The latest increase to development at Barangaroo "could be squeezing the lemon too hard," according to Paul Keating, after the Baird government said it would allow larger buildings at the site to help pay for a new metro station.

Premier Mike Baird announced on Thursday the tender process for Central Barangaroo would open next week, and would include provision for the new station.

Central Barangaroo is planned to be a residential and commercial "bridge" between the headland park at the northern end of the development site and the more intensive commercial section at the southern end of the 22-hectare precinct.

The area was approved for buildings with a floor space of about 60,000 square metres, with about half the area to be used for public recreation facilities.