profile and much investment money comes from China, which is heating the property market here. Furthermore there is an enthusiasm in Asia to convert and take a little more risk than Australians might. The current Greenland development in the CBD is a prime example. The agent noted the imminent supply in Barangaroo lead to oversupply in lower Grade B and C office stock in 2016 and 2017. He concurred with the developers that Highest and Best Use is what determines the use noting that, currently hotels are popular office conversion projects in the CBD. Sydney has high visitor numbers and the major tourist destinations of the Harbour Bridge and Opera House are within walking distance. The biggest risk perceived by the valuer / agent is timing the market cycle, so that your project is ready at a time when demand is high and gave example of buildings which hit the market during the GFC and had to accept much lower rents and purchase prices than estimated 2 to 3 years earlier.
With regulatory issues such as planning and heritage, the developers felt there is considerable variation in approach and context from council to council, which can be hard to account for. Changes to the procedures and more uniformity would help to encourage more conversion adaptation. Shortening planning procedures, would help as heritage building projects are very protracted currently. Overall heritage was perceived as an emotional area to deal with which could be positive or negative for developers with potentially higher exposure to risk. One interesting debate was whether heritage is a societal responsibility or an individual one? Developers perceived that businesses want to maximise their returns so if that means demolition then a building will be demolished, whereas if society values the building, and there was a fund to offset the lower profit resulting from retention, that might work. Again the sustainability attributes such as retention of known and appreciated buildings and landmarks, retention of embodied energy were not considerations or important.
Both developers and the valuer felt that social and environmental variables are not as important in this market as economic and legal ones. As the developers stated although people feel good about sustainability, but they are not prepared to pay extra for it. As embodied carbon in Sydney is not factored into environmental assessments such as Green Star, the argument regarding retention of existing buildings is not so strong as it could be. The agent agreed embodied carbon is not discussed. There is a perception that every developer‘ green washes’ their developments which implies a superficial weak sustainability is achieved at best, and that ironically the argument for retained embodied carbon within the existing structure is being missed in this market. Significantly the developers we spoke to acknowledged that inter-generational equity is important. However the current Australian government does not regard sustainability as important, and the developers felt there has to be a push from the population for sustainability to be valued. The valuer also noted sustainability is not high on buyer’ s agendas in the CBD residential market.
Technically, plan shape, and the location and number of columns affects ability to accommodate residential units in office conversion projects. The agent noted high construction costs currently due to under supply and high demand in the market. He also noted that older buildings typically pre 1980 have asbestos in them, which adds further to risk, cost and time delays. The valuer thought the location of the service core was important as it can affect the number and size of apartments in a conversion project which again comes back to economics and profits. Again, all attributes raised by interviewees were not considered in the context of sustainability and are very limited given the potential range of attributes identified in Table 2 above.
Sustainability and office to residential conversion adaptation in Sydney 771