The future of workplace — Greg Sciortino

Greg is Knight Frank Town Planning’s Town Planner having recently completed his post-graduate qualification in urban and regional planning and is a qualified teacher. He has been involved in a wide variety of statutory and strategic projects, undertaking background research, preparing submissions, reviewing strategic documents, preparing development applications and presenting geographic information. Greg has a strong interest in strategic planning, sustainability and place making.

Workforce and workplace dynamics have been consistently changing and trends have adapted to new technologies and office strategies since the turn of the century. As millennials have entered the workforce, employers have needed to adapt to the new generation shifting their thinking regarding where, when and how employees work.

“These shifts are growing not only due to technological advances, but also due to the growing understanding that in order for employees to be more productive, they need to be happier and more satisfied” (Kropp, 2019). The aim of this post is to better understand how these trends have influenced the workforce and workplace and determine how planning for future developments can accommodate these changing work patterns.

COVID-19 has undoubtedly been one of the most significant global events to occur in the 21st Century and has caused the largest shift in work practices in recent history, forcing companies to be nimble and agile, creating efficient work from anywhere systems. A Gartner survey analysis reveals that post-pandemic, 41 percent of employees are likely to work remotely at least some of the time (HR Asia, 2020). How such a large portion of the working population continues to work from home is the next question.

IWG country head Damien Sheehan states “a hybrid model that incorporates elements of the head office plus multiple smaller private, flexible offices across decentralised suburban locations” are a more agile option for companies moving forward. The creation of smaller, accessible and localised working spaces will provide the workforce with those features of a working office environment and could further boost community wellbeing and sustainability.

This could also provide benefits for innovation and cross-pollination of ideas between sectors that usually would not mix in a traditional office environment. Providing new solutions to cater for changing workforce dynamics and provide local space for people to utilise will allow employers and employees the opportunity to create a virtual or physical environment and network that works best for their personalised situations.

The Greater Sydney Commission as part of the Metropolis of Three Cities Strategy is aiming to create 30-minute cities with multiple nodes within the Greater Sydney Metropolitan area. Hub and Spoke models of businesses with smaller offices located closer to where people live in these ‘spokes’ in smaller strategic centres and local centres will be a viable way forward in the future. Locating the right locations close to where employees live will be an important step in achieving a 30-minute city within Sydney.

Transport for NSW Network Capability Tool (Transport for NSW)

Living within walking distance to a workplace whether it be a formalised spoke space or a shared co-worker space close to home will be an important feature for employees wishing to maintain the flexibility they had during the time working from home in 2020, as well as providing many lifestyle and health benefits.

Possible Futures

There is no doubt that the future of the workplace has forever been changed by the pandemic. Creating new, different and safe workplaces for the workforce is still yet to be determined but a variety of ‘possibilities’ have been found to be the most likely. As mentioned previously, flexibility depending on specific employee and employer needs and benefits will continue into the future including specific responses to individual needs.

Deloitte’s March 2020 paper Future of Work: Ways of Working in Uncertain Times concluded that the workplace beyond 2020 will:

• Blend the physical and virtual environments and will deliver a consistent employer identity to all types of employees, contractors and other stakeholders.

• Provide personalized experiences that will empower people to be their best, balanced selves.

• Utilise collaboration tools and platforms that will support dynamic work locations and collaboration.

The offer of flexible work arrangements by employers represents more than just a response to the pandemic, but also represents a broader acceptance of flexible arrangements as the preferred method of working in the future. One possible solution for this is for new developments to incorporate a co-working space within a residential neighbourhood in new projects incorporating such a feature at the design stage underpinned by strata plans.

“Offering coworking spaces as an added feature in residential or mixed-use developments is definitely a timely notion. Many people are finding it difficult to work purely from home due to distractions and space/ infrastructure constraints” (The Daily Guardian, October 2020).

Integrating co-working spaces in residential developments represents a significant opportunity for developers to re-think the amenity mix, improve its relevance to purchaser’s post-pandemic and contribute to neighbourhood building and activation during for longer periods during the day and night. This goes hand-in-hand with allowing the workforce to choose where they would like to work in the future, allowing businesses and companies to seek flexible spaces and options as a means of future-proofing their business strategy and adapting to the changing needs of employees (Property Council of Australia, 2020). Keeping people within a precinct provides benefits and synergies to more sectors, including the commercial and retail footprints within such neighbourhoods.

There is also justification for the replacement of other amenity in high rise projects such as gyms and pools accounting for better use as worker or co-working space. “A 260 square metre space originally earmarked for a gym could accommodate up to 132 people per week if repurposed for apartment co-working. This is equivalent of about one full-time worker or three part-time workers per five square metres. It is worth questioning whether the gym—or any other amenity—would have the same rate of utilisation and engagement” (Huynh, Matkovic and Du, October 2020).

Workplace and workforce dynamics were considerably affected and changed in 2020 and will have a significant long lasting effect on the future. Changes have been seen in how employees approach work itself, productivity levels, a reimagined workplace and accessibility. The Work from Anywhere future of the workforce for a majority of businesses will cause a major reconfiguration of business strategy to create agility to cope with rapid change.

The planning system needs to get “climate conscious”, fast — John Brockhoff

John Brockhoff is the National Policy Manager for the Planning Institute of Australia. John guided the preparation of PIA’s policy positions on climate, infrastructure funding, the Parliamentary Inquiry into the ‘development of cities’, and PIA’s call for a ‘National Settlement Strategy’. John led the technical development of Sydney’s Metropolitan Strategy. He formulated NSW Government policy for urban renewal, employment lands, and the integration of land use and transport. In private practice, John led environmental assessment of water, road, and rail infrastructure projects, as well as policy-oriented research mapping city living conditions. John is currently an assessor on the NSW Regional Panel and Georges River Council Planning Panel.

The Planning Institute of Australia (PIA) is committed to achieving zero net carbon from the built environment by 2050, if not sooner.

But to achieve this goal it is critical that planning systems be a help – not a hindrance – by cutting greenhouse gas emissions and by adapting to climate change.

Ginninderry near Canberra has achieved a 6 Star Green Star – Communities rating, the highest rating available under the Green Building Council of Australia’s national Green Star – Communities rating tool.

The planning system

When planners assess development, they are shaping new additions to the built environment in the public interest.

Planners interpret development proposals through the filter of long-term strategy, plans and standards adopted by the community and their government. These rules are the “planning system”.

Australians ask a lot of our state and local government planning systems:

• to maintain investment and ensure a steady supply of building stock;

• to shape urban settlement in ways that work best with infrastructure;

• to create places and buildings that are well designed and resilient; and

• to avoid harm and ensure a positive contribution from the built environment.

Over time, coherent planning decisions should build the net worth of our cities, towns and regions.

The climate emergency

But the context for making planning decisions has changed. The Intergovernmental Panel on Climate Change (IPCC) notes we have less time to respond to reduce the impacts of climate change than the time we have available. This defines an emergency – and is the basis for moving more rapidly to reduce carbon emissions and improve resilience across all industry sectors.

We need climate-conscious planning systems that reflect the reality of a climate emergency and allow planners to make the best decisions possible.

In the absence of a national climate framework to allocate the most cost-effective pathways, each industry is setting its own response. For the built environment sector, there is action on building sustainability performance, construction codes and for urban design that responds to hazards and reduces the demand for energy. These initiatives will have long term benefits, but rapidly improving access to renewable energy – and responding to escalating hazards – are urgent needs, given the implications of carbon concentration trajectories on global temperature.

The goals of a “climate conscious” planning system

The task for a “climate conscious” planning system is clear. It must:

• enable urgent initiatives that transform the energy use and access to renewables – and offsets;

• set decision making pathways for the built environment and infrastructure investment to:

  • produce much less carbon;

  • adapt to changes in climate and hazards that are already locked in;

• ensure that living and working conditions in buildings and places are fit for future conditions;

• promote strategy to protect the values of the natural environment threatened by rapid climate change;

• continue to ensure that sympathetic development and investment flows smoothly according to current and future needs; and

• be able to adapt, listen, learn and build trust in the community.

A climate conscious planning system will have the “elements of a resilient system” in its rules and culture. It would grow the capacity of proponents, professionals and the community who work and engage with it. A climate conscious planning system would recognize that the single best pathway is not always the most resilient one. It would enable a diversity of scenarios to be considered and adaptable pathways to be pursued, it would ensure that decisions are made at the lowest capable level.

Figure 1: Characteristics of Resilient Systems (Kharazzi et al 2020)

A campaign to reform planning systems

As a body representing the planning profession, PIA has initiated a national campaign targeting every state and territory government to ensure that their planning systems enable effective climate action.

As an organization, we continues to advocate for national adoption of a zero net carbon commitment to meet our Paris Agreement obligations. We support a national climate change framework (Climate Bill) to allocate and account for abatement and adaptation tasks accordingly. This is an ongoing assignment.

However, in the meantime, planners must get their house in order. Australia’s federated system means each state and territory government sets the rules for land use strategy and development decision making, either centrally or via local government.

The different contexts make it impossible to set a single valid set of reforms, yet there are common challenges posed by climate change to which every planning system can respond. PIA’s Mitigation and Adaptation Discussion Papers help identify ten “asks” of a climate-conscious planning system.

The association is aware that these ten “asks” are not comprehensive – they represent a challenge for each jurisdiction to identify a suite of corresponding actions to make their planning systems more fit for purpose in a changing climate. We have asked working groups in each state and territory to respond with ten representative “fixes” (or actions) relevant to the reform of system.

Great ideas are already emerging, such as:

• incorporating resilience strategies into Regional Plans;

• integrating climate scenario planning into strategic plan decision making tools

• resolving EIS guidelines for solar farms;

• incorporating adaptive management pathways into development consent conditions;

• requiring building performance metrics for carbon emissions and thermal comfort respond to expected climatic conditions beyond 2050;

• clarifying rules and definitions for how precinct carbon performance would be measured; and

• considering a “climate filter” on the evaluation of the performance of infrastructure.

Some of these ideas are clear actions for “no regret” reforms – others expose how much we don’t know – and require work to build industry capacity. We are confident that the profession can progress the ‘no regret’ actions – while advocating for the means to solve the tough problems.

Getting past policy freeze

The complexity and scale of the climate change challenge can be overwhelming. Political gridlock and the rapidly changing nature of the emergency can make frustrate action. But planners know how to plan. We know the weaknesses of our planning systems and we can make headway on mitigation and adaptation by improving our tools as practitioners.

A concerted effort to fix key elements of each planning system around Australia would have a monumental impact on the performance of the built environment. Let’s harness our power and do our part in responding to the climate emergency.

This article was first published on The Fifth Estate. Access it here…

Why do we need investment in Affordable Housing and why should the development industry support it? — Rob McGauran

Rob McGauran leads the masterplanning, design advocacy and urban design disciplines at MGS Architects.

He is an experienced advocate, managing community consultation and government partnership processes involving large and complex multi-disciplinary consultant teams and stakeholder groups.

