The dynamics of retail leasing in the Sydney CBD

Artist impression of 55 Market Street, Sydney.Sydney retailers are set for a new round of musical chairs as they jostle for space as part of the NSW Government’s move to buy properties for preparation of the planned Metro stations.

This will see a number of key tenants looking to relocate before the wrecking balls demolishes the buildings, in which they lease the ground floor.

In November, the NSW Government announced that it will buy up to 20 commercial buildings in Sydney as part of its plan to roll out six new train stations across the city.

Tiffany & Co, will be one of the major names impacted as it leases the prominent site at 39 Martin Place, which is owned by DEXUS Property.

The upmarket jeweller has to now move out by early/mid 2017 at the latest.

According to agents, Tiffany & Co. might need 1,000 square metres and the options could include ISPT’s 345 George Street or GPT/Queensland Investment Corp’s MLC Centre.

However, due to the timing, other possibilities such as DEXUS Property’s 175 Pitt Street and Brookfield/Investa’s 388 George Street could be harder as both projects will not be ready until 2018/19.

The David Jones Market Street department store site, which is up for sale, might be hard as the chain may lease it back for another five years.

Agents said if Tiffany & Co moves to 345 George Street, to be opposite Burberry, then it will change the future landscape of George Street as more semi-luxury brands will follow.

Alex Alamsyah​, Knight Frank’s senior director, retail leasing said the the Sydney CBD is very dynamic, with expectations of some movement of luxury/super luxury brands to King Street to take advantage of the developments of the adjoining properties such as 388 George Street, 175 Pitt Street, 138 Pitt Street and the MLC Centre.

“There is also changes of tenancy mix along Market Street because of the future project of 55 Market Street and whatever happens to the David Jones Market Street building,” Mr Alamsyah said.

It is understood that Investa, on behalf of the new owners, the Chinese Investment Corp, has lodged a development application to demolish existing facades, internal structures and former monorail station facility at 55 Market Street and construct new facades and upgrade the retail units.

This comes as the market awaits the outcome of the purchase of the management rights of the CIC portfolio, with Mirvac said to be the purchaser, and the DEXUS and Investa Office Fund proposed merger.

“With this news we could see the DEXUS play on 388 George Street, next to their 175 Pitt Street, and Mirvac’s on 55 Market Street, hence the dynamics of retail leasing in Sydney CBD is unpredictable,” Mr Alamsyah said.

“In 2015 we have seen the opening of Microsoft, H&M, Zara Home in Pitt Street Mall Sydney; and luxury brands Rimowa​, Franck Muller and Cartier in Martin Place, King Street and Castlereagh Street respectively.

“Next year (2016) we will see the opening of HSBC flagship branch at 333 George Street, Tesla at 20 Martin Place, and undisclosed luxury brands at 119 King Street and 112 Castlereagh Street which have been secured by Knight Frank but will only be announced by early next year 2016.”

In addition to all this retail activity, the casual food & takeaway market in the Sydney CBD continues to evolve, according to Michael Hanscomb​, Knight Frank’s director, retail leasing.

“First it was Westfield Sydney’s Black Label Food Court, then the Galleries remixed and dramatically improved their food court offering, Now it’s MLC Centre and Barangaroo which have set a new benchmark,” Mr Hanscomb said.

“The next major food court offering development will be Chifley Plaza’s redevelopment which also incorporate high-end restaurants/cafes and fashion which will set a new benchmark for excellence in the Sydney CBD.”

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