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In the late 1830s, the edge of Sydney Town more or less coincided with Bathurst Street, beyond the burial ground and the temporary wooden cathedral. Here an east–west ridge gave George Street a steep incline around the brickfields, known as Brickfield Hill, on the site that is now the World Square complex. At the end of the 1830s, the top of the hill was shovelled down Bathurst Street, thereby improving the incline of both streets and making the area beyond more accessible.
In 1829 the valley below Brickfield Hill, which contained a little stream that drained west to Darling Harbour, was designated as a site for cattle and corn markets. The Haymarket, as the place became known, was a convenient stopping place for farmers' bullock carts before the long haul up the Brickfield Hill to the city's market buildings. In the 1840s, corn was traded along Campbell Street between George and Pitt streets, with cattle markets occupying the next block, between Pitt and Castlereagh streets. When the City of Sydney was established in 1842, ownership of the land and the markets shifted to its control.
James Maclehose described the area in positive terms, somewhat tongue in cheek, in 1838:
… but for its distance from the resort of the shipping, [Campbell Street] would be the most valuable street in the township … there is not a more convenient residence in Sydney, for although it is not in the vicinity of the harbour, yet its defect is atoned for by its proximity to the markets … it has a pretty extensive prospect to the southward, the views being terminated in this direction by the Surry Hills. 
'Rookeries' and the Chinese
Markets everywhere attract some of the rougher elements in the community, and this low-lying and swampy land proved attractive to small manufacturing and also to housing described in official dispatches as 'substandard'. Proximity to the markets encouraged the use of buildings as temporary boarding houses for itinerant market traders who needed to spend a night or two each week in town. An infamous 'rookery' such as Durand's Alley, singled out in a detailed housing report of 1876 as a haunt of whores and layabouts, was just one of a maze of back-lanes in the vicinity of Goulburn and Campbell streets.  This was later known as Robertson's Lane (now Cunningham Lane) after Robertson's coach factory, which eventually became a doss house for Chinese market gardeners.
The movement of Chinese into this area began in the 1870s, following the construction of new fruit and vegetable markets, known as the Belmore Markets, on the old cattle market site in 1869. A nucleus of Chinese shops and cookhouses along Goulburn, Pitt and Campbell streets expanded over the next four decades, as did Chinese dwellings further afield into lower Surry Hills. 
The Belmore Markets, and a Paddy's market on the old hay-market site adjacent, encouraged the establishment of public houses, and on Saturday nights the Haymarket was a place to gather not only for cheap shopping, but for cheap entertainment provided by sideshows and street theatre.
Market building and rebuilding
In 1892–93 the Belmore Markets were augmented with a new market building on the old Paddy's site. These new Belmore Markets, designed by George McRae, were built in style, with fine terracotta ornamental tiling that featured designs of fruit – citrus and figs and even the common choko vine.
But this fine new market building was not well sited in relation to rail and coastal shipping, and after only a few years of use it was replaced in the first decades of the twentieth century with new markets closer to Darling Harbour. The City fathers then took the unusual step of demolishing the building and carefully reconstructing it to the same exterior design, complete with chokos, but with more height. It was leased to Wirth Brothers Circus for use as a Hippodrome between 1916 and 1927. This gave an exotic atmosphere to the Haymarket, with Parker Street often used as temporary parking space for caged animals.
The name Hordern had been associated with retailing in Sydney since the 1820s, with various branches of the family running a number of stores. In 1856 there was a Hordern's store in the Haymarket, and over the next decade various pieces of land in the vicinity were acquired. In 1879 Anthony Hordern & Sons opened a new Palace Emporium, which was a major employer in the area with about 300 staff. At its peak it employed about 3,000 people. When the building burnt down in 1901, the firm rebuilt a far grander department store of five storeys (later a sixth floor was added). Using the address of Brickfield Hill, this 'universal provider' dominated George Street in the Haymarket for many decades. By the1920s the store contained tearooms, a post and parcel office, and services for its employees that included a library and a doctor.
Decline and rebirth
From the late 1920s until the end of the 1960s the Belmore Market-turned-Hippodrome functioned as the Capitol Picture Theatre. By then it was run down and stranded in an unlikely part of town. Cheap hotels provided for rail travellers disembarking at Central and cheap properties housed the offices of social services and philanthropic organisations designed to help the poor. The Chinese shops had gone into decline not only because the centre of gravity of the markets had shifted to Darling Harbour, but because Sydney's Chinese population was shrinking.
The doors of the once-mighty Hordern's store closed forever in 1973, and after a series of temporary tenants, the building was demolished in 1987. The property had been bought by Singapore developer Ipoh Gardens, but for many years it remained Sydney's most infamous hole in the ground, as development plans fell foul of financial upheavals and legal battles. The conglomerate of tall residential towers, hotels and shops which finally emerged on the site now known as World Square in the early years of the twenty-first century cluster around an internal pattern of laneways that recalls the earlier haphazard street layout in this locality, but the scale and finish of the development has nothing in common with what went before.
In the meantime the older small-scale shops in Campbell and Hay streets reasserted themselves as Chinese places. Chinatown, formerly confined to the western side of George Street, spread back into this older stamping ground. The City Council, long-term landlord of various market-related buildings in the area, restored some of its best small-scale nineteenth-century buildings and installed Haymarket Library into an old bank building. The library specialises in Chinese-language books and newspapers.
One piece of the Haymarket that seems never to change is Cyril's Delicatessen in Hay Street, where Cyril Vincenc has been serving fine middle-European fare for half a century. He was a real pioneer in the culinary desert of Sydney, 50 years ago.
The Capitol restored
The City's commitment to its heritage buildings was sorely tried when it came to determining what to do with the scruffy and disused Capitol Theatre. The subject of various redevelopment plans and much political intrigue, it was eventually turned into a modern lyric theatre, while its visible interior was restored to its 1920s glory as an extravagantly and fancifully decorated atmospheric theatre.  Since reopening in 1995 it has hosted international and local musical productions, maintaining a long connection between the Haymarket area and entertainment.
 James Maclehose, Picture of Sydney; and strangers' guide in New South Wales for 1839, the author, Sydney, 1839
 Sydney City & Suburban Sewage and Health Board, 'Eleventh Progress Report', New South Wales Legislative Assembly Votes & Proceedings, 1875–76, vol 3
 Shirley Fitzgerald, Red Tape Gold Scissors, 2nd Edition, Halstead Press, Sydney, 2008
 Lisa Murray, The Capitol Theatre Restoration, City of Sydney, Sydney, 2003