets through

measured new activity or through actual revenue to Council that results from

new initiatives (e.g. direct revenue benefits such as income from market stalls,

other forms of casual leasing within the public domain and sponsorship, etc.

and indirect achievements such as improved satisfaction levels by North

Sydney tenants and workers; reduction in retail vacancy levels; etc.). Key

Underway

Council is in the process of employing a

staff member (under Council’s new

‘Events Team’) whose role will be

dedicated to running events in the North

Sydney Centre.

Council has not altered their stance on

prohibiting residential development in

the commercial core. A number of

developments have been completed in

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 STUDY BACKGROUND iii


DESIRED OUTCOME


RESPONSE

regional, national and

global competitive

edge.

elements of the role include:

Establishment of a North Sydney CBD Retailers Forum to discuss

marketing and other initiatives to maximise business opportunities and

improve the quality of retailing for the benefit of workers, residents and

visitors;

Investigate and implement opportunities to increase activation levels

within the North Sydney CBD both within core trading hours and after

hours / on weekends;

Working with key building owners and managers to identify and implement

marketing strategies to attract and retain key office tenants; and

Work with property owners to assist in fostering relationships with Council

to identify and investigate development opportunities such as site

amalgamation and redevelopment.

Develop the public domain further through the following:

Seek an urban design study to identify key movement patterns and

opportunities to create an improved open space provision and

development of a functioning street level centre heart;

Maximising the value and utility of outdoor areas (e.g. courtyards, lane

ways) through design. Key considerations: Position and access allowing

internal and external areas to merge; multiple outdoor areas viewed

positively; maximise harbour and water views;

ground floor building corners– tenancies who act as creating a

social/cultural hub (work and social meeting points); and

Introduce activities that will enhance weekend visitation, such as markets

the Mixed Use zone and a number are

under construction/ approved. These

developments will result in over 1,300

new dwellings and approximately 2,500

new residents.

iv STUDY BACKGROUND URBIS



DESIRED OUTCOME


RESPONSE

and a strong food and beverage offer.

We note that there has been a call for a greater degree of residential

property to be developed within the North Sydney CBD by a range of

individuals and groups to help promote a greater level of vibrancy and retail

performance. At the same time, we have also been advised by some

interviewees in our discussions with industry participants that caution should

be exercised in allowing new residential development in the commercial core

so not to erode the primacy of office based uses. As such we have

undertaken an assessment of the relative contribution that residential and

office based developments can make to retail sales within the North Sydney

CBD. Our analysis is summarised as follows:

We have looked at the potential retail market generated by office and

residential apartment development in a building assumed to have a gross

floor area of 20,000 sq.m for comparative purposes. We have applied

typical efficiency ratios to obtain a net floor area for both uses and applied

a range of employment and dwelling densities to obtain a building

population (worker / residents). To this we have applied an average

annual spend to each group based on recent survey data for workers and

benchmark data for resident per capital expenditure to derive a total retail

market for each. We have then applied a benchmark retention rate for

worker spend and resident spend to reflect what might be retained within

North Sydney CBD;

From this assessment the expenditure generated by workers and

residents under each option was broadly comparable as workers spend

less on a per capital basis than residents however make up much greater

numbers within the building. It is also noted that the retention rates for

workers for the North Sydney CBD would be higher than residents as the

worker spend is based on surveys of what people spend during their

working day. Residents have a much greater choice of retail options

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 STUDY BACKGROUND v


DESIRED OUTCOME


RESPONSE

outside of the North Sydney CBD and therefore will direct a lower

proportion of their expenditure to local retailers;

Based on the scenarios analysed, retail turnover generated by office

workers is likely to be 36% to 56% higher than a residents in a building of

a comparable size. This would indicate that office uses are more

economically important overall to retailers than residents within the North

Sydney CBD.

We note however that this worker expenditure is concentrated during core

business hours, particularly during the morning commute period and lunch

time and less so in the evening. There is a higher likelihood that residents

will direct more expenditure to retailers close to their homes after core

business hours, including supermarket based shopping as well as food

and beverage. This may assist in generating demand for some extended

hours retailers, however the overall benefit to retailers of opening longer

hours is unlikely to be realised unless they can attract a larger after hours

market including the retention of some additional worker after hours spend

and resident spend from a broader surrounding area. Therefore

residential development on its own is unlikely to produce a significant

improvement in the performance of retail businesses within North Sydney.

Improve the Public

Domain – in order to

have a dual function

(work and social

purpose), similar to that

of the Sydney CBD.

Increasing the use of

the public domain for

the existing and future

workforce/residents.

Innovations in the use of space and flexibility of design could have substantial

benefits for the attractiveness of North Sydney CBD;

Increase the level of maintenance undertaken to maintain the public domain;

Introduce mechanisms that will assist in improving the access to sport and

recreation facilities around North Sydney to help promote an active workforce

(e.g. lunch time team sport competitions, etc.);

Review the current traffic design within the North Sydney CBD and consider

Underway

The following areas within the Public

Domain are currently undergoing

upgrades:

Brett Whitely Place

Upgrade and expand the

pedestrian realm (Brett

Whiteley Place, Elizabeth

vi STUDY BACKGROUND URBIS



DESIRED OUTCOME


RESPONSE

opportunities to improve the experience for pedestrians, particularly around the

intersection of Pacific Highway, Miller Street and Mount Street; and

Work with RMS to review the operation of the Pacific Highway and identify

measures to improve pedestrian amenity and accessibility (e.g. reduce speed

limits, additional crossing points, taxi set down bays during core office hours,

etc.).

Plaza, portions of Denison

Street and Mount Street)

Expected commencement in

mid to late 2015.

Walker Street

Construction has commenced

on preliminary works to

upgrade the street.

Miller Street

Currently in design phase for

street upgrade i.e. new

pavement treatments, footpath

widening and additional

crossing).

Education Precinct Masterplan

Adopted in September 2014

Proposing a suite of short to

long term public domain

upgrades. This includes

introducing ‘Shared Zones’ at

several locations.

The above public domain works will be

carried out in conjunction with works

identified in the ‘North Sydney Centre

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 STUDY BACKGROUND vii


DESIRED OUTCOME


RESPONSE

Traffic and Pedestrian Management

Study’. The upgrades will also be in

accordance with Council’s ‘Public

Domain Style Guide’.

Quality of Office

Supply

Meet current and

future demand trends

in order for North

Sydney’s Commercial

Centre to become a

viable choice option to

prospective tenants.

The current mix of office development within North Sydney is skewed towards

B grade office accommodation, with a reclassification of a number of buildings

from A grade to B grade in July 2009. This has placed North Sydney at a

relative disadvantage compared to its competing office markets

There is an overall trend for larger scale tenants to seek larger floor plate,

highly efficient buildings, which only makes up a relatively low proportion of

North Sydney office stock. This indicates that there will be a need for a

greater proportion of new / refurbished accommodation over time

Prepare a strategic review of older office buildings within the North Sydney

CBD and prepare a strategy to identify key potential redevelopment and/or

amalgamation sites and consider the range of appropriate uses that

should be considered on each of these sites in the long term

Develop policy that will incentivise the amalgamation of smaller sites for

redevelopment and/or refurbishment of older commercial office buildings

for higher quality office accommodation and the potential for alternative

higher economic uses consistent with the overall operation of the North

Sydney CBD. This could include a combination of any of the following

potential example measures:

Floor Space Ratio (FSR) bonuses;

Building height bonuses;

Setback relaxation;

Not Commenced

The strategic review of older buildings is

believed to occur as part of the

upcoming ‘Built Form Capacity Review’.

This review will:

Identify older buildings which

may be suitable for

redevelopment and possibly

identify sites where

amalgamation is needed

Consider a range of

interventions to encourage

redevelopment (such as

bonuses and relaxing controls).

viii STUDY BACKGROUND URBIS



DESIRED OUTCOME


RESPONSE

Developer Contribution discounts;

Preferential rating agreements for a set period of time after development;

Flexibility relating to assessment of car parking provision (based on

prevailing tenant requirements);

Commitments to public domain improvements around identified

amalgamation opportunities.

Development Viability Investigate the impact of levies such as parking and railway station upgrade, in

addition to other council based development changes and costs on the

competitiveness of new development in North Sydney. Although Leighton

Properties has been able to secure pre-commitment by taking head lease and

occupying over 76% of office space, the other two proposed developments

(Mirvac and Laing O’Rourke and East Mark Holdings) have not been able to

attract pre-commitments due to competitive space from Sydney CBD.

The current Part 3A approvals will require approximately 50% lease pre-

commitment in order to obtain funding for development. This will require a

higher volume of lease pre-commitment than has been achieved in other North

Sydney Buildings

Based on employment forecasts and sensitivity testing, approximately 123,000

sq.m of new office accommodation is likely to be required in the North Sydney

CBD by 2036 under the Bureau of Transport Statistics Forecasts released in

2014. We note however that the actual level of new stock constructed will

have to exceed this underlying level of demand as there will also be the

requirement to provide a higher quality standard of accommodation that could

only be achieved through new development

Review the impact of current Council planning policies on the ability of existing

approved Part 3A projects to be delivered in their current formats and consider

Underway

The development at 177 Pacific

Highway commenced construction in

2014 and will provide approximately

40,000 sq.m of floorspace.

The ‘Built Form and Capacity Review’

will examine the development and

possibly consider the costs associated

with the development.


will re-examine the floorspace targets.

Council has reviewed its current

planning policies and determined that

Part 3A could largely be approved under

the existing controls.

Council made a submission to ‘Making

NSW No. 1 Again: Shaping Future

Communities (Strata & Community Title

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 STUDY BACKGROUND ix


DESIRED OUTCOME


RESPONSE

how these development proposals will be treated in the event that their current

approvals lapse

Review the NSW Government paper entitled ‘Making NSW No. 1 Again:

Shaping Future Communities (Strata & Community Title Law Reform

Discussion Paper)’ that has been produced to discuss reforms to the ongoing

management of strata schemes in NSW. Based on this review, North Sydney

Council should prepare a submission in response to the discussion paper

supporting the proposed changes that will help to facilitate the long term urban

renewal of the North Sydney CBD through making the consolidation of existing

strata schemes for renewal or redevelopment easier to achieve, provided

appropriate safe guards are maintained to protect confidence in the strata

property market.

Law Reform Discussion Paper)’.

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 STUDY BACKGROUND 1

1 Study Background

1.1 STUDY PURPOSE

North Sydney Council and the Property Council of Australia appointed Urbis in 2013 to conduct a Commercial Market Demand Study of the North Sydney Centre to guide and manage the appropriate supply office development to meet the demand for employment uses appropriate to the area and to support the strategic role of the centre and its overall vitality. As such, this report is an update to the initial 2013 report.

The study has been designed to help define the current supply and occupancy of office accommodation by grade; the attractiveness of North Sydney to occupiers; issues faced by developers and investors; North Sydney’s competitive positioning; need for additional office accommodation; and key recommendations that will support the economic vitality of the North Sydney Centre.

1.2 METHODOLOGY

The original 2013 methodology has been developed and refined in conjunction with North Sydney Council and Property Council of Australia. The project has focused heavily on a broad consultation process supported by economic analysis of office market and employment data for North Sydney. The methodology has been incorporated under the following broad phases.

1. Literature Review - Undertake a literature review of current and draft planning policy documents (including North Sydney Local Environmental Plan 2013); past economic and employment studies (Including Urbis North Sydney Commercial Centre Study 2013 and Urbis North Sydney Demand Study 2004); and other relevant information such as census data, Property Council Office Market Report, industry research, etc.

2. Current Local Supply Assessment - Assess current supply of office floor space within North Sydney by office grade; proposed new development by grade and age; occupancy level by grade; ownership profile; and building stock by typology profile (ages, floor plate size, car parking, etc.).

3. Market Research – Undertake a survey of land owners, business tenants and employees within the North Sydney Centre to gain an understanding of sentiment regarding North Sydney’s positioning within the market. This was undertaken as direct interviews with major investors and tenants, online survey of other North Sydney tenants and intercept surveys with workers. To note, the survey was conducted for the 2013 report and is not included as part of the 2015 update due to the specified scope of work.

4. Economic Drivers - Examine the future economic drivers and trends that will influence the mix of businesses operating with the North Sydney Centre, including examining how major attractors such as the heavy rail transport network will influence future industry patterns.

5. Regional Review of Competitive Employment Locations - Review the broader supply of employment within Sydney and in particular the development of Barangaroo as identified in the Sydney Metropolitan Strategy: A Plan for Growing Sydney.

6. Demographic and Workforce Review - Review the Demographic Profile of North Sydney LGA Residents & Workers to assist in determining base line levels of employment.

7. Employment Forecasts - Forecast Future Employment Growth to Determine Future Demand for Employment Lands in North Sydney LGA and Centre.

8. Land Constraints Analysis – Work with Council to identify potential constraints on the land within the North Sydney Centre that may influence the nature and location of various employment uses (e.g. proximity and capacity of local transport nodes, adjacency to residential uses, ownerships fragmentation, etc.).

2 STUDY BACKGROUND URBIS


9. North Sydney Centre Conclusions and Recommendations - Develop Strategy Plan for the North Sydney Centre including recommendations on changes to the North Sydney LEP and other non-statutory actions that will act to facilitate the strategy and promote the role of North Sydney in the broader economy.

The project has been undertaken through collaboration between our Property Economics, Consumer Research and Town Planning teams.

1.3 STUDY AREA

The study area as defined by North Sydney Council includes the North Sydney CBD blocks that are outlined in Figure 1 as the “Area Subject to North Sydney Centre Controls”, which is sourced from the North Sydney LEP 2013. This area is defined as the core commercial precinct of North Sydney and contains the highest concentration of employment generating land uses within the LGA.

We note that the Property Council of Australia Office Market Report (OMR) quoted throughout this report refer to the area of North Sydney defined by the Property Council of Australia, which includes parts of Milsons Point, Blues Point Road and areas north to Ridge Street. This area is larger than the study area defined by North Sydney Council; however the majority of office space included in the OMR falls within the boundary of the study area. (http://www.propertycouncil.com.au/research/OMR_Maps.pdf).

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 STUDY BACKGROUND 3

Figure 1 – North Sydney LEP 2013 – North Sydney Centre Map Outlining Study Area

4 LITERATURE REVIEW URBIS


2 Literature Review

In order to summarise the current planning framework that affects the North Sydney CBD we have undertaken a literature review of the current and draft strategy documents and planning controls. The key aspects of these documents are summarised below in Tables 1 to 3.

Table 1 summarises the current Sydney Metropolitan Strategy: A Plan for Growing Sydney and the Inner North Draft Subregional Strategy prepared by the NSW Department of Planning and Infrastructure.

Table 2 reviews the local strategic documents prepared by or for North Sydney Council including the North Sydney Community Strategic Plan 2013-2023, 2020 Vision North Sydney Community Strategic Plan, North Sydney Local Development Strategy 2009, North Sydney Residential Development Strategy 2009, North Sydney Public Domain Strategy and North Sydney Commercial Centre Study 2013 (Urbis).

Table 3 overviews the current town planning controls including the North Sydney LEP 2013 and North Sydney DCP 2013.

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 LITERATURE REVIEW 5

TABLE 1 – METROPOLITAN AND REGIONAL STRATEGIES

METROPOLITAN AND REGIONAL STRATEGIES

Sydney Metropolitan Strategy: A Plan for Growing Sydney (2014)

North Sydney CBD is part of the Global Sydney Strategic Centre with Sydney CBD, and forms part of the

North subregion.

The Plan indicates that North Sydney will be increasingly important in the medium to long run in

accommodating office and residential space particularly as these markets are forecast to grow. Consequently

planning controls, floor space ratios and building heights will be examined. In the short run however the Plan

acknowledges that Barangaroo, which also makes up Global Sydney’s Strategic Centre, will meet short run

office floor space demand.

Chatswood, St Leonards and Macquarie Park are all targeted to provide capacity for mixed-use development

to accommodate additional employment including offices, retail, services and housing. North Sydney CBD is

also identified to accommodate future employment and housing opportunities associated with a Sydney Rapid

Transit train station (proposed) at Victoria Cross.

Metropolitan Plan for Sydney 2036 (2011)

North Sydney forms part of Global Sydney with Sydney CBD within the Global Economic Corridor and also

forms part of the Inner North subregion. Although this has been superseded by “A Plan for Growing Sydney”,

the Metropolitan Plan for Sydney 2036 contains targets that have not been addressed in the most recent

Metropolitan plan.

The Plan sets an employment capacity target for the Inner North subregion of 300,000. This is a 26% increase

on the existing level. North Sydney has been identified to accommodate 14,000 new jobs from 2006 to 2036

to realise an overall total of 61,000 jobs (we note that this target includes a cross section of all job types, not all

of which will be aligned to the North Sydney CBD). The Plan indicates that North Sydney is to experience high

growth in finance and insurance services. It is noted that Macquarie Park is identified to accommodate an

additional 19,000 jobs bringing the overall employment number to 58,000. Chatswood and St. Leonards are

also planned to accommodate additional employment.

Inner North Draft Subregional Strategy (2007)

The Inner North Subregion is relatively job rich with a locally based workforce of around 145,000 in 2001,

equating to 1.7 jobs per working resident. Due to the range and level of employment opportunities, around half

the resident workers live and work within the Subregion, with the remaining population largely commuting to

work in neighbouring Sydney City Subregion.

The Subregional Strategy sets an employment capacity target for North Sydney of 15,000 additional jobs to

2031. This is slightly higher than the Metro Plan 2036, however represents a different time period from 2001

to 2031. The Subregional Strategy also identifies Ryde (20,000), Willoughby (16,000), Chatswood (7,300),

Macquarie Park (23,100) and St. Leonards (8,200) as centres to accommodate a significant amount of

additional employment.



Table 2 – Local Strategy Documents

LOCAL STRATEGIES

North Sydney Community Strategic Plan 2013-2023

The purpose of the Plan is to identify the community’s main priorities in order to set the future direction of

North Sydney. The Plan identifies 5 ‘directions’ that focus on key issues and strategic goals and are

encompassed around the following:

Living Environment – quality urban green spaces

Built Environment – infrastructure and assets that meet community needs; vibrant, connected and well

maintained streetscapes and villages that build a sense of community; improved traffic management, and

parking options and supply

Economic Vitality – expanded trading hours; employment growth; increased national and international

exposure; identify opportunities for cultural, entertainment and public art activities in commercial centres

Social Vitality – a connected community; housing accommodation improvements and affordability

Civic Leadership

Note: Strategies that are most relevant to North Sydney’s commercial centre have been mentioned.

2020 Vision North Sydney Community Strategic Plan (2009)

Direction 3 under the 2020 vision sets goals to address the economic vitality of North Sydney. Strategies

developed to achieve these include:

Ensure the design of major infrastructure and public domain contributes to North Sydney’s business needs;

Review opportunities for commercial centre growth;

Ensure the LEP provides capacity for employment growth in North Sydney;

Develop criteria to attract and encourage businesses in the North Sydney CBD; and

Ensure that decision making in reference to the CBD respects the needs of surrounding residents and the

natural environment.

North Sydney Local Development Strategy 2009

The Local Development Strategy provides key directions for Council to assist with the planning the future of

the North Sydney Centre. These include:

Planning for 15, 000 additional jobs;

Expanding available commercial floor space - a review of the NSC planning controls is required once

200,000m2 of additional non-residential floor space has been approved;

Protecting existing employment lands by prohibiting residential development in the core of the CBD;

Planning to provide a total of over 1,000,000 sq.m of commercial floor space and a total of 87,000 jobs in

the LGA by 2031; and


Reviewing planning controls to encourage consolidation of key sites for large scale development.

North Sydney Residential Development Strategy 2009

The key residential strategies are outlined below:

Concentrate the bulk of new dwellings in Mixed Use centres in close proximity to retail, office, health,

education, transport, leisure, entertainment facilities and community and personal services.

The Draft LEP 2009 contains sufficient capacity to meet the NSW Government’s housing target of 5,500

additional dwellings to 2031.

Council has planned for the aforementioned forecast demand by ensuring the majority of North Sydney’s

planned capacity for residential dwellings will continue to be 1, 2 and 3 bedroom apartments. Primarily this

form of development will continue to occur in the mixed use centres of North Sydney’s CBD, St Leonards,

Neutral Bay, Cremorne and Crows Nest.

