News that the former Coca-Cola Amatil's headquarters at 71 Macquarie Street was to be demolished and rebuilt into flats and serviced apartments was greeted with enthusiasm by the investors and office landlords alike.

But can the city cope with so many apartments? According to the experts and those with an opinion, the answer is yes.

The City of Sydney and the NSW Government are on a mission to give the place an upgrade with new transport, pedestrian zones and the arrival of international retailers. But there remain issues with shopping hours: Sydney does close down much earlier than the overseas cities on which it models itself.

Barangaroo will add to the mix of hotels, bars and inner city residents to reflect the "work, play, live" mantra of other global cities.

Historically, and thanks to the good weather, Sydney has tended to be more of a daytime city where residents can enjoy the beach, harbour and sun-filled cafes. Living in Sydney's city was never a preference as it closed early and was not near a beach. Melbourne, in contrast, functions better as a night-time city - with its European leanings, lane-way bars and later-closing restaurants - making inner city apartments more attractive.

For vendors of older office towers the conversion to apartments is being relished.

They can get a whole lot more cash from developing and then selling the apartments singularly.

If they kept the buildings as offices or sold to another office developer, the landlord must deal with leasing contracts, cutting rents and offering incentives to tenants to reflect changing market conditions. And there is always the risk of a new office opening nearby to entice tenants. It seems a no-brainer to offer the site for apartments.

The residential conversions also help to spruce up the city. Most also have a retail and food component, to add to the cafe society.

Sydney's residential property market is in the midst of an upturn, with rising demand from prospective home owners and investors, local and offshore, colliding with a long-term under-supply of accommodation, according to JLL's latest research. Its report on the positive signs of Sydney's residential market upturn found these factors have driven dwelling prices up and lifted auction clearance rates to a 10-year high in 2013.

According to JLL's director of valuations and advisory Tyrone Hodge, improving residential demand from investors and home buyers is driving demand for development sites.