At a strategic planning level, Rob has been responsible for urban design frameworks and structure plans for key areas of Melbourne’s transformations, including Arden Urban Renewal Precinct, Footscray University Town, Cremorne Precinct and the historic Alphington Paper Mills. Rob has led the masterplans for Monash University, which has been awarded in Victoria and nationally, as well as for University of New South Wales, University of Wollongong, Victoria University and La Trobe University campuses.

His built projects are known for their innovation, relevance to contemporary issues and community focus.

In recent days we have seen many news stories pointing to the bounce back and now surge in house prices in our capital cities. With this a host of public servants, politicians, residential property investors, and homeowners sit back content, another KPI met, clearly all is well in the garden. The low interest rates, the decades-long incentives rewarding this investment class are working.  But are they?  Are we getting the housing infrastructure we need, in the locations and in the form and tenure required to build the Australia we need economically and socially?

The facts

• Average capital city prices have more than doubled since 2003 outstripping wages growth. 

• Career and income certainty in the last 10 years has rapidly transformed, with Covid 19 bringing into sharp focus the vulnerability of many Australians to loss of income and with that eviction.

• Once rent and mortgage costs are deducted, the rate of increase in average equivalised disposable income of the top 10% of households was 2.7 times faster than for the bottom 10% (between 1988 and 2015), with more rapid gaps established since that time.

• Home ownership across the nation continues to fall with now more than a third in rental accommodation. In areas of high concentration of jobs around which our nation is dependant, rental levels are sometimes more than half of all households and the availability of appropriate and affordable housing is even more dire.

• Our capital cities, our regional cities, and our popular tourist destinations all report major shortages of affordable housing for lower income households, including the key workers on which the centres are dependant for their services.

• For these renters (many of them millennials), higher debts on graduation combine with less job certainty, lower rates of wages growth and higher household costs to place households under enormous stress.

• Victoria has the lowest percentage of Public Housing in the country and whilst the unprecedented Big Build of the Andrews Government will introduce a welcome and massive investment of $5,3bn to replace old stock and build 12000 new homes, the increase only brings this housing targeted at our lowest income households to a level like that in NSW.

Work we undertook for the Inner South East group of councils with SGS consultants highlights this concerning shift with nearly all the areas of Melbourne serviced by good public transport severely, or extremely, unaffordable for single workers – identified with this darkening map occurring over only 8 years.

What is meant by Affordable Housing?

In recent years key changes in the Planning and Environment Act have made the delivery of Affordable Housing a key purpose of Planning and Urban Development. 

The Act has also provided definitions of what is meant by affordable housing describing three categories, Very Low, Low and Moderate-Income. The income levels are regularly updated and reflect the circumstances of a broad range of Victorians essential to our communities and economy

The Opportunity

20 years ago, as part of a broader research project looking at the future of the Australian City, I sought to better understand models of scalable investment in diversified income household. It had became evident that a combination of market failure and government inaction was leading to major areas of social disadvantage, with consequential social and productivity impacts across the nation.

Subsequent visits to institutions, NFP’s, developers and governments in the UK, North America, Europe, and Asia suggested interventionist models in housing supply as key infrastructure, was necessary to combat the absence of long-term thinking in the market. Whilst not always consistently pursued, the legacy of these initiatives has seen:

• The growth of listed developers such as Countryside in the UK who have leveraged access to prime development opportunities through trusted long-term partnerships with governments in delivering diverse and inclusive communities.

• Large not-for-profit Housing Associations that are complimentary to private supply chains, include the Peabody Trust and Clarion Housing Group in the UK with over 65,000 and 125,000 dwellings, and Paris Habitat in Paris with over 124000 units, respectively.

• In the US, the growth of the REIT Market with housing representing approximately 20% of the total market by value and affordable housing the fastest growing sector.  This has been supported by the development of a for-profit sector providing mixed market and subsidised housing - with Winn having over 100,000 units including 55,000 subsidised units.

In contrast, whilst our largest organisations are growing, and the number of community housing dwellings more than doubled between 2008/09 and 2017/18 from 39,800 to 87,800 dwellings, public housing has decreased by 20,000 in the same period.

Self-evidently, we have much to do.

Fast Tracking and faster support

In Victoria, the Minister of Planning has made available the Victorian Planning Authority and Development Victoria agencies responsible to fast-track rezoning and approvals for the development of strategic sites, where the provision of affordable housing is a key attribute of the project. 

By informing our clients of these opportunities to access fast track arrangements, we have seen complimentary enhanced local support with consequential lower development risk and enhanced diversified funding opportunities – which has resulted in a series of projects being rapidly delivered, including:

• The 24 hectare East Village Bentleigh for the Abacus/Gillon/Make Consortium achieving approval for a project inclusive of an obligation of 5% affordable housing in the 3,000+ unit that also includes a high performance public school campus and over 95,000 sqm of retail and employment space.

• The 51 hectare New Epping project for Riverlee, with the delivery of a Private Hospital, 151 Affordable Housing Units and a major new 1200 car carpark for Northern Hospital forming early stages of a project that will deliver more than 2,800 homes and 3,100 jobs and 5% affordable housing.

• The 16.4Ha Alphington Mills where a 5% commitment of the inclusion of affordable housing was achieved.

These projects reached the market in an expeditious time frame, in contrast to other projects that languish as they seek to argue that they have meet the (minimum) necessary community benefit thresholds to warrant support.

New Markets and Models

Numerous opportunities are emerging for innovative ways to deliver both development opportunity and community benefit. The chart above outlines some of these. 

Increasing Institutional investment in the sector is evident in examples such as investment of Australian Super in the Assemble BTR model, the mixed tenure Nightingale Village, and the emergence of Ethical Investment Classes and groups such as Conscious Investment Management. Based on the overseas precedents, these early entrants are likely to secure significant early scaling opportunities from governments and investors seeking solutions to pressing needs.

The missing middle

Whilst the increase in BTR markets is welcomed, most of its focus is the highest 20 % of income earners. Equally the focus of Government initiatives is the lowest quartile of income earners. 

For much of Australia the biggest issue by numbers and productivity impacts will lie in the missing middle: - Affordable rental housing in areas of high employment concentration; and designed to enable careers to be started, developed, resurrected, or grown and families nurtured. 

Our National success will, in large part, be dependant on the transformation of the Housing Investment Class (from what one professional colleague boasts is vanilla investor product for Mums and Dads and a global investment pool), to housing that is first and foremost configured as flexible high-quality infrastructure for the country, and quality homes for our people (that any of us would be happy to live in).

Access to high quality Development Opportunities

Following overseas precedents, the State and Local Government have increasingly announced that they are seeking partnerships for major urban renewal sites where inclusion of Affordable Housing will be a key criterion for developer participation.  These highly sought sites including the State-owned Arden Metro Precinct, the Fitzroy Gasworks with high expectations for affordable housing inclusion. 

Local Government is similarly developing strategies with similar aims. The City of Melbourne, Hobsons Bay, Glen Eira, Darebin and Moreland are amongst those with Affordable Housing strategies that develop expectations for developers and leverage their own land holdings.

In Banyule, the Bellfield site masterplanned by us for the council incorporated an affordable housing goal with Launch Housing nominated as the successful partner.

Bellfield site masterplan

It is not a new idea.

Delivering mixed tenure for communities of diverse means is not a new idea.

We have recently had the privilege of working with OCAV,  an NFP aged care provider that has been providing mixed asset level tenure for Victorians for more than 150 years where high nett worth individuals occupy dwelling undiscernible in specification and layout from low-income residents.

Leveraging Lazy Land

We have also been able to demonstrate how we can use lazy land to deliver affordable housing at locations in inner Melbourne over retail carparks and community facilities.  This has led to an expanded research project at the University of Melbourne that has identified the opportunity to leverage sites in inner and middle Melbourne for a further 30,000 affordable homes, with most achieving acceptable infrastructure category rates of return. 

We are similarly working with private sector, NFP and listed company clients about how to better leverage their development footprints to diversify income and partner opportunities and deliver positive impact.

Affordable Housing does not mean poor quality or bad neighbours.

Typically, by prioritising local people with strong local connections, participating clients have seen the development of strong relationships between new residents and neighbours that have strengthened communities.

If not, well-located Affordable Housing what is Plan B?

Many in the industry have clung to outdated taxation incentives and models focussed on negative gearing, rather than the sophisticated and demonstrated capacity of our REIT sector.  Unsophisticated research and the lack of design innovation has seen massive oversupply of approvals for units whilst amplifying chronic undersupply of essential housing - of the type needed by to 60% of those seeking rental accommodation in a locality.

Infrastructure Victoria has identified the need for a clear shared agenda of Affordable Secure Rental Housing as Key Infrastructure.

Without this they and other demographers and researchers point to a high likelihood that our cities and regions will see an explosion of misery, inequity and visible homelessness accompanied by frustration amongst industries of their inability to attract the best talent to areas of economic growth. 

Progressive developers are acting now. As one commented to me recently, if you are not prepared to embrace that we have a social contract with the community, then you will rapidly fall off the pace and be left the scraps.

---

Pressure on construction pricing eases due to COVID and falling activity: RLB — Arif Uzay

Arif Uzay joined Rider Levett Bucknall in 2002 as a cadet quantity surveyor, promoted to an associate in 2010 and in 2017 was appointed as a director. He is passionate about the built environment, diversity and inclusion within the construction industry, and contributing to change. Arif also demonstrates a comprehensive understanding of financial and cost management, specialising in conceptual estimating, cost planning, construction services and project procurement. He has considerable experience providing services for both the Government and the private sector on a broad range of construction projects and industries.

The Australian construction industry was impacted in 2020 by several unprecedented events. Initially, in early January 2020, bushfires ravaged significant regions of the country, followed by the growth of the COVID-19 pandemic. With borders across the country generally open, red spot covid outbreaks fought off, and with the latest GDP data indicating that the country has “turned the corner”, according to the RBA governor, where to now for the property and construction industry into 2021?

Victoria has experienced strong construction growth from 2018 to 2020. In particular, the 2019 and 2020 calendar years saw record levels of activity, at $59 billion and $57 billion respectively. The three major sectors—residential, non-residential, and engineering—all contributed to these record results.

While COVID-19 will affect future volumes of construction activity in Victoria, its impact is difficult to quantify. This difficulty arises as construction activity in 2021, and beyond, was already forecast to decline (particularly compared to the recent record highs) prior to the pandemic. Sectors classified as high performers in recent years have been most affected by the downturn. Activity within the high-density residential, office, hotel, and retail sectors are all predicted to decline in the short to medium term after significant new additions to supply. This is not surprising, given that these sectors are historically driven by strong net migration, influxes of international students, strong employment growth in the financial and service industries, and positive tourism activity—all of which have diminished since the outbreak of the COVID-19 pandemic in March 2020.

There is reason for optimism, with COVID-19 community transmission largely controlled in Australia, and the commencement of the vaccine rollout. However, the ‘working from home’ debate is still very much alive. While workers in most states have returned to the office in some capacity, commentators suggest that it will take some time for workplaces to return to ‘normal’.

All these factors are creating uncertainty in contractor tender pricing. Some factors are causing downward shifts in costs, with contractors and sub-contractors reducing margins while fighting to rebuild their pipelines of work. Other factors are expected to increase pricing, such as restrictions on the movement of labour and materials both nationally and internationally, and higher on-site costs due to COVID-19 site requirements.