North Sydney Public Domain Strategy (2004)

Identifies improvements to the public domain centred on Pacific Hwy / Mount Street / Miller Street over the

period 2004 to 2018.

North Sydney Commercial Centre Study 2013 (Urbis)

The North Sydney Commercial Centre Study 2013 provided a set of high level recommendations to stimulate

commercial office tenant demand in the North Sydney Centre. These recommendations included:

Revitalising the marketing strategy to publicise the benefits of the CBD to potential tenants looking to locate

in the North Sydney Centre;

Revitalising of the CBD through additional Council resources, public domain improvements and stimulation

of activity outside business hours;

A focus on office developments rather than residential developments due to their greater economic

importance to retailers;

Prepare a strategic review of older office buildings and prepare a strategy to identify key potential

redevelopment and/or amalgamation sites;

Reinforcing the North Sydney CBD strategic importance as part of the Sydney metropolitan ‘Global Arc’;

and

Ensuring that planning controls achieve quality outcomes for the long term benefit of the CBD.

North Sydney Demand Study 2004 (Urbis)

The North Sydney Demand Study 2004 provided a set of high level recommendations to stimulate commercial

office tenant demand in the North Sydney Centre. These recommendations included:

Marketing the benefits of the CBD to potential tenants looking to locate in the North Sydney Centre;

Revitalising of the CBD through additional Council resources, public domain improvements and stimulation

of activity outside business hours;



Prohibiting residential development ion the commercial core;

Investigating the impact of State levies on the competitiveness of development;

Reinforcing the North Sydney CBD strategic importance as part of the Sydney metropolitan ‘Global Arc’;

and

Ensuring that planning controls achieve quality outcomes for the long term benefit of the CBD.


TABLE 3 – LOCAL PLANNING INSTRUMENTS

PLANNING INSTRUMENTS

North Sydney Local Environmental Plan 2013

The NSLEP 2013 zones land in the North Sydney Centre B4 Mixed-Use, B3 Commercial Core, R4 High and

R3 Medium Density Residential. The primary objectives of the Commercial Cone are to prevent the loss of

commercial floor space to residential uses, and encourage a diverse range of employment opportunities. As

such the B3 Commercial Core is the only zone that prohibits residential development.

The following outlines the key controls in the B3 Commercial Core and B4 Mixed Use zones:

B3 Commercial Core

Permitted with consent

Amusement centres; Backpackers’ accommodation; Child care centres; Commercial premises; Community

facilities; Educational establishments; Entertainment facilities; Function centres; Hotel or motel

accommodation; Information and education facilities; Medical centres; Passenger transport facilities; Places of

public worship; Recreation areas; Recreation facilities (indoor); Registered clubs; Respite day care centres;

Restricted premises; Roads; Serviced apartments; Sex services premises; Signage; Vehicle repair stations;

Veterinary hospitals.

Height limits in the B3 Commercial Core range from 200m at the junction of Miller Street, Mount Street and the

Pacific Highway down to 65m along the southern side of Blue Street.

There are no floor space ratio controls for land zoned B3 Commercial Core.

B4 Mixed Use

Permitted with consent

Amusement centres; Backpackers’ accommodation; Boarding houses; Car parks; Child care centres;

Commercial premises; Community facilities; Educational establishments; Entertainment facilities; Function

centres; Hostels; Hotel or motel accommodation; Information and education facilities; Medical centres;

Passenger transport facilities; Places of public worship; Recreation areas; Recreation facilities (indoor);

Registered clubs; Respite day care centres; Restricted premises; Roads; Seniors housing; Serviced

apartments; Sex services premises; Shop top housing; Signage; Vehicle repair stations; Veterinary hospitals

Height limits in the B4 Mixed Use zone vary from 155m at the corner of McLaren and Walker Streets down to

10m at the northern edge of the CBD.

The R3 and R4 residential zones do not permit office or commercial development.

Division 1 of the NSLEP 2013 outlines provision for the North Sydney Centre. The key objectives are to:

Improve railway infrastructure prior to allowing additional non-residential gross floor area in relation to any

proposed development in the North Sydney Centre

Limit additional non-residential gross floor area to 250,000 sq.m in addition to the estimated existing (as at

28 February 2003) 700,000 sq.m.



North Sydney Development Control Plan 2013

The North Sydney Development Control Plan provides specific detailed design criteria to land zoned under the

NSLEP 2013. It contains a character statement for the North Sydney Centre that addresses built form and the

urban environment. Key design consideration for the North Sydney Centre are outlined below:

Height is to step down regardless of topography from Miller Street and Berry Street

The DCP discourages private car use in the North Sydney Centre as the commercial zone parking rate is 1

space per 400 sq.m, with parking to be provided underground. Access to buildings is to be provided via

laneways where possible, and where possible the adjoining buildings should share or amalgamate

vehicular access to reduce the number of drive way cross-overs

Maximise public transport use and prohibit additional long stay commuter parking

Design buildings to provide through-site access for pedestrians and to enhance connections to public

transport infrastructure

The DCP seeks to provide high quality built form that contributes to the quality of the open space and

pedestrian network in the North Sydney Centre, with Mount Street plaza as the focus of the CBD

Design buildings to provide adequate amenity for any adjacent residential properties

Buildings, or the commercial components of mixed use buildings, that have a gross floor area greater than

2000m2 must be capable of achieving a minimum 4.5 star rating under DECCW‘s NABERS Energy

Developments involving the provision of more than 5,000 sq.m of office floor space must demonstrate that

the development can achieve a minimum 5 star rating under the Green Building Council of Australia’s

Green Star – Office rating tool

The significance of the existing heritage items is to be retained.

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 NORTH SYDNEY OFFICE MARKET PROFILE 11

3 North Sydney Office Market Profile

This section of the report considers the current office market profile of North Sydney based on a review of data prepared by the Property Council of Australia in its regular office market research entitled Office Market Report (OMR) January 2015. This consists of a review of the size of the North Sydney’s office market compared to other CBD locations in Sydney, providing an indication of its relative size and differentiating characteristics. An analysis of North Sydney CBD’s vacancy rate, net absorption rate and rental data is also included, and will provide an indication of demand for commercial office space within North Sydney, how it this has changed over time.

In addition to this, the IPD/PCA Australia Property Industry digest has been reviewed, which comprises an analysis of how North Sydney CBD commercial office assets have performed compared to other locations. This consists of an analysis of the total return on investment for North Sydney commercial office assets in 2014 and a historical analysis of annualised return over a 15 year period.

3.1 TOTAL STOCK

Chart 3.1 shows the sizes of Sydney’s office markets based on office floor space.

With total office stock of approximately 822,000 sq.m, North Sydney is the second largest of Sydney’s non-CBD office markets, and the ninth largest office market in Australia. North Ryde/Macquarie Park is ahead of North Sydney, with 866,000 sq.m. North Ryde/Macquarie overtook North Sydney as second largest CBD in January 2014 due to the combined effect of total office stock in North Ryde/Macquarie increasing by around 20,000 sq.m and total office stock in North Sydney decreasing by 12,000 sq.m, from July 2013 levels. Other key competing markets in Sydney’s North, including Crows Nest/St Leonards and Chatswood, are approximately one third of the size of North Sydney.

Office Market Size Comparison INNER NORTH MARKETS AND SYDNEY CBD, AS AT JANUARY 2015 CHART 3.1

The 15 year trend (as of January 2015) of total office floor space for the North Sydney office market is shown in Chart 3.2. From January 2000 to January 2015 North Sydney office stock increased by 4% (0.3% p.a. average). Over the same period, Sydney CBD office stock increased by 17% (1.1% p.a. on average), Crows Nest/St Leonards office stock increased by 12% (0.8% p.a. on average) and Chatswood office stock fell by 1% (-0.1% p.a. on average).

The historic total office floor space from January 2000 is recorded in Chart 3.2.

Source: PCA; Urbis

4,962

866 822

348 285

0

1,000

2,000

3,000

4,000

5,000

6,000

Sydney CBD North Ryde/Macquarie Park

North Sydney St Leonards/Crows Nest

Chatswood

Offic

e F

loo

r S

pa

ce

('0

00

) S

q.m

12 NORTH SYDNEY OFFICE MARKET PROFILE URBIS


Total Office Floor Space NORTH SYDNEY, JANUARY 2000 TO 2015 CHART 3.2

3.2 ADDITIONS

Chart 3.3 shows the office floor area additions for North Sydney between January 2000 and January 2015.

The volume of new office space supply in North Sydney fluctuated between zero and 30,000sq.m from Jan 2000 to Jan 2015, with the half yearly average being around 8,000sq.m and total additions being 236,000sq.m over the period.

Significant development occurred in the three and a half year period Jan 2007 to July 2010 – total additions over the period were equivalent to around 23% of total office stock in North Sydney currently. We note however that this included the reintroduction of floors from 101 Miller Street during 2009 after refurbishment commencing in 2008.

The largest additions in the past decade have included 89-96 and 100 Mount Street (40,100 sq.m) in 2014, The Ark/Coca-Cola Place at 40 Mount Street in 2010 (28,500 sq.m) and Innovation Place at 100 Arthur Street in 2007 (26,300 sq.m).

Major office supply that is anticipated to enter the North Sydney market over the next few years include Leighton Properties (39,200 sq.m) at 177-199 Pacific Highway in 2015/16 and Eastmark Holdings (46,000 sq.m) at 1 Denison Street with expected completion beyond 2016.

Source : PCA; Urbis

788

814

802

811 812804

797

805 801

820

836

861860

862

849

822

740

760

780

800

820

840

860

880Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

Ja

n-1

0

Ja

n-1

1

Ja

n-1

2

Ja

n-1

3

Ja

n-1

4

Ja

n-1

5

Offic

e F

loo

r S

pa

ce

(S

q.m

)

Thousands


Office Floor Area Additions NORTH SYDNEY, JANAURY 2000 TO JANAURY 2015 CHART 3.3

3.3 WITHDRAWALS

Office stock is regularly withdrawn from the market as a result of redevelopment, refurbishments, and conversion to alternate uses, for example residential. Withdrawals can be temporary (e.g. refurbishment) or permanent (e.g. conversion).

Chart 3.4 illustrates the withdrawals of office floor area for the North Sydney office market between January 2000 and January 2015. Around 7,000sq.m was withdrawn from the market half yearly on average during this period, with total withdrawals over the period being 202,000sq.m. The largest withdrawals occurred in 2005, due to residential conversions and refurbishments (PCA media release August 2005), and in January 2008 which saw a record high in withdrawal of office stock of 36,822 sq.m. due to the refurbishment of 101 Miller Street after the departure of Optus (the largest building in the North Sydney CBD).

The most recent withdrawals during 2014 have been partially due to redevelopment opportunities for residential change of use, located primarily in Milsons Point. The change of use includes 80 Arthur Street (6,500 sq.m) into a serviced apartment complex by Meriton. In addition, Knight Frank 2014 projects a further withdrawal of approximately 46,000 sq.m (expected from neighbouring areas of the North Sydney core i.e. Milsons Point) over the next three years.

Source: PCA; Urbis

0

13,600

20,813

00

2,450

12,542

0

8,9117,792

11,779

7,0066,250

2,712

23,381

6,386

29,031

0

20,90020,250

5,200

28,420

538 0 7612,642

1,374350

5822,472

00

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Ja

n-0

0

Ju

l-0

0

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Offic

e F

loo

r S

pa

ce

(S

q.m

)



Office Floor Area Withdrawals NORTH SYDNEY, JANAURY 2000 TO JANUARY 2015 CHART 3.4

3.4 NET ADDITIONS

Taking additions and withdrawals into account, Chart 3.5 shows the net additions for the North Sydney office market during the period January 2000 to January 2015. There was a net addition to office floor space in North Sydney in 15 out of 31 half years during the fifteen-year period. Total additions exceeded withdrawals over January 2000 to January 2015, resulting in 34,000sq.m net increase in office floor space over the entire period.

The largest net additions occurred between January 2009 and July 2010 due to the reintroduction of 101 Miller Street and the completion of The Ark/Coca-Cola Place at 40 Mount Street. This was a period of significant economic downturn, resulting in a peak in vacancy rates at 11.8% in July 2010 (see Section 3.9).

The largest net withdrawals have occurred in recent years between July 2014 and January 2015, as mentioned above in Section 3.3.

Office Floor Area Net Additions NORTH SYDNEY, JANUARY 2000 TO JANAURY 2015 CHART 3.5

Source: PCA; Urbis

0 0

8,1309,007

3,535

1,237

4,5455,063

2,655

7,582

19,997

17,131

3,633

6,543

10,746

2,764

36,822

1,7180

4,4615,152

0

3,915

8001,349

1,374973

1,443

12,43811,570

17,317

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Ja

n-0

0

Ju

l-0

0

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Offic

e F

loo

r S

pa

ce

(S

q.m

)

Source : Urbis

0

13,60012,683

-9,007

-3,535

1,213

7,997

-5,063

6,256

211

-8,218-10,125

2,617

-3,831

12,635

3,622

-7,791

-1,718

20,900

15,789

48

28,420

-3,377-800-588

1,268401

-1,093

-11,856-9,098

-17,317

-30,000

-20,000

-10,000

0

10,000

20,000

30,000

40,000

Ja

n-0

0

Ju

l-0

0

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Offic

e F

loo

r S

pa

ce

(S

q.m

)


3.5 HISTORIC ABSORPTION

Chart 3.6 shows the historical trend in net absorption for the five Sydney CBDs. The North Sydney CBDs net absorption for January 2015 was -6268 sq.m, the weakest of all the centres benchmarked. It represents a downturn in space leased compared to previous periods, with net absorption for January 2011 at 10,727 sq.m and 16,708 sq.m in January 2012, both the strongest net absorption of office stock amongst the benchmarked CBDs for these periods.

This reversal in net absorption is reflected in the increased office vacancy in July 2013 (shown in Section 3.9). We note however that this vacancy is largely concentrated in lower quality C & D grade office buildings, whereas vacancy is very low in A grade office accommodation.

We note that future permanent tenant departures of 7,200 sq.m are expected in 2015. These departures include Symantec (4,900 sq.m) at 181 Miller Street and Havas Worldwide (2,300 sq.m) at 60 Miller Street who will both move to the Sydney CBD.

Despite the large net withdrawals in recent years (as mentioned in Section 3.3) incoming tenants will add to net absorption during 2015 including Jemena (5,600 sq.m) at 99 Walker Street, Sony Australia (2,400 sq.m) at 165 Walker Street and LivingSocial (1,400 sq.m) at 73 Miller Street.

Historical Net Absorption INNER NORTH AND SYDNEY CBD OFFICE MARKETS, JANUARY 2000 TO JANUARY 2015 CHART 3.6

Table 4 presents total net absorptions in the Sydney CBDs for the past decade and their annual averages.

Over the past 10 years, North Sydney has experienced overall net office space absorption of 28,593 sq.m (averaging 2,859 sq.m per annum). This compares favourably relative to Chatswood and St Leonards, however well below Macquarie Park / North Ryde and Sydney CBD.

Note: M acquarie Park/North Ryde represents 11 years of recorded data

Source: PCA; Urbis

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

Ja

n-0

0

Ju

l-0

0

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Ne

t A

bs

orp

tio

n

North Sydney Chatswood St Leonards/Crows Nest Macquarie Park/North Ryde Sydney CBD



TABLE 4 – AVERAGE ANNUAL NET OFFICE ABSORPTION

OFFICE MARKET NET ABSORPTION (10 YRS

TO JANUARY 2015)

AVERAGE ANNUAL (10 YRS

TO JANUARY 2015)

North Sydney 28,593 sq.m 2,859 sq.m

Chatswood 15,921 sq.m 1,592 sq.m

St Leonards / Crows Nest -467 sq.m -47 sq.m

Macquarie Park / North Ryde 1 328,176 sq.m 32,818 sq.m

Sydney CBD 573,237 sq.m 57,324 sq.m

3.6 GRADE OF STOCK

Chart 3.7 illustrates the shift in the grade of office stock in North Sydney since 2000.

As January 2015, 52% of office stock in North Sydney was classified as B grade. This has remained relatively consistent over the long term.

The largest shifts occurred in July 2009 as a large proportion of the North Sydney office stock was re-rated against the Property Council of Australia’s Guide to Office Quality. The most notable shifts from January 2009 levels (prior to the re-rating) to January 2015 are the fall in the proportion of A grade space from 38% to 22% (312,111 sq.m. to 186,000sq.m), the increase in the proportion of C grade space from 11% to 20% (91,188 sq.m to 160,026 sq.m) and increase in proportion of D grade space, from 1% to 2% (7,546 sq.m. to 13,752 sq.m.).

As illustrated, the proportion of Premium grade space accounts for just 4% (36,500sq.m.) of office floor space in North Sydney which is effectively contained within one building. The fall in Premium grade space in 2008 was a result of the building undergoing extensive refurbishment during this time.

Grade of Office Stock NORTH SYDNEY, JANAURY 2000 TO JANAURY 2015 CHART 3.7

Source: PCA; Urbis

0

100

200

300

400

500

600

700

800

900

1000

Ja

n-0

0

Ju

l-0

0

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Qu

ality

of S

tock (

'00

0)

Sq

.m

Premium A B C D


Chart 3.8 below shows the distribution of North Sydney office stock quality compared to other major commercial centres. As noted, the volume of Prime stock (Premium and A grade stock combined) in North Sydney is less than Sydney CBD and Macquarie Park / North Ryde. Increasing the provision of Prime quality accommodation may improve North Sydney’s competitive positioning, as explored in subsequent sections of this report.

Comparison of Grade of Stock JANUARY 2015 CHART 3.8

3.7 AGE OF STOCK

Chart 3.9 overleaf shows the age of commercial office space and buildings in the North Sydney CBD. It illustrates that a large proportion of North Sydney office stock was developed between 1971 and 1990, with 65% of its office floor space and 66% of buildings developed during this period. This is significantly higher than the number of buildings developed and floor space added from 1991 onwards, which represents 24% of total floor space and 13% of buildings. The reduced commercial office development compared to 1971 and 1990 likely reflects the diminishing availability of developable land within the North Sydney CBD.

While the total quantum of floor space and buildings developed was significantly lower after 1991, the average building size increased from 5,287 sq.m between 1971 and 1991 to 8,036 sq.m from 1991 onwards. This reflects the trend to larger floor plate developments which have been more prolific since 1991.

There is also a correlation between the age of the office accommodation and the quality of accommodation by grade. The aging of office accommodation in North Sydney and an increase in the standard thresholds for office accommodation grades have combined to diminish the level of Prime quality stock within the North Sydney CBD. Without future renewal of the office accommodation there is a risk that the overall quality of the North Sydney office market will continue to decline over time.

It is apparent that the aging nature of office accommodation within North Sydney will require consideration of the overall mix that is offered by the market into the future.

Source: PCA; Urbis

Sydney CBDNorth Ryde /

Macquarie ParkNorth Sydney

St Leonards /Crows Nest

Chatswood

Premium 793,963 0 36,500 0 0

A Grade 1,835,294 615,716 186,296 102,699 157,412

B Grade 1,576,404 228,026 425,616 66,775 81,146

C Grade 563,308 20,017 160,026 165,249 46,233

D Grade 192,759 2,721 13,752 13,646 454

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pro

po

rtio

n o

f O

ffic

e S

tock (

%)



Age of Commercial Office Space NORTH SYDNEY SUBURB, AS AT JANUARY 2015 CHART 3.9

The distribution of office accommodation by age is further represented in the map in Figure 2 overleaf. We note that properties in white do not have any data available relating to age of improvements.

Source : CityScope; Urbis

99,639

333,346

232,331

34,031

174,817

Floor Space

33

4760

715

Buildings

<1971

1971-1980

1981-1990

1991-2000

>2000


FIGURE 2 – AGE OF BUILDING STOCK MAP



3.8 BUILDING AND FLOOR PLATE SIZES

Table 3.5 below shows the scale of commercial and office development in North Sydney CBD. A small proportion of floor plates exist over 1,000 sq.m with the average size 651 sq.m. This indicates that North Sydney has a larger proportion of smaller floor plates.

This is significant for North Sydney as there has been a general trend for organisations to occupy larger floor plates and fewer floors in order to maximise organisational efficiency and connectivity. These are attributes that markets, such as Macquarie Park / North Ryde, have been able to leverage through the provision of building floor plates regularly exceeding 2,000 sq.m.

