The value of sticky tenants in Sydney’s City Fringe

In Sydney’s city fringe, a diverse mix of commercial properties – from Victorian terraces to repurposed warehouses – attracts a wide range of tenants. However, not all tenants offer the same level of stability and long-term value.

Tenants who invest heavily in fitting out their premises often become the most stable and valuable occupants. These businesses, due to their substantial investment in the property, are less likely to relocate, providing landlords with consistent rental income and reduced vacancy periods.

In commercial real estate, we refer to these as ‘sticky’ tenants; that is, those who remain in place for the long haul, offering consistent rental income and reducing vacancy risk.

One key group of sticky tenants includes businesses that benefit directly from being located near large institutions such as hospitals and universities, so good news for many of our landlords in the Sydney city fringe. These anchor organisations create a steady flow of foot traffic and economic activity, which in turn supports a thriving ecosystem of adjacent service providers and retailers. For property owners, securing tenants that are closely tied to the operational gravity of these institutions can be a smart long-term strategy.

Near hospitals, for example, tenants like pathology labs, physiotherapy clinics, radiology centres, pharmacies and specialist medical consulting suites often set up shop. These businesses rely on the steady referral flow from hospital practitioners and the proximity to patients who need ongoing care. Their business models are heavily dependent on location; being across the street from a hospital is not a luxury, it’s a necessity. This symbiosis makes them unlikely to relocate easily, even in a tighter market, thereby contributing to their ‘stickiness’.

Similarly, the areas around universities attract a different but equally stable cohort of tenants. Think student accommodation managers, cafés, fast food shops, copy centres, tech repair shops, bookstores, child care centres and tutoring services. Many also serve the staff and research community such as legal offices, grant consultants or corporate training providers who benefit from the intellectual and commercial activity a university generates. These businesses thrive on proximity and are typically embedded in the local community, making relocation disruptive and costly. For landlords, these types of tenants are particularly appealing because they align their long-term commercial success with the health and stability of the nearby institution.

Another adjacent and sometimes overlapping group includes those businesses with high fitout costs.

Why Sydney City Fringe fitout matters

A commercial fitout is all about shaping a space to suit the unique needs of a business. That might mean structural changes, installing specialist equipment or creating a specific interior look and feel. The more a tenant puts into making a space their own, the more likely they are to stay put – which is great news for landlords.
Some types of tenants are especially likely to commit serious time and money to a fitout.

Take dental clinics, for example. These practices rely on specialised gear – dental chairs, X-ray machines, sterilisation units – and their spaces have to meet strict health regulations. Moving elsewhere isn’t just expensive; it’s a logistical headache.

Then there are restaurants and cafés, which need commercial-grade kitchens, proper ventilation and well-designed seating areas for customers. Add in the extra layer of food safety standards and it’s clear their setups aren’t something you pack up overnight.

Medical centres – whether for GPs or specialists – also require careful fitouts. Think consultation rooms, waiting areas and a host of equipment, all installed to meet healthcare guidelines. These fitouts aren’t just costly; they’re highly tailored.

Even architectural and design firms and other creatives tend to go all-in on their office spaces. Often, they create bespoke environments that reflect their brand and working culture, including open-plan layouts, sleek meeting rooms and premium finishes.

Why sticky tenants are great for Sydney City Fringe landlords

When tenants invest significantly in their premises, they’re typically more committed. They’re likely to sign longer leases – it only makes sense when they’ve put so much into a place. It also means they’re more inclined to look after the property, which helps preserve its condition and value.

What’s more, these tenants are less likely to up and leave. Their investment helps ensure consistent rental income and reduces the hassle (and cost) of finding new occupants.

Attracting and retaining sticky tenants

If you’re a landlord looking to attract tenants like these, it helps to understand what they need from the outset. Make sure your property can support any structural changes or equipment that might be required – and that everything complies with relevant regulations.

Being flexible with lease terms can also go a long way. It shows you’re willing to support their business over the long haul. And don’t be afraid to get involved during the fitout planning stage – a bit of collaboration can lead to better outcomes for everyone.

In areas like Sydney’s city fringe, tenants who put serious money into their fitouts bring stability, long-term value and reduced vacancy risk for landlords. By understanding what these tenants need – and the level of commitment involved – property owners can make smarter choices that pay off over time.

Let us help you with your Sydney city fringe 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 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