However, the pressure on pricing eased through 2020 and into the beginning of 2021, and we are seeing a reduction in the escalation uplifts that were forecast 12 months ago, compared to that forecast now.

In general, Rider Levett Bucknall (RLB) contends that:

• The industry will possess a latent capacity for projects during 2021 and into 2022, due to the forecasted falling levels of activity anticipated by the Construction Forecasting Council (down 7% in FY 2021)

• Tender pricing will remain stable in 2021 and 2022, with modest increases in escalation expected. This could change quickly if demand intensifies or significant disruptions to supply chains occur (such as insolvencies, surges in material prices due to global trade conflicts, and lack of skilled trade personnel). However, current indicators suggest a more tepid path.

• The commencement of significant infrastructure projects should not have a dramatic impact on the supply chain. The recent surge in infrastructure activity has not seen significant escalation within the sector based on Australian Bureau of Statistics (ABS) numbers. However, this was not the case in 2018; there was a significant spike when the Melbourne Metro, Monash Freeway Upgrade, and West Gate Tunnel Project were announced. The civil market now appears mature enough to maintain pricing stability as proposed new projects are tendered into the market.
  

RLB believes that COVID-19 specific inputs into construction costs are generating several opposing factors. Reduced construction volumes in some sectors have increased competition, resulting in a corresponding reduction in tender pricing margins. However, factors such as increasing material costs, volatile exchange rates, supply chain reliability, and changing work practices are lowering productivity and potentially increasing program durations—all of which are influencing costs.

Prior to the impact of COVID-19, it was anticipated that construction escalation uplifts across Victoria would range from 2% to 4% per annum over the coming years. With construction activity forecast to decline in 2021 and the impacts of the pandemic now apparent, RLB is forecasting a general escalation rate of 1.5% in 2021. The ABS-published Producer Price Index for the Building Construction industry saw a 1.2% increase in overall building costs during the 2020 calendar year. We feel that with the current Enterprise Bargaining Agreement (EBA) in place, foreign exchange rates stabilising, and a falling level of activity, contractors and suppliers will be looking to consolidate throughout 2021. This will be achieved by reducing margins and lowering their expectations of supply chain profits to ensure a stable supply of new work, which will in turn offset known material and labour supply increases.

RLB published escalation forecasts

Table 4 - Forecasted RLB published Tender price index (TPI) uplifts

Reenergising your workforce to get back into the office and back to work – Yvette Martin

As Director and Head Coach at Kingfisher Advisory, Yvette is passionate about helping our clients shape their future through implementing consulting solutions based on the latest in neuroscience, positive psychology and Gallup’s strengths and engagement sciences. She has spent over a decade coaching and consulting to many ASX Top 500 and other companies around Australia and NZ in the areas of Strengths-Based Leadership, Employee Engagement, Wellbeing and Behavioural Economics.

‘I get out of bed every morning to help people at work give their best, stay motivated, and get great things done by creating solid relationships, stellar careers, and superior results’.

A common problem we are hearing from leaders across the property industry is that they are struggling to get their team motivated to get back into the office this year.

With all of last year’s lockdowns it seems that, for a lot of us, work has become something we now fit around the rest of our lives rather than being the bedrock of our days.

There is no doubt that Covid-19 has dramatically and forever changed the way we work. When we recently surveyed a selection of companies across the built environment, 35% said they felt there is no more need for a centralised office with it now being proven people can work effectively from home. However, that view is not shared by the majority; over 60% of business leaders plan to return their teams to an office-based workplace structure. Team morale and productivity are the main reasons to do so, with improved client interaction and work capabilities also cited as core motivations to get team members back in the office. 

Not everyone seems to share these leaders’ opinions though. After working from home for so long in 2020, especially for our Victorian colleagues, we are hearing that managers are struggling to justify to their teams why they should grapple with public transport and make the commute to the office multiple days per week. 

So, what can you do if you are one of these leaders and are wondering how you can boost engagement and performance of your team by getting them back into the office? How do you get your team back together and focused on providing great products and services for your clients?

There are three main things you can do now to light that spark of enthusiasm that helps teams come together, produce great work, and boost profitability for your business.

1)     Refresh your purpose and clarify your values.

This may sound too simple to have any real effect on performance. However, clarifying the bigger vision of why you do what you do can help connect the people on your team in a deeper and more meaningful way.

Simon Sinek says it best when he suggests ‘people don’t buy what you do, they buy why you do it’. This does not just work for your customers; it works equally as well for your team members.

As soon as a company’s WHY is put into words, the culture becomes a little more tangible and team behaviours adapt to align with the company’s vision. 

The reason this works is that our brains light up when we hear stories. Well before the written word, we used stories to unite tribes and create cultures around what was important for us.

Your purpose, when articulated clearly, should be a compelling story for your people to rally around. It is the motivation behind your service or product and the mission you stand for. Your purpose, when spoken aloud, is what makes team members proud to be part of your tribe. Your values, when shared, are what drive the right behaviours for you to achieve your vision as a business.

When you discuss your core purpose and values with your team members, you reenergise them with the promise of the value they help create in the world. This can help them reconnect with your central purpose and choose to physically be back in the thick of your tribe.

2)     Connect their individual efforts to your business outcomes.

Everyone wants to feel like their job is important. If they feel like they are just a cog in a wheel, you will not get the discretionary effort that comes from a fully engaged team member.

Take the time to connect 1:1 with your people and show them the value of their contribution to business success. This will help them feel recognised and appreciated. It also gives you a chance to better understand their individual motivations - what they enjoy about their role, what lights them up, and what frustrates them. When you know this, you have a much better chance of speaking to their core motivations.

Understanding their WIIFM – ‘what’s in it for me’. When returning to the office this can help you encourage them to be present while also allowing you to support them in overcoming any frustrations that may be preventing them from fully engaging in their role again this year.

This knowledge can also allow you to align their individual motivations with your team and business goals. This is a simple but not always easy thing to do. It is worth the effort though, because when you get this right you will have an energised, productive workforce across your entire business.

3)     Lead by example by creating as many ‘collision moments’ throughout your week as you can.

Collision moments are those moments where you physically ‘collide’ with your colleagues – not literally knock into them, but where you come face to face and have those micro-moments of bonding and camaraderie that helps to energise, engage us all.

The late and great ex-CEO of Zappos, Tony Hsieh talks about the power and value of ‘collisions – serendipitous encounters that happen throughout the working day which help create community – enhancing team culture and camaraderie across your business. Studies show that random encounters throughout the day increase both innovation and productivity.

When team members work from home full time, it is much harder to build these valuable collisions into your day. As a result, people are bombarded with hours of video calls and have now created a new workplace phenomenon – zoom-fatigue.

When you show up, excited yourself to be back in the office, you send vital belonging cues to your people. It allows you to utilise the extra conversations and natural collisions that happen throughout the day to move projects on, answer questions from your people and check in with them on a personal level. As a leader, your job is to encourage your team to do the same.

In summary, to help boost productivity and team engagement, reconnect your team with your purpose and values and share the enthusiasm you have as a leader in delivering the great products and services your business is known for. Align individual motivation with team and business goals, and then emphasise the value in collision moments - the energy, creativity and support that only happens when we are face to face and all working together to create great things in the world.

Are superintendents really independent? It depends — Phillip Vassiliadis & Paul Abrahams

Phillip Vassiliadis is a Senior Associate at Moray & Agnew Lawyers. He has extensive experience advising on residential, commercial, industrial civic, sporting and renewable energy projects across Australia, Asia, Europe and the Pacific region. Phillip has been names as a ‘Key Lawyer’ in the 2020 Legal 500 in the area of building and construction, and ‘rising star’ in the 2021 edition.

Paul Abrahams is a co-founder and director of Debuilt Property. Paul has extensive experience in construction, project management, development management and asset management.

PA

A significant component of our work at Debuilt involves the monitoring of construction loans on behalf of financiers and investors. Through numerous projects we have observed a variety of approaches to contract administration - and the issues that arise as a result. 

Almost all construction projects involve an underlying tension between the principal and the contractor - in relation to claims for variations, extensions of time, early bonus completion and the like. 

Larger projects typically incorporate more sophisticated processes and resources and are more likely to engage a third-party superintendent with a deep understanding of contractual issues.

Smaller, and what might appear to be simpler projects, often forgo engaging a suitably qualified independent superintendent, which can often lead to an increased risk of dispute between the parties.  

We spoke to Phillip Vassiliadis from Moray & Agnew Lawyers about a decision in the Supreme Court of Victoria relating to an infrastructure project and the independence of the superintendent.

To Phillip:

You recently wrote an article about a case in which a contractor claimed that collaboration between the Principal and the Principal’s representative had occurred, which was contrary to his legally required independence as a certifier. Could you provide a brief synopsis of that case?

PV

Vestas – Australian Wind Technology Pty Ltd (Contractor) entered into a contract with Lal Lal Wind Farm Nom Co Pty Ltd (Principal) under which it agreed to provide its services to engineer, procure and construct a wind farm in rural Victoria (the Contract). Under the Contract, the Contractor was required to submit claims and refer disputes to the ‘Principal’s Representative’.

As part of its role under the Contract, the ‘Principal’s Representative’ was required to undertake a ‘Certification Role’ (as that term was defined in the Contract), and in doing so act honestly, reasonably and make fair determinations in accordance with the Contract.

After being unsuccessful in multiple claims and disputes, all of which were assessed and/or certified by the Principal’s Representative, the Contractor alleged that the Principal had been ‘improperly involved’ with the Certification Role. Underpinning concerns of this wrongful influence was the discovery of references to the Principal’s solicitor’s comments on multiple documents issued by the Principal’s Representative, whilst performing its Certification Role.

PA

What exactly did the contractor make application for, and was the application successful?

PV

The Contractor applied for two things:

• An injunction to restrain the suspected collaboration between the Principal and Principal’s Representative in the latter’s performance of its role as certifier.

• Discovery from the Principal as a prospective defendant.

The injunction was resolved by the Principal giving undertakings to the Court that it would not communicate with the Principal’s Representative in performance of its role as certifier.

The second part of the Contractor’s application was unsuccessful. The Court held that the Contractor had sufficient information to decide whether it should initiate proceedings and did not require further discovery for this purpose.

PA

The court commented on the independence of the Principal’s Representative when acting in the certification role. Could you elaborate on these comments?

PV

An interesting feature of this decision is that notwithstanding the application being denied, the Court held that: “any private communication is sufficient to undermine the independence of the Principal’s Representative when acting in the Certification Role”. 

On this basis, any private communication between the Principal’s Representative and the Principal as to the Certification Role, which was not at the same time notified to the Contractor was sufficient to amount to an actionable breach.

PA

Does this case have any relevance to traditional building contracts?

PV

The Court’s decision to provide pointed statements is likely to get the attention of the industry. At face value, these comments do not necessarily compromise the ‘dual role’ of a representative of the Principal also performing the function of certifier, but can be seen as a reminder of a minimum standard of conduct that needs to be observed in this relationship.

The form of contract in Vestas was an ‘engineering, procurement and construction’ (EPC) contract. The cited provisions of the EPC relating to the certification functions are substantially similar to those commonly found in amended standard form contracts.