Building and Floor Plate Size NORTH SYDNEY 2015 TABLE 3.5

3.9 VACANCY RATES

Chart 3.10 provides a comparison of office market vacancy between different Sydney CBDs from January 2001 to January 2015. Vacancy rates provide an indication of market demand for commercial office floor space across Sydney CBDs.

The North Sydney CBD has the third lowest vacancy rate out of the CBDs benchmarked in Chart 3.10. This follows a period which saw North Sydney office market vacancy rise from 7% in January 2012 to 11% in January 2014. The increase vacancy reflects the impact of typical tenant movements across a number of segments. This rise in vacancy in North Sydney was reversed in July 2014 decreasing to 9.1% in January 2015. This was due to the large amount of withdrawals as detailed in Section 3.3.

Chatswood’s vacancy rate is relatively low (8.4%) following a drop from its rate in January 2014 of 13.5%, with Sydney CBD the only CBD with lower vacancy rate as of January 2015 (7.4%). The weakest CBDs are St Leonards/Crows Nest having the highest vacancy rate of 11.6%, although this has fallen modestly from the previous year rate of 14.3%, and Macquarie Park/North Ryde posting a vacancy rate of 10.0% which is higher after the completion of new developments that are still being absorbed.

Mean Median Standard Deviation >1,000sq.m

Floor Plate 651 464 635 12%

Building Size 6,116 3,096 7,429

Source: City Scope; Urbis


Office Market Vacancy INNER NORTHERN MARKET AND SYDNEY CBD, AS AT JANUARY 2015 CHART 3.10

Chart 3.11 illustrates the North Sydney office vacancy by grade between January 2001 and January 2015. Premium grade floorspace experienced the highest vacancy rate in January 2009 at 10%, however since then has trended downwards and currently sits at zero vacancy along with C and D grade office floorspace. A and B grade office floorspace have experienced similar vacancy trends since July 2008. As at January 2015, B grade office space has the highest vacancy rate at 10.9%.

Office Market Vacancy By Grade NORTH SYDNEY, JANUARY 2001 TO JANUARY 2015 CHART 3.11

Source: PCA; Urbis

7.4%

11.6%

9.1%8.2%

10.0%

0.0%

5.0%

10.0%

15.0%

20.0%Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Va

cn

acy

Ra

te (

%)

North Sydney Chatswood St Leonards/Crows Nest

Macquarie Park/North Ryde Sydney CBD

Source: PCA; Urbis

0.0%

5.9%

10.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

Ja

n-0

1

Ju

l-0

1

Ja

n-0

2

Ju

l-0

2

Ja

n-0

3

Ju

l-0

3

Ja

n-0

4

Ju

l-0

4

Ja

n-0

5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Va

cn

acy

Ra

te (

%)

Premium Grade A Grade B Grade C Grade D Grade



3.10 MAJOR TENANTS

Table 3.6 outlines the top 20 Tenants by size within North Sydney in January 2015. There is a broad mix of tenants including insurance / finance, government, telecommunications, infrastructure, information technology, construction based companies et.al within this group.

Top 20 Tenants in North Sydney BY FLOORSPACE (SQ.M), AS AT JANUARY 2015 TABLE 3.6

3.11 RENTS AND YIELD

Table 3.7 compares October 2014 Median Net Face Rents2 and the Median Market Yield

3 of different

CBD locations within Sydney. The rental data illustrates that North Shore locations appear to attract high median rents compared North Ryde/Macquarie Park and Parramatta.

2 Median Net Face Rents are the average rent excluding outgoings charges that appear on the lease that have not been adjusted to reflect the value of any incentive offered to the tenants. On the other hand an Effective Rent removes the value of any incentive offered to a tenant, reducing the rental to reflect the actual value of the lease to the landlord.

3 Median Market Yield is the average return on investment as measured by dividing the annual net sustainable market income of a building by the market value.

Rank Building NameStreet

NumberStreet Company Name

NLA

(Sq.m)

Lease

Expiry Options

1 Campus MLC 105 Miller Street MLC Limited 26,638 1/10/2024 5

2 101 Miller Street Roads and Traffic Authority 15,653 1/01/2022

3 73 Miller Street NSW Health 12,285 1/07/2018 5

4The Ark / Coca

Cola Place40 Mount Street

Vodaphone Hutchinson

Australia Pty Ltd11,003 1/07/2024

5 50 Miller Street National Australia Bank 9,940 1/11/2021 5

6 100 Arthur Street NBN 9,462 1/07/2022 3+3

7 40 Miller Street United Group Pty Ltd / UGL 9,090 7/11/2019 5

8Zurich Insurance

Building5 Blue Street

Zurich Financial Services

Australia Ltd8,079

9Northside Garden;

SAP Building168 Walker Street

First Data Resources

Australia Limited7,852 1/04/2021 5

10 CISCO Systems 80 Pacific HighwayCisco Systems Australia Pty

Ltd7,105 1/07/2017 3

11 111 Pacific Highway Transfield Services Ltd 6,353 1/08/2022

12 99 Walker Street GE Capital Finance 6,268 1/07/2026

13Victoria Cross;

Carnival Cruises60 Miller Street Carnival Australia 6,089 1/02/2022

14 141 Walker Street WorleyParsons 5,723 1/07/2020 6

15 213 Miller Street Virgin Mobile 5,656 1/11/2017 6

16 33 Berry Street Flight Centre Limited 5,594 14/03/2022

17 99 Walker Street AAMI 5,402 1/02/2019 5+5

18 99 Mount Street Raffles College Pty Ltd 5,297 1/02/2019 5+5

19 Innovation Place 100 Arthur StreetLaing O'Rourke Australia Pty

Ltd5,280 1/10/2017 3

20 Syamntec Place 181 Miller Street Symantec (Australia) Pty Ltd 5,027 1/08/2018

Source: City Scope; Urbis


In addition to this, it illustrates that the spread between A and B/C/D grade is greatest in North Shore office locations, when compared to Parramatta and North Ryde/Macquarie Park. This indicates that a higher premium is paid by tenants for A grade stock in North Shore CBDs.

North Sydney rents are the highest rents outside of the Sydney CBD. The Western Corridor of the Sydney CBD display rental rates that are only slightly above those experienced in North Sydney (Table13 Section 7). The Sydney CBD Western Corridor is broadly defined by the Property Council of Australia as the area west of York Street as far south as Liverpool Street and adjoins the Barangaroo redevelopment area. A number of participants in the investor interviews indicated that they viewed the Western Corridor of Sydney as the most competitive office market to North Sydney. The rental gap between North Sydney and the Sydney CBD Western Corridor may widen as it has marginally in recent months due to new developments, capital expenditure on upgrades and the anticipated Wynyard walkway that links pedestrians between Wynyard train station and the precinct. Furthermore greater demand is expected for commercial space within the Western Corridor as the numbers of buildings in the Sydney CBD are in the process of change of use to residential and hotel accommodation which is creating displaced tenants.

Despite this, Median Market Yields as an indicator for an assets return on capital investment shows that greater returns are available in other CBD locations; however this also reflects that North Sydney is viewed as having a lower risk profile compared to other markets (i.e. a lower risk profile is reflected in a lower required rate of return.

Median Rent and Yield North Sydney CBD OCTOBER 2014 TABLE 3.7

3.12 RETURNS

The PCA/IPD Investment Performance Index tracks commercial office investment performance. It provides a comparison between how commercial office space in the North Sydney CBD has performed next to other CBD locations in Sydney and across the country. Table 3.8 illustrates the comparative annual return in 2014 for different CBD locations in Sydney and non-CBD locations in Australia, breaking this down between both income return and capital growth

4.

4 Income returns reflect annual rental received on a building less any outgoings incurred in running that building.

Capital growth looks at the change in asset value from one period to another.

Grade Median Net Facing Rents /sq.m Median Market Yield (%)

North Sydney A $631 7.00

B, C and D $508 8.25

St Leonards / Crows Nest A $468 8.25

B, C and D $399 8.88

Chatswood A $435 8.38

B, C and D $346 9.00

North Ryde / Macquarie Park A $340 7.75

B, C and D $283 9.13

Parramatta A $400 7.63

B, C and D $303 9.13

Sydney CBD A $685 6.38

B, C and D $518 7.38

Source: Savills; Knight Frank; Urbis



Total return represents both the income return accrued from rent and the capital gains on property in 2014. It shows that during 2014 the North Sydney commercial office market performed well with a higher total return of 12.0% when compared to some of the other CBD locations such as Chatswood/St Leonards/Crows Nest (8.4%), North Ryde (9.1%) and Sydney CBD (11.0%) and when compared to the rest of Australia Non-CBD office locations which averaged at 9.0%. This is due to a mix of strong income and capital return compared to other CBD locations.

For North Sydney the relatively high capital growth (4.1%) indicates an alignment with the performance of the Sydney CBD, albeit noting that this growth of 4.1% in North Sydney was after a lower base relative to the Sydney CBD. Therefore the total value of growth is still substantially lower than the Sydney CBD overall.

Income and Capital Return QE DECEMBER 2014 TABLE 3.8

The annualised return shown in Table 3.9 represents the average annual return over respective time periods. It shows that over the long-term total returns are typically lower or differences are marginal for the North Sydney CBD relative to other locations.

It shows that the rest of Australia’s non-CBD office average over the long-term has a higher rate of return, compared to other locations, with the 15 year annualised rate significantly higher than other Sydney office locations.

Total Return Annualised QE SEPTEMBER 2014 TABLE 3.9

3.13 PROPOSED DEVELOPMENTS

In addition to the existing supply of office accommodation within North Sydney, there are three proposed developments that have been approved through Part 3A development applications. The locations of the sites are outlined in the map in Map 3.1. These three sites are summarised in Table 3.10.

Total return in the addition of income returns and capital growth in any year.

Office Locations Income Return (% p.a.) Capital Growth (% p.a.) Total Return (% p.a.)

North Sydney 7.6 4.1 12.0

Chatswood / St Leonards / Crows

Nest7.7 0.7 8.4

North Ryde 8.3 0.8 9.1

Sydney CBD 6.3 4.4 11.0

Rest of Australia Non-CBD Office 8.5 0.5 9.0Note: M acquarie Park office location is currently not being reported by IPD

Source: IPD; Urbis

Office LocationsTotal Return (%) 3

Year Annualised

Total Return (%) 5

year Annualised

Total Return (%) 10

Year Annualised

Total Return (%) 15

Year Annualised

North Sydney 12.3 10.8 8.8 8.7

Chatswood / St Leonards / Crows

Nest9.4 8.7 7.6 8.3

North Ryde 8.0 8.4 7.6 8.7

Sydney CBD 9.2 9.1 8.9 8.6

Rest of Australia Non-CBD Office 8.6 9.0 7.7 10.4Note: M acquarie Park office location is currently not being reported by IPD

Source: IPD; Urbis


Proposed North Sydney Office Developments AS AT JANURY 2015 TABLE 3.10

Each of these proposed buildings are larger than any other existing office building within the North Sydney CBD and each provide floor plates in excess of 1,200 sq.m, significantly larger than the average floor plate currently offered in North Sydney. Whilst this overall size and larger floor plate configuration will be viewed beneficially by potential tenants, the post GFC financing climate require that any new office building will require a tenant pre-commitment of approximately 50% of the potential income before a lender will commit to funding construction. Leighton Properties have been able to justify their development by taking head lease and occupying over 76% of office space.

The required pre-commitment level is a significant challenge for each of the proponent developers and may be a factor delaying the development of these buildings in the short term, despite the relatively low level of vacancy in Prime Quality Buildings (Premium and A grade) within North Sydney. This is potentially a risk for North Sydney as the aging of existing buildings combined with the tight supply of Prime office space may result in some tenants having to consider options outside of North Sydney if they cannot fulfil expansion requirements within their local market. There are already examples of tenants spread across multiple North Sydney office builds as they have not been able to locate quality contiguous space within the tightly held Premium and A grade Markets, a situation that may not be tolerated for long.

Address DeveloperOffice Floor Space /

(Floor Plate)

Retail Floor

Space

Levels / Car

Parking

Completion

Date

177-199 Pacific

HighwayLeighton Properties 389,383 / (1,570) 370 31 / 112 2016

100 Mount StreetMirvac and Laing

O’Rourke40,100 / (1,250) 300 32 / 113 N/A

1 Denison East Mark Holdings 45,720 / (1,850) 2,700 32 / 1,850 N/A

Source: PCA; Urbis



PLANNED OFFICE DEVELOPMENTS MAP 3.1

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 TENANT SENTIMENT SURVEY 27

4 Tenant Sentiment Survey

The following survey was conducted for the 2013 report and is not updated due to the specified scope of work.

4.1 SURVEY METHODOLOGY

As a key part of the study, tenants were engaged to complete an online survey to answer questions regarding their view on North Sydney as an office market. An inducement in the form of a chance to win an Apple iPad was offered in order to maximise the response rate.

The sample for the survey was taken from a database of some 800 business that were listed in the Citiscope index as currently leasing office space in North Sydney. Businesses were invited to participate through a range of mediums including:

Direct telephone calls to larger tenants within North Sydney alerting them to the upcoming survey (we note that most larger tenants indicated that they did not wish to share information that could be viewed as sensitive);

Emails sent directly to tenants by major landlords who had agreed to directly invite participation;

Direct mail to over 500 businesses not included in the buildings owned by major landlords;

Handouts that were distributed over two days within North Sydney inviting people to participate in the tenant survey.

A total of 80 qualified responses were received as a result of the recruitment process, an increase of 17 responses over above that obtained within the 2004 survey. We note that some responses were excluded where they were only partially completed (i.e. the respondent quite the survey during the introductory questions).

Surveys were initially directed to the General Manager (or equivalent), but respondents were invited to redirect the survey if someone else in their business was better placed to answer the questions. The survey was completely confidential, and respondents were offered the opportunity to receive a summary of the survey results at the conclusion of the project.

The survey took less than 10 minutes to complete for most participants.

4.2 DESCRIPTION OF THE SAMPLE

Figures 14 to 19 illustrate the characteristics of those that responded to the Tenant survey. The following observations can be made:

On average, respondents had 10 employees per organisation. Almost half of respondents had fewer than 9 employees in their organisation, with a further 26% having between 10-19;

In terms of floor space, the average size of respondents was 50 sq.m. 31% of businesses had less than 200 sq.m, and an equal proportion had between 200 to 499 sq.m. Per employee, respondents had 19 sq.m of floor space on average, with 67% having lower than 24.9 sq.m / employee;

The majority of businesses first set up in North Sydney after 1995 (81%), with 14% having set up in the last two years since 2010;

The most prominent business type is Personal and Other Services (44%), with 16% of businesses in Property and Business Services and 15% in Communication Services;

65% of businesses were National Head Offices.

28 TENANT SENTIMENT SURVEY URBIS


In comparison with the 2004 study, a number of key observations regarding respondents can be made. Firstly, the size of businesses have declined from 17 to 10 staff on average, with a corresponding decline in the amount of space from 325 to 50 sq.m. We note however that this may also be a function of a number of larger businesses that we approached directly indicating that they were not prepared to answer questions regarding the future of their organisations. We also note that the minimum floor space ratio quoted in Figure 16 at 3 sq.m per staff member reflects staff within the organisation that are not permanently based in North Sydney (e.g. field staff).

Secondly, a considerable number of respondents have moved into the area between 2005 and 2009 (28% of respondents) and a higher proportion of National Head Offices, up from 25% in 2004 to 65% in this study.

FIGURE 3 – NUMBER OF EMPLOYEES

FIGURE 4 – FLOORSPACE

48%

26%

16%

6%

1% 3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Up to 9 10-19 20-49 50-99 100-500 500+

% o

f th

e s

am

ple

Number of employees

Min = 3Max = 4,000Median = 10

31% 31%

6%

3%1%

0%

28%

0%

5%

10%

15%

20%

25%

30%

35%

<200 200-499 500-999 1,000-2,999 3,000-5,999 6,000-12,000 No ans

% o

f th

e s

am

ple

Floorspace (sqm)

Min = 5 sq.mMax = 5,230 sq.mMedian = 50 sq.m


FIGURE 5 – FLOORSPACE RATIO

FIGURE 6 – YEAR IN WHICH BUSINESSES HAD FIRST SET UP IN NORTH SYDNEY

27%

19%21%

5%

8%

11%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Up to 14.9 15-19.9 20-24.9 25-29.9 30-34.9 35+ No ans

% o

f th

e s

am

ple

Floorspace ratio (sqm per person)

Min = 3 sq.m / personMax = 83 sq.m / personMedian = 19 sq.m / person

1% 1% 1%0% 0%

1%0%

3%

5%

8%

20%19%

28%

14%

0%

5%

10%

15%

20%

25%

30%

10-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 00-04 05-09 10-12

% o

f th

e s

am

ple

Year first established in North Sydney



FIGURE 7 – BUSINESS TYPE

FIGURE 8 – STATUS OF THE NORTH SYDNEY OFFICE

16%

9%

6%

15%

1%1%

4%

1%

44%

3%Property & Business Services

Finance & Insurance

Construction

Communication Services

Transport & Storage

Wholesale Trade

Health & Community Services

Cultural & Recreational Services

Personal & Other Services

Mining

65%

16%

13%

6%

National Head Office

NSW State Office

Local/Regional Office

Other, not sure


4.3 FACTORS INFLUENCING CHOICE OF OFFICE LOCATION

The most prominent factors influencing the choice of office location were the “availability of public transport” (85% of respondents) and “proximity to the Sydney CBD” (76%). “Being close to clients/customers”, being in a “desirable location for attracting new staff”, and “fitting in with your corporate image” also rated well, each accounting for around 55% to 59% of respondents.

“Availability of buildings with large floor plates and consecutive floors” only struck a chord with 9% of respondents, however this reflects the average size of respondents to the only survey. We note however that through the Real Estate Agent and Investor Survey that the availability of larger or contiguous floor plates is a significant factors for larger organisations.

FIGURE 9 – MAIN TRIGGERS FOR COMPANY’S MOVE TO NORTH SYDNEY

2

2

7

9

15

24

24

25

29

30

37

44

45

47

62

68

0 20 40 60 80

Being located close to cultural amenities/communityevents

Having immediate access to amenities such aschildcare

Availability of buildings with large floors orconsecutive floors

Proximity to recreational/fitness

Proximity to retail/shopping centres

Proximity to cafes/dining/bars

Views and environmental amenity

Being close to suppliers, subcontractors, or yoursupport industry

Being located where you current staff want to work

Availability of parking

Cost of office space (per square metre)

Fitting in wih your corporate image

Desirable location for attracting new staff

Being close to clients/customers

Being close to Sydney CBD

Availability of public transport



4.4 PARKING

The need for additional parking spaces was unaffected by the size of the operator. However smaller operators tended to have a higher requirement for additional parking spots.

Almost 50% of rented off site spaces are located on Berry Street, with balance split between Blues Point Road, Arthur Street, Mount Street, Elizabeth Plaza and Church street.

FIGURE 10 – NUMBER OF ON-SITE PARKING SPACES

FIGURE 11 – LEASING OFF-SITE CAR SPACES

0%

5%

10%

15%

20%

25%

30%

0 1 2 3 4 5 6 7 8 9 10 11 150 Not sure

% o

f th

e s

am

ple

Number of on-site car spaces and need for additional on-site spaces

Need more (33%)

Not sure/not stated if need more (6%)

Have enough (61%)

13%

3%

12%

72%

Rent off-site - need more on-site

Rent off-site - not sure if need more on-site

Rent off-site - have enough on-site

Don't rent off-site


4.5 SUITABILITY OF LOCATIONS

In relation to the suitability of North Sydney as a business location, all bar one respondent indicated that it was either an ‘acceptable’ or ‘ideal’ location for their business.

Other key locations suitable for respondents business included Sydney CBD (90% viewed it as suitable) and other northern Sydney locations including St Leonards (70%), Chatswood (55%) and North Ryde (Macquarie Park) (32%).

This confirms comments received through our interviews with real estate agents and investors who generally saw the Western Corridor of the Sydney CBD and St Leonards / Chatswood as the most competitive markets to North Sydney. These same groups also commented that despite the success of Macquarie Park / North Ryde in attracting large tenants in the past form North Sydney (e.g. Optus), most of this exodus has occurred with tenants preferring North Sydney having quite different drivers to tenants that would consider Macquarie Park / North Ryde.

