Startup hub hits first big hurdle

Denham Sadler
Senior Reporter

Ambitious NSW Government plans to underwrite centralised innovation precincts in Sydney have run into significant trouble, with two big players pulling out of partnership negotiations.

Just as Google announced on Tuesday that it was walking away from negotiations to become an anchor tenant at planned tech hub within the White Bay redevelopment, has learned that iCentral – one of the largest tech-focused incubator/co-working outfits in the city – has withdrawn from the Sydney Startup Hub project.

The state has been pushing short and long-term projects to build density in the tech ecosystem, addressing the fragmentation caused by high rents and lack of available real estate in the CBD.

In the short-term, it had announced via Jobs for NSW plans for a 15,000 square metre startup hub in the CBD to open in the middle of this year. The Sydney Startup Hub would act as a “bridging measure” before a huge innovation precinct at White Bay, which won’t be ready for at least five years.

But both plays have run into trouble, with potential anchor tenants pulling the plug on discussions.

Tech giant Google has walked away from discussions to locate its local headquarters at the White Bay redevelopment, citing a lack of public transport infrastructure to the site. And now iCentral has walked away from the Sydney Startup Hub process.

iCentral had been in talks with Jobs for NSW to become a lead anchor for the site last year, and formally applied for tenancy during the expressions of interest phase earlier this year.

But it’s understood that the group has pulled itself over concerns about the high cost of rent at the proposed site, and a lack of focus on tech startups.

The Sydney Startup Hub is proposes subsidise CBD office space rent for young, high-growth startups and promising entrepreneurs, with an aim for creating a “high density startup cluster”.

The government is considering several locations for the 15,000 square metre site in the city, but leases are yet to be signed, while expressions of interest for incubators, accelerators and other groups to partner with the government on the project closed at the start of March.

Co-working giants Fishburners and Stone & Chalk, which each have their own fair share of real estate headaches, are understood to have signed up in principle to the idea and tendered an EoI.

The Sydney Startup Hub has been proposed by the state government as a short-term fix to the local innovation ecosystem’s real estate crisis, and was stamped with an aggressive timeline. The successful partners are expected to be announced within weeks, with the site hoping to be operational midway through this year.

Barangaroo remains an option for the hub, but ultra-premium rents attached to them are unlikely to be well-received by entrepreneurs or the general public, who will be assisting them with rent.

Lighthouse, a startup hub run by muru-D co-founder Annie Parker, announced late last year that it would be taking over three floors of Barangaroo Tower Three for its own innovation hub. The plan falls well in line with the state government’s short term play, although the mysterious Lighthouse project has fallen silent this year during the EoI process.

It’s not yet known whether the government has been in discussions with Lighthouse over the proposal or if the group applied to be a partner.

The Sydney Startup Hub was always meant to be a short-term play, with the prospect of taxpayers’ subsidising the inner city rent of young tech startups not proving palatable in the longer-term.

For a long-term centralised location, the state had planned to transform White Bay into a tech hub in the next five to seven years. These plans have also been dealt a blow with Google walking away on Tuesday.

“Through the genuine and productive negotiations in the last few months we’ve come to realise that achieving that vision isn’t possible within our timeframe,” a Google spokesperson said.

A state government spokesperson confirmed the negotiations had fallen through mainly due to the lack of public transport infrastructure in the White Bay area.

“Ultimately, the complexity of the project and the timing of associated transport infrastructure could not meet Google’s requirements at this time. The NSW government remains committed to the development of the White Bay Power Station as a technology and innovation hub,” the spokesperson said.

It’s a major blow for the state’s long-term aspirations. Having Google as the major tenant of the state’s flagship innovation precinct would have drawn in local startups and given strong validation and confidence to the idea.

But the snags encountered along the way are threatening to derail these plans, with the state government losing the backing of two significant players in the local ecosystem.

It’s expected that the first partners and location for the Sydney Startup Hub will be announced in the coming weeks.

Do you know more? Contact James Riley via Email.

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