In Vestas, the Principal’s Representative was required to act honestly, fairly and reasonably when certifying, assessing or determining. In the ‘Australian Standard’ suite of head contracts, this role is performed by the ‘Superintendent’ who will commonly have similar obligations.

Amended Australian Standard head contracts are the ‘go to’ for building and construction projects in Australia. Accordingly, the decision in Vestas has wide ranging application to the building and construction industry.

PA

A large number of projects have a Principal’s Representative also appointed as Superintendent. Have the comments of the court affected the contractual ability of this dual role being undertaken by the same person?

PV

The decision is unlikely to limit the contractual ability of a Principal appointed party to be the contract certifier (whether as ‘Principal’s Representative’ or ‘Superintendent’). However, it will necessitate closer consideration of how this role is performed.

While, in our experience, the use of mutually appointed contract certifiers (e.g. independent certifiers or project engineers) is on the rise, there are still reasons why this approach may not be preferred by project participants.

PA

Then, do you believe that in practice there will be changes in the conduct of the relationship of the Principal and Principal’s Representative if they are also acting as Superintendent?

PV

Change in the discharge of contract certifier duties is the more likely outcome. It appears that Principals and Contractors are becoming more alive to the impact that this conduct can have on the outcome of disputes and differences under the contract.  

While many contracts include clauses designed to insulate the Principal from the allegations made in Vestas (e.g. disclaimer clauses, stringent dispute resolution mechanisms and time bars), these protections can come undone, or at least under sustained attack, if the proper performance of the function of the contract certifier is, or appears to be, compromised.

As always, additional drafting in construction contracts can assist to further insulate the Principal. However, Principals be mindful that these contractual provisions are not ‘set and forget’.

Attention needs to be given to communication protocols on a ‘day to day’ basis. While dispute resolution clauses are often intended to resolve such disagreements, they are too often only used at the ‘pointy end’ when there is a series of consolidated claims (as appeared to be the case in Vestas).

Often, improper influence of a contract certifier materialises through a series of incremental divergences from the certifier’s function. At the time of the breach, these may be innocuous (and sometimes, to the advantage of the Contractor), however in totality may have serious consequences for the outcome of disputes that turn on certification (generally of time and cost matters).

I think this is beginning to be recognised, and parties are focusing a lot more on communication protocols and ‘small scale’ dispute resolution clauses so that these issues can be dealt with at a project or mid-range commercial level without the need to invoke a more traditional (and often unpalatable) ‘dispute resolution’ regime in the contract.

Where the project budget allows, project participants are also turning their mind to better equipping the contract certifier to properly perform its functions. This may include express drafting empowering the contract certifier to seek the input of experts on certain matters, or taking more ‘minor’ disputes out of the hands of the contract certifier and referring them directly to binding expert determination.

The Vestas decision is likely to accelerate these types of initiatives.

PA

Are there any final issues related to the independence a Superintendent that you feel might be of interest to our readers?

PV

Parties need to be willing to turn their minds to the management of the contract certifier from the outset of the project. While construction contracts generally allocate the risks associated with improper performance of the contract certifier’s functions, project participants can do more to set down protocols of communication, and ‘day to day’ resolution of differences. In our experience, this goes a long way to avoiding disputes of the kind encountered in Vestas or at least ensures that in the event of such disputes, the functions of the contract certifier are not a central feature. These kinds of initiatives often come at a higher up front and ongoing project cost. However, if the project budget allows, it can be money saved in the long run. 

PA

Despite the differing interests of the parties, construction requires all participants to work collaboratively to achieve a truly successful outcome. The best projects are those where the parties have a mutual respect and understanding for each other and are then willing to go beyond contractual obligations to resolve an issue for the other party.

It only requires the perception that contractual decisions are not being made fairly to create a level of mistrust. A Principal’s Representative acting as the superintendent will only amplify this risk.  In the end, whether or not these decisions have been made appropriately may in fact become irrelevant in achieving a positive outcome for all.

Australian house prices on the upswing again – seven things to bear in mind about the Australian property market

Shane Oliver joined AMP in 1984, becoming Chief Economist in 1994 and is now Chief Economist and Head of Investment Strategy. Shane is a regular media commentator on economic and investment market issues and engages regularly with investors at public events and forums. He is responsible for the provision of economic and macro investment analysis and, as part of the broader Investment Strategy and Dynamic Markets team, the management of the Dynamic Markets Fund and the determination of AMP Capital’s asset allocation policy which is applied across more than $65bn invested in multi-asset funds. Shane has a PhD in economics which focussed on the validity of the Efficient Market Hypothesis (it isn't) and asset price bubbles (there are). He is also an Adjunct Professor of Economics at Macquarie University.

Introduction

After a 2.8% dip around mid-last year in response to the pandemic, average capital city home prices are rising again. 

Source: CoreLogic, AMP Capital

Put simply - record low mortgage rates, multiple government home buyer incentives, government income support measures, pent up demand from the lockdowns, bank mortgage payment holidays, activity associated with a desire to “escape from the city” and an emerging element of FOMO (fear of missing out) have swamped the negative impact of higher unemployment, a collapse in immigration and weak rental markets in Sydney and Melbourne. So, we are in yet another cyclical upswing in property prices. So, where to from here? But first to provide some perspective, there are seven key things worth bearing in mind regarding the Australian property market.

First – it remains expensive

• According to the 2020 Demographia Housing Affordability Survey, the median multiple of house prices to income is 5.9 times in Australia versus 3.6 in the US and 4.5 in the UK. In Sydney, it’s 11 times and Melbourne is 9.5 times.

• The ratios of house prices to incomes and rents versus their long-term averages are at the high end of OECD countries – all of which have low interest rates too! See the next chart.

• The surge in prices relative to incomes has seen the ratio of household debt to income rise 5-fold over the last 30 years, taking it from the low end of OECD countries to the high end.

Source: OECD, AMP Capital

Second – house prices go up and down

A common property myth is that prices only ever go up. But this is not so. Real Sydney house prices (ie, after inflation) fell 36% in 1934-35, 32% in 1937-41, 41% in 1942-43, 12% in 1947-48, 14% in 1951-53, 12% in 1961-62 and 22% in 1974-77. In nominal terms based on CoreLogic data, Sydney dwelling prices fell 25% in 1980-83, 10% in 1989-91, 8% in 2004-06, 7% in 2008-09, 3% in 2011-12, 3% in 2015-16 and 15% in 2017-19.

Third – talk of mortgage stress remains overstated

There is no denying housing affordability is poor, debt is high and some households are suffering significant mortgage stress. But most borrowers appear to be able to service their mortgages. The share by value of housing loans on bank payment holidays has collapsed from 11% in May to just 2.4% in December. And the collapse in mortgage rates – that has seen household interest payments as a share of income fall to their lowest since the mid-1980s – has helped.

Source: ABS, RBA, AMP Capital

In the absence of an unexpected renewed economic downturn, it’s hard to see much rise in distressed sales. It’s also easy to see from this chart, when combined with home buyer incentives, why home borrowing and buying is surging again.

Fourth – the Australian property market has been in a long-term bull market since the mid-1990s

Looking back over the last 100 years, the first long term boom was in the 1920s and ended with the Depression and WW2. This was followed by the post war immigration boom that ended with high rates in the 1970s. The latest long-term boom started in the mid-1990s. The key drivers of this boom have been easier access to debt and the shift from high to low interest rates (with mortgage rates dropping from around 17% in the late 1980s to around 2-4% now) which allowed Australians to pay each other more for property and from about 15 years ago a chronic undersupply of property. The latter can be seen in the next chart.

Source: ABS, AMP Capital

Annual population growth surged from around 2005 but the supply of dwellings did not start to catch up until around 2015, which led to a chronic undersupply of housing. This combined with low interest rates and easier access to debt explains why Australian housing went from cheap to expensive and stayed there over the last 25 years. Other countries have had low rates and tax breaks for property but far cheaper property because it’s been better supplied.

Fifth – we may be getter closer to the end of the long-term bull market in property

It may still have a way to go, but the two key drivers of the long-term property boom may be getting close to the end. First, interest rates are at or close to the bottom with the RBA now resorting to extreme measures to get inflation back up – which should ultimately mean higher interest rates. Second, the chronic under supply of property may be starting to fade thanks to the unit building boom since 2015, the hit to immigration and home building incentives which are likely to keep home building high for the next 12 months. As evident in the last chart, supply is likely to remain strong this year and next, but population growth has collapsed & could take years to recover. This may take some pressure off house prices on a 3-5 year view.

Sixth – “escape from the city” will have a big impact

The pandemic has seen a profound shift in how office workers do work. In particular, the work from home phenomenon is likely to remain, albeit not five days a week for all. This means less need to live close to work and a greater focus on lifestyle, which means greater demand for houses relative to units and in outer suburbs, smaller cities and regional areas.

Finally – the national property market is highly diverse

While it’s common to refer to “the Australian property market,” in reality there is significant divergence between cities. This was clearly evident over the last decade with Sydney and Melbourne booming up until 2017, Perth and Darwin falling sharply after the mining boom and the other capital cities and regional property generally seeing modest gains. See the next chart. Right now, Perth and Darwin are only just starting to recover and there is potential for Brisbane, Adelaide, Hobart, Canberra and regional dwelling prices to play catch up to Sydney and Melbourne. The surge in immigration played a big role in the outperformance of Sydney and Melbourne into 2017 and this is now going into reverse as other cities and regional centres are benefitting from the “escape from the city” phenomenon.

Source: CoreLogic, AMP Capital

The divergence is also evident in residential vacancy rates that have been rising in Sydney and Melbourne, reflecting increased unit supply and the collapse in immigration, but falling in other cities. This in turn points to upwards pressure on rents and property values in other cities relative to Sydney & Melbourne.

Source: REIA, AMP Capital

So where to now for residential property prices?

Australian home prices are likely to continue rising over the next two years thanks to record low mortgage rates and the recovery in the economy, with the latter offsetting the phasing down of income support measures and bank payment holidays. Housing finance is running around record levels and auction clearance rates are at levels consistent with strong price gains.

As a result, average capital city home prices are expected to rise by 5-10% this year and next. While first home buyer incentives are likely to be reduced, investor interest is expected to pick up and fill the gap.

However, the outlook is divergent. The hit to immigration is likely to constrain inner city Sydney and Melbourne as well as unit demand but outer suburban areas, houses, the smaller cities and regional property are all likely to see strong price gains helped along by the “escape from the city” phenomenon and less exposure to immigration. Expect average price gains of around 10% in Adelaide, Brisbane, Perth, Hobart, Canberra and Darwin in addition to regional areas.

The broader economy is unlikely to justify rate hikes until around 2023, but if the property market continues to hot up as expected, causing financial stability concerns for the RBA, a tightening in lending standards is likely next year which should start to slow things down and eventually the bottoming of the long-term interest rate cycle and the shift to oversupply may take pressure off prices, but that’s a while off yet.

Has COVID really caused an exodus from our cities? In fact, moving to the regions is nothing new

Professor Amanda Davies is Head of UWA’s School of Social Sciences and a lecturer and researcher in human geography.