FIGURE 12 – SUITABILITY OF NORTH SYDNEY AND OTHER LOCATIONS FOR YOUR BUSINESS

-11%

-24%

-43%

-63%

-77%

-87%

-93%

-88%

-85%

-91%

-92%

-95%

59%

27%

61%

47%

27%

16%

12%

3%

8%

7%

4%

4%

31%

71%

9%

8%

5%

3%

1%

1%

1%

1%

1%

1%

-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120%

Sydney CBD

North Sydney

St Leonards

Chatswood

North Ryde (Macquarie Park)

South Sydney (Alexandria)

Parramatta

Norwest Business Park

Homebush/Rhodes

Frenchs Forrest

St.George area (Hurstville,Rockdale etc.)

South West Sydney(Campbelltown, Liverpool etc.)

Blacktown

Unsuitable

Not sure/Can't say

Acceptable

Ideal



4.6 EXPECTATIONS OF GROWTH

How much more? Of those requiring more space (around 21 respondents), around 1/3rd

expect to need between 100 to 149 sq.m, and 85% expect to need between 150 to 249 sq.m of space.

How much less? Of those expecting to require less space (9 respondents), areas varied up to 200 sq.m. Of these respondents, 4 were from the property and business services industry.

There was a low expectation that the North Sydney CBD would experience decline in terms of anticipated growth.

Expectations for growth are somewhat spread across the different tenant types (in terms of size).

FIGURE 13 – ANTICIPATED OFFICE SPACE NEEDS IN FIVE YEARS TIME (2017)

FIGURE 14 – ANTICIPATED GROWTH OF THE NORTH SYDNEY CBD

4.7 VIEWS OF NORTH SYDNEY

The most positive feature of North Sydney cited in responses is the proximity to other areas of Sydney, including the Sydney CBD, to customers and to where staff live, accounting for 59% of responses. Around 24% of responses specifically mention that they North Sydney’s high level of transport is a key benefit of the area and a further 6% mention “location” as a positive attribute.

The level of amenity and services was stated in 22% of responses, with a number mentioning the number of restaurants and cafes benefitting staff and visitors, in addition to other retail and services.

46%

37%

13%

4%

More

About the same

Less

Not sure

52%

36%

5%

7%

Improve

Remain the same

Not sure

Decline


14% of respondents mentioned the culture and ambience of North Sydney, with some comparing the area to the Sydney CBD, and commenting that there are more open spaces, that it has a more attractive environment and even that the people culture is better. Specifically, the lack of congestion, both in terms of vehicular and pedestrians, was mentioned in 10% of responses.

Another key attribute for many respondents (13%) was the relatively affordability of rents, particularly in comparison with the Sydney CBD.

A sample of positive comments is included:

“North Sydney is buzzing with people going to work, it's very inspiring.”

“The options for food and drinks is great for not only the staff to have variety but also to entertain clients.”

“The retail shops nearby are very convenient as it is becoming harder to find time to shop.”

“Close to CBD without being as slow to get around as the CBD.”

“Access to everything is key. We have commercial, business, cafes and recreation connected well in an integrated work society. Also the people culture is great.”

“North Sydney has everything we need without being in the hustle of the city. It offers all types of food outlets, shopping and easy access to public transport.”

“Mixed residential and commercial a big plus”

“North Sydney is well serviced commercially, has excellent access to transport and highways to all areas of Sydney.”

“Proximity to CBD, ease of connection to airport, proximity to North Ryde area high tech cluster.”

4.8 RECOMMODATIONS FOR NORTH SYDNEY

A large proportion of recommendations made regarding the North Sydney CBD related to better provision of retail, improvements relating to parking and improvements to transportation. Specifically:

16% of all comments made related to the improvement of retail provision, including the variety of stores;

15% of comments suggested cheaper and/or more parking for staff (an additional 6% of comments suggested better and/or cheaper short term parking for visitors);

9% of comments suggested better provision of bars/cafes;

8% suggested improvements to public transportation, including linkages to other train lines, more services, more on time services;



FIGURE 15 – SUGGESTED IMPROVEMENTS TO NORTH SYDNEYCBD – BY CATEGORY

FIGURE 16 – SUGGESTED IMPROVEMENTS TO NORTH SYDNEYCBD - SPECIFICALLY

0%

5%

10%

15%

20%

25%

30%

Impro

ve

d r

eta

il

Impro

ve

d p

ark

ing

Impro

ve

d t

ransp

ort

atio

n

Impro

ve

d a

me

nitie

s

Bett

er

mix

of

resid

entia

l/co

mm

erc

ial

Impro

ve

me

nts

re

latin

g t

ooff

ice s

pa

ce

Susta

inab

ility

impro

ve

me

nts

Incre

ase

d n

um

be

r of h

ote

ls

% o

f th

e s

am

ple

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Bett

er

reta

il pro

vis

ion / v

ari

ety

Ch

ea

per

/ m

ore

pa

rkin

g fo

r sta

ff

More

bars

/ c

afe

s

Bett

er

pu

blic

tra

nsp

ort

ion

- o

n t

ime

,m

ore

se

rvic

es,

bett

er

links

Bett

er

ou

tdo

or

lan

dscap

ing /

sp

ace

sfo

r p

ed

estr

ian

s/lu

nch

es

More

/chea

pe

r sho

rt t

erm

vis

itor

pa

rkin

g/

loa

din

g z

one

s

Fix

fo

otp

ath

s / p

ede

str

ian

impro

ve

me

nts

Bett

er

road

co

nne

ctio

ns/c

on

ditio

ns

Bett

er

su

sta

inab

ility

in

itia

tive

s/c

lean

er

Cycle

wa

ys / p

ath

s

More

even

ts

Bett

er

ou

t o

f h

ours

fa

cili

tie

s/a

men

itie

s

More

resid

en

tial d

eve

lop

me

nt

Re

du

ced

levy

More

ta

xi ra

nks

Ch

ea

per

offic

e s

pa

ce

Big

ger

flo

or

pla

tes f

or

com

merc

ial

Ho

tel

Ch

ea

per

public

tra

nsp

ort

More

le

isu

re fa

cili

tie

s

Bett

er

se

rvic

es a

nd f

acili

tie

s

Art

Am

enitie

s f

or

tho

se t

ha

t liv

e in N

ort

hS

yd

ney

Bett

er

mix

of

no

n c

orp

ora

te

% o

f th

e s

am

ple

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 WORKER SENTIMENT SURVEY 37

5 Worker Sentiment Survey

The following survey was conducted for the 2013 report and is not updated due to the specified scope of work.

5.1 SURVEY METHODOLOGY

As a key part of the study, workers within North Sydney were engaged to complete an online survey to answer questions regarding their view on North Sydney as a place to work. This was a new initiative that was not undertaken as part of the 2004 Urbis JHD North Sydney Study.

Similar to the Tenant Survey, an inducement in the form of a chance to win an Apple iPad was offered in order to maximise the response rate.

Worker participants were invited to participate through handouts that were distributed over two days within North Sydney inviting people to participate in the worker survey. Over 6,000 flyers were produced and distributed during this time through positions at:

North Sydney Station;

Blue Street bus stops;

Intersection of Mount Street Plaza and Miller Street (near pedestrian sub-way connection from Greenwood Plaza exit and Miller Street bus stops);

Walker Street (near Mount Street Plaza);

and, a small number distributed through cafes.

FIGURE 17 – SAMPLE HANDOUT

38 WORKER SENTIMENT SURVEY URBIS


In addition to this hand out campaign, major property owners also send emails directly to their tenants asking for them to invite their staff to participate in the survey.

A total of 769 qualified responses were received as a result of the recruitment process, a response rate that well exceed the early estimates of response rate. We note that some responses were excluded where they were only partially completed (i.e. the respondent quite the survey during the introductory questions).

The survey took generally 5 to 6 minutes to complete for most participants.

5.2 FACTORS INFLUENCING WORK LOCATIONS

A majority of workers that responded to the survey worked in North Sydney because their “job was located in North Sydney”, with only a small proportion attributing it to the level of accessibility. This indicates that very few workers have absolute control over the location of their place of work. This is often also seen in Australian Bureau of Statistics (ABS) Journey to Work data, where residential address often has little bearing on the location of place of work.

FIGURE 18 – REASON FOR WORKING IN NORTH SYDNEY

5.3 USAGE AND VIEWS OF NORTH SYDNEY AMENITIES

The highest rated amenities in North Sydney in terms of usage was retail (97% of respondents often or sometimes utilising); followed by restaurants, cafés and bars (96%); sporting and recreational amenities (57%); and medical services (52%).

2%

11%

81%

3% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Other, please specify My company relocated toNorth Sydney

My job is located in NorthSydney

The areas has goodtransport links

It is close to myhome/schools

% o

f th

e s

am

ple

Reason for working in North Sydney


FIGURE 19 – USAGE OF AMENITIES IN NORTH SYDNEY

In terms of ratings of these amenities, those viewed as most satisfactory were those facilities most used, including restaurants, cafes and bars (49% of respondents viewed them as “good”), retail (46%) and sporting and recreational amenity (46%). There is a low proportion of respondents that viewed professional services and other services as “good” (22% and 28% correspondingly).

FIGURE 20 – RATING OF AMENITIES IN NORTH SYDNEY

5.4 RETAIL AND SPEND

The average weekly spend per respondent was $133, with 55% spending between $50-$150. Those categories that captured the majority of spending included clothing and accessories and food and beverage.

Despite a large proportion of weekly spend being directed towards clothing and accessories, 19% of respondents felt that ‘clothing’ store provision was insufficient and 16% of respondents felt that sporting retail provision was missing.

3%

48%

81%73%

5%

44%

20%

41%

16%17%

44%

33%77%

11%4%

11%

52%

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Retail, e.g. foodcourts, shoppingcentres, shops

Medical services, e.g.doctor, dentist,

optometrist,chiropractor

Professional services,e.g. accountants,property, solicitor

Services e.g.childcare, communityhealth centre, library

Restaurants, cafes,bars

Sporting andrecreational, e.g.

ovals, parks, gyms

% o

f th

e s

am

ple

Usage of amenities in North Sydney

Often Sometimes Rarely/Never

10% 6% 7% 9% 11% 8%

45% 58%

71% 63%

40% 46%

46%37%

22%28%

49% 46%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Retail, e.g. foodcourts, shoppingcentres, shops

Medical services,e.g. doctor, dentist,

optometrist,chiropractor

Professionalservices, e.g.accountants,

property, solicitor

Services e.g.childcare, library

Restaurants, cafes,bars

Sporting andrecreational, e.g.

ovals, parks, gyms

% o

f th

e s

am

ple

Rating of North Sydney amenities

Good

Average

Poor



FIGURE 21 – AVERAGE WEEKLY SPEND

FIGURE 22 – AVERAGE WEEKLY SPEND PER CATEGORY

13% 11%

29%26%

11%8% 6%

2% 2%5%

0%

5%

10%

15%

20%

25%

30%

35%

$0

-25

$2

5-5

0

$5

0-1

00

$1

00

-150

$1

50

-200

$2

00

-250

$2

50

-300

$3

00

-350

$3

50

-400

$4

00

+

Avera

ge w

eekly

spend p

er

capita

$23

$55

$17

$10 $12

$18 $16 $16

$40 $39

$11

$-

$10

$20

$30

$40

$50

$60

Pha

rmacy

Clo

thin

g a

nd

accesso

rie

s, e

.g.

clo

the

s,

sh

oe

s, b

ag

s, je

welle

ry, sun

gla

sses

Ho

me

ware

s/s

ma

llap

plia

nce

s/h

ou

seh

old

ite

ms

Spo

rtin

g/leis

ure

go

ods, e

.g.

spo

rtin

ggo

od

s, to

ys,

ga

me

s

Boo

ks/D

VD

's

Sta

tion

ery

/Ne

wsag

en

t ite

ms

Co

sm

etics/p

erf

um

e/n

on s

upe

rmark

et

toile

trie

s

Re

tail

serv

ices,

e.g

. film

pro

cessin

g,

dry

cle

an

ing,

key c

utt

ing

, o

pto

me

tris

t

Food a

nd b

evera

ge –

take a

way

Food a

nd b

evera

ge –

sit d

ow

n e

,g,

food

court

, cafe

s,

resta

ura

nts

Oth

er

Avera

ge w

eekly

spend p

er

capita


FIGURE 23 – MISSING FACILITIES AT NORTH SYDNEY

5.5 TRANSPORTATION

84% of respondents viewed rail as being a very important or important transportation option, with 64% viewing taxis and 62% viewing buses as important/very important. The availability of ferry’s and cycle links was of less importance.

In terms of transportation preferences, 65% of respondents placed the rail as their first preference, followed by cycle, accounting for 47% of respondents. Bus had a high representation of second preferences (49% of respondents) and taxis and ferry’s had a high representation in third preferences (65% and 54% respectively).

19%16%

10% 9% 8%6% 5% 4% 4% 4% 4%

0%

5%

10%

15%

20%

25%

Clo

thin

g

Spo

rtin

g

Ele

ctr

onic

s

Ch

ildre

ns ite

ms

Sup

erm

ark

et ite

m

CD

/dvd

Ho

me

ware

ite

m

Re

sta

ura

nt/

fast

food

Boo

ks/m

ag

azin

es

Men

s c

loth

ing

Serv

ice

s

% o

f th

e s

am

ple

Missing facilities at North Sydney



FIGURE 24 – IMPORTANCE OF TRANSPORTATION OPTIONS

FIGURE 25 – PUBLIC TRANSPORTATION PREFERENCES

8%

7%

8%

15%

8%

18%

10%

6%

11%

10%

21%

9%

20%

13%

13%

15%

27%

17%

35%

16%

21%

21%

9%

13%

32%

11%

27%

27%

41%

75%

16%

32%

8%

31%

30%

0% 20% 40% 60% 80% 100%

Bus

Rail

Cycle

Taxi

Ferry

Car

Walk/jog

Don't know / Notsure

Unimportant

Very unimportant

Neither unimportantor important

Important

Very Important

20%

65%

37%

20% 22%28%

49%

22%

29%

34%

26%

36% 28%

32%

13%

34%

65%

54%

41% 44%

0%

20%

40%

60%

80%

100%

Bus Rail Cycle Taxi Ferry Car Walk/jog

% o

f th

e s

am

ple

3rd preference

2nd preference

1st preference


5.6 WORK PLACE LOCATION

Over half of respondents were satisfied with working in North Sydney, with approximately one third ‘fairly satisfied’. Only 8% of respondents were unsatisfied.

FIGURE 26 – SATISFACTION LEVELS REGARDING WORKING IN THE NORTH SYDNEY AREA

In terms of preferred workplace, Sydney CBD was the highest ranked location in terms of first preferences (48% of first preferences), followed by North Sydney (25%). However, North Sydney was the highest cited preference of all locations, being the highest rank 2

nd and 3

rd preference.

The most important rationale behind respondent’s workplace location preferences was its’ location/accessibility, accounting for almost 50% of responses for those locations ranked the highest (Sydney CBD, North Sydney and Chatswood). Amenity was less important, accounting for 29% and 25% of responses for Sydney CBD and North Sydney.

However, interestingly, the most important attribute that contribute to the appeal of an office location was the ‘immediate access to amenities such as childcare’ (94% of respondents viewed as important or very important), followed by ‘fitting in with your professional image’ (87%) and being ‘located close to cultural amenities/community events’ (84%). This response rate relating to ‘immediate access to amenities such as childcare’ is interesting as 73% of respondents had earlier indicated that they had not or rarely accessed these services.

8%

36%

56%

0%0%

10%

20%

30%

40%

50%

60%

Unsatisfied Fairly satisfied Satisfied Don't know/unsure

% o

f th

e s

am

ple

Satisfaction levels of working in the North Sydney area



FIGURE 27 – PREFERRED WORKPLACE BY RANKING

FIGURE 28 – PREFERRED WORKPLACE – REASONS BEHIND CHOICE

0%

20%

40%

60%

80%

100%

Sydney C

BD

Nort

h S

ydn

ey C

BD

Chats

wood

St

Leonard

s

Pa

rram

atta

Nort

h R

yde (

Ma

cquarie

Park

)

So

uth

Sydney (

Ale

xandria

)

Hom

ebush/R

hodes

St.

Ge

org

e a

rea (

Hurs

tvill

e, R

ockdale

etc

.)

Norw

est B

usin

ess P

ark

Fre

nch

s F

orr

est

% o

f th

e s

am

ple

Preferred workplace by ranking

3rd preference

2nd preference

1st preference

Note - % of each location do not add to 100% as they represent the proportion of responses ineach preference that location accounted for

46% 46% 45%

67%

52% 51%

75%

50% 55% 53% 58%

29% 25%19%

20%

28%

14%

25%

10% 18% 8%

21% 26%30%

13%17%

29%50%

35%29%

25%

0%

20%

40%

60%

80%

100%

Sydney C

BD

Nort

h S

ydn

ey C

BD

Chats

wood

St

Le

ona

rds

Pa

rram

atta

Nort

h R

yde (

Ma

cquarie

Park

)

So

uth

Sydney (

Ale

xandria

)

Hom

ebush/R

hodes

St.

Ge

org

e a

rea

Norw

est B

usin

ess P

ark

Fre

nch

s F

orr

est

% o

f th

e s

am

ple

Aesthetics Transportation provision Amenity Location/accessibility


FIGURE 29 – ATTRIBUTES IMPORTANT TO THE APPEAL OF AN OFFICE LOCATION AREA

4%

4%

8%

5%

9%

6%

15%

8%

5%

7%

8%

9%

14%

13%

20%

18%

7%

11%

13%

15%

21%

21%

18%

26%

29%

30%

32%

41%

11%

35%

52%

49%

53%

49%

45%

32%

37%

32%

35%

19%

25%

83%

52%

32%

31%

25%

22%

23%

34%

23%

15%

15%

12%

7%

0% 20% 40% 60% 80% 100%

Immediate access to amenities such as childcare

Fitting in with your professional image

Located close to cultural amenities/community events

Close to clients/customers

Proximity to recreational/fitness

Somewhere with great ambience/atmosphere

Availability of public transport

Availability of parking

Close to Sydney CBD

Located close to home

Proximity to retail/shopping centres

Views and environmental amenity

Proximity to cafes/dining/bars

Very unimportant Unimportant Neither unimportant or important

Important Very important Don't know / Not sure

Very unimportantVery important

46 INVESTOR SENTIMENT INTERVIEWS URBIS


6 Investor Sentiment Interviews

The following interviews were conducted for the 2013 report and are not updated due to the specified scope of work.

In addition to the view of Tenants and Workers, we also sought the views of Investors within North Sydney to gauge their views on the current and future performance of North Sydney as an office market. This process was conducted as a series of interviews based on a common discussion guide. The Investors that made up the sample set account for in excess of 50% of the study area’s Net Lettable Area and range from institutional investors with multiple holdings of Prime buildings to single asset private owners of lower grade office accommodation.

Whilst Investors were the main focus for these interviews, we also engaged with a range of other groups such as Real Estate Agents that specialise in sales, leasing and management within North Sydney; owners of development sites; Australian Catholic University; and other interested parties such as North Sydney Council, Property Council of Australia and Living North Sydney.

Interviews were held with the groups outlined in Table 12. We note that the responses from these groups have been amalgamated and de-identified for confidentiality and reporting purposes.

TABLE 11 – INTERVIEWEES

INVESTORS REAL ESTATE AGENTS OTHER GROUPS

Colonial First State

Dexus

Five X Property Group

Innovation Place

Investa

ISPT

Mirvac

Stockland

Strand Estates

Zurich (as owner and occupiers)

Lang O’Rourke (as developer)

Winten Property Group (as

developer)

CB Richard Ellis

Hartigan Bolt

Knight Frank

Jones Lang LaSalle

Colliers International

North Sydney Council

Property Council of Australia

Living North Sydney

Australian Catholic University

In all, 21 interviews were held with these groups with the key topics covered in our discussions including:

Reasons for tenants choosing North Sydney;

Benefits of North Sydney as an office market;

Factors that differentiate North Sydney from other key competitor markets;

Income and return factors for investors and how conditions have changed over time to affect this;

Whether new development would likely result in a decrease in demand for the existing building stock or tap unmet demand;

Adequacy of building stock within North Sydney;

Adequacy and satisfaction of facilities/services within North Sydney;

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 INVESTOR SENTIMENT INTERVIEWS 47

If tenant a was forced to move, what options would they consider as an alternative location, including relocating with North Sydney;

Transport and car parking factors;

Issues affecting vibrancy and vitality of North Sydney;

Physical factors of North Sydney and their impact on the attractiveness of North Sydney as an office market;

Overall expectations for growth / change.

