Google was to anchor the NSW government’s White Bay project but that fell through, leaving it to seek out an additional 100,000 sq m elsewhere — about the same size as the proposed Central station site.
Under the latest plan, it will comprise a twin-tower development of about 150,000 square metres of office space in the centre of the government-backed technology precinct next to Central station.
The project has made it through to the third and final stage of the NSW government’s unsolicited proposal process after Dexus and Frasers formed a joint venture over the buildings they own at Henry Deane Plaza on Lee Street.
Dexus and Frasers’ properties are held under long-term leases, with 14 Lee Street held by Dexus and its Office Partner, and 20 Lee Street and 26 Lee Street held by Frasers Property Australia.
‘Ratings agency S&P Global predict rental growth will be slower for office space.’
Macquarie Equities property analyst Stuart McLean said it will boost Dexus’ status as the largest office landlord in the country and give Singapore-based Frasers even more firepower in the market.
Mr McLean said while increasing supply and softer demand are likely to result in softer office markets in the short term, “the progress here is a positive in isolation”.
“This project will firmly establish Central as one of the most distinctive and lively places to work or visit in Australia, and it is set to rejuvenate Central as one of the key gateways to the Sydney CBD,” Dexus chief executive Darren Steinberg said.
The development will give a much-needed boost to the NSW government’s economy, with the creation of about 700 construction jobs, adding more than $3 billion in value each year.
“Central Place Sydney will reshape the daily experience for more than 20 million people who use Central each year,” said Frasers Property Australia chief executive Rod Fehring.
Against the backdrop of new developments, ratings agency S&P Global predict rental growth will be slower for office space as the private sector cuts costs substantially due to a weaker economy.
S&P Global real estate investment trust analyst Craig Parker says in the short term, office landlords who lease to governments, large corporates and multinational tenants will be more protected than the retail sector given their tenants’ ability to operate in a “work from home” mode and generally stronger creditworthiness than retailers.
“Still, recessionary conditions will soften leasing demand in major central business districts,” Mr Parker said. “White-collar and knowledge-based industries were growing quite strongly prior to this disruption, which may assist in the recovery if the pandemic is short-lived.”
Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.