This article was originally published in The Conversation. Read it here.

Internal migration resulted in a net loss of 11,200 people from Australia’s capital cities in the September quarter of 2020, according to Australian Bureau of Statistics data released this month. At the same time, some regional areas experienced significant growth in house prices as demand for properties increased. So this has raised the questions: are we starting to see an exodus from our cities, and is this related to the COVID-19 pandemic?

To work out what is happening there are a few important things to consider.

In Australia we move a lot

The first thing to keep in mind is that Australia has one of the most internally mobile populations in the world. About 40% of the population change their addresses at least once within a five-year period. However, the level of internal migration within Australia has fallen since the 1990s.

The greatest fall has been for long-distance moves between Australia cities and regions, which declined by 25% between 1991 and 2016. Moves between states and territories fell by 16% over this period. An increase or decrease in internal migration from year to year is not unusual.

Putting the numbers into context

While the recent loss of 11,200 people from Australia’s capital cities is the largest on record, it’s not a significant proportion of the population. Australia’s population has grown and so we expect to see the number of internal migrants to grow too.

The net loss of 11,200 people from capital cities is only 0.06% of the total population – 17.2 million – living in these cities. This is comparable to recent years.

While net loss – those arriving less those departing – is interesting, it is also important to consider the actual numbers of people who are moving to or leaving capital cities. The growth in the net loss of population from capital cities in the September quarter was not the result of a city exodus. What happened in 2020 was that fewer people moved into capital cities.

Drilling down further behind the headline data, we find Brisbane, Perth and Darwin all had net population gains. Brisbane has gained residents through internal migration in each quarter since 2014.

The greatest contributor to the recent net quarterly loss of 11,200 was Sydney, with a net loss of 7,782 people. Melbourne was close behind with a net loss of 7,445.

While this might look alarming at first, Sydney and Melbourne are the largest population centres in Australia. And Sydney has recorded a net loss of population through internal migration every quarter for the past two decades. Melbourne recorded net losses until 2012 and then since 2017.

Sydney and Melbourne’s overall population continued to grow over this period due to international migration. Population churn is part of the rhythm of these global cities.

The data also reveal that, on average, regional Australia has been gaining population for many years – decades actually. Moving to regional Australia is not new.
The past year’s COVID-19 restrictions closed Australia’s borders to the previously large numbers of international migrants. Without these international migrants moving to capital cities, the long-term trend of people relocating to urban areas around major cities has become more apparent.

Have the capital cities lost their appeal?

Just considering the September 2020 quarter, nearly 42,000 people moved to capital cities. This is comparable to the March and June quarters of 2020.

This inflow is noteworthy. At a time when many capital cities had mobility restrictions related to COVID-19 in place, people were still moving to these cities. Australia’s capital cities have not lost their appeal.

There is a risk in interpreting net migration from capital cities as an indicator of decreasing satisfaction with city lifestyles or a growing desire for rural lifestyles. It masks the considerable variability in the types of moves people are making, where they are going and why.

Outside of capital cities are a whole range of different community types. They range from expansive city areas such as the Gold Coast and Geelong through to tiny agricultural and fishing hamlets.

The fastest-growing areas outside capital cities are those that offer sophisticated urban settings. They have diverse employment options and high-order social, education and healthcare infrastructure. So when people leave a capital city, more often than not they are moving to a large city.

Will COVID-19 lead to growth in smaller centres?

Australia’s overall population growth has promoted the growth of capital cities and larger regional cities. Some smaller communities, particularly high-amenity coastal towns, have also experienced periods of sustained population growth.

Distributing this growth further inland to smaller towns and cities is both possible and plausible.

A major barrier to population growth in smaller rural communities is the lack of diverse local employment options. For those who have made the transition to working fully or partially online as a result of COVID-19 restrictions, moving further from their workplace more permanently – and perhaps to the country – could be on the cards.

So is there a pandemic-related exodus?

The COVID-19 pandemic is disrupting the way we live our lives but, no, there is not an exodus from Australia’s capital cities. For some, pandemic-related disruptions might have heightened their dissatisfaction with where they live. For others, working from home might have provided them with the opportunity to consider alternative living arrangements.

However, right now, given the data we have, it is unlikely that COVID-19 is driving a shift away from capital cities or city lifestyles.

VCAT's new normal: Online planning hearings – Andrea Towson

Andrea is a Principal Lawyer in DWF's Real Estate Team. Andrea is a highly experienced planning, environment and development lawyer. She has extensive experience in running large and complex planning and environment litigation relating to development and regulatory approvals, the rezoning of land and compulsory acquisition claims. Andrea's advisory experience includes planning and environment due diligence in connection with large scale property and corporate transactions, including providing advice on contaminated land, heritage issues, native vegetation offsets and development contributions. Andrea is recommended by Doyle's Guide in the area of Planning and Environment law. She was also a 2019 participant in the Property Council of Australia's 500 Women in Property program, which identifies female talent in the property industry.

There is no question that COVID-19 has fundamentally changed the way we work and the conduct of litigation (including planning hearings for development projects) is no exception to this.

Traditionally planning hearings before both the Victorian Civil and Administrative Tribunal (VCAT) and Planning Panels Victoria (Planning Panels):

• Involved multiple lawyers, experts and resident objectors attending hearings in person (including off-site physical site inspections with multiple attendees); and  

• Were very paper intensive, with trolleys of expert reports, A1 plan sets, and written submissions being printed and handed out to each individual hearing participant.

What changed in 2020?

The physical layout of both the VCAT and Planning Panels buildings makes it very challenging (if not impossible) to achieve social distancing for face-to-face hearings – particularly where there are large numbers of parties involved.  

As such, COVID-19 restrictions have seen VCAT and Planning Panels hearings conducted as online or telephone hearings through much of 2020. Telephone hearings were typically limited to directions hearing and other, less complex hearings, with a small number of parties.  

Backlogs and Adjournments

Between March 2020 and May 2020 (the first Melbourne lockdown), there was an initial backlog of COVID affected cases – largely because VCAT and Planning Panels did not have the technical capability at the outset of the pandemic. This resulted in significant hearing delays.  For example, non-major cases list matters filed in May 2020 were not being listed for final hearing until early 2021.

One positive observation from these hearing delays, is that parties were strongly encouraged to resolve issues by agreement wherever possible (even outside of the formal compulsory conference process). 

On 28 April 2020, VCAT received State Government funding to implement digital solutions to the Planning and Environment Division.  Consequently, in the second half of 2020, the COVID backlog was actively triaged (including through the introduction of a revamped short cases list in VCAT) and timetabling is now largely 'back to normal'.

Key differences between a physical hearing and online hearing

The key difference between a physical and online hearing is that all parties are not physically present together in the same room. Each individual participant will 'log in' from their individual location – whether that be chambers, a home office, or (more recently) their work office.  

VCAT hearings were primarily conducted on Zoom and Planning Panels Hearings on MS Teams. A good working knowledge of both interfaces, including screen sharing, video and audio controls and the chat function has been essential to be able to successfully participate in an online hearing.

A high quality set of headphones (with an inbuilt microphone) is helpful for participants, and the most prepared experts have also invested in magnifying glasses, making the viewing of plans on screen much less straining. 

The recording of an online hearing is prohibited. This includes any 'observers' (i.e. a development manager observing the hearing on behalf of a development company). 

Procedural Orders – Online Hearings

There are additional procedural requirements for online hearings, including that:

• The applicants prepare and maintain an electronic Tribunal / Court Book of all hearing documents;

• Expert evidence and plans be circulated to all parties electronically; and

• Part A written submissions are circulated at least 5 business days before the hearing commences.

These changes have significantly improved the efficiency of hearings, as all parties (including VCAT and Planning Panels members) have the opportunity to review relevant material before the hearing commences.

Typically, no hard copy filing of the entire Tribunal Book is required after the conclusion of a hearing. VCAT or Planning Panels will generally only require the following to be filed: 

• A USB containing the Tribunal Book documents in electronic format;

• Paper copies of select documents (typically A1 plans).

This initiative has significantly reduced double handling of voluminous hard copy documents and reduced the environmental footprint of proceedings. These procedural changes will no doubt become permanent improvements to the conduct of planning hearings.

Key challenges of online hearings   

Despite procedural improvements, online hearings do present challenges in the planning and development world.

Physical Site Inspections

Given that planning hearings are focussed on land and the appropriateness of future development, there is no substitute for a physical site inspection of the subject land and its surrounds. Site visits were very restricted in 2020, but it is hoped that these can resume in a more traditional form in 2021.

Expert Evidence

It can also be very challenging for expert evidence to present online evidence.  Many cases rest on the credibility of an expert witness. It can be difficult to gauge the credibility of an expert over the screen. For example, is a witness pausing to think – or because they are trying to avoid a line of questioning? Giving evidence online can unfortunately diminish the quality of witnesses' evidence.

There are additional challenges if evidence does not complete within the allocated hearing date and runs access multiple days, given that experts are prohibited from communicating with their clients and legal team whilst still technically presenting their evidence. This needs to be carefully managed in the remote working environment.

Teams / Zoom Fatigue

Teams / Zoom fatigue is very real.  There are concerns surrounding the amount of time parties spend in front of screens – especially during lengthy hearings. This is most challenging for advocates, who need to be 100% present and concentrating at all times.

Eye strain, headaches and increased tiredness associated with online hearings, need to be managed via regular 'technology' breaks. Unfortunately, the consequence of these breaks is often a more disjointed and ultimately longer hearing than if conducted in person.    

Technology can fail

Despite the very best systems, technology can and does fail. If a person drops out at a critical point in the hearing, this will cause disruption and delay.  

Are online planning hearings the new normal?

Quite clearly online planning hearings are here to stay and will be the 'new normal' in 2021 – albeit, hopefully in a more flexible form as COVID-19 restrictions are further relaxed.

The additional procedural orders (online Tribunal Books and the pre-filing of written submissions) should remain in place permanently. These procedures significantly improve the efficiency of hearings.

While larger hearings will remain unworkable in the immediate future (due to the number of parties involved), consideration must be given to how critical evidence can be delivered in person – at least to the relevant member – in circumstances where:

• Determination of the facts cannot occur via a screen; or

• There is conflicting evidence, which is central to the dispute. 

While the efficiency improvements associated with online hearings should be celebrated, adopting 'remote hearings' on a permanent basis should not occur if this will ultimately result in the deterioration of the quality of justice and prejudice to the parties.

2021 will no doubt see even more changes and improvements in this space – so, to be continued…  

This article was written by Andrea Towson, Principal DWF (Australia) – Real Estate (Planning & Development)

DWF's Real Estate team takes a 'whole of project' to real estate developments – providing advice across all areas of property, planning and construction. This consolidated approach allows us to partner with our developer clients and their project team, adding value and acting as trusted advisors for the entire project lifecycle. 

Office or not? – Daniel Burger

Danny is a co-founder and director of Debuilt Property and has a professional career spanning architecture, construction, project management, development and property finance. Debuilt provides a wide range of consulting services to investors, financiers and developers.

The pandemic has dramatically altered the way in which we work.

While there is considerable speculation around the future of the office-home balance, one thing is for certain, we have been forced to experience a different way of working and a lot of people like it (or at least parts of it). 