6.1 SURVEY METHODOLOGY:

A combination of owners, property developers, larger tenants and leasing and managing agents were interviewed face-to-face utilising semi structure interviews questions over a seven week period.

Responses to the feedback sought was generally consistent amongst more participants, however differing views when asked about amenities and retail in North Sydney were evident, the key influences can be attributed to:

- Proximity of the interviewee building/s to the Greenwood Plaza as the major retail centre;

- The interviewee’s familiarity of North Sydney itself.

6.2 OVERALL SENTIMENT AND COMMENTS

QUALITY OF OFFICE SUPPLY

There is a general consensus that North Sydney is a second tier office market and that premium stock is in short supply. There is a need for more ‘A’ grade stock with larger floor plates (>1,500 sq.m) if North Sydney is going to remain competitive in the market. The three proposed development sites, all of which cater for approximately 40,000 to 45,000 sq.m in office area each, are seen as being impeded by their size in this current economic climate and may have difficulty obtaining the minimum 50% tenant pre-commitment required by finance providers. This is due to the fact that there are a limited number of tenants with requirements over 10,000 sq.m in the market and that anyone of these properties could require at least two 10,000 sq.m tenants to commit prior to reaching a critical mass for development financing requirements. At least one respondent felt that the ideal scale of development for new office accommodation in North Sydney was approximately 20,000 sq.m.

FINANCE CONSTRAINTS

Many of the respondents felt that the current restrictions to access to finance was a real impediment to development of new office buildings within North Sydney. It was commonly shared that if pre-GFC conditions existed today, tenant pre-commitment requirements would be significantly lower given the strong current demand reflected in low vacancy rates in Prime quality buildings.

RESIDENTIAL DEVELOPMENT (MIXED VIEWS)

There are mixed attitudes in relation to the exclusion of residential development in the North Sydney CBD. The major concerns amongst respondents that are opposed or unsure about the inclusion of residential development within the North Sydney CBD was the ‘Chatswood’ syndrome where too much residential development had been constructed adjacent to office accommodation. It was felt by these groups that poor integration of residential development within the commercial core could have the potential knock on effect of tenants leaving and North Sydney becoming predominately residential. Others see the development of residential within the CBD as essential for reigniting the atmosphere of the area by activating the area outside of core business hours and an opportunity for better utilisation of the older office market stock.

All respondents agreed that residential development was appropriate at least on the periphery of the core commercial area and felt that an increased local population within walking distance of the commercial core could assist to invigorate North Sydney outside of core business hours.



VIBRANCY AND IDENTITY

When discussing the vibrancy of North Sydney in more detail, one respondent said “North Sydney CBD… is far from a vibrant CBD…” There was a general belief amongst most respondents that North Sydney has lost its identity, once seen as the Advertising and them IT mecca, it no longer has a clear identity as a place any key focus of industry activity and with areas such as Macquarie Park, Western Corridor, Pyrmont etc., offering larger floor plates, lower rent and better amenities, if a marketable differentiator is not found to promote North Sydney, it will struggle to hold its own.

STREET SCAPE AND PUBLIC DOMAIN

There was a continual reference throughout the interviews to the low quality streetscape and inadequate maintenance, especially in regards to the ‘no bin’ policy which was seen an unnecessary inconvenience to North Sydney workers and visitors. Additionally, we received many comments on issues such as the poor choice of sandstone paving, inability to hold utilities providers to account for rectification of damage they cause to footpaths and the general lack of ongoing maintenance around North Sydney. Most of the respondents felt that the overall poor presentation of the street scape combined with a lack of open space was a detractor to attracting new tenants, particularly if compared against options in the Sydney CBD. Only one representative thought North Sydney had good presentation and was kept clean and tidy.

The development or improvement of centrally located “open space” in the North Sydney CBD centre was suggested, as surrounding areas of open space were considered to be too far away for workers to access regularly. The topography of North Sydney is seen as a barrier in development of any significant open space, however better use and redesign of existing street areas such as Mount Street Plaza and Miller Street were suggested in order to better host events that could enliven the North Sydney CBD e.g. relocation of noodle markets and/or weekend markets.

FUNDING OF PUBLIC DOMAIN IMPROVEMENTS

Due to lower levels of development, the expected expenditure for public domain improvements outlined under the Section 94 Plan is significantly less than the $22 million expected, and as such most of the respondents suggested that alternative methods of raising funds need to be investigated. Many of the investors felt that the Rates charges collected from the North Sydney CBD were allocated to spending outside of the CBD and that a better balance needed to be found to help improve the upkeep of the commercial areas.

RETAIL PROVISION

Comments around Retail varied, some believe that there is a real disconnect between the quality of Greenwood Plaza vs. other arcades and street based retail areas and that improvements to the street scape and public domain may assist in attracting new quality retail business to balance the overall offer. It is noted however that most thought that the overall retail provision in North Sydney was adequate for the current user demand with the majority of improvement required focused on quality and diversity of retail operators. Lack of quality restaurants and an anchor tenant e.g.: supermarket, provide limited incentive to those not living in North Sydney to visit outside of core business hours.

STRATA FRAGMENTATION AND BUILDING QUALITY

Strata buildings are seen as a major issue for North Sydney, as some of this office stock is poorly maintained and very difficult for investors to amalgamate and redevelop to modern standards. It was widely felt that strata ownership structures restrict renewal opportunities for office and will contribute to a fall in the perception of the quality of office accommodation in North Sydney due to the aging nature of this stock. Incidents of strata owners holding back the sale / new development of property has been known to occur in North Sydney amongst some members of the interview group. It was held by a number of respondents that redeveloping of strata buildings will only become viable if changes to Strata Laws to allow for easier amalgamation of properties.

CAR PARKING COSTS

Cost of parking in North Sydney is still seen as excessive amongst the investor group, with the levy inequitable. In one instant the representative advised tenants wanted to hand back parking or were only renewing and not increasing spots because of costs. A review of the cost of metered parking during non-core hours was seen as an opportunity to encourage visitors to North Sydney in the weekends.

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 INVESTOR SENTIMENT INTERVIEWS 49

CONCERNS OVER DEVELOPMENT CHARGES

There is a general consensus that Council levies are excessive for little benefit or no return, raising concerns that the Council has not put any thought in the planning of their CBD. Development chargers are seen as inflated compared to other Councils, as cited by one participant, North Sydney’s construction levies is approximately 1% of the total construction costs and 25% more than what City of Sydney would charge. It was felt by most participants that development levies and charges needed to be more competitive than the Sydney CBD to help foster the conditions for new construction.

PLANNING CONTROLS AND RELATIONS WITH COUNCIL

The LEP controls are seen as the key restriction for development in North Sydney, with current planning controls needing to be reviewed to help promote development. Some participants suggested that an incentivised planning regime encouraging commercial upgrades of older buildings and underutilised sites should be explored (e.g. FSR and/or building height bonuses for amalgamation of sites, etc.).

Overall there is a consistent opinion from most representatives that when dealing with Council it is “bureaucratic, costly, time consuming, unsupportive process, and not open to business ideas at the expensive of creativity”. Those departments within the Council that were singled out as being consultative and open were often overruled by Councillors who appeared to be subjective and contradictory with stated policy and too heavily focused on the issues of a minority of residents.

North Sydney Council motivations were questioned in regards to the commercial vs. residential interest balance. Councillors are seen to represent the CBD however decisions more often than not are seen to be done with the residential constituency at the forefront, impacting the long term planning of the commercial domain.

ENVIRONMENTAL UPGRADE AGREEMENTS (EUA)

Majority of participants were not aware of the suggested North Sydney Environmental Upgrade Agreement (EUA) with further clarification being cited. Questions were raised whether this should be sitting at a Council level to administer as opposed to State or Federal. Some other respondents were quite opposed to the EUA concept as it transforms what would otherwise be a capital responsibility of the landlord into a recurrent cost through the rate system that can then be passed onto tenants. Others thought in order for this to be successful that tenant’s appetite for longer term leases would be required to increase in lower quality office buildings as most tenants in these market segments occupy under relatively short lease terms which means that rents will reset to market too quickly which places a higher risk on owners to fund any shortfall that may occur.

6.3 COMPARISON WITH OTHER OFFICE MARKETS

When asked how North Sydney compared against the other office markets, there is a belief by many participants that the tenants looking at the more suburban markets are a ‘different’ type of tenant i.e.: minimal requirement to be close to the Sydney CBD for ease of clients access, larger floor plates and lower required rental compared to what is currently available in North Sydney. However these markets are still seen as the major competitors and North Sydney Council needs to keep this in mind for future planning of the CBD.

SYDNEY CBD

Has lost its competitive advantage of cheaper rents over the Sydney CBD, with the differential between A g9krade space within the Western Corridor of Sydney and North Sydney now negligible.

There is potential that North Sydney could lose tenants to the Sydney CBD once Barangaroo is developed. This is more likely to be related to the backfilling of space vacated by tenants relocating to Barangaroo as opposed to direct moves to Barangaroo.

CHATSWOOD

Civic centre has lifted Chatswood;

Too much interference from residential developments located close to Prime office buildings;



Chatswood completely different asset to North Sydney.

MACQUARIE PARK / NORTH RYDE

Attracts different tenants due to the larger floor plates and pricing;

Is still 15 + years away from maturity;

Has capacity for approximately 800,000 sq.m more office potential.

North Sydney will lose some potential tenants to North Ryde due to the larger floor plates if larger floor plates cannot be provided within the North Sydney CBD;

North Sydney won’t compete directly with North Ryde and is unlikely to attract tenants from this area as there are so many development sites available within Macquarie Park / North Ryde. As soon as rents increase within Macquarie Park / North Ryde, more development will occur and rent will stabilise or decrease.

ST LEONARDS

Has lost its identity, seen as the cousin of North Sydney and an extension of that market;

SURRY HILLS

Smarter and trendier, converted warehouses and atmosphere make this a very sought after area.

WESTERN CORRIDOR (SYDNEY CBD)

Attractive alternative to North Sydney, particularly based on price and availability of contiguous

floor space options;

Whilst Barangaroo will increase rents in Western Corridor on average due to an increase in

quality, the majority of existing A grade Buildings will not increase substantially.

6.4 FUTURE

With no more new land assigned to commercial developments the commercial space will become more and more compact. Changes in policies to inspire developers / owners to improve or redevelop their building are needed. The status quo will only result in rental growth stagnating and the office space being seen as mediocre compared to other commercial hubs that are going through solid commercial growth.

6.5 GENERAL COMMENTS

“There will always be a North Sydney CBD, but I fear it will be a boring, unstimulating 1970’s-feel

CBD”;

“North Sydney CBD is a good revenue earner for Council, nothing gets given back via improvements

and maintenance of the environment”;

“If nothing gets done, North Sydney office market will decay more and more, or will eventually

transform into a residential area”;

“The age of all buildings (office, hotels etc.) and amenities in North Sydney is the big issue. Council

has the opportunity to bring all owners together, communicate their views on the future and

consolidate forward thinking”;

“Changes in technology mean you don’t need to be close to clients – business can be done via

mobile phone / teleconference, things are changing and North Sydney Council hasn’t kept up, being

close to the CBD is not enough anymore. What incentive are you offering? “

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 NORTH SYDNEY OFFICE MARKET COMPARATIVE REVIEW 51

7 North Sydney Office Market Comparative Review

This section includes an analysis of the commercial market characteristics and opportunities within commercial precincts in Sydney. These precincts include the North Sydney CBD, the Sydney CBD, Chatswood, St Leonards, Macquarie Park / North Ryde and Parramatta.

The comparative review considers the rents, vacancies, transport connectivity and convenience, car parking, future supply, retail and amenity, walkability and other and mooted developments within each commercial precinct.

TABLE 12 – COMPETITIVE PROFILE

LOCATION INDICATIVE

NLA (SQ.M.)

PROFILE

Sydney CBD (excl.

Western Corridor)

4,961,728

(3,748,857)

The Sydney CBD is the main commercial centre of Sydney. The

CBD can be geographically divided into the Core, Midtown,

Western Corridor, Southern and Walsh Bay precincts.

The Sydney CBD currently provides almost 5,000,000 square

metres of commercial stock, the majority of which is Premium

grade (793,963 sq.m), A grade (1,835,294 sq.m.) and B grade

(1,576,404 sq.m.).

The floor area excluding the Western Corridor is 3,748,857 sq.m

as at January 2015.

The area is well serviced by public transport, with seven railway

Stations (Central, Wynyard, Town Hall, Circular Quay, St James,

Martin Place and Museum stations), buses, ferries, light rail and

the Monorail. This generates a high level of commuter amenity to

the CBD.

According to the City of Sydney, as at January 2015, there were

62 car parking stations in the Sydney CBD. For office and

business premises in the CBD, City of Sydney Council planning

controls stipulate that the maximum number of car parking spaces

varies between 1 space per 75 sq.m and 1 space per 175 sq.m of

GFA dependent on floorspace ratios of 1.5:1, 2.5:1 and 3.5:1 and

land category (to note: for greater floor space ratios a different

formula is applied to determine the maximum number of car

parking spaces. The Sydney CBD will typically rely on the formula

to obtain maximum car parking numbers since the CBD generally

has a blanket floorspace ratio of 8:1)

As at January 2015, the vacancy rate for the Sydney CBD was

7.4%, this was down from 9.0% in January 2014. The main driver

behind the decrease in vacancy is the continued period of soft

supply over the past three years, with 28,591 sq.m of space

exiting the market in the six months to January 2015, combined

with net absorption of 54,279 sq.m over this same period. A

grade office space in the Sydney CBD had the highest overall

vacancy of 8.0% in January 2015.

Approximately 250,000 sq.m of commercial space is currently

52 NORTH SYDNEY OFFICE MARKET COMPARATIVE REVIEW URBIS


LOCATION INDICATIVE

NLA (SQ.M.)

PROFILE

under construction in the Sydney CBD, with 2 developments due

for completion by late 2015. A further three developments have

Development Approval to add an extra 150,050 sq.m in the Core,

Southern and Walsh Bay precincts, and there is a Development

Application lodged for a further 60,000 sq.m. within one

development.

Major developments include Mirvac/AMP (39,000 sq.m) at 200

George Street and Charter Hall (14,000 sq.m) at 333 George

Street.

The Sydney CBD benefits from a number of quality public domain

areas, including parks such as The Domain, Hyde Park and the

Botanic Gardens, and open space at Circular Quay to the north of

the CBD core.

The Sydney CBD has a wide selection of retail offerings, including

department stores (Myer and David Jones) and many speciality

retailers. However, there are only a limited number of small

supermarkets in the Core CBD.

Sydney CBD (Western

Corridor)

1,212,871 The Western Corridor of the Sydney CBD can be broadly defined

geographically as approximately the area west of York Street

between Darling Harbour, north of Liverpool Street and South of

Walsh Bay.

The Western Precinct is well serviced by rail (Wynyard and Town

Hall Stations), buses and ferries departing and arriving to Darling

Harbour.

The amenity of the Precinct is aided by the open space areas at

Darling Harbour. Retail amenity is lower within the Western

Corridor compared to the Core CBD, however the area is

developing an expanded local retail offer and employees can

easily walk to the retail areas of the Core CBD.

As at January 2015, the Western Corridor remained the CBD

precinct with the third lowest vacancy rate of 5.6% decreasing by

1.1% from January 2014. This was the result of positive net

absorption over the period.

(Note: Walsh Bay was reported as having the lowest vacancy rate

of 1.2% as at January 2015).

The most significant development in the Sydney CBD (Western

Corridor) is the Lend Lease Barangaroo, with approximately

270,000 square metres of commercial space due to enter the

market over the next two years. The first Barangaroo tower to

complete (T2) is due in the second half of 2015 and the second

two towers completing in 2016. Other major developments


LOCATION INDICATIVE

NLA (SQ.M.)

PROFILE

include DEXUS/Brookfield (27,500 sq.m) at 10 Shelley Street

and DEXUS (16,000 sq.m) at 30 Hickson Road which are both

due for completion in 2017. As well as Investa (21,000 sq.m) at

151 Clarence Street, due for completion in 2018.

The Western Corridor’s B, C and D grade stock has marginally

fallen since the year ending January 2015.

A grade rents in the Western Corridor is forecast to rise due to the

precincts urban renewal project currently under construction

(increased amenities).

Chatswood 285,245 Chatswood is described as the “retail hub” of Sydney’s North

Shore, with two major regional shopping centres (Chatswood

Chase and Westfield Chatswood) and smaller shopping centres

including Lemon Grove and the Mandarin Centre. A fifth centre,

Metro Chatswood has been completed above the railway and bus

interchange.

The area is well serviced by both trains and buses. Chatswood

Railway Station is on the North Shore and Northern Lines, and rail

services run south to the Sydney CBD and North Sydney CBD,

north to Hornsby, Newcastle, Gosford and Wyong and west to

Strathfield. In 2009, the Epping to Chatswood railway line was

opened, connecting the two suburbs. Chatswood is also home to

a major bus interchange terminal, with routes to the CBD,

Northern Beaches, North Shore and Parramatta, inter alia.

Vehicular access to Chatswood is via the Pacific Highway on its

western boundary, a major arterial road.

Parking metres have been installed in the Chatswood commercial

precinct by Willoughby City Council for designated street parking

spots. There are also a number of parking stations in Chatswood

which service both the retail and commercial uses within the

precinct. All day parking ranges from approximately $25 to $80

per day, depending on the parking station location, operator and

whether “early bird rates” are available.

Willoughby Council requires 1 car parking space per 200 sq.m. of

net floor area of commercial development in the suburb of

Chatswood.

Chatswood is home to the Australian headquarters of Vodafone,

Smith's Snackfood, Pepsico and Carter Holt Harvey, and houses

the offices of Optus, IBM and NEC.

Average Net Face Rents (per sq.m. p.a.) for A grade commercial

space currently averages $346 per square metre per annum, and

averages $435 for B, C and D grade commercial space (as at

http://en.wikipedia.org/wiki/Vodafone

http://en.wikipedia.org/wiki/The_Smith%27s_Snackfood_Company

http://en.wikipedia.org/wiki/Pepsico

http://en.wikipedia.org/wiki/Carter_Holt_Harvey

http://en.wikipedia.org/wiki/Optus

http://en.wikipedia.org/wiki/IBM

http://en.wikipedia.org/wiki/NEC_Corporation



LOCATION INDICATIVE

NLA (SQ.M.)

PROFILE

January 2015). Average outgoings range between $82 and $101

per square metre per annum.

As at January 2015, the vacancy rate for all commercial space in

Chatswood was 8.2% (including 8.7% of vacant A grade space

and 8.6% of vacant B grade space). The vacancy rate of 8.2% is

well below the average of 14% experienced over the past five

years. These vacancy rates reflect the highest for Sydney

metropolitan commercial space. Vacancy in the area in July 2010

was over 19%.

In the 12 months to January 2015, it was reported that Chatswood

had a net absorption of circa 15,921 sq.m for commercial space in

the area.

New development in Chatswood has been subdued over the past

10 years, which has resulted in stock supply decreasing by 1.6%

(4,454 sq.m) over the decade to the current supply levels of

285,245 sq.m.

New commercial supply in Chatswood includes the completion of

the Mirvac development (4,400 sq.m) at 7 Railway Street at the

beginning of 2014. There are currently no major commercial

projects in the pipeline for the Chatswood office market. Instead

there are smaller supplies of commercial space under mixed use

developments, this includes the Australia Post office site at 45

Victor Street which plans to include 1,860 sq.m of commercial

space. The anticipated small increments of supply will however

have minimal effect on the market.

Crows Nest /St Leonards 348,369 The commercial property boom in the 1970’s and 1980’s

cemented the suburb of St Leonards as a commercial precinct in

Sydney’s North Shore. This was aided by the presence of the

railway station and the location of the precinct on the Pacific

Highway, a major arterial road.

Over the past 18 years, there has been considerable high-rise

development in St Leonards, most notably high rise residential

developments. This includes the 38-storey “Forum” building

above the railway station, which opened in 2000 and included the

refurbishment of the St Leonards Railway Station.

According to ABS 2011 Census Data, the population for the St

Leonards SSC is 4,467 persons and approximately 92.4% of

residents in the St Leonards SSC live in a flat, unit or apartment.

