Oct. 5 (Bloomberg) -- Lend Lease Group aims to lure financial companies to a defunct shipyard on the fringe of Sydney’s business district, creating a rival banking center.
Australia’s largest developer is spending A$6 billion ($5.8 billion) on the Barangaroo site, the country’s biggest project, 1 kilometer (0.6 mile) northwest of the city center. It will boast offices with almost double the area per floor of Sydney’s existing towers, making them better suited to trading floors and modern open-plan work spaces.
Redevelopment of the last available land parcel in the city will transform the “Hungry Mile,” where harbor laborers in the 1930s went to find work, into an alternative financial center similar to London’s Canary Wharf or New York’s Midtown. To do so, it will have to draw firms away from the Martin Place to Circular Quay area which today houses companies including Goldman Sachs Group Inc., UBS AG and Macquarie Group Ltd.
“They’re creating a new world down there,” said James Patterson, Sydney-based senior managing director at CB Richard Ellis Group Inc., the world’s largest commercial property broker. “The city’s got buildings that are ageing, so the design with the big floors, the environmental standards, that’s the next stage of where Sydney’s going to go.”
Midtown Manhattan, home to Times Square and the Empire State Building, has attracted firms including JPMorgan Chase & Co. and Citigroup Inc. away from their traditional Wall Street home. London’s Canary Wharf, also built on former docklands, has won tenants such as Barclays Plc and HSBC Holdings Plc since the first tower was completed in the early 1990s.
Still, Lend Lease’s redevelopment, which will take up about a third of the 22-hectare (54-acre) site, isn’t without detractors, with opponents raising concerns about design, contamination on the site, transport and the project’s environmental credentials.
Lend Lease, which expects to start construction on the publicly owned land by the end of the year, is awaiting state government approval on changes to the existing plan -- including a 60,000 square meter (645,840 square feet) increase in floor space -- that will allow its proposal to proceed, said David Hutton, group head of development at the Sydney-based company. No date has been set for a decision.
The plan for Barangaroo South -- by Rogers Stirk Harbour + Partners, which designed Madrid’s Barajas Airport and the Pompidou Center in Paris -- shows a fan of about 14 buildings, including three commercial and three residential towers on six hectares overlooking Darling Harbour, flanked by a waterfront promenade. A 40-story hotel with oval-shaped floors will be built on a pier jutting into the water, designed to evoke the ships that sailed into Barangaroo in its former life.
The rest of Barangaroo will be split between cultural and public uses in the middle, and a park in the north. Barangaroo is named after an Aboriginal woman who opposed conciliatory talks with British colonizers. She was the wife of Bennelong, after whom the site of the Opera House is named.
The project will add about 300,000 square meters of offices and about 1,500 homes, with half the total area remaining public space, Lend Lease’s plans and the Rogers Stirk website show. The commercial buildings will have floors as large as 2,000 square meters each, said Hutton.
“Sydney is Australia’s financial capital, but it doesn’t have many relevant buildings for the financial services sector,” said Kevin George, head of leasing at Jones Lang LaSalle Inc., one of the brokers responsible for finding tenants for Barangaroo. “A lot of bigger tenants in the financial services sector in Hong Kong, Singapore, London, New York are taking buildings with very big floor plates. Barangaroo is able to provide those types of buildings in Sydney.”
Lend Lease has received “serious commercial interest” for more than half the site and will announce three tenant agreements by the year’s end, said spokesman Greg Flynn.
Sydney city office vacancies will fall to 2.8 percent in January 2014, when the first Barangaroo commercial tower is scheduled to be completed, from 8.5 percent in July, according to estimates from real-estate consultant Colliers International.
Barangaroo will meet 40 percent of expected office demand over the next 10 years, Lend Lease’s Hutton forecasts. Rents will be similar to premium towers such as Aurora Place, the Sydney home of Royal Bank of Scotland Group Plc, and Chifley Tower, where UBS is located, said John Hickey, international director for office leasing at real estate company DTZ, also involved in finding tenants.
Companies pay net rents of as much as A$1,100 a square meter in Sydney’s most expensive commercial buildings, said George of Jones Lang LaSalle, the second-largest publicly traded commercial property broker.
Companies including KPMG, Westpac Banking Corp. and PricewaterhouseCoopers LLP already have their offices in the western part of the business district and Barangaroo will draw others, Hutton said.
“The western edge of the city has started to see a major trend,” Hutton said. “Barangaroo will be the major contributor to accommodating that growth.”
The residential, retail and commercial mix -- a first for a major development in Sydney -- will see some 30,000 people living and working in the area and contribute A$1.5 billion to the New South Wales state economy every year, the Barangaroo Delivery Authority, which is overseeing the project, estimates.
Barangaroo’s green credentials are a selling point for Lend Lease, which is targeting a carbon-neutral development. The buildings’ design and its own alternative energy generation will cut emissions by about 80 percent, Lend Lease said, with carbon offsets and outside facilities compensating for the rest.
A waste treatment plant, recycling and offsite rubbish processing will help meet Barangaroo’s zero waste target and export more water to surrounding areas than it uses, Lend Lease said in an e-mailed statement.
“The key criteria on a tenant’s shopping list is the environment,” DTZ’s Hickey said. “Barangaroo ticks all the boxes in terms of the credentials that a lot of the big employers in town, that their staff, are demanding.”
Not everyone is convinced. Chris Harris, a Greens party member of the Sydney City Council, criticized the carbon offset purchase and outside waste treatment plans and said the project is unlikely to live up to its environmental claims.
“Barangaroo will be a lost opportunity to do something that sets new standards and seriously addresses the climate-change impact of a large urban development,” Harris said in a statement.
Community groups have raised concerns about the release into Sydney Harbour of buried contaminants when excavation begins at Barangaroo, which is in an area that was a gas plant in the 1800s, and are calling for shorter buildings and no hotel. They’ve also questioned the likelihood that a light-rail extension to service Barangaroo will be built.
Ian Campbell, chairman of the Barangaroo Action Group, an organization opposing the project, said the group will take legal action if Lend Lease’s requests to amend the existing area plan and to begin work are approved.
NSW state Premier Kristina Keneally last week took direct control of the project from the planning minister, saying some groups sought to “derail” it. Sydney Lord Mayor Clover Moore resigned from the Delivery Authority last month, citing concerns about its transparency and lack of public involvement.
Starting excavation would enable the removal of contaminants, funded by the company’s payments to the state, Hutton said. A court case wouldn’t hamper the start of construction, he said.
Philip Thalis, founder of Hill Thalis Architecture + Urban Projects, whose design won a global competition in 2006 and was subsequently replaced by Lend Lease’s plan, argued against the concentration of buildings.
“Lend Lease is proposing seven of the tallest buildings in Sydney in one enclave,” Thalis said. “What attracts people in great cities is the public space and where it is.”
The opposition is “mystifying,” given the need for such a project and the efforts to reduce its environmental footprint, said Aaron Gadiel, chief executive officer of the Urban Taskforce, a developers’ group based in Sydney.
“The project is unprecedented,” he said. “It’s a great opportunity to have a fully masterplanned site, almost with a blank canvas. Sydney’s CBD has evolved gradually over 220 years and it’s never had this luxury before.”
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