The White Bay area in the Bays Precinct, Balmain, is emerging as one of the favoured locations for the new offices of the global internet service providor, Google.
It is currently used as the main terminal for the P&O cruise ships.
While the company has been looking at the Australian Technology Park in Redfern and the Ribbon development at Darling Harbourm, the chance to plan a building from the start, is said to be an attractive proposition.
Google has a leasing mandate for up to 60,000 square metres of office, which would allow it to consolidate its staff from Darling Island, Pyrmont's Fairfax Media, the publisher of the Sydney Morning Herald and GPT's Workplace6, known as the Accenture building, under the one roof.
UrbanGrowth owns the White Bay and ATP, and is looking to sell the properties. It has appointed Knight Frank on the ATP campaign, with suggestions Mirvac is a front runner.
Office agents said Google is keen to be involved in the development of its new offices, which are considered "quirky" and unique working areas. At Darling Island, it sub leases two floors, one of which has integrated a carriage from the former Monorail, as a meeting room.
The possible lease comes as office markets are moving into more positive territory, for both lower vacancies and strong sales volumes and values.
Simon Hemphill, NSW research director at Savills, said the influence of overseas investors in the market has undoubtedly had a profound effect in Sydney CBD, as evidenced by the high levels of transactions over the last 12 months.
"Indeed, the $4.7 billion of transactions over the last 12 months is the highest level of sales recorded in the last decade, eclipsing the combined total of $4 billion recorded in the 'halcyon years' of 2006/07," Mr Hemphill said.
"Recent interest in secondary grade buildings with either residential upside or redevelopment potential from both overseas and local investors has also created price tension. There are currently a number of secondary grade assets in the market that are earmarked for conversion to residential or hotel use.
"This will combine with an increasing lease expiry profile for the Sydney CBD over the next two years and the withdrawal of a number of commercial assets from the market that are earmarked for conversion. As a result, Savills expect incentives to come under pressure toward the end of this period."
Mr Hemphill said the future supply pipeline remains relatively constrained over the short to medium-term, despite a number of large commercial towers commencing construction during the last 12 months.
A majority of the new supply is coming from Barangaroo, which is closing in on being fully leased. It has been speculated that Westpac may lease more space as it over flows from its current 275 Kent Street headquarters.
The Savills research shows that while demand from the traditional finance and insurance sectors remains strong, the new information technology and business services' sectors are gaining momentum in demand for office space.
The two sectors combined accounted for 65 per cent of leases signed during the last 12 months totalling about 160,000 sqm.
BY CAROLYN CUMMINS