Rising demand: An artist's impression of 555 Collins Street, Melbourne. Rising demand: An artist's impression of 555 Collins Street, Melbourne. Photo: Supplied
Capital city skylines are set to get more cranes as the wrecking ball demolishes decrepit buildings to make way for new, shiny apartment blocks and futuristic office towers.
In Sydney, one of the latest to be earmarked for change is Gold Fields House at Circular Quay.
Its co-owners Blackstone, the private Valad Core Plus Fund and Dutch fund APG, have appointed CBRE and JLL to market the almost 50-year-old building for about $400 million.
An artist's impression of the landmark Gold Fields House at Sydney's Circular Quay. An artist's impression of the landmark Gold Fields House at Sydney's Circular Quay. Photo: Supplied
Once redeveloped it will bookend Circular Quay with AMP's $1 billion revamp of its 50 Bridge Street office tower and laneway, and the former Coca Cola building opposite in Macquarie Street, which is also being developed into apartments.
Lend Lease has also lodged a draft planning proposal with the City of Sydney for a commercial tower at Circular Quay at 174-176 George Street, 182 George Street and 33-35 Pitt Street.
This could include the Jacksons on George bar, which all could be turned into apartments or a hotel.
The revamp has been triggered by the rise in demand for city living and the fact that more than half of city-based office blocks across the country are considered derelict and as they are more than 30 years old.
While a majority still look good and are safe to work in, the demand for high-speed internet connections, hot desking and the new "end of journey" facilities - bike racks, showers and lockers - has put pressure in older buildings.
This has led to the growth in the conversion of the towers into apartments.
According to JLL researchers, the anticipated plans for ageing office stock across Australia's office markets is expected to vary, with Sydney and Melbourne leading a charge for residential development conversions well above commercial book value.
"Melbourne's ageing buildings within the CBD have landlords questioning how best to treat them in order to stay relevant and keep the buildings occupied," said JLL's head of tenant representation for Victoria, Peter Walsh.
"For occupiers, this is a positive as it means landlords recognise the way occupiers work, and what they expect from workplaces, is changing – and they need to keep up with expectations," Mr Walsh said.
"The adoption of new work styles and increased demand for higher-quality amenities, such as end-of-trip facilities, conference facilities and business clubs, certainly hasn't ruled out consideration of ageing stock."
Three examples in Melbourne are 85 Spring Street, which JLL sold to Grocon with planning approval for a residential tower; 35 Spring Street, which is owned by Cbus and recently demolished for a residential tower; and 555 Collins Street, also earmarked for a residential tower.
JLL's head of tenant representation for NSW and ACT, Gavin Martin, said Sydney's strong appetite for residential conversions would continue to maintain a balance of oversupply by absorbing excess older-style stock.
"Over $1 billion of commercial property has been purchased in the last year, with the intent to redevelop or convert the site for residential use," he said.
According to Mr Martin, Sydney is leading the charge across Australia in adopting new workplace styles to achieve more with less. "Unless large corporates have a valid reason to move, they're deciding to stay, with many working more efficiently in less space."
This has been seen along Martin Place, where older properties have been given a facelift.
The biggest are 20 Martin Place, which is currently a skeleton building that the owners Pembroke will redevelop into a futuristic office tower, and the Cbus and DEXUS $450 million redevelopment at 5 Martin Place.
Nearby, GPT is rejuvenating the MLC building and the surrounding retail area along Castlereagh Street.
Similarly, in Canberra's commercial office market, any move needs to be justified by productivity gains. "If an existing fit-out works and the size of the space is appropriate, then the likelihood of a renewal will be higher than that of a move," Mr Martin said.
"Ageing stock in Canberra is likely to undergo a similar cycle to the refurbishment and demolition that other states are currently experiencing; however it may not come to fruition for years due to slower demand."
According to Colliers International, the residential development is the flavour of the month throughout Sydney and this is influencing metropolitan commercial markets.
Its Competitive Rivalry: Office Versus Residential in Metro Markets report, says that some metro markets have seen contraction as a result of residential conversions, while in others development sites that would once have been for commercial use, are now being pushed as residential.