Thus highlighting the presence of the suburb as medium and high

density living hub.

The Royal North Shore Hospital (RNSH) is located in St

Leonards. Accordingly, the commercial areas of the suburb


LOCATION INDICATIVE

NLA (SQ.M.)

PROFILE

support a wide range of health and supplementary industries.

The St Leonards commercial centre is home to a diverse mix of

tenants including Toyota Financial Services, IBM, Lenovo, Oporto,

Manchester Unity, Savvytel, Leighton Holdings and Macquarie

Media Group.

St Leonards is serviced by vehicle access via the Pacific Highway

and train access at St Leonards Railway Station. The St

Leonards Railway Station is located on the North Shore Line and

Northern Line of Sydney’s CityRail network. Buses also service St

Leonards, with services along the Pacific Highway. There is no

railway station at Crows Nest.

The walkability of the commercial area is poor given the elongated

nature of the precinct and the busy nature of the Pacific Highway.

As at January 2015, Average net face rents (per sq.m p.a.) for A

grade commercial space was $468 per square metre per annum

(increasing by 4.8% since year ending June 2014), and $399 for

B, C and D grade commercial space in St Leonards / Crows Nest.

Average outgoings range between $82 and $101 per square

metre per annum.

As at January 2015, the vacancy rate for all commercial space in

Crows Nest / St Leonards was 11.6% (including 11.1% of vacant

A grade space, 9.1% of vacant B grade space and 12.5% of

vacant C grade Space). These vacancy rates reflect the highest

for Sydney metropolitan commercial space.

In the 12 months to January 2015, it was reported that Crows

Nest / St Leonards had net negative absorption of circa -1,803

sq.m for commercial space, despite the reductions in office

accommodation on offer.

Future supply in office stock is limited, particularly since the Crows

Nest/St Leonards is subject to a land use zoning allowing for

residential uses as part of mixed use development. There are

several development approved sites are the Gore Hill Technology

Park for long term supply. In addition, 88 Christie Street, St

Leonards has development approval however it is believed the

project is likely to proceed as residential.

Macquarie Park Corridor 866,480 The ‘Macquarie Park Corridor’ is a 340 hectare employment lands

area incorporating the business park precincts of Macquarie Park

and North Ryde. It is a major employment centre, located

approximately 4 kilometres north east of Ryde, and approximately

11 kilometres northwest of North Sydney (by direct line).

The area contains a range of key research, business and

http://en.wikipedia.org/wiki/Toyota_Financial_Services

http://en.wikipedia.org/wiki/IBM

http://en.wikipedia.org/wiki/Lenovo

http://en.wikipedia.org/wiki/Oporto_%28restaurant%29

http://en.wikipedia.org/w/index.php?title=Manchester_Unity&action=edit&redlink=1

http://en.wikipedia.org/wiki/Savvytel

http://en.wikipedia.org/wiki/Leighton_Holdings

http://en.wikipedia.org/wiki/Macquarie_Media_Group

http://en.wikipedia.org/wiki/Macquarie_Media_Group



LOCATION INDICATIVE

NLA (SQ.M.)

PROFILE

employment generating assets including Macquarie Shopping

Centre, Macquarie University, Macquarie University Hospital and

CSIRO facilities.

The area is currently home to a broad mix of tenants including

Optus, Oracle, Honeywell, Telstra, Optus, CSR, Komatsu, Dexion,

Sony, Toshiba, Ericsson, Hyundai, Orix, Dupont, Canon, Hitachi,

Brother and Datacom.

Boosting A-grade net absorption has been the recent completion

of the pre-leased facilities to Fujitsu (9,500 sq.m) at 112 Talavera

Road and Canon (11,200 sq.m) at 5 Talavera Road in the

beginning of 2014. Conversely backfill space in the secondary

market led to negative net absorption of approximately 21,300

sq.m over this period.

Most commercial development in the area has been completed in

the last 13 years.

The scale, configuration, age and grade of office stock varies but

is broadly between 6 and 12 levels in height providing good

quality suburban standard accommodation with generally larger

floor plates compared to other office markets, which has proved

attractive for large scale corporate users.

The Corridor has been bolstered in recent years by the completion

of three railway stations significantly improving public transport

accessibility – North Ryde, Macquarie Park and Macquarie

University railway stations.

The area is well serviced by the M2 Motorway, Epping Road and

Lane Cove Road, however the dependency on cars for travel to

and from work in the areas has placed the road networks under

considerable strain.

As at January 2015, total vacancy in the Macquarie Park corridor

was 10.0% reflecting 86,291 sq.m. This amount is lower than the

July 2014 vacancy of 11.2% and was the result of a net

absorption over the past 6 months of 10,565 sq.m despite new

speculative development entering online. Over the past 5 years

vacancy rates have varied from a low of 7.1% in July 2012 to a

high of 12.2% at the peak of the global financial crisis in January

2010.

There are 2 new projects under construction with a combined NLA

of over 21,400 sq.m.

There is approximately 100,000 sq.m. of new stock in the pipeline

for North Ryde, most of which is awaiting pre-commitment prior to

commencing construction (thus, considered long term planning).


LOCATION INDICATIVE

NLA (SQ.M.)

PROFILE

Parramatta 680,317 Parramatta is located approximately 23 kilometres west of the

Sydney CBD.

Since the early 2000’s, Parramatta has seen a number of

government agencies relocate their head offices to the area,

creating a “government centre”. This includes the New South

Wales Police Force and Sydney Water Corporation.

Parramatta is serviced by a rail, buses and ferries. The

Parramatta railway station (refurbished in the mid-2000’s) is a

major interchange, on the Blue Mountains, Cumberland and

Western lines. A number of government and privately provided

bus routes also service Parramatta, including the North West T-

Way (to Rouse Hill) and the Liverpool-Parramatta T-Way (to

Liverpool), and five “Metrobus” services. A free bus route (Route

900) is operated by the Parramatta City Council providing free

transport around the Parramatta CBD. Ferry access is available

via the Parramatta Ferry Wharf, to the Sydney Ferries River Cat

ferry service.

Vehicular access to Parramatta is via Parramatta Road, the Great

Western Highway, the M4 Western Motorway and James Ruse

Drive.

Retail amenity includes Westfield Parramatta and strip retail on

Church Street, which has become the centre of a thriving dining

scene.

As at January 2015, Parramatta had a very low A grade vacancy

rate of 0.8%. D grade vacancy was also low at 2.7%. We note

however that vacancy is significantly higher in the C grade market

at 18.8%. Overall vacancy stood at 6.3%, down from 6.7% in the

previous 6 months.

As at January 2015, A grade net face rents averaged $400 per

square metre. B, C and D grade rents have averaged $303, a 6%

decrease since year ending June 2014.

Parramatta will see supply rise with the completion of new

developments in the area over the next five years, adding an

approximate total NLA of 126,000 sq.m.



We have summarised the key attributes and statistics relating to each of the markets in this Section in Table 15 below.

TABLE 13 – KEY COMPETITOR STATISTICS

NORTH SYDNEY SYDNEY CBD

(EXCL.

WESTERN)

SYDNEY CBD

(WESTERN

CORRIDOR)

CHATSWOOD CROWNS NEST /

ST LEONARDS

MACQUARIE

PARK CORRIDOR

PARRAMATTA

Indicative Commercial NLA (sq.m.) (Jan 2015)

822,190

↑ 3,748,857

↑ 1,212,871

↔ 285,245

↓ 348,369

↓ 866,480

↓ 680,317

Average A grade Rents ($ per sq.m) net

$631

↑ $780

↑ $640

↓ $435

↓ $468

↓ $340

↓ $400

Average B, C and D grade Rents ($ per sq.m. per annum) net

$508

↑ $540

↑ $510

↓ $346

↑ $399

↓ $283

↓ $303

Commercial Vacancy Rates (overall)

9.1%

↑ 9.72%

↓ 5.6%

↓ 8.2

↑ 11.6%

↓ 10.0%

↓ 6.3%

Long Term Average Vacancy Rates (10 years to Jan 2015)

9.7%

↓ 7.6%

↑ 7.4%

↑ 13.0%

↑ 12.6%

↓ 9.8%

↑ 8.7%

Average Annual Net Absorption (10 years to Jan 2015)

2,859

↑ 1,382

↑ 1,348

↑ 1,592

↓ -180

↑ 32,818

↑ 412

Average Incentives 25%

↔ 25%

↔ 26%

↔ 25%

↔ 29%

↔ 30%

↓ 17%

Average percentage of white collar employees (within a 5km radius)

89%

↔ 88%

↔ 88%

↔ 89%

↔ 90%

↓ 83%

↓ 66%

Transport infrastructure Trains Bus

Vehicle

(We note that the NWRL proposal will improve the rail accessibility)

Trains ↑ Bus ↑

Vehicle ↑ Ferry ↑

Light Rail ↑


Trains ↑ Bus ↑


Trains ↔ Bus ↑

Vehicle ↑


Trains ↔ Bus ↓

Vehicle ↓


Trains ↔ Bus ↓

Vehicle ↑


Trains ↑ Bus ↔



NORTH SYDNEY SYDNEY CBD

(EXCL.

WESTERN)

SYDNEY CBD

(WESTERN

CORRIDOR)

CHATSWOOD CROWNS NEST /

ST LEONARDS

MACQUARIE

PARK CORRIDOR

PARRAMATTA

Mix of office stock (grade & typologies)

P 4.4% A 22.7% B 51.8% C 19.5% D 1.7%

High proportion of sub-prime space

P 16.5% A 36.2% B 33.1% C 9.9% D 4.4%

Broad mix in a large market

P 14.6% A 39.5% B 27.7% C 15.8% D 2.4%

Broad mix in a larger market

P 0% A 55.2% B 28.4% C 16.2% D 0.2%

High focus on A

grade stock

P 0% A 29.5% B 19.2% C 47.4% D 3.9%

Lower quality mix

overall

P 0% A 71.1% B 26.3% C 2.3% D 0.3%

Focus on A grade stock with large

floor plates – generally newer

buildings

P 0% A 40.2% B 31.0% C 15.4% D 13.3%

Broad mix in a larger market,

higher proportion of A grade stock

Retail provision (Major Retail Centres / Locations)

(Greenwood

Plaza)

↑ Superior

(Pitt Street & Department

Stores)

↑ Superior

(Access to Pitt St & Department

Stores)

↑ Superior

(Access to Westfield

Chatswood & Chatswood

Chase)

↔ Similar

(The Forum)

↑ Superior

(Access to Macquarie Centre)

↑ Superior

(Westfield Parramatta)

Accessibility to Retail Average with

some Topography

issues

↑ Good

Very Central

↔ Average

albeit distance to retail is poorer

↔ Average

albeit major retail is slightly removed

↓ Poor

Lack of connectivity

↓ Poor

Disbursed nature of area

↑ Good

Very Central

Public Domain Limited open space

opportunities –

separated by

Highway

High quality open

space provision

(Martin Place,

Hyde Park, Pitt

Street Mall, etc.)

Access to Darling

Harbour waterfront

however limited

elsewhere

Similar to North

Sydney however

does have access

to

Poor public domain

provision with

centre being quite

disconnected

Poor public domain

provision due to

lower densities and

large distances

Access to

improving public

domain areas such

as Church Street

plus river access

Car parking provision (source: Local Council)

1 space per 100

sq.m. of non-residential floor

space

↔ Ranging from 1 per 75 sq.m. to

175 sq.m. of GFA

↔ Ranging from 1 per 75 sq.m. to

175 sq.m. of GFA

↑ 1 space per 200 sq.m. of net floor

area

↔ 1 space per 110 sq.m. of net floor

area

↓ 1 space per 40 sq.m. of GFA

↓ 1 space per 50 sq.m. of GFA

Potential future office supply sq.m.

125,203 459,726 N/A N/A 74,800 121,481 126,405



From our analysis of the competing markets, we have identified the following attributes that North Sydney should focus on enhancing in developing strategies to market the area to the broader economy:

The central location of North Sydney CBD within the Global Economic Ark;

Access to a highly qualified white collar workforce;

Competitiveness of rental levels in North Sydney versus Sydney CBD locations;

Current and future improved accessibility to rail transport, including future accessibility to workers located in the North West Growth Centre on completion of the North West Rail Link (this is not a unique offer, however is an important selling point);


Opportunities for new development including promoting the current proposed developments that will improve the mix of office accommodation;


URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 NORTH SYDNEY RESIDENT & WORKER PROFILE 61

8 North Sydney Resident & Worker Profile

8.1 RESIDENT PROFILE

8.1.1 HISTORICAL AND FORECASTED POPULATION GROWTH

Table 8.1 presents the current population for North Sydney LGA and the forecasted growths to 2031, benchmarked against the Sydney Metropolitan region.

As at 2011, the population in the North Sydney LGA was 66,850. Since 2006, the population has grown at an average of 1.3%, with an additional 806 residents per year, at the Sydney average.

The population in the LGA is expected to reach 85,700 by 2031, with growth at 1.1% per annum. Growth is expected to equate to 708 additional residents per annum. Growth is expected to be strongest between 2011 and 2021, moderating beyond that.

Growth in the North Sydney LGA is expected to be moderately lower than the Sydney average between 2011 and 2031, averaging at 1.2% per annum.

Historic Population Growth and Forecasts NORTH SYDNEY LGA, 2011 - 2031 TABLE 8.1

2011 2016 2021 2026 2031

North Sydney LGA 66,850 71,550 76,600 81,150 85,700

Sydney Metropolitan 4,286,200 4,657,650 5,064,200 5,467,200 5,861,750

2011-16 2016-21 2021-26 2026-31

North Sydney LGA 940 1,010 910 910

Sydney Metropolitan 74,290 81,310 80,600 78,910

2011-16 2016-21 2021-26 2026-31

North Sydney LGA 1.4% 1.4% 1.2% 1.1%

Sydney Metropolitan 1.7% 1.7% 1.5% 1.4%

Source: NSW Department of Planning & Environment, Urbis

Growth

Annual Growth (no.)

Annual Growth (%)

62 NORTH SYDNEY RESIDENT & WORKER PROFILE URBIS


8.1.2 AGE DISTRIBUTION

Chart 8.1 presents the population age distribution for residents in North Sydney LGA and Sydney. Relative to the Sydney Statistical Division, North Sydney has a considerably higher proportion of residents aged between 25-39 year (37% compared to 23%) and a lower proportion of residents aged 0-13 (11% compared to 18%).

The age profile reflects the family composition of the catchment area, discussed below.

Population Age Distribution NORTH SYDNEY LGA AND SYDNEY 2011 CHART 8.1

Chart 8.2 shows the projected change in the population age distribution of North Sydney LGA and Sydney to 2031.

While the population in the area is expected to grow, the age distribution of the area is expected to shift somewhat. Specifically, the proportion of residents aged over 60 is expected to increase, following a city wide trend, and the number of residents aged 0-14 is expected to increase albeit be a relatively small amount. In contrast, the proportion of residents aged between 25 and 59 is expected to fall and this is expected to be greater for residents within North Sydney LGA.

Change in Population Age Distribution NORTH SYDNEY LGA AND SYDNEY, 2011 TO 2031 CHART 8.2

Source : ABS Census 2011; Urbis

11% 9%

37%

25%

18%18%15%

23%27%

18%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Aged 0-13 Aged 14-24 Aged 25-39 Aged 40-59 Aged 60+

North Sydney LGA

Sydney

Source : ABS Census 2011, Department of Planning 2014; Urbis

1%0%

-5%

0%

4%

0%

-1%

-2%

-1%

4%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Aged 0-14 Aged 15-24 Aged 25-39 Aged 40-59 Aged 60+

North Sydney LGA

Sydney


8.1.3 FAMILY TYPES

Chart 8.3 shows the family composition for North Sydney LGA residents in 2001, 2006 and 2011.

Couple families with no children, despite the large fall since 2001, and lone person households make up a significant proportion of families within North Sydney LGA.

Family Composition NORTH SYDNEY LGA 2006 AND 2011 CHART 8.3

8.1.4 INCOMES

Table 8.2 presents the household income distribution for residents of North Sydney LGA compared the Sydney Statistical Division. Chart 8.4 following, shows this variation of average household income of North Sydney LGA against the Sydney average.

Incomes within the North Sydney LGA are comparatively higher compared to the Sydney Statistical Division, with a significant skew of households earning salaries in excess of $130,000 per annum. Overall, North Sydney Household incomes are approximately 32% higher than average household incomes across Sydney, reflecting the higher proportion of white collar professionals residing within the North Sydney LGA.

Source : ABS Census 2006 and 2011; Urbis

0% 10% 20% 30% 40% 50% 60% 70%

Group

Lone Person

Couple family with no children

Couple family with children under 15

Couple family with no children under 15

One parent family with children under 15

One parent family with no children under 15

Other2011 2006 2001



Household Income Distribution NORTH SYDNEY LGA AND SYDNEY, 2011 TABLE 8.2

North Sydney Residents’ Household Income Variation to Sydney 2001, 2006 AND 2011 CHART 8.4

8.1.5 INDUSTRY OF EMPLOYMENT

Chart 8.5 shows the industry distribution of employment for North Sydney LGA and Sydney based on the ABS Census 2011. In terms of North Sydney Resident’s Industry of Employment, approximately 92% of working resident are engaged in white collar professions compared to the Sydney average of 74%. This highlights the importance of office precincts to local residents in providing them greater options to work close to where they live.

Gross Annual Household Income North Sydney LGA Sydney

$Neg/Nil 2% 2%

$1 - $10,400 1% 2%

$10,400 - $15,600 2% 3%

$15,600 -$20,800 3% 6%

$20,800 - $31,200 5% 8%

$31,200 - $41,600 4% 8%

$41,600 - $52,000 5% 8%

$52,000 - $65,000 7% 8%

$65,000 - $78,000 7% 8%

$78,000 - $104,000 12% 13%

$104,000 - $130,000 7% 9%

$130,000 - $156,000 20% 11%

$156,000 plus 26% 16%

Average Household Income $124,845 $94,428


Source : ABS Census; Urbis

32%

32%

33%

33%

34%

2001 2006 2011


Industry of Employment NORTH SYDNEY LGA AND SYDNEY, 2011 CHART 8.5

8.1.6 PLACE OF EMPLOYMENT / JOURNEY TO WORK

Table 8.3 presents North Sydney residents’ top 10 destinations (LGA) of work.

Given the fact that so many North Sydney residents are involved in white collar professions, it is no surprise that a high proportion of these residents work in locations predominantly known for focusing on office. Whilst the majority of resident workers travel to the Sydney CBD to work, there are also a significant proportion of residents that remain within the North Sydney LGA to work. Other notable locations of work are generally clustered close to North Sydney on the North Shore. This demonstrates that North Sydney residents have a good variety of work opportunities within close proximity to where they live.


0% 5% 10% 15% 20% 25%

Professional, scientific & technical services

Financial & insurance services

Health care & social assistance

Education & training

Information media & telecommunications

Retail trade

Accommodation & food services

Wholesale trade

Public Administration & safety

Administrative & support services

Manufacturing

Construction

Other services

Rental, hiring & real estate services

Transport, postal & warehousing

Arts & recreation services

Electricity, as, water & waste services

Mining

Agriculture, forestry & fishing

Sydney

North Sydney LGA



North Sydney Residents’ Place of Work NORTH SYDNEY LGA 2011 TABLE 8.3

8.2 EMPLOYEE PROFILE

8.2.1 INDUSTRY OF EMPLOYMENT

Table 8.4 shows the industry distribution of employment for workers who work within North Sydney LGA, North Sydney CBD and Sydney.

Workers that work within the North Sydney LGA and specifically within the North Sydney CBD are more likely to work in white collar professions compared to the Sydney average. The key workforce areas for North Sydney include people working in Professional, Scientific and Technical Services; Financial and Insurance Services; and Information Media and Telecommunications sectors. The North Sydney CBD also hosts a significant proportion of workers in Administrative and Support Services.

Location Number %

Sydney 14,344 38%

North Sydney 9,642 26%

Willoughby 3,233 9%

Ryde 1,653 4%

Warringah 780 2%

Mosman 712 2%

Lane Cove 645 2%

Ku-ring-gai 527 1%

Botany Bay 481 1%

Parramatta 438 1%

No Fixed Work Address 700 2%

Balance 4,229 11%

Total 37,384 100%

Source : Journey to Work 2011 Bureau of Transport Statistics; Urbis

North Sydney LGA Residents

Place of Work


North Sydney Workers’ Industry of Employment NORTH SYDNEY LGA, NORTH SYDNEY CBD AND SYDNEY, 2011 TABLE 8.4

8.2.2 PLACE OF RESIDENCES / JOURNEY TO WORK

Table 8.5 shows where workers who work within North Sydney LGA and North Sydney CBD live.

