The sale of Blackwattle studios and eviction of the tenants in June 2000 has meant the collapse of the largest artists community and the loss of the only remaining large arts and crafts complex in Sydney. Other artists colonies lost in recent years include the Silknit House in Surry Hills, Sylvester Studios in Redfern and Shepherd & Newman in East Sydney. Communities like the Blackwattle studios have been described as important breeding grounds for creative talent and incubators for small business, and in an enlightened city would be considered community assets.

The demolition of Blackwattle Studios is a great loss for the character of Sydney, where urban diversity, heritage and history is being swamped by unsympathetic development. The greed of developers and lack of vision by local councils and the Land and Environmental Court has created a bland uniformity of land use around the harbour, with a proliferation of residential apartment blocks on the foreshores and increased gentrification of waterfront areas.

The studios were some of the last working buildings on the waterfront. As the Blackwattle newsletter noted, in a generation there will be nothing to tell us that Sydney harbour was a working harbour, where people of all classes lived and where artists and craftspeople could afford to work. The waterfront has become dominated by luxury residential housing.

In November 1997 the State government introduced the Regional Environmental Plan 26, which reserved foreshore land around Rozelle and Blackwattle Bay, banning apartment and hotel development. The intention was to conserve heritage buildings and the land against the pressures of non-industrial development. REP26 did not cover Blackwattle Studios as they were privately owned, but as the architect Clarke Walton noted, the studios represented exactly what the REP26 was trying to preserve: waterfront industrial buildings, employment and heritage.