Back to the office

The office sector has seen a turbulent 12 months. At the conclusion of 2020, Sydney’s office towers were filled to about 50% of their capacity, while Melbourne occupancy was around 13%.

On Monday 18th January 2021, City of Melbourne data indicated 380 pedestrians walked past Southern Cross station on Collins street between 8am and 9am. This count is the highest since March 2020. (Pre-Covid Melbourne hosted an average of 3,800 pedestrians walking around Southern Cross). Whilst this is certainly a positive trend indicating that many office workers are returning to the CBD, there continues to be great interest around the discussion of future working arrangements.

Changing attitudes – here to stay?

In October 2020, JLL undertook an online survey of 2,033 office workers across 10 countries spanning all major industries. Nearly three-quarters of respondents still desired the ability to come into an office, while 70% consider the office as the best place for team building and connecting with management.

With the general success of the remote working experiment and an overwhelmingly positive attitude to workplace flexibility, it is clear that workplace environments will change. One valuable takeaway from the pandemic is that workplaces reduced their dependence on working with printed hard copy files, further aiding the ability to work flexibly.

A hybrid office environment is likely to emerge in order to accommodate for changing workplace needs and preferences. A new normal will most likely take shape in a variety of ways, but the general consensus seems to be that employees might have the opportunity of working remotely for one or two days a week. Some roles could shift entirely online.

The impact on offices

Negative forecasts for the commercial sector’s future are wide-spread, with many predicting a reduction in demand for office space. David Cannington of Investa Research estimates that the uptake of office space could fall by as much as 15% in the coming year as a significant amount of city workers spend more days each week working from home. JPMorgan predicts that demand could take a 10% hit over the next 5 years. QIC, one of the country’s largest property fund managers, predicts half of Australia’s workforce will work from home two days a week following the pandemic, resulting in a 5% fall in net demand for office space.

What these predictions possibly do not take into account is a need for increased collaborative work and meeting spaces, a focus on enhanced employee and guest amenity areas, video conferencing requirements (discussed further below) and ongoing social distancing. This should soften a prolonged negative impact on office space demand.

Video conferencing and online collaboration 

Our initial experience with video conferencing (“the Zoom Boom”) showed us that we could meet, share documents and communicate effectively, despite being apart. Whilst sometimes a little clunky, it still remains a relatively successful ‘second best’ option to meeting in person.

As with all technology platforms, a certainty is that the video conferencing companies are working furiously to enhance their product to close the gap between in-person and online interaction.

Michael Chetner, Head of Zoom Video Communications Australia and Asia Pacific believes the next 12 months will be characterised by businesses learning how to create equality between employees in the office and those at home. The Zoom Meeting Room facility, for example, intends to enhance and streamline meetings between a room full of on-site attendees and off-site individuals. Zoom will also likely further develop their phone service and their real time translation service.

Other mooted developments include a proposal by Japan’s NTT to use projectors and thin, semitransparent screens to mimic a colleague’s head movements in an attempt to make the virtual person’s presence seem more life-like.

(The Verge, 2012)

With further advancement in technology, offices will also adapt and improve to accommodate the increased use of video conferencing – offices will need to be designed with consideration of an increase in the noise and disruption generated through online meetings. 

Landlords will respond

Whilst physical offices will certainly remain central to work, office landlords will need to make similar adjustments in order to adapt to a new ‘COVID normal’.

Office buildings, not just tenancies, will have to enhance their offering as a destination for collaboration, networking, problem solving and career development. Buildings will benefit from including, or being located adjacent to, quality facilities and spaces that promote collaboration, networking and social interaction.

Despite many predicting a negative outcome for the office sector, Simon Hunt (MD of Office Leasing at Colliers International) says Australia-wide demand for office space is still going strong. He says at the end of Q3 into Q4 Colliers actually saw an impressive 546,000sqm of enquiry recorded for Q4 alone and this was up on Q4 2019 enquiry by 4%. 

Colliers’ Office Demand Index, released in January, indicates that whilst demand was positive in the second half of 2020, the influence of COVID was evident. For example, in Melbourne whilst the government sector was the most active, part of the metro market increase (200,000 sqm more in 2020 than 2019) can be attributed to businesses seeking office space in lower density areas to allow for working closer to home and social distancing measures.

The need for landlords to adapt was reinforced this week, as The Age reported that office vacancy levels have reached highs not seen since the 1990 recession. According to the Property Council of Australia, whilst Covid was a factor, increased supply of available office towers was the main contributor.

Ultimately the space will be absorbed; with the major impact being the commercial return to landlords and a delay in new supply.

So, what does this all mean?

Leaving aside the benefits and opportunities provided by remote working, the ultimate environment to promote team collaboration, mentoring, networking, business socialisation and work efficiency is to bring people together in one place – the office.  

The advancement in remote working options will deliver flexibility and adaptability in the workplace whilst providing the opportunity to enhance the employee experience.

Therefore, the future of work requires the agility for landlords and tenants to adapt to, not only the changes we are presented with now, but also the changes we will be presented with in the future. Through enabling hybrid models of work and empowering employees wherever they are located, the future workplace should be conducive for all.

How Buildings Learn — Mark Upton

Mark holds a Bachelor of Business in Property from RMIT, commenced his career in valuations and held positions with Chesterton International and Richard Ellis (now CBRE) before working in the City London during the late 1990’s.

Returning from the UK, Mark undertook primarily residential development projects of varying scale & complexity from single residences to multi-unit projects mainly in Melbourne’s inner and south eastern suburbs. An opportunity then arose to join McDonald’s Australia where his role was site acquisition and securing of town planning consent across three states.

Presently with Coles Group Property Developments, Mark is a Fellow of the Royal Institute of Chartered Surveyors and a member of the Australian Property Institute.

Is there a keen observer of property who has not wandered the streets of Melbourne’s once proud retail strip centres and thought “What has happened?” or more so “What is next?”

 Post pandemic (vaccine notwithstanding) perhaps the same can also now be asked of other asset classes. What for example is to become of secondary or “sub-prime” office buildings in need of refit or where lifts can accommodate numbers insufficient to allow for social distancing? The concept of “Highest & Best Use” must surely continue to impact inner suburban light industrial areas as modern manufacturing & distribution premises are constructed in outer lying Growth Areas with superior transport linkages.

The answers may lie in Stewart Brand’s 1994 book entitled “How Buildings Learn”.

 Subtitled “What happens after they’re built” the book takes early drawings or photographs of structures from when first conceived or constructed and then contrasts these with later photographs of exactly the same buildings and/or streetscapes, often over considerable time periods. By so doing so the reader comes to understand a chronology of built form.

 “ ….. Monumental ….” grain silos once owned by Quaker Oats in Akron, Ohio are now the “Quaker Hilton” a downtown hotel. A proud Georgian house constructed in 1926 for a notable Long Island, New York local became a restaurant before falling into disrepair and a candidate for demolition in 1985 only to then be repurposed by a fast food chain in 1991. To quote Brand;

“Large houses are exceptionally skilled at being comfortable, being loved and being adaptable. Like old factories and warehouses they are always prime candidates for preservation’s best political-economic design device - “adaptive use”.

Brand’s overall thrust is that architecture is not permanent and buildings can (and indeed do) adapt, provided they are allowed to do so and not constantly demolished and consolidated for wholesale redevelopment. There may well be periods of neglect as precincts become undesirable or undervalued, but then these very same structures are, for a variety of reasons, reinvigourated bringing the undefinable cachet and inner suburban character found in certain parts of say Fitzroy, Carlton, Collingwood and Richmond.

Be it gentrification due to sheer proximity to the core of a metropolis, Government sponsored changes to transport infrastructure or public policy enshrined in Planning Schemes, if allowed to do so buildings can, and do, adapt and evolve.  

There is much to be learnt from this in the current circumstance; innovation will inevitably occur as structures, just like humans, adapt to meet needs.

Who has not visited a former warehouse, perhaps now an office or high-end residence, and marvelled at the irregular exposed brickwork and saw-tooth roof? Similarly a former workingman’s cottage now sees the what was once a sitting room “repurposed” as a master bedroom with ensuite, the whole original structure standing in contrast the strikingly modern (and often expansive) glazed extension to the rear?

Over time, buildings may be added to, another level here; a different window there; fenestration added or removed, signage incorporated. However certain buildings remain to some extent intact, albeit repurposed, therefore adding to the “patina” and character of a location.

It is a simple fact that a good many buildings are “recycled”, possibly several times, as the original purpose of the structure alters in response to its environment and other (possibly social) circumstances. This may be as simple as a further level being added to a residential building to accommodate a larger family; or it may be more fundamental and visionary.

An example is the former Phillip Morris cigarette manufacturing facility in the industrial precinct of Moorabbin being transformed to include a micro-brewery, a child care facility, office space and retail. Much of the original structure (durable and quality built; something of a local landmark) is being retained and will be re-purposed as “Morris Moor”, contributing to a new and evolving fabric / character of the neighbourhood. 

There should be some optimism that, allowed to do so (possibly by fate, a “hold out”, or similar quirk), structures that are retained evolve in an altogether beneficial (and often aesthetically pleasing) manner. This is in contrast to a constant (and seductive) cycle of demolition, consolidation, redevelopment and progressively smaller subdivision.

The examples above demonstrate that those buildings which, for a variety of reasons, are allowed to remain will find a use; be it one that conforms to a prescriptive Town Planning regimen or one that Planning Authorities ultimately come to appreciate the wisdom of permitting.

If, as Brand proposes, buildings do indeed “learn”, then it seems there is presently an opportunity to be grasped as pandemic recovery stimulus initiatives, government policy, a chronic lack of affordable housing and historic low interest rates enable the development community to become less “…. artists of space…. ” and perhaps more “…. artists of time ….”.

Leaving 2020 behind

2020 was a year of unexpected twists and turns. Australian and global property industries experienced a few positive and a lot of negative outcomes. For our last Expert article for the year, we asked 20 industry experts to give us a statement on 2020, and a projection for 2021. Debuilt hopes that next year brings a vaccine and a healthy appetite for property assets.

Architecture

Michael Bialek - SJB Architects

“2020 was a challenging year but reminded us all of what is important in everyday life. 2021 will see our team return to the studio and respond innovatively to the changing conditions in the property market.”

Building Surveying

Shane Leonard - Phillip Chun & Associates

“2020 taught us that even the building consultant industry can work remotely and has the ability to adapt. 2021 looks as though the construction industry’s recovery will be quicker than expected. However, it will be garnished with a healthy dose of caution.”

Construction

John Crane - Alfasi

“2020 was a year of reflection and re-setting of expectations. I predict that 2021 is a dynamic year of change with both positive and negative outcomes for the property market.”

Development

Guy Taylor - Digital Harbour

“2020 has required all of us, including the property industry, to pivot quickly. The key take away for me from 2020 has been ‘maintain great relationships’. Not only on a personal level (being confined at home) but also on a professional level with colleagues, tenants and clients. It could have been either negotiating rent relief, a design issue or an alternative playground for a 3 year old. That being said these challenges have certainly presented new opportunities in the property industry - it has allowed us time to consider how to reposition assets or reconsider designs to meet future demands. The ability to respond quickly to the ever changing demands of the market will be the key to 2021 along with maintaining great relationships.

