The limited supply of new office towers in Sydney - with the exception of Barangaroo South and Mirvac's George Street sites - has seen a resurgence of interest in buying and renovating heritage buildings across town.
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".