Investment NSW remains locked in negotiations with the potential operator for the state’s new startup hub, just days before the current hub closes and eight months after announcing the move.
A deal is believed to be close, but the lack of certainty will add to concerns about the hub’s two kilometre move to Tech Central, which some tenants are still resisting.
The current CBD hub has struggled to attract corporates and startups, operating at around 50 per cent capacity, according to the government, which will spend $5 million on the move.
The move was announced last December as a strategic play to get startups closer to unicorns like Atlassian and Canva, as well as research being spun out of universities and institutes in and around Tech Central.
But NSW Innovation minister Anoulack Chanthivong now acknowledges it was also driven by concerns about the Sydney Startup Hub’s commercial viability.
He told a NSW Budget Estimates hearing on Monday that the former Coalition government signed a contract for the CBD hub that was “so bad that it needed to be totally revamped”.
“The Sydney Startup Hub is no longer commercially viable, the anchor tenants can’t get enough paying tenants to the facility,” he said.
Officials later told the same hearing that the government had paid to break the lease for the York Street facility, but took on notice the cost.
Investment NSW’s Liza Noonan said the Sydney Startup Hub has struggled to attract founders and corporates to its dedicated work and event spaces after the pandemic altered working habits and competition for coworking spaces grew.
Three and a half levels at the CBD hub have been empty for “some time”, she said, and there has not been a “market demand” to replace departed corporate tenants like Optus and Caltex.
“The reason the decision was made was that commercial models of the anchor operators in the Sydney startup hub was no longer viable…” Ms Noonan said.
The anchor operators at the current hub are Stone and Chalk, Fishburners and Tank Stream Labs, which sublease from the government to run incubator programs and offer desk spaces.
Tank Stream, which sold out to innovation investor Scalare last month, has reportedly ruled out joining the new Tech Central Hub, while Fishburners is pivoting to a new decentralised model and has warned founders could suffer from the hub switch.
Only Stone and Chalk, which already runs a scale up hub that is being upgraded to the new Tech Central Innovation Hub has openly endorsed the move.
It remains in negotiations with the government about the new operations just days out from switch on September 1.
Ms Noonan declined to say if the other Sydney Startup Hub operators had been offered similar pricing arrangements to operate out of the new Tech Central hub, or what residents could expect to pay for a place because of the commercial sensitivities in the negotiations.
Some startups have already moved to the new hub and space is available for more, but the uncertainty means exactly what support the Tech Central Innovation Hub will provide remains unclear.
As a scale up hub it was targeted to more mature companies, offering spaces over six floors, with operator Stone and Chalk facilitating connections with investors, universities, corporates and government.
Investment NSW declined to answer questions from InnovationAus.com about what happens if an agreement is not in place with new operator Stone and Chalk when the CBD hub closes on August 31, or the status of the current hub’s other anchor tenants.
In a statement, a spokesperson for Mr Chanthivong said the move will rectify a “broken accommodation model” and get startup sector closer to researchers in “Australia’s leading innovation precinct”.
“All current anchor tenants were consulted, and support relocating the services currently provided to Tech Central and current residents of the Sydney Startup Hub, have been kept updated about the opportunity to transition through their anchor tenants,” the spokesperson said.
“The NSW Government is engaging closely with key stakeholders at the Sydney Startup Hub to facilitate a smooth transition and service continuity for the Hub’s residents. A number of Startup Hub residents have already moved.”
Do you know more? Contact James Riley via Email.