Deicorp Plots Offices-to-Hotel Crows Nest Tower Switch

Deicorp wants to again modify its Falcon and Alexander project in Sydney’s Crows Nest, seeking approval for a significant change of fitout and usage several months into demolition and excavation work . The 22-storey tower has a history of modifications and council objections . The latest application seeks to replace commercial space with a hotel in response to a weak local office market. Deicorp corporate communications executive Rob Furolo told The Urban Developer that the company was adopting a strategy of integrating hotels into several projects across Sydney. “We think it’s an ideal site for this type of development, to add some vibrancy to the southern tip of the [Crows Nest] town centre,” Furolo said. The site at 391-423 Pacific Highway, 3-15 Falcon Street and 8 Alexander Street was formerly known as the Five Ways project. Zoned for mixed-use, the approved form of the project includes a three-storey podium with commercial and retail space. That podium will be topped by 19 storeys of residential comprising 188 apartments, 48 of them affordable housing. However, Deicorp has filed a modification proposal, seeking to remove all 2500sq m of commercial floorspace and reduce retail GFA by 3857sq m (from 5502sq m to 1915sq m). Those modifications would leave enough room to slot in a 100-key, 3736sq m hotel, according to Deicorp, while also increasing residential GFA from 16,117sq m to 18,468sq m (an increase of 2351sq m). The overall floorspace of the building would not change. The number of apartments would grow to 212, although no new affordable homes would be added. Parking spaces would grow from 220 to 230 and bicycle spaces reduced from 302 to 270 under the proposed amendments. A static billboard that was previously on the site would be replaced with a digital sign of similar size and location, while the facade has been changed from white concrete to blue terracotta. The proposed modifications are once again on exhibition, with additional information in response to challenges from council. ‘Worst performing office market’ Council and other stakeholders raised concerns about the loss of ongoing employment potential during the project’s initial exhibition. In response, Deicorp commissioned Atlas Economics to conduct an economic analysis of the office-to-hotel pivot. ▲ Crows Nest office vacancy is more than double that of the Sydney CBD. That study pointed to “the competitive disadvantage that Crows Nest has, which is self-evident in the vacancy rates which put it as the worst performing office market in the country”. Post-pandemic segmentation of the office market has particularly hit the Crows Nest area, according to the study, with vacancy sitting consistently at 30 per cent (up from 7 per cent in 2019). Even prime grade office space is holding a 26 per cent vacancy rate in the suburb, compared to 14 per cent in the CBD, about 20-22 per cent in Chatswood, Macquarie Park, Parramatta and North Sydney. The national average vacancy rate in commercial sits about 15 per cent. Net effective rents in Crows Nest are 36 per cent lower, due to weak growth in net face rents at 1.4 per cent a year, and rent incentives increasing to 40 per cent (up from 21 per cent in 2019). Current office space of 357,400sq m will be sufficient for the area until 2041 under Atlas Economics low-demand scenario, or at least 2030 under its high-demand scenario. By 2051, only an additional 6170 workers will be employed in Crows Nest, at an annual growth rate of less than 1 per cent. In a response to the submissions, consultants Gyde (on behalf of Deicorp) pointed to a list of stalled office projects in the area as providing “a tangible indicator of commercial hesitancy and structural change in commercial office market conditions”. Gyde suggested that a Holdmark project proposing adaptive reuse of a commercial tower at 20 Berry Street into a hotel is evidence that the moment is right for pivoting. Hotels needed for North Sydney Meanwhile, the North Sydney LGA’s current 1069 hotel rooms will not be sufficient to meet 2051 estimates for high (6340) or low (2370) demand from business travellers and tourists. The additional 533 rooms already in the pipeline do not change that calculation, according to Atlas Economics, which also pointed to the three major hospitals within 1km of the Falcon and Alexander site as a draw for temporary accommodation. A proposed Freecity building at 153-157 Walker Street is among projects in the area looking to add to that pipeline, with a 51-storey mixed-use tower combining a 164-key hotel with 296 apartments. The site was originally approved for a 43-storey office tower in late 2024. The report also suggests that, although the hotel has a lower employee headcount than potential office space, the indirect effects will be greater. As many as 71 more full-time equivalent (FTE) jobs are generated by the new proposal, with every $1 million spent supporting 7.5FTE across the North Sydney LGA a year. In the original proposal, that figure was 5.5FTE.

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Deicorp Plots Offices-to-Hotel Crows Nest Tower Switch

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