2021 is going to be an exciting year and I believe there will continue to be opportunities in property for those who can pivot and adapt quickly. We will have the opportunity to have the social and personal interactions we have all been missing. I hope the lessons of 2020 will see the streamlining of bureaucratic processes and a focus on enabling outcomes not only to improve of health of all of us but also that of the environment which will allow our great city of Melbourne to be the vital and exciting place it is. I hope we will see a focus next year of improving public spaces which will inherently improve property values.”

Finance

Kathy Johnson - Yarraport

“2020 has been a volatile year and property capital markets have been no exception, seeing a strong shift in appetite towards more “COVID-safe” assets such as industrial, medical and medium to low density residential.

We expect 2021 to have continued growth in non-bank capital providing competitive tension for borrowers, and activity growth with the delivery projects from both pent-up and pulled forward demand from lockdown and government stimulus.”

Fiona Clark - Merricks Capital

“The resilience of the property market in 2020 has surprised many. The strong rebound in sentiment and continued fiscal and monetary stimulus should limit downside, but risk factors have also intensified.”

Neil Slonim - Slonim Consulting

“2020 has been a year like no other. No one could have predicted what would unfold. Whilst many have been, and will continue to be, adversely impacted, this ‘Black Swan’ event has spurred learnings and creativity which is already generating new opportunities for well-managed and reputable developers, investors and lenders.”

Project Management

Josh Whiteley & Tynan John - APP

“2020 was challenging for most, some more than others, but everyone came together and we got through it - which now provides a great base for the next phase of growth/opportunities. 2021 will see the implementation phase of industry shifts that were in afoot, but are now accelerated, being more social housing, build to rent rise, mixed use on top of retail, WFH & more work being done from non-‘CBD traditional office block’ locations.”

Property Law

Michael Fetter - Tischer Liner FC Law

“2020….interesting year as property was meant to be depressed, but was resilient with low rates and opportunities. There were very little mortgagee in possession sales, and lots of mezz lending deals.

2021…while no one can foretell the future, trends seem to be de-centralising from Melbourne CBD, build to rent, holiday house acquisitions, smaller developments of townhouses and lifestyle apartments. Office market rents will fall, incentives to lease to rise, and residential rents will continue to be under pressure until students return.”

Briget O’Callaghan - marshalls+dent+wilmoth lawyers

“2020 saw Melbourne’s commercial and residential property market slow down, however the overall outcome was not as bleak as anticipated.

Developers’ access to finance for construction projects was harshly affected by cautious and risk-adverse lenders. The risk and reality of being unable to meet milestones and deadlines due to unexpected delays was also a concern for many developers this year.

Property prices held steady regardless - we saw an increase in first-home buyers return to the market in the second half of 2020, taking advantage of various State and Federal government grants directed their way.  

The property market outlook for 2021 is uncertain, however this uncertainty creates some opportunities within the property market; Victoria’s 2020/21 budget focused on stimulating the property/construction sector with affordable housing opportunities. opportunities for developers and provide much needed relief to some of the more vulnerable members of Victoria with many projects tipped to begin early next year.”

Jane Hodder - Herbert Smith Freehills

The year 2020 has certainly been a challenge for us all, especially in the commercial office, residential apartment and retail sectors. There has also parts of the property sector which have benefited from market conditions during 2020 such as industrial. It is therefore more important than ever for real estate players to pre-empt some of the future trends that will emerge from 2020 so that they can be ahead of the game in both taking defensive positions on risk areas and pursuing new opportunities.

With the deferral of many transactions during 2020, especially in the commercial office and retail sectors, there is likely to be a significant uplift in activity in the first half of 2021. Despite the pandemic’s devastating impact to lives and livelihoods of so many people, senior executives also highlighted that through disruption, opportunities arise. The road ahead does not come without its challenges though which the property industry will need to navigate during 2021.

Real Estate — Commercial

David O’Callaghan - O’Callaghan Commercial

“2020 saw decades of property and contract law thrown under the bus as Government decided pandemic survival was only about tenants. 2021 is likely to see the beginning of a long, deep and very painful journey for owners and investors forced into a post-Coronavirus hangover and a platform where they hold a significantly weaker hand.”

Paul Burns - Fitzroys

“2020 saw appetites for secure, long-term assets increase, with tenants who can and will pay rent being in demand. The long term affect on assets will be modest - people need the collaborative and social environment of an office, and employers need to see what their employees are doing. Now, more than ever, productivity will need to be driven to catch up for the losses.”

Raoul Salter - Gross Waddell

“2020: The challenges of 2020 have been well documented but as expected, the resilience of property has been on display, bouncing back well.

2021: A crystal ball gazing approach sees a brisk start with possible head winds as the year progresses. A vaccine can’t come quickly enough!”

Jesse Radisich - Savills

“2020 was clearly an extraordinarily tumultuous year for all of us and within the property market. It was a year of contrasts, with an exceptionally strong start to the year brought to a sudden halt by the onset of the pandemic. It was then a period of consolidation and caution, followed by a period of strong activity and optimism throughout the second half of the year as the virus unfolded and we managed to get it under control.

2021 is shaping up to be an exciting year. We anticipate the confidence and optimism currently running through the market will roll over into the new year, and we expect strong activity early on in 2021. The big question is whether this will be maintained throughout the balance of the year, and the hope is that with interest rates at rock bottom levels, plenty of cash in the market, big Government spending, the proposed vaccine rollout and then subsequently tourism and migration returning, we may just be able to cushion ourselves moving forward.

Recruitment

Rohan Christie - Kingfisher Recruitment

“2020 broke the crystal ball, but it was pleasing to see how resilient our local community and economy has been throughout this tough period. We have never been busier in December, which is a great sign for what is to come in 2021, although questions remain to be answered about drivers like immigration.”

Retail

Mark Upton - Coles Property Group

“2020 - A year to forget; one which further accelerated trends toward reduced retail floor areas in favour of logistics and dark stores for online ‘Click & Collect’ options.

2021 - I am predicting a slow recovery to a new ‘normal’. There is an opportunity to capitalise on work-from-home learnings and forced innovation in the repurposing of existing structures. State-sponsored investments in affordable/public housing and infrastructure looms as a potential saviour for the construction industry.”

Town Planning

Deon White - Roberts Day

“2020 was global dose of what’s important and reminder of humanity’s ability to adapt. 2021 will reward innovation, driven by the need to nimble and the opportunity in shifting community values.”

Kellie Burns - SJB Planning

“2020 gave us a reset we couldn’t have imagined possible (or that we would have desired) and forced a seismic creative re-think of how we do business and relate to one another – hopefully for the better! 2021 will see a return to property activity, with 2020’s insights guiding decisions across all sectors of government and private interests particularly relating to how we live, where we work and how our public spaces can enrich us.”

Valuation

Scott Keck - Charter Keck Cramer

“The impact of COVID-19 was not as severe as most commentators were suggesting. However, as the pandemic fades, we will return to some of the pre COVID-19 economic challenges of under-employment, stagnant wages and low inflation and productivity. On a more positive note, support for the residential markets is on the horizon, with the inevitable return to the appropriate rates of population growth boosted by immigration mainly from Asia, including China, and the return of foreign students.”

Debuilt Property

Danny Burger & Paul Abrahams

“2020: The Debrief, with its bespoke cartoons, was meant to generate a smile but each week seemed to deliver more bleak news.  Having said that, COVID did not have the devastating impact on the property industry many of us feared. Rather many of us gave up hard copy files, became more mobile, advanced our IT skills, got better acquainted with the people in our household and are now convinced that greater flexibility in our work methodology is achievable.

2021: We are creatures of habit, and barring a new pandemic hitting us in close succession, we will mostly revert to a modified version of past practice. Collaboration, socialisation, strategy, mentoring and relationships are best achieved in person. However our lessons from 2020 will create exciting and innovative design options that will emerge in our built form.”

Scott Keck – Market Commentary – National Market Forecast, COVID-19 December Update

Scott Keck is Chairman of Charter Keck Cramer, a leading Australian strategic property consulting firm. Scott has 50 years of property valuation and Corporate Real Estate experience across the national markets. He began with the firm in 1968, became a Director in 1978, Managing Director in 1984 and Chairman in 2010. As an experienced independent practitioner, Scott provides specialist strategic and mediation consulting.

Over the last nine months, in my July and again in my October commentaries, I strongly foreshadowed the impact of COVID-19 on the property markets would not be as  severe as most commentators were suggesting and that the recovery would be relatively strong and fast. I rationalised that the fundamentals, both economic and social would not be so dramatically disrupted by events as to result in significant permanent change. I still hold to that view yet believe that as the pandemic fades, we will return to some of the pre COVID-19 economic challenges of under employment, stagnant wages and low inflation and productivity.

Much of the uncertainty about the direction of the economy generally and the real estate markets in particular, is now giving way to growing confidence that we are returning to normal conditions, not a new COVID 19 normal, but conditions as they were prior to the pandemic intervention.  Whilst there is genuine sympathy for those who have been adversely affected, I think nonetheless that the consequent dramatic surge in the application of effective and user friendly IT in our society during this period will have lasting positive legacies.

For many businesses, doing things differently, pivoting their operations and embracing innovation will lead to leaner cost, more profitable enterprises with employee workplace flexibility. The record low interest rates, globally and in Australia, in part due to Government revival monetary strategies, now provides the availability of extremely useful, low cost debt, which in the private sector, supports real estate generally and particularly the housing market when coupled with Government grants and incentives, but which is also an extremely powerful tool to assist Federal and State Governments strengthen the economy with infrastructure and other strategies providing the debt is invested wisely. Cheap debt can be an extremely useful resource.

The current rhetoric with China will pass as there are social and economic imperatives necessitating good bilateral relationships with China. In one sense the current spat is nothing more than a brief argument in what should be a long and strategic marriage. Consequently, support for the residential markets is on the horizon, with the inevitable return to appropriate rates of population growth boosted by immigration mainly from Asia, including China and the return of foreign students.

As the virus contagion fades and health protocols improve with the expectation of a vaccine, confidence is surging, domestic tourism is strengthening, economic activity generally is recommencing and there is now even the prospect of a return of international tourism mid to late next year.  These are all positive influences which are removing the anxiety from the minds of property investors and financiers.  It needs to be appreciated that with commercial property, investment yields or capitalisation rates will stay at their current levels, the only adjustment to value being on the income side, in respect of which rent concessions are fading, incomes are stabilising and values are emerging relatively unaffected.

For most retail properties the locations remain strong, appropriately zoned and central and the improvements relevant for continued use. Accordingly, most retail holdings will survive current pressures and emerge with new and varied occupancies meeting wider community needs and expectations. Office buildings will also maintain their important role and whilst there may be some interim tenancy churn, future development and renovations will be paced to ensure a supply/demand balance.

