Planes, cranes and automobiles: Key indicators of Sydney city fringe demand

While you might have read that commercial property returns have stagnated or slumped, this doesn’t tell the whole story.

In this article, we discuss the key indicators for optimism in some commercial property sectors.

Soaring confidence: cranes and commercial property prices

Sydney’s skyline is a study in perpetual motion, even through so-called downturns. The skyline is ever-changing; buildings in our CBD and on the city fringe increase in height, with the landscape punctuated by cranes. We love to see cranes; they’re the embodiment of confidence in our city.

As at October 2023, across Australia the RLB Crane Index stood at 882 cranes for residential and commercial. Commercial projects are on the up, as measured by the index. While most are accounted for in mixed-use projects that include residential, retail and offices, we note some of the spaces have been diverted to child care and medical.

Cranes represent optimism, and rightly so for Sydney and the city fringes. We have a strong economy, a highly skilled workforce, a maturing start-up ecosystem and a stable government. Our location in the Asia-Pacific region and our cosmopolitan lifestyle are attractive to new businesses and investors. Those cranes you see represent new office spaces – a physical manifestation of businesses choosing Sydney as their base. This influx not only creates jobs but also fuels demand for prime locations. As a result, commercial property prices are on an upward trajectory, benefiting investors and developers alike.

More planes, more tourists, more demand for hospitality assets

While commercial property investment was limited in 2023 across some asset classes and regions around the country, in the tourism sector we note the opposite. As more airlines add flights to popular routes, prices are coming down and tourism is up. Once restrictions on international travel eased, we saw the explosion of pent-up demand, with Sydney poised to reclaim its position as a global tourist destination.
This increase in visitor numbers will drive demand for hotels, restaurants and other tourism-related businesses.

The hospitality sector is already gearing up for the surge in demand. New hotels are being planned, existing ones are undergoing renovations and tourism operators are expanding their offerings. This creates a welcome economic boost, generating revenue and creating jobs across the hospitality spectrum. As tourism flourishes, so will the demand for assets in the hospitality sector, creating further opportunities for investors in the buoyant Sydney market.

Automobiles and parking stations: time for change

Sure, we’re seeing growth in tourism assets. However, one asset type hasn’t kept pace. The return on inner-city parking stations is stagnant or showing low rate rises. With hybrid work here to stay for the foreseeable future, fewer people are visiting the city on any given day and we’re still seeing heavy discounting of casual parking rates. So what do you do with a low-performing parking station to unlock inherent value?

Fortunately, owners have a few options. In Canberra, many parking stations now offer EV charging stations, with an attendant growth in rates.

In Sydney, we’re seeing some adaptive reuse to make the most of the embodied energy in these buildings while unlocking value. In Surry Hills, for example, a former parking station has been transformed into modern commercial office space. This not only adds valuable workspace to this city fringe district but also demonstrates the adaptability of existing infrastructure.

Similar transformations can be envisioned across the city, converting underused parking spaces into community centres or even green spaces.

The proximity of many parking stations on the Sydney city fringe to educational institutions presents another intriguing possibility – student accommodation. Universities are under increasing pressure to provide housing for their student population, particularly international students. (Student accommodation continues to prove to be a prudent investment with the Australian Bureau of Statistics showing that temporary higher education visa holders accounted for 33.9% of overseas migration in the 2022-2023 financial year.)

Converting strategically located parking stations into well-designed student housing complexes could unlock value, alleviate this pressure and provide much-needed living quarters close to campuses and amenities.

The bottom line on Sydney city fringe commercial

Ultimately, Sydney’s growth presents both opportunities and challenges. Soaring cranes symbolise confidence and economic prosperity while the increasing number of planes signifies a vibrant tourism sector. However, addressing the growing pains of urban mobility is crucial to ensure everyone benefits from this growth. By embracing adaptive reuse, promoting alternative modes of transport, and fostering a culture of shared mobility, the city can maintain its momentum while ensuring an accessible and sustainable future. Sydney’s story is one of planes, cranes and automobiles, but the real narrative is about a city in evolution, adapting to growth and navigating its path towards a vibrant and dynamic future.

Let us help you with your commercial property

As dedicated local commercial real estate agents, we can help you extract more value from your commercial property. Please get in touch to discuss your circumstances and assets so that we can give you personalised advice. Whether it’s commercial leasing, management or sales, we’re here to help you with your Sydney-based commercial property.

Contact us at Ray White Commercial Sydney City Fringe