One of the common myths about heritage is that "nothing can be done with heritage-listed properties; they can't be redeveloped or altered". This notion that heritage places are frozen in time has been challenged by a new study on the economics of heritage listing.

The major study was commissioned by Australia's state heritage agencies and managed by the NSW Heritage Office. At the heart of the national project was the need to find out more about the development economics of listed properties. How do we value heritage? How do we measure the public benefits of the heritage listing of commercial buildings? And how does heritage listing affect the financial viability of individual development proposals. These important questions challenge some of the major assumptions that people bring to the table when talking about heritage and development.

One of the interesting findings of the study was that the benefits of heritage listing often outweigh the additional costs of heritage conservation.

The study included a cost/benefit analysis of heritage requirements for the owner. Colin Dominy, lecturer in Property Economics at the University of Western Sydney, working under the guidance of the Australian Property Institute (NSW), prepared seven case studies of commercial properties in urban environments. Four of the heritage places were adaptive re-use or redevelopment sites: No.1 Martin Place, the Medina Apartments in Railway Square, the Radisson Plaza Hotel in Pitt Street and former banking chambers in High Street, Maitland.

The case studies showed that while the project costs increased mildly due to the impact of the heritage listing, the combination of financial incentives and the commercially-oriented nature of the adaptive re-use schemes in each case outweighed any extra heritage-related costs and project risks.

One of the most high profile redevelopments in Sydney of the last few years is the GPO, now known as No. 1 Martin Place. For over 125 years this immense building was the focal point from which all other places in Sydney were measured. Its impressive facade and cavernous postal hall were familiar to all Sydneysiders as the city's major postal and telecommunications facility.

In May 1995 the Grocon construction group, representing the interests of the Melbourne-based Grollo family, emerged as the successful bidder in Australia Post's tender process for the comprehensive redevelopment of the Sydney this key Sydney site.

The cutting-edge project involved retaining and restoring the old GPO building while erecting a completely new development on rear land immediately behind the historic building. The non-heritage part of the project comprised a 26-level, 40,000 square metre office tower and a 31-level, 369-room hotel.

The NSW Heritage Council and Central Sydney Planning Committee made major contributions to the adaptive re-use design.

The heritage elements of the project were completed with meticulous care. All the external sandstone building facades, walkways and clock tower were repaired and conserved. The grand central staircase just inside the main building entrance in Martin Place, which had been destroyed in 1927, was reconstructed. A striking glass-roofed atrium was built between the old and new buildings, enclosing the shell of the 1927 postal hall.

The basement vaults now house bars and restaurants. The public can view the piped Tank Stream which was left exposed to provide a permanent record of this important part of Sydney's history. Equal attention was also paid to the upper floors of the building, where the vaulted east and west attics were retained and adaptively re-used as a heritage ballroom.

Dominy's report points out that the public now have greater access to the restored GPO building than when it was used for post and communications as large sections of the building were not then accessible to the general public.

After its opening in 1999, former Heritage Council Chair, Howard Tanner, praised the GPO's adaption for a new use in the 21st century.

"A key virtue of the completed project is that it breathes new life and activity into both the historic building and the precinct generally," he said.

Dominy describes the Sydney GPO adaptive re-use scheme as "one of the most innovative and dynamic integrated mixed-use commercial heritage redevelopment projects yet seen in the history of NSW statutory heritage protection and preservation."

He concludes that one of the important factors in the viability of the GPO redevelopment scheme was the financial incentive provided by the Floor Space Ratio bonus. The proportional added capital value of the Floor Space Ratio bonus far exceeded the added project costs attributable to the property's heritage listing.

The commercially-orientated uses for which the GPO was adapted were also an important element. The five-storey heritage building was completely conserved and now contains substantial prime small-area retail space. Shops, bars, hospitality areas and hotel rooms are all part of an attractive package. Much of the ground floor is devoted to small-tenancy specialist retail use.

Dominy points to the availability for redevelopment of the extra rear land as the crucial factor in the financial viability of the project. The additional land permitted the erection of a large non-heritage office tower and adjoining major hotel tower. The heritage-listed GPO supports and complements this commercial development.

The conclusions of the study help to clarify some of the factors concerning heritage and development. What the study found was that when it comes to property development, economic viability is first and foremost dependent upon market-related factors which are not generally related to heritage considerations. What developers looked for was whether there was an unmet market demand and favourable market conditions and timing. Whether a building was heritage listed or not did not influence these first fundamental considerations.

All of the redevelopment projects examined by the report involved hospitality-based commercial adaptive re-uses - five star hotels, serviced apartments, conference centres, bed & breakfast accommodation. The combination of financial incentives and the commercially-oriented nature of the adaptive re-use schemes in the Sydney CBD outweighed any extra heritage-related costs and project risks. These sympathetic adaptive re-use schemes have created commercially viable investment assets for the owners.