Heritage is hip again
While tackling heritage projects is not for the faint-hearted, investor demand is high for bricks and mortar and previously ignored sites are now viewed more favourably.
The George Group, which renovated 66 King Street into the Louis Vuitton flagship store, is now looking to sell, or lease, a floor at 75 King Street, known as Reid House. The 11-storey Federation building is thought to be Australia's tallest timber structure.
Agents say that prior to the success of the new LVMH store and building at 66 King Street, it wasn't so long ago that developers and investors ran for the hills at the mention of the word "heritage". Today, the reverse is occurring.
There is a significant proportion of the Sydney central business district classified as heritage, but many buildings have been internally converted for modern offices. Many of the sites have been converted into strata offices.
Capital markets director at CBRE, Gavin Lloyd, said heritage conversions are now helping to create value, and in some cases better financial outcomes, compared with modern office assets. He said a significant proportion of the occupier market is seeking creative and interesting work spaces. That has led to developer and investors getting involved, particularly with low interest rates making higher-yielding property look attractive.
Mr Lloyd said a number of Sydney heritage precincts had been refurbished by developers, including finger wharves at Wooloomooloo, Jones Bay at Pyrmont and Walsh Bay's Pier 8 and 9.
"Some recent lease deals have demonstrated tenant incentives for creative heritage space can be half that of conventional office stock," Mr Lloyd said.
At 36 Hickson Road, a sandstone heritage building, which was a gas works and refurbished by Lend Lease, is attracting strong buyer interest, according to CBRE.
Mr Lloyd said demand for heritage space has also led to an intense investor focus on Sydney's western corridor, where many of the city's original heritage warehouses have been converted to funky and contemporary office space.
The precinct is developing into a creative hub that has attracted architects and designers, along with advertising, media and software groups. Some tenants have reportedly paid more than the asking rent to secure their desired creative space.
Online travel company Wotif recently leased 1350 square metres of space in the 1887-built Corn Exchange building in Sussex Street.
Wotif chief executive Scott Blume said the company and staff considered the historic building to be an "inspirational work place".
Frequently Asked Questions about this Article…
Investor interest is rising because new office tower supply in Sydney is limited (except for Barangaroo South and Mirvac’s George Street sites), occupiers are seeking creative and interesting workplaces, and high-profile conversions such as the Louis Vuitton store at 66 King Street have demonstrated strong demand and value creation for heritage buildings.
According to CBRE’s capital markets director Gavin Lloyd, heritage conversions are helping to create value and can, in some cases, produce better financial outcomes than modern office assets—driven by occupier demand for creative space and, in a low interest rate environment, investor appetite for higher-yielding property.
The article notes heritage projects are "not for the faint-hearted," meaning investors should expect complex renovations, heritage regulatory constraints and potentially higher refurbishment costs. Despite these challenges, demand for renovated heritage space remains strong.
Notable examples in the article include the George Group’s Louis Vuitton conversion at 66 King Street, the Reid House floor at 75 King Street (an 11‑storey Federation timber building), Lend Lease’s refurbishment of the sandstone gas works at 36 Hickson Road, converted finger wharves at Woolloomooloo, Jones Bay at Pyrmont, Walsh Bay Pier 8 & 9, and the Corn Exchange on Sussex Street leased by online travel company Wotif.
Demand for creative heritage space can change leasing dynamics: some tenants have been prepared to pay more than the asking rent to secure space, while CBRE notes tenant incentives for creative heritage space can be around half those of conventional office stock—making leasing economics attractive in some cases.
Heritage precincts are developing into creative hubs that attract architects, designers, advertising and media agencies, software groups and other creative occupiers—examples include Wotif leasing space in the historic Corn Exchange building.
Yes. The article says there is intense investor focus on Sydney’s western corridor where many original heritage warehouses have been converted into contemporary office space, helping create a creative hub that appeals to tenants and investors alike.
Investors can access opportunities in several ways noted in the article: developers and groups like the George Group may sell or lease floors (for example at 75 King Street), many heritage buildings have been internally converted into strata offices, and developers have refurbished precincts for leasing or sale.
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