From a property or real estate perspective, I do not believe that the events of the last 12 months have in any way been significant enough to change the ground rules, or cause lasting structural change endangering the prospects for fundamental performance and reliability of investment returns. In the residential markets there are primarily three groups: those who own properties; those who aspire to own properties; and those who, less fortunate, will probably never be able to be owner occupiers but will always be tenants.  Those three groups existed prior to COVID and those three groups will exist after COVID without great change. Online retailing, working remotely and the trend of moving to regional centres was all happening for some years prior to
COVID and to a degree accelerated during the COVID period.  Those trends will continue – no surprises there really.  Population growth remains a top priority for our economic prosperity and Government strategies will ensure the resumption of immigration at the needed numbers as early as possible and foreign students will return for the reason that as a destination, Australia is now more attractive than ever before. Tourism, both domestic and international, will also reliably return.

Over the last 12 months, I have remained confident about real estate’s resilience to the economic consequences of COVID, and as there was so much pessimism, my confidence seemed relatively very optimistic, but really was only born of objective analysis and research. Whilst there remains an agenda for economic reform to ensure Australia’s future, its sustainability and its independence for those that understand real estate and its debt markets, there is now an immediate opportunity over the medium term to work with very low cost levels of debt and the arbitrage that offers to secure healthy returns.

So, in conclusion, whilst we are rapidly emerging from COVID-19, I think it is nonetheless realistic to recognise that there is a degree of “make-up” or camouflage currently in the economy due to the various support initiatives. So whilst probably not “in the eye of the storm”, we should accept that the economic challenges that existed prior to COVID largely remain, predominantly, significant under-employment, stagnant wages and low productivity, which all need to be addressed and now there will be the added need to pay back the recent vast Federal and State Government borrowings drawn down to kick start the economy. The reality however is that any economic burden may be largely avoided by those fortunate to have income or capital as they will, at an individual level be able to weave amongst the pervading threats and with good management and advice secure returns, maximise income and grow wealth.

Commercial Real Estate market: REIT insight — Fiona Clark

Fiona Clark is the Investor Relations Manager at Merricks Capital and is responsible for managing the firm’s platform fund investor relationships including investor onboarding and communication.

Fiona has experience across a broad range of financial markets including domestic and international equities, commodities, fixed interest and derivative products.

Fiona holds a Bachelor of Economics (Actuarial Studies) from Macquarie University. She also holds a Graduate Diploma of Applied Finance and Investment (FINSIA), a Graduate Diploma in Treasury Management (FTA in conjunction with Monash University) and a Diploma in Financial Services (Financial Planning).

The recent quarterly trading updates from the listed real estate companies have provided valuable insight about the various sectors, and while market conditions have been diverse and volatile, we can see emerging trends that are generally positive. A few observations and specific examples of the trends are highlighted below.

Office

The key themes in the office sector were varied levels of leasing activity (high levels of enquiry but some potential tenants delaying decision making), stable valuations, resilient occupancy levels and improving levels of rent collection. The outlook is also looking more positive, with several references to the continued importance of the office in a balanced and flexible working environment.

• Dexus (DXS) - Rent collections remained at 94%, occupancy fell only slightly to 95.4% (from 96.5% at 30 June). Face rents have been holding across Sydney and Melbourne. Dexus believes the outlook for the office market has improved in recent months, noting employment in white collar industries was down just 0.2% in the year to August 2020. The company also pointed to a recent sale of a 22-level A-grade tower in the Melbourne CBD at an 11% premium to book value, which highlights the resilience of prime grade office values.

• Mirvac (MGR) - Noted increasing evidence of tenants starting to encourage more of their staff to return to the office due to the benefits the physical workplace brings to culture, innovation, productivity and staff development. Occupancy was 97.4%.

• Centuria Office REIT (COF) - Rent relief in the September quarter was down 58% compared to the June quarter and rent collection averaged 94%. Occupancy remained high at 95.9%. “Leasing activity also indicates that tenants continue to value office space as a central workplace, essential to maintaining productivity and culture… While immediate uncertainty resulting from COVID-19 remains, the medium to long-term outlook for high quality office assets remains positive, as evidenced by strong recent investment sales for comparable office buildings and the growing trend of tenants returning to office space to enhance productivity and culture.”

Industrial

This sector was a clear beneficiary of the COVID-19 lockdown and changing consumer behaviour, with logistics and warehousing sectors providing essential infrastructure for the digital economy and enabling distribution of products to consumers. Occupancy, rent collection, rental growth and lease activity all showed positive momentum.

• Mirvac (MGR) noted resilience in industrial markets, particularly those in e-commerce. Occupancy was 99.4%.

• Centuria Industrial REIT (CIP) - Occupancy remained high (96.5%) and rent collections remained strong, averaging 97% for the 6 months.

• Goodman Group (GMG) – Reported high utilisation of warehouse space, occupancy at 97.8% and continued rental growth.

Retail

Retail has been one of the worst hit sectors of the commercial real estate market but the majority of companies who provided updates reported a rapid recovery in foot traffic, particularly in areas of virus containment. Some measures have returned to pre-COVID 19 levels. Suburban and local centres also outperformed those reliant on workers, tourists or outside trade in most key metrics. Leasing activity has been good, occupancy is higher and while rent collection has been low, it is improving for some groups.

• Mirvac (MGR) - Leasing activity has been solid in centres where operating conditions have stabilised and deal structures are comparable to those negotiated pre-pandemic. Occupancy has been high (98.0%) but rent collection low (64%).

• Stockland (SGP) - Total portfolio traffic is 90% of pre-COVID levels (97% excluding COVID-19 hit areas). Rent collection was 81%, significantly higher than 4Q20.

• Vicinity Centres (VCX) - Centre visitation for the week ended 3 November, was 80% (Sep Q average was 58%) of year ago levels (96% excluding Victoria and CBD). 56% of gross rental billings across the portfolio had been collected over the quarter or 76% excluding Victorian and CBD centres.

Source: Vicinity Centres (VCX)

• Scentre Group (SCG) – In early November, 92% of retail stores were open and trading (including Victoria) and customer visits were 90% of the previous year levels (excluding Victoria). SCG had also reached agreement with 89% of total retailers regarding COVID arrangements. Rent collection for the quarter improved to 85% and was higher again in October at 96%.

Source: Scentre Group (SCG)

Residential

The residential sector was significantly affected by COVID restrictions on inspections and auctions. A key positive consequence has been the adaptability of the market, including growth in digital sales tools such as guided, online project tours. This supported sales during the downturn and will assist markets going forward. Mirvac (MGR) and Stockland (SCP) both reported a strong recovery in leads, enquiries and exchanges during the September quarter, and noted that default rates remain low and in line with historical averages.

• Mirvac (MGR) reported leads up 34% and exchanges up 40% over the quarter. Default rates are low at 1.9%.

• Stockland (SGP) has seen elevated sales and settlements and 1Q21 was the highest quarterly net sales in over 3 years (although the rate eased from the end of Q320). This “reflects pent up demand, low interest rates, improved credit availability and government stimulus measures”. There has been a clear shift in buyer preferences towards master planned communities which are well-located, liveable and affordable with good access to open space, schools and local services.

Is social housing the treatment and vaccine the australian economy needs? – Craig Rydquist

Craig Rydquist is a Business Unit Leader, Project Director at APP Corporation managing a national team of program and project managers within the Program Solutions (Program Management) division. He has over 20 years’ international experience in architecture, consulting, project management and construction as an executive manager for companies including; Hassell, Coffey, Leighton Contractors, Decmil Group Limited and APP Corporation. Craig is a registered architect (RAIA), project manager and registered builder with experience spanning the full lifecycle of projects.  He has delivered projects of +$1B in value, across multiple sectors including; government, private, defence, mining and oil & gas, both within Australia and Europe.

Just as an effective treatment and vaccine is urgently required to tackle COVID19, the Australian economy is in urgent need of both a treatment to stimulate the construction industry and a vaccine to prevent a social housing catastrophe.

In May 2020 I published an article on How Program Management can assist in driving economic stimulus, commenting on international examples of stimulus programs implemented during the GFC, and how large programs of small/medium construction works can successfully stimulate economies. Social housing was identified within this article as a key area where demand outstrips supply and Australia’s economic recovery would benefit from investment in large programs of work in this sector.

Following the GFC, a review of global fiscal stimulus was carried out by the European Commission (EC) and the International Labour Organization (ILO). Their report highlighted the significant economic benefit that a well-considered strategy harnessing the construction sector to stimulate the economy would, and should, incorporate large programs of works delivering multiple small to medium construction projects.

The reason for this was simple: for buildings up to three storeys, over 50% of the total project cost relates to on-site labour. Of the remaining project budget, the vast majority of materials are Australian-made. Hence, programs such as housing have been proven to be very effective in creating jobs, both directly and throughout the wider economy through extended supply chains.

The construction industry is one of the lynchpins of the Australian economy. It accounts for around 10% of our GDP and employs 1.2 million people, or 9.1% of the entire Australian workforce. The industry provides more full-time jobs than any other sector of the economy and is made up of 395,000 businesses – 388,800 of which are SMEs.

Australian Council of Social Service (ACOSS) reports investment in social housing provides a greater boost to growth in GDP per dollar spent by government than tax cuts or other transfers to households because the money is spent and not saved, and relatively little of it is spent on imports. The ‘multiplier’ (boost to incomes per dollar spent) from the last major boost to social housing investment in 2009-12 (the Social Housing Initiative or SHI) was 1.3 (1.3 dollars in additional income for every dollar spent).

Just last week both the Victorian and NSW Governments announced a combined total of $6.22B of economic stimulus.

Deciphering government media announcements is much of an art as science and in an attempt to understand Australian social housing commitments, I have adjusted budget data to reflect a 12-month period as per the table below:

From the data above it appears that somewhere around 4,330 houses are forecast to be delivered across Australia over the next year.  Although this investment is welcome it is accepted that demand continues to significantly outweigh supply in this sector and more needs to be done to address the housing crisis.

The national shortfall in social housing is estimated at 438,000 dwellings in 2020 and set to grow to 729,000 by 2036.

Aware that their industry is about to stall, Master Builders Australia and the construction union CFMEU set aside their usual differences to jointly call for the government to spend $10.0 billion building 30,000 new dwellings. Based on their calculations it appears they have allocated an average $333,000 per house.

To address the estimated shortfall Australia would need to construct 45,563 houses per year to reach 729,000 by 2036.  At this number and applying an average cost of construction of $333,000 over $15.17 billion needs to be allocated per year for the next 16 years.

To put these numbers into perspective, Post WWII, in 1943, a year-long commission of inquiry led by HC Coombs warned that Australia faced a shortage of 300,000 dwellings.  Over the next 25 years, about one in every six new houses in Australia was built by government.

In other words, even before the virus, Australia already had a housing crisis, comparable to the situation during WWII.

According to economist Saul Eslake, in the post-war decades public sector agencies built more than 15,000 dwellings every year. Today fewer than 4,000 are constructed annually, which is barely enough to replace the number demolished or sold.

Over 20 years I have delivered large numbers of social and Indigenous housing throughout WA, NT and SA including Strategic Indigenous Housing and Infrastructure Program (SIHIP), National Partnership Agreement for Remote Indigenous Housing (NPARIH) and a plethora of other state and federal programs. 

These programs included alliance, early contractor involvement and traditional Fixed Lump Sum contracts. While no program was