A significant proportion of North Sydney workers reside on the North Shore or Northern Beaches, within relatively close proximity to their place of work. This is an important factor for businesses operating out of North Sydney as the North Shore and northern Beaches have a high proportion of white collar workers for these businesses to draw on.

A large volume of workers also reside in a wide variety of locations throughout Sydney and are dependent on good public transport links to connect them to North Sydney.

Industry

North Sydney LGA

Workers

North Sydney CBD

WorkersSydney Workers

Professional, Scientific and Technical Services 9% 28% 10%

Financial and Insurance Services 5% 22% 7%

Information Media and Telecommunications 5% 3% 3%

Administrative and Support Services 5% 6% 3%

Construction 5% 4% 6%

Public Administration and Safety 5% 6% 6%

Health Care and Social Assistance 5% 5% 11%

Retail Trade 5% 3% 10%

Manufacturing 5% 2% 9%

Wholesale Trade 5% 5% 6%

Education and Training 5% 2% 8%

Transport, Postal and Warehousing 5% 3% 5%

Accommodation and Food Services 5% 3% 6%

Inadequately described 5% 2% 1%

Other Services 5% 3% 4%

Rental, Hiring and Real Estate Services 4% 2% 2%

Not stated 4% 1% 1%

Arts and Recreation Services 4% 0% 2%

Electricity, Gas, Water and Waste Services 3% 1% 1%

Mining 3% 0% 0%

Agriculture, Forestry and Fishing 1% 0% 0%




North Sydney Workers’ Place of Residence NORTH SYDNEY LGA AND NORTH SYDNEY CBD, 2011 TABLE 8.5

LGA Number % LGA Number %

North Sydney 10,436 14% North Sydney 1,659 9%

Sydney 4,895 7% Sydney 1,386 7%

Warringah 4,374 6% Hornsby 1,037 6%

Willoughby 4,363 6% Warringah 1,000 5%

Ku-ring-gai 3,968 5% Ku-ring-gai 994 5%

Hornsby 3,825 5% Willoughby 883 5%

Ryde 2,502 3% Blacktown 650 3%

The Hills Shire 2,278 3% Sutherland Shire 610 3%

Lane Cove 2,160 3% Ryde 605 3%

Parramatta 2,116 3% Randwick 584 3%

Balance 33,708 45% Balance 9,312 50%

Total 74,625 100% Total 18,720 100%


North Sydney LGA Workers - Place of Residence North Sydney CBD Workers - Place of Residence

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 NORTH SYDNEY OFFICE DEMAND FORECASTS 69

9 North Sydney Office Demand Forecasts

In this Section we assess the likely future demand for office floor space in North Sydney, taking into account projected white collar employment growth and competition in other key centres.

9.1 EMPLOYMENT PROJECTIONS

This section assesses forecasted jobs growth as a basis for projecting future office demand. Jobs growth is assessed at the LGA level, then for North Sydney CBD specifically. Projected jobs growth for competing commercial centres is also reviewed, to set some context to the North Sydney forecasts, and provide a basis for establishing North Sydney’s future role within the hierarchy of centres.

Job growth forecasts are based on BTS 2014 release.

9.1.1 NORTH SYDNEY LGA

As shown in Table 9.1, over the 25 year period from 2011 to 2036 the number of job is North Sydney LGA is expected to increase by around 19,000.

To note, in Urbis’s previous study in 2013 employment projections were recorded to increase by around 8,000 rather than the current revision of 19,000. This is due to the fact that official government data were revised upwards since the previous employment study. The revision is based on the revised population projections by the Department of Planning and also the expected office supply growth in North Sydney.

Almost 25% of new jobs are expected to be the Professional, Scientific & Technical Services industry. Activities incorporated within this sector include scientific research, technical services, surveying services and consulting engineering services. Growth in this sector is likely to be the key driver of demand for office space in North Sydney LGA going forward.

Health Care and Social Assistance is also expected to be a key growth sector in North Sydney LGA. These jobs will primarily be located in hospitals, health clinics, nursing homes and child care centres, though a proportion is also likely to be accommodated in commercial office space (e.g. in the form of medical consulting suites or health administration).

The net effect on office demand is discussed in Section 9.2.

70 NORTH SYDNEY OFFICE DEMAND FORECASTS URBIS


Employment Projections By Industry NORTH SYDNEY LGA, 2011 TO 2036 TABLE 9.1

Industry Sector No. % No. % No. % No. % No. % No. %Total

Change

Annual

Growth %

Professional, Scientific and Technical Services 22,695 29% 23,156 29% 23,680 28% 24,608 28% 25,846 28% 27,080 28% 4,385 0.7%

Health Care and Social Assistance 4,883 6% 5,255 6% 5,836 7% 6,319 7% 6,791 7% 7,282 8% 2,399 1.6%

Financial and Insurance Services 8,907 12% 8,915 11% 9,220 11% 9,718 11% 10,194 11% 10,692 11% 1,786 0.7%

Education and Training 4,259 6% 4,311 5% 4,678 6% 5,081 6% 5,483 6% 5,884 6% 1,625 1.3%

Information Media and Telecommunications 4,272 6% 5,440 7% 5,485 7% 5,550 6% 5,636 6% 5,750 6% 1,478 1.2%

Retail Trade 3,668 5% 4,096 5% 4,347 5% 4,555 5% 4,757 5% 4,970 5% 1,302 1.2%

Unclassified 2,100 3% 2,859 4% 2,978 4% 3,098 4% 3,195 3% 3,290 3% 1,189 1.8%

Accommodation and Food Services 3,950 5% 4,220 5% 4,426 5% 4,638 5% 4,861 5% 5,113 5% 1,164 1.0%

Construction 2,675 3% 2,891 4% 3,110 4% 3,334 4% 3,566 4% 3,795 4% 1,121 1.4%

Administrative and Support Services 3,575 5% 3,933 5% 4,016 5% 4,095 5% 4,217 5% 4,360 5% 786 0.8%

Manufacturing 2,951 4% 2,755 3% 2,975 4% 3,179 4% 3,382 4% 3,595 4% 644 0.8%

Other Services 2,226 3% 2,298 3% 2,357 3% 2,440 3% 2,531 3% 2,624 3% 398 0.7%

Rental, Hiring and Real Estate Services 1,772 2% 1,835 2% 1,904 2% 1,984 2% 2,067 2% 2,167 2% 395 0.8%

Arts and Recreation Services 1,129 1% 1,193 1% 1,207 1% 1,260 1% 1,318 1% 1,372 1% 243 0.8%

Electricity, Gas, Water and Waste Services 345 0% 414 1% 426 1% 447 1% 463 1% 482 1% 137 1.3%

Mining 214 0% 226 0% 256 0% 280 0% 308 0% 338 0% 124 1.8%

Wholesale Trade 2,915 4% 2,915 4% 2,912 3% 2,937 3% 2,974 3% 3,022 3% 107 0.1%

Agriculture, Forestry and Fishing 78 0% 92 0% 100 0% 107 0% 115 0% 122 0% 44 1.8%

Public Administration and Safety 3,065 4% 2,748 3% 2,827 3% 2,916 3% 3,000 3% 3,080 3% 15 0.0%

Transport, Postal and Warehousing 1,439 2% 1,440 2% 1,390 2% 1,391 2% 1,406 2% 1,436 1% -3 0.0%

Total Employment 77,116 100% 80,992 100% 84,130 100% 87,935 100% 92,111 100% 96,455 100% 19,339 0.9%

White Collar Employment 56,782 74% 59,085 73% 61,210 73% 63,969 73% 67,084 73% 70,292 73% 13,510 0.9%

Office-Based White Collar Employment 44,286 57% 46,028 57% 47,131 56% 48,870 56% 50,960 55% 53,130 55% 8,845 0.7%

Source: BTS 2014 Release; Urbis

2011-36

Historic Forecast

2011 2016 2021 2026 2031 2036


9.1.2 NORTH SYDNEY CBD

North Sydney CBD currently accommodates around 60% of all jobs in North Sydney LGA, and this proportion is expected to remain relatively constant to 2036.

Around 60% (2,784) of new jobs projected to be created in the Professional, Scientific & Technical Services sector in North Sydney LGA are expected to be located within the North Sydney CBD.

From these official forecasts prepared by the Bureau of Transport Statistics (BTS), it is apparent that the Professional Technical & Scientific Services sector is likely to have a significant influence on the evolution of North Sydney CBD.



Employment Projections By Industry NORTH SYDNEY CBD, 2011 TO 2036 TABLE 9.2

Industry Sector No. % No. % No. % No. % No. % No. %Total

Change

Annual

Growth %

Professional, Scientific and Technical Services 14,543 30% 14,957 30% 15,249 29% 15,808 29% 16,568 29% 17,328 29% 2,784 0.9%

Financial and Insurance Services 7,389 15% 7,327 15% 7,610 15% 8,049 15% 8,467 15% 8,902 15% 1,513 0.9%

Information Media and Telecommunications 3,409 7% 4,296 9% 4,323 8% 4,367 8% 4,429 8% 4,513 8% 1,104 1.4%

Education and Training 2,574 5% 2,593 5% 2,820 5% 3,068 6% 3,316 6% 3,563 6% 990 1.6%

Construction 2,176 5% 2,384 5% 2,565 5% 2,750 5% 2,942 5% 3,131 5% 955 1.8%

Health Care and Social Assistance 1,765 4% 1,890 4% 2,101 4% 2,276 4% 2,447 4% 2,624 4% 859 2.0%

Unclassified 1,255 3% 1,759 4% 1,845 4% 1,929 4% 1,998 4% 2,065 3% 810 2.5%

Administrative and Support Services 2,929 6% 3,183 6% 3,243 6% 3,302 6% 3,395 6% 3,506 6% 577 0.9%

Retail Trade 1,396 3% 1,561 3% 1,657 3% 1,737 3% 1,814 3% 1,895 3% 499 1.5%

Accommodation and Food Services 1,278 3% 1,368 3% 1,433 3% 1,500 3% 1,571 3% 1,652 3% 373 1.3%

Rental, Hiring and Real Estate Services 819 2% 852 2% 883 2% 919 2% 957 2% 1,002 2% 184 1.0%

Other Services 1,174 2% 1,188 2% 1,217 2% 1,258 2% 1,305 2% 1,351 2% 177 0.7%

Electricity, Gas, Water and Waste Services 411 1% 493 1% 507 1% 532 1% 551 1% 574 1% 163 1.7%

Mining 242 1% 259 1% 295 1% 323 1% 356 1% 391 1% 149 2.4%

Wholesale Trade 1,791 4% 1,790 4% 1,792 3% 1,810 3% 1,836 3% 1,868 3% 76 0.2%

Arts and Recreation Services 224 0% 239 0% 243 0% 254 0% 266 0% 277 0% 53 1.1%

Manufacturing 1,486 3% 1,188 2% 1,271 2% 1,349 2% 1,427 3% 1,509 3% 23 0.1%

Agriculture, Forestry and Fishing 38 0% 45 0% 49 0% 52 0% 56 0% 60 0% 21 2.2%

Public Administration and Safety 2,023 4% 1,801 4% 1,854 4% 1,912 4% 1,968 3% 2,021 3% -2 0.0%

Transport, Postal and Warehousing 1,092 2% 1,069 2% 1,028 2% 1,025 2% 1,034 2% 1,053 2% -38 -0.2%

Total 48,017 100% 50,242 100% 51,984 100% 54,221 100% 56,702 100% 59,286 100% 11,268 1.1%

White Collar Employment 36,851 77% 38,327 76% 39,543 76% 41,213 76% 43,118 76% 45,088 76% 8,237 1.0%

Office-Based White Collar Employment 31,114 65% 32,416 65% 33,163 64% 34,357 63% 35,784 63% 37,272 63% 6,158 0.9%


2011-36

ForecastHistoric

2011 2016 2021 2026 2031 2036


COMPETING COMMERCIAL CENTRES

Table 9.3 illustrates projected office-based white collar employment growth for key competing commercial centres – Macquarie Park / North Ryde, Chatswood and St Leonards / Crows Nest.

As noted, Macquarie Park / North Ryde is expected to attract an additional 6,000 office based jobs by 2036 – the largest increase of the North Shore commercial centres. This is not surprising given that the centre is less constrained, in terms of development potential, than North Sydney due to the large number of available development sites. Therefore, although Macquarie Park / North Ryde is expected to attract the largest increase in employment the total change in employment is quite low based on historic growth and development capacity.

Relative to Macquarie Park / North Ryde and North Sydney, growth in office based jobs in Chatswood is expected to be the lowest at around 2,500.

Competing Commercial Centres OFFICE BASED WHITE COLLAR EMPLOYMENT PROJECTIONS 2011 TO 2036 TABLE 9.3

RECENT DEVELOPMENTS

Barangaroo: The ongoing expansion of Barangaroo has potential to become a competitive threat to North Sydney, albeit indirectly. Many of the A grade office buildings that will be exited by tenants moving to Barangaroo could be priced at similar levels to that of North Sydney. As a result, the space left behind by tenants moving to Barangaroo could weaken tenant demand in the North Sydney market until this backfill space is taken-up in the Sydney CBD.

177 Pacific Highway: Leighton Properties has been able to secure pre-commitment by taking head lease and occupying over 76% of office space. The unoccupied portion of office space in this new development will require new demand and no new deals have been announced on this space to date. The leasing agent has indicated that offers have been submitted on the entire balance of the unlet space, however decisions on the final tenants are not yet due as the is approximately 12 months until practical completion. Due to the fact that the floor plates are relatively larger (in excess of 1,200 sq.m) than the average floor plate currently offered in North Sydney this is seen as an attractive factor in the market.

2011 2016 2021 2026 2031 2036 Total Change

North Sydney 31,114 32,416 33,163 34,357 35,784 37,272 6,158

Macquarie Park / North Ryde 18,356 19,222 20,340 21,634 23,114 24,692 6,336

Chatswood 10,095 11,096 11,355 11,728 12,178 12,653 2,558

St Leonards / Crows Nest 15,097 16,325 16,711 17,300 18,027 18,787 3,690




9.2 OFFICE DEMAND FORECASTS

This Section assesses the future demand for office space in North Sydney LGA and CBD, drawing on the job projections contained in the preceding sections.

9.2.1 NORTH SYDNEY LGA

Of the 19,000 new jobs forecasted to be located in North Sydney LGA from 2011 to 2036, around 9,000 are expected to be office based, with the balance being located in retail, community, health and other accommodation.

Based on an employment density of 20sq.m. NLA per employee, new office based jobs arising in North Sydney LGA will generate demand for around 177,000sq.m of new office space.

We note that employment densities can vary significantly and that newer office fit out formats are achieving lower employment densities of 15 sq.m NLA per employee (on average) and as low as 12 sq.m NLA per employee for large scale corporate fit outs that can achieve high levels of efficiency including activity based workplace design.

We note that in 2006, office employment densities were around 24sq.m. per employee. A lower density has been assumed for the forecast period, to account for the trend towards more efficient utilisation of office space, driven primarily by organisations’ efforts to cut operating costs. The adopted employment density of 20 sq.m NLA per employee has been adopted as a conservative rate to reflect a reduction in the average employment density from 2006; the on average smaller employee size of North Sydney businesses (therefore achieving lower efficiency rates); and typical market vacancy rate within the overall office market.

On this basis a net addition office floor space of approximately 92,000 sq.m could be justified within the next 10 years (Table 9.5).

Actual net construction demand may actually be higher as there is a strong likelihood that some older buildings will be withdrawn (as is the case with the proposed serviced apartment development at 80 Arthur Street) and/or demand will be focused towards the A grade + end of the market as tenants move away from the lowest quality buildings.

Office Demand Forecasts NORTH SYDNEY LGA, 2011 TO 2036 TABLE 9.4

9.2.2 NORTH SYDNEY CBD

We note that the previous North Sydney Commercial Centre Study (2013) report provided a ‘base case’ and an ‘upside base case’. The additional section of an ‘upside base case’ was due to the BTS forecasts considered conservative for North Sydney as white collar employment was recorded to grow by 0.38% per annum between 2001 and 2036, with overall Sydney white collar employment growth from 2011 to 2036 expected to be just over 1% per annum. However since the latest BTS employment forecast release (2014) figures have been revised and as a result record white collar employment growth in North Sydney at 1% per annum between 2011 and 2036 (as shown in Table 9.2). Consequently, this report does not include an ‘upside base case’.

2011 2016 2021 2026 2031 2036

Office-Based White Collar Workers 44,286 46,028 47,131 48,870 50,960 53,130

2011-16 2016-21 2021-26 2026-31 2031-36

Additional Office-Based White Collar

Workers - Cumulative1,742 2,846 4,584 6,675 8,845

Forecast Office Demand (NLA sq.m) -

Cumulative1 34,836 56,913 91,685 133,490 176,893

Based on 20 sq.m per worker

Source: BTS 2014 Release; NSW Department of Planning; Urbis


Of the additional jobs expected to be located in North Sydney CBD in the future based on forecast by industry sector, 55% (6,158) will be accommodated in office space, with the balance accommodated in retail, community and other spaces.

Based on an office space ratio of 20sq.m. NLA per employee, this would generate demand for an additional 123,000sq.m. of office space in North Sydney from 2011 to 2036.

Once again, this is based on an office floor space ratio of 20 sq.m. per employee, this represents a decrease from 24 sq.m. since 2006 (as discussed in Section 9.2.1).

Office Demand Forecasts NORTH SYDNEY CBD, 2011 TO 2036 TABLE 9.5

2011 2016 2021 2026 2031 2036

Office-Based White Collar Workers 31,114 32,416 33,163 34,357 35,784 37,272

2011-16 2016-21 2021-26 2026-31 2031-36

Additional Office-Based White Collar

Workers - Cumulative1,302 2,049 3,243 4,671 6,158

Forecast Office Demand (NLA sq.m) -

Cumulative1 26,044 40,979 64,866 93,414 123,168

Based on 20 sq.m per worker

Source: BTS 2014 Release; NSW Department of Planning; Urbis

76 DEVELOPMENT CONSTRAINTS ANALYSIS URBIS


10 Development Constraints Analysis

As part of the study we have also undertaken a high level review of likely constraints to future development of the North Sydney CBD. As all sites within the North Sydney CBD have essentially been built on, the key opportunities for new development lie in the redevelopment of existing properties to maximise unrealised floor space ratio potential and/or improve the quality of stock provided to the market over time.

A number of the aging buildings within the North Sydney CBD that are approaching 40 plus years of age (Section 3.7 Chart 3.9) and will require major capital expenditure over the foreseeable future to maintain basic levels of quality and services. It is noted however that in general, much of this older building stock is constrained by smaller floor plates as a result of being located on smaller sites.

The potential for redevelopment of older office accommodation is also constrained by the presence of strata ownership. Strata ownership has been identified through our consultation with industry participants as a major barrier to the amalgamation of smaller sites to enable larger scale redevelopment over time.

In addition to parcel size and strata ownerships which are the major constraints to new development, other potential constraints to future office development include:

North Sydney CBD Footprint - The overall footprint of the North Sydney CBD which provides limitations to the lateral expansion of office precincts due to conflicts with adjoining low density residential areas. Recent examples of these constraints have been reflected in restrictions placed on the Australian Catholic University’s library operating hours due to the adjacency of low density residential properties.

Topography – The slope of the CBD from south to north and the location of Pacific Highway centrally within the CBD provide some barriers to the attractiveness of new development away from the Train Station. However this is primarily associated with willingness of tenants to locate away from the Train Station as opposed to any fundamental construction issue.

Council Fees & Charges – It has been raised by some participants within our interviews that development fees and charges are high when compared to similar changes within competing markets such as the Sydney CBD. This is a constraint in that it increases the cost of development relative to completive markets.

We expand further on the key issues of parcel size and ownership fragmentation as follows.

10.1 PARCEL SIZE

It is noted that a number of the larger sites within the CBD have been developed at or close to their full development potential under the current planning controls or have buildings that are some time off reaching the end of their economic life.

Most older office buildings within the C and D grade categories are situated on smaller sites and therefore have smaller floor plates and in many cases have restricted natural light due to adjoining buildings being built to their side boundaries (this is notable along parts of Arthur and Walker Streets and the northern section of the Pacific Highway). If the overall quality of accommodation is to renew and improve over time, site amalgamations would be required to result in buildings with larger floor plates and improved amenity by way of outlook and natural light access.

Site amalgamation for redevelopment will be difficult to justify on the grounds of economic viability unless the cost of the acquisition and potential demolition does not significantly exceed the underlying land value for new development.

As such there may be scope for Council to consider planning incentives that will assist in site amalgamations over time provided they result in new development that improved the overall quality of stock in North Sydney over time (i.e. improving the quality of office accommodation by grade, which includes larger floor plates, improved access to natural light and improved ESD outcomes). Possible

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 DEVELOPMENT CONSTRAINTS ANALYSIS 77

example initiatives that could be considered in a more detailed assessment of options to improve building stock quality could include one or a combination of the following:



Setback relaxation;



Flexibility relating to assessment of car parking provision (based on prevailing tenant requirements);

Commitments to public domain improvements around identified amalgamation opportunities.

The purpose of these initiatives would be to assist in maximising the financial viability of redevelopment projects. We note however that Council’s ability to promote and/or influence site amalgamation is limited, and ultimately the market will have the greatest influence on redevelopment occurring, albeit with the support of Council.

Figure 30 overleaf outlines the broad distribution of parcel sizes within the North Sydney CBD. It is noted that most of the larger size have already been developed with larger higher quality office buildings, or alternatively are utilised for mixed use developments, such as Greenwood Plaza, which is also constrained by heritage elements.



FIGURE 30 – NORTH SYDNEY CBD PARCEL SIZE


10.2 OWNERSHIP FRAGMENTATION

In addition to parcel size, strata ownership of office buildings has also been identified as a significant issue within the North Sydney CBD. The strata sub-division of office buildings and sale of individual units has traditionally been seen by some owners as a way of maximising the value of their assets as opposed to sale in one line.

This has created some challenges for future development within North Sydney CBD as it has proven very difficult over time to amalgamate strata units in an economic way that maintains the viability of new development. Despite this difficulty, we note that both the Leighton Properties and Laing O’Rourke development sites have both been amalgamated with the inclusion of some strata titled properties. In the case of the Laing O’Rourke site a number of the strata units had been held by one owner, whereas the Leighton site took approximately 10 years to amalgamate by two separate developers over this time. This would typically be a time period that would deter most developers / investors from commencing the amalgamation process.

There are also questions in the market about the long term maintenance of strata office buildings and the drag they may place on perceptions of the North Sydney CBD. These buildings will be less able to aggressively upgrade their overall quality due to the conflicting interests of multiple owners.

Council may have some role to play in engaging with strata building owners to help identify opportunities to realise potential uplifts in development opportunities on their sites (in line with the initiatives summarised in Section 10.1 above), or alternatively identify initiatives such as the Environmental Upgrade Agreement that may assist in improving the underlying performance and quality of their buildings.

On 15 September 2012, the NSW Government released a discussion paper that reviewed the strata ownership laws in NSW. The paper was released by the Minister for Fair Trading, Anthony Roberts, as is entitled ‘Making NSW No. 1 Again: Shaping Future Communities (Strata & Community Title Law Reform Discussion Paper)’.

This paper covers a wide range of topics around the management of Strata and Community Title Schemes and includes chapters on (1) Future Regulatory Approach; (2) Governance; (3) Managing the Built Environment; (4) Managing Money; and (5) Managing Disputes.

Whilst all of the issues are pertinent to the future management of strata schemes, Chapter 3, Managing the Built Environment in particular has relevance to the renewal and redevelopment of existing strata schemes. This is particularly important to North Sydney as any changes to the strata laws surrounding the termination of strata schemes may impact the ability of existing strata titled buildings within the North Sydney CBD to be redeveloped over time.

The report raises the need for urban consolidation and renewal within existing urban areas as a key reason to drive changes in strata laws to make the redevelopment more achievable. As buildings age, the ability to maintain them economically reduces and ultimately at some point the buildings will need to be replaced or substantially upgraded. This is something that is easily achieved within properties that are held in a single ownership, however very difficult in buildings with multiple owners.

This circumstance exists as present NSW Legislation required a unanimous resolution of strata owners to terminate a scheme to enable sale and redevelopment of a strata building. Chapter 3 of the paper explores options for less than 100% agreement to terminate a scheme, with a recommendation that “the most common level of support required in international legislation to initiate a termination is 80%”. Reducing the vote threshold to 80% would certainly assist in facilitating processes that would lead to the ongoing improvement and renewal of strata buildings within North Sydney.

Sensible options based on the age of a building and a gradual reduction of voting thresholds is also discussed in the paper to provide some security to purchasers in newer buildings. These recommendations would appear to have merit as they balance the rights of owners in strata schemes with the overall community benefit derived from urban renewal. For example, it has been suggested that schemes of less than 20 years old may require 100% agreement to terminate a scheme, whilst a scheme of 20 to 30 years old may require a 90% majority vote to terminate the scheme, etc.



We note that any proposed changes to Strata Laws that reduce overall property ownership rights for those falling within a minority position on the vote against terminating a scheme would have to be protected through appropriate controls to ensure they receive fair market value for their interests in the property and other appropriate safeguards to ensure ongoing confidence in the strata property market.

Figure 31 outlines the location of strata titled buildings in North Sydney. Figure 32 following compiles both the parcel size and strata title ownership maps into one combined map.


FIGURE 31 – NORTH SYDNEY CBD – STRATA OWNERSHIP DISTRIBUTION



FIGURE 32 – NORTH SYDNEY CBD – COMBINED PARCEL SIZE AND STRATA OWNERSHIP

URBIS NORTH SYDNEY COMMERCIAL CENTRE STUDY 2015 CONCLUSIONS & RECOMMENDATIONS 83

11 Conclusions & Recommendations

The objective of this study has been to identify the current supply and occupancy of office accommodation by grade; the attractiveness of North Sydney to occupiers; issues faced by developers and investors; North Sydney’s competitive positioning; need for additional office accommodation; and key recommendations that will support the economic vitality of the North Sydney Centre.

The North Sydney’s office market overall performance and key challenges are as follows:

Decreasing stock levels since July 2010 has led to North Ryde/Macquarie overtaking North Sydney as second largest CBD in January 2014. The most recent withdrawals during 2014 have been partially due to redevelopment opportunities for residential change of use, located primarily in Milsons Point (which sit outside the core North Sydney CBD)

Aging of office accommodation and an increase in the standard thresholds for office accommodation grades have combined to diminish the level of Prime quality stock. Without future renewal of the office accommodation there is a risk that the overall quality of the North Sydney office market will continue to decline over time

A larger proportion of buildings with smaller floor plates reduces the overall competitiveness of the North Sydney office market when compared to other office markets in Sydney

Decreasing vacancy rates since July 2013 (9.1%) has been mainly due to the large amount of withdrawals rather than any definable increased demand for office space within existing buildings, noting that demand for 177 Pacific Highway appears to be strong (indicating a desire for quality)

North Sydney rents are the highest rents outside of the Sydney CBD

The Western Corridor of the Sydney CBD display rental rates that are only slightly above those experienced in North Sydney and therefore the expansion of Barangaroo is seen as an indirect competitor, particularly since A grade office floor space being vacated by tenants relocating to Barangaroo is likely to be priced similar to that of North Sydney.

From the analysis outlined within this report for the North Sydney Centre we have developed recommendations for North Sydney Council (both statutory and non-statutory actions) that will act to facilitate the strategy and promote the role of North Sydney in the broader economy. We note that these recommendations are parallel to the recommendations in our previous report: (‘North Sydney Commercial Centre Study 2013’). As a result, Table 11.1 includes not only the previous report’s strategies however also the current performance/response against the previous recommendations in order to indicate the current status and progress of the North Sydney Commercial Centre.

84 CONCLUSIONS & RECOMMENDATIONS URBIS


Status of 2013 Recommendations NORTH SYDNEY COMMERCIAL CENTRE TABLE 11.1


DESIRED OUTCOME


RESPONSE

Marketing - Revitalise

the marketing strategy

for North Sydney to

publicise the benefits of


to existing and potential

tenants, investors,

building owners and

managers.

Increase national and

international exposure.

Key areas to focus on are the following:

The central location of North Sydney CBD within the Global Economic Ark as

well as its identification as a Global Sydney Strategic Centre;

Access to a highly skilled white collar workforce;

Competitiveness of rental levels in North Sydney versus Sydney CBD

locations. (Note: improvement of worker amenity in North Sydney CBD will

create a greater competitive edge in this respect);

Current and future improved accessibility to rail transport, including future

accessibility to workers located in the North West Growth Centre on

completion of the North West Rail Link;


Opportunities for new development including promoting the current proposed

developments that will improve the mix of office accommodation; and


Underway

A marketing strategy was completed in

2014. The launch of the campaign is

expected on 14th May 2015.

The marketing strategy will highlight

the economic strength of North Sydney

and promote the centre as an area

which offers a good work/life balance.

North Sydney’s competitive edge was

identified by North Sydney Council by

undertaking research with residents,

workers and key stakeholders. The

presentation of North Sydney’s

economic strength was given to a PCA

breakfast on 17th October 2014.

Economic

Development –

Maximising the utility of


as a community

infrastructure asset.

Creating a substantial

improvement to the

ambiance and working

environment of North

Sydney Centre and

therefore increase

traffic in flow

(particularly during

leisure time). In turn,

Creating a dedicated Council resource to actively support key revitalisation

and investment projects – responsible for economic development strategies

and providing advice on the use of the public domain. Based on discussions

with other Local Government’s that operate similar programs, it will be

important for this role to be tied to income generation targets through

measured new activity or through actual revenue to Council that results from

new initiatives (e.g. direct revenue benefits such as income from market stalls,

other forms of casual leasing within the public domain and sponsorship, etc.

Underway

Council is in the process of employing a

staff member (under Council’s new

‘Events Team’) whose role will be

dedicated to running events in the North

Sydney Centre.

Council has not altered their stance on



DESIRED OUTCOME


RESPONSE

increasing North

Sydney’s CBD

regional, national and

global competitive

edge.

and indirect achievements such as improved satisfaction levels by North

Sydney tenants and workers; reduction in retail vacancy levels; etc.). Key

elements of the role include:

Establishment of a North Sydney CBD Retailers Forum to discuss

marketing and other initiatives to maximise business opportunities and

improve the quality of retailing for the benefit of workers, residents and

visitors;

Investigate and implement opportunities to increase activation levels

within the North Sydney CBD both within core trading hours and after

hours / on weekends;

Working with key building owners and managers to identify and implement

marketing strategies to attract and retain key office tenants; and

Work with property owners to assist in fostering relationships with Council

to identify and investigate development opportunities such as site

amalgamation and redevelopment.

Develop the public domain further through the following:

Seek an urban design study to identify key movement patterns and

opportunities to create an improved open space provision and

development of a functioning street level centre heart;

Maximising the value and utility of outdoor areas (e.g. courtyards, lane

ways) through design. Key considerations: Position and access allowing

internal and external areas to merge; multiple outdoor areas viewed

positively; maximise harbour and water views;

ground floor building corners– tenancies who act as creating a

prohibiting residential development in

the commercial core. A number of

developments have been completed in

the Mixed Use zone and a number are

under construction/ approved. These

developments will result in over 1,300

new dwellings and approximately 2,500

new residents.




DESIRED OUTCOME


RESPONSE

social/cultural hub (work and social meeting points); and

Introduce activities that will enhance weekend visitation, such as markets

and a strong food and beverage offer.

We note that there has been a call for a greater degree of residential

property to be developed within the North Sydney CBD by a range of

individuals and groups to help promote a greater level of vibrancy and retail

performance. At the same time, we have also been advised by some

interviewees in our discussions with industry participants that caution should

be exercised in allowing new residential development in the commercial core

so not to erode the primacy of office based uses. As such we have

undertaken an assessment of the relative contribution that residential and

office based developments can make to retail sales within the North Sydney

CBD. Our analysis is summarised as follows:

We have looked at the potential retail market generated by office and

residential apartment development in a building assumed to have a gross

floor area of 20,000 sq.m for comparative purposes. We have applied

typical efficiency ratios to obtain a net floor area for both uses and applied

a range of employment and dwelling densities to obtain a building

population (worker / residents). To this we have applied an average

annual spend to each group based on recent survey data for workers and

benchmark data for resident per capital expenditure to derive a total retail

market for each. We have then applied a benchmark retention rate for

worker spend and resident spend to reflect what might be retained within

North Sydney CBD;

From this assessment the expenditure generated by workers and

residents under each option was broadly comparable as workers spend

less on a per capital basis than residents however make up much greater

numbers within the building. It is also noted that the retention rates for



DESIRED OUTCOME


RESPONSE

workers for the North Sydney CBD would be higher than residents as the

worker spend is based on surveys of what people spend during their

working day. Residents have a much greater choice of retail options

outside of the North Sydney CBD and therefore will direct a lower

proportion of their expenditure to local retailers;

Based on the scenarios analysed, retail turnover generated by office

workers is likely to be 36% to 56% higher than a residents in a building of

a comparable size. This would indicate that office uses are more

economically important overall to retailers than residents within the North

Sydney CBD.

We note however that this worker expenditure is concentrated during core

business hours, particularly during the morning commute period and lunch

time and less so in the evening. There is a higher likelihood that residents

will direct more expenditure to retailers close to their homes after core

business hours, including supermarket based shopping as well as food

and beverage. This may assist in generating demand for some extended

hours retailers, however the overall benefit to retailers of opening longer

hours is unlikely to be realised unless they can attract a larger after hours

market including the retention of some additional worker after hours spend

and resident spend from a broader surrounding area. Therefore

residential development on its own is unlikely to produce a significant

improvement in the performance of retail businesses within North Sydney.

Improve the Public

Domain – in order to

have a dual function

(work and social

purpose), similar to that

of the Sydney CBD.

Increasing the use of

the public domain for

the existing and future

workforce/residents.

Innovations in the use of space and flexibility of design could have substantial

benefits for the attractiveness of North Sydney CBD;

Increase the level of maintenance undertaken to maintain the public domain;

Introduce mechanisms that will assist in improving the access to sport and

recreation facilities around North Sydney to help promote an active workforce

Underway

The following areas within the Public

Domain are currently undergoing

upgrades:

Brett Whitely Place




DESIRED OUTCOME


RESPONSE

(e.g. lunch time team sport competitions, etc.);

Review the current traffic design within the North Sydney CBD and consider

opportunities to improve the experience for pedestrians, particularly around the

intersection of Pacific Highway, Miller Street and Mount Street; and

Work with RMS to review the operation of the Pacific Highway and identify

measures to improve pedestrian amenity and accessibility (e.g. reduce speed

limits, additional crossing points, taxi set down bays during core office hours,

etc.).

Upgrade and expand the

pedestrian realm (Brett

Whiteley Place, Elizabeth

Plaza, portions of Denison

Street and Mount Street)

Expected commencement in

mid to late 2015.

Walker Street

Construction has commenced

on preliminary works to

upgrade the street.

Miller Street

Currently in design phase for

street upgrade i.e. new

pavement treatments, footpath

widening and additional

crossing).

Education Precinct Masterplan

Adopted in September 2014

Proposing a suite of short to

long term public domain

upgrades. This includes

introducing ‘Shared Zones’ at

several locations.



DESIRED OUTCOME


RESPONSE

The above public domain works will be

carried out in conjunction with works

identified in the ‘North Sydney Centre

Traffic and Pedestrian Management

Study’. The upgrades will also be in

accordance with Council’s ‘Public

Domain Style Guide’.

Quality of Office

Supply

Meet current and

future demand trends

in order for North

Sydney’s Commercial

Centre to become a

viable choice option to

prospective tenants.

The current mix of office development within North Sydney is skewed towards

B grade office accommodation, with a reclassification of a number of buildings

from A grade to B grade in July 2009. This has placed North Sydney at a

relative disadvantage compared to its competing office markets

There is an overall trend for larger scale tenants to seek larger floor plate,

highly efficient buildings, which only makes up a relatively low proportion of

North Sydney office stock. This indicates that there will be a need for a

greater proportion of new / refurbished accommodation over time

Prepare a strategic review of older office buildings within the North Sydney

CBD and prepare a strategy to identify key potential redevelopment and/or

amalgamation sites and consider the range of appropriate uses that

should be considered on each of these sites in the long term

Develop policy that will incentivise the amalgamation of smaller sites for

redevelopment and/or refurbishment of older commercial office buildings

for higher quality office accommodation and the potential for alternative

higher economic uses consistent with the overall operation of the North

Sydney CBD. This could include a combination of any of the following

potential example measures:


Not Commenced

The strategic review of older buildings is

believed to occur as part of the

upcoming ‘Built Form Capacity Review’.

This review will:

Identify older buildings which

may be suitable for

redevelopment and possibly

identify sites where

amalgamation is needed

Consider a range of

interventions to encourage

redevelopment (such as

bonuses and relaxing controls).




DESIRED OUTCOME


RESPONSE


Setback relaxation;



Flexibility relating to assessment of car parking provision (based on

prevailing tenant requirements);

Commitments to public domain improvements around identified

amalgamation opportunities.

Development Viability Investigate the impact of levies such as parking and railway station upgrade, in

addition to other council based development changes and costs on the

competitiveness of new development in North Sydney. Although Leighton

Properties has been able to secure pre-commitment by taking head lease and

occupying over 76% of office space, the other two proposed developments

(Mirvac and Laing O’Rourke and East Mark Holdings) have not been able to

attract pre-commitments due to competitive space from Sydney CBD.

The current Part 3A approvals will require approximately 50% lease pre-

commitment in order to obtain funding for development. This will require a

higher volume of lease pre-commitment than has been achieved in other North

Sydney Buildings

Based on employment forecasts and sensitivity testing, approximately 123,000

sq.m of new office accommodation is likely to be required in the North Sydney

CBD by 2036 under the Bureau of Transport Statistics Forecasts released in

2014. We note however that the actual level of new stock constructed will

have to exceed this underlying level of demand as there will also be the

requirement to provide a higher quality standard of accommodation that could

Underway

The development at 177 Pacific

Highway commenced construction in

2014 and will provide approximately

40,000 sq.m of floorspace.


will examine the development and

possibly consider the costs associated

with the development.


will re-examine the floorspace targets.

Council has reviewed its current

planning policies and determined that

Part 3A could largely be approved under

the existing controls.



DESIRED OUTCOME


RESPONSE

only be achieved through new development

Review the impact of current Council planning policies on the ability of existing

approved Part 3A projects to be delivered in their current formats and consider

how these development proposals will be treated in the event that their current

approvals lapse

Review the NSW Government paper entitled ‘Making NSW No. 1 Again:

Shaping Future Communities (Strata & Community Title Law Reform

Discussion Paper)’ that has been produced to discuss reforms to the ongoing

management of strata schemes in NSW. Based on this review, North Sydney

Council should prepare a submission in response to the discussion paper

supporting the proposed changes that will help to facilitate the long term urban

renewal of the North Sydney CBD through making the consolidation of existing

strata schemes for renewal or redevelopment easier to achieve, provided

appropriate safe guards are maintained to protect confidence in the strata

property market.

Council made a submission to ‘Making

NSW No. 1 Again: Shaping Future

Communities (Strata & Community Title

Law Reform Discussion Paper)’

supporting changes to the legislation

which promote good management and

governance of strata schemes, good

dispute resolution mechanisms

(including a new system of compulsory

conciliation that derives a resolution

where there are disputes and conciliates

and where there is multiple strata

schemed in the fabric of one building),

and a mechanism to enable easier

strata building renewal/redevelopment

with appropriate safeguards built in.

Sydney Level 23, Tower 2 Darling Park 201 Sussex Street Sydney, NSW 2000 t +02 8233 9900 f +02 8233 9966

Brisbane Level 7, 123 Albert Street Brisbane, QLD 4000 t +07 3007 3800 f +07 3007 3811

Melbourne Level 12, 120 Collins Street Melbourne, VIC 3000 t +03 8663 4888 f +03 8663 4999

Perth Level 1, 55 St Georges Terrace Perth, WA 6000 t +08 9346 0500 f +08 9221 1779

Australia • Asia • Middle East w urbis.com.au e [email protected]

http://www.urbis.com.au/

Date post:	25-Sep-2020
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times