The Sydney Light Rail: Three Impacts You Need to Know

November 27, 2019 | Commercial Real Estate

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All aboard- the Sydney Light Rail is coming soon! You may have thought about what this will mean for your daily commute to work, but how about the light rail’s impact on property?

The light rail is estimated to have the largest impact of any infrastructure projects on New South Wales’ property market in the next six years. The 12km route will feature 19 stops in the CBD, Eastern Suburbs and Inner West (click here for an interactive map).

This means that the light rail will impact everyone, whether you use the light rail or not.  So, with the light rail possibly opening as early as December in Randwick and Surry Hills, let’s have a little look at its impacts:

  1. Disruption to Businesses from Construction

Tenants have seen mass disruption occur due to construction, particularly small business owners who have been forced to close or financially struggled. Businesses have seen customer numbers dwindle as construction makes locations harder for customers to access. For example, the Emperor’s Garden in Chinatown, who suffered up to a 50% decrease in revenue since construction began. Additionally, Transport for NSW has increased rent on properties they own every year since construction began in 2015.

Last year, over 60 tenants joined a class action suit which sought over $40 million in compensation over disruption from light rail construction. In July, The NSW government has already offered 154 businesses a total of $31 million in compensation for disruption from the light rail construction.

Hence, many tenants are also asking for rent reduction or consideration as compensation from landlords for the disruption from construction.

  1. Increased Connectivity With and Within the CBD

The light rail brings an increased connectivity to and within highly visited the CBD. This facilitates easier access and convenience to areas, making it easier for Sydneysiders to commute to work or for a night out! The light rail makes North Sydney a 4-minute ride away from Barangaroo, causing experts to tout it as a ‘de-facto’ part of the CBD.  This centralizes tenants away from suburban markets, transforming the CBD into a single cohesive market.

This means that prices for commercial property in these areas may increase in prices and have lower vacancy rates. However, with improved connectivity, it becomes easier for tenants to look beyond the core CBD areas in order to secure lower office rental rates. Goulbourn Street is a great example of this- the average A-Grade rent is 31% lower than those in the core CBD.

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  1. Increased Demand for Light Rail Areas

Properties close to light rail areas are incredibly likely to increase in demand, and hence value. Having a transport ‘stop’ improves value through accessibility and convenience. This is particularly true in areas such as Surry Hills and Randwick which are mainly accessible by bus.  The City Fringe touted to undergo a ‘rebirth’, with lower vacancy rates compared to the CBD, and a B4 mixed-use zoning which increases flexibility by allowing for for a mix of property types (commercial, retail, hospitality etc). Additionally, the increased ease of access to the CBD will see an increase in office demand, and George Street is particularly expected to be a highly desirable location for luxury and food-and-beverage retailers due to its prime location with a light rail stop.

With increased demand and value, comes possible changes to your rent that owners charge to secure or keep tenants. But once the light rail starts functioning, it will impact future leases for new tenants and the negotiation of agreement extensions for existing ones.

How we can help

Considering moving your offices nearer to a light rail location? Need help negotiating your lease? 

Tenant CS is a commercial tenant advisory service that caters to companies across AustraliaSingapore and the greater Asia-Pacific region. We have an office at the heart of Sydney’s CBD, so contact our team today for assistance with your next relocation!

Want to know more first? Click  here to read our Commercial Leasing Agreement Checklist before signing on the dotted line, or here to read about why it pays to have a tenant advisor on your side!

 

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