Converting commercial buildings into apartments may not be new but it has certainly been reignited as a hot topic. Events over the past year have given supporters fresh impetus to push for more flexible planning laws to fast-track of commercial/residential conversions. While acknowledging CBDs will always remain critical to any city’s economy, the rise of working from home since March last year mean those hubs may never be as well patronised as they were before covid hit our shores, observers say.

This is especially true of Sydney’s CBD according to NSW chief economist Stephen Walters. Although CBD office workers are increasingly returning, they will never do so in the same numbers experienced pre-pandemic he said. “We are not coming back in 100 per cent five days a week and so the reality is the demand for office space is not going to be what it used to be,” Mr Walters said.

Dramatic redevelopments

Mr Walters is one of several influential voices who believe Sydney and other capital cities could easily follow the lead of places like London and New York where empty office floors have been successfully turned into apartments. In Manhattan for example the downtown area underwent dramatic redevelopment following September 11 2001 which saw the financial district transformed into a thriving residential centre with three times as many people occupying the area.

Head of lobby group The Urban Taskforce CEO Tom Forrest is adamant there will be less and less demand for city office space as the need for more residential soars. Growing housing supply problems particularly in Sydney and Melbourne are helping push up home prices and forcing many to more affordable regions outside metro areas. A clear solution Mr Forrest said would be governments and councils removing red tape to allow speedier conversion of commercial into residential, especially low-rise offices and old warehouses which are easier and less complex to refurbish and reconfigure than city skyscrapers.

Keeping the commercial core

“Flexibility is key and the NSW Planning system needs to be streamlined,” Mr Forrest said. “There is also resistance from some larger institutions which assert allowing residential development in more areas of the CBD will turn it into a backstreet version of an Asian city with washing hanging on balconies of apartments opposite commercial blocks.  

“I reject that view as does the Property Council of NSW. It could be that only a certain proportion of a CBD become residential could be put in place, for instance. The idea is not to lose the commercial core and business activity. But as working becomes more flexible planning laws must follow suit.”

Developers say regulatory hurdles surrounding conversions include greater requirements for separation between residential buildings than commercial, and more generous setbacks from the street. Even when zoning allowed commercial/resi conversion, such regulations add to the difficulty of finding suitable properties for redevelopment Mr Forrest said. “We are arguing that zoning must be freed up so that buildings can be adapted to suit the needs of the day,” Mr Forrest said. “That way we will be flexible enough to deal with covid-19 and whatever happens next. Disallowing residential conversions completely within CBD and even metropolitan hubs is what will leave buildings with substantial vacancies after an external shock to the economy like a pandemic.”

In Sydney, property agencies such as Savills are among those on the hunt for the style of warehouses and smaller commercial buildings that are ideally suited for conversion into homes. In Melbourne mortgage brokers report an emerging shift toward people living in regional areas and purchasing or renting city apartments for short term use whether for work or as a second home. Likewise Mr Forrest said research empty nesters are increasingly buying Sydney CBD apartments, downsizing to residences that effectively put restaurants, parks, theatres and attractions on their doorsteps. “We’re also seeing the city becoming more and more attractive to younger people and families who previously lived in the suburbs and want to be closer to the harbour and major precincts.”

Keys to success

Another key successfully blended cities were mixed use developments such as Central Park on the southern fringe of the Sydney CBD, Mr Forrest said. The award-winning redevelopment of the Carlton United Brewery was completed in 2014 to become one of the first complexes of its kind in the city. It features two residential towers distinguished by unique vertical hanging gardens filled with tens of thousands of plants, as well as more than 75,000sqm of office and retail incorporating a shopping mall anchored by a major supermarket. Also on-site are two generous parks and a dramatic wind-powered sculpture. Now bookended by Barangaroo, the two complete an original vision of statement buildings mixing commercial and residential at either ends of the Sydney CBD.

“The core of the city used to be Martin Place which was home to most of the major law and accounting firms and the like,” Mr Forrest said. “Some of them have moved across to Barangaroo now and filling the void are high tech companies like Atlassian and Apple. These firms are the kind that attract the best and brightest in the world and to do that they have to be able to offer them the chance to live near the centre of the city. Residential has been proven to underpin commercial developments in the CBD in the past and it needs to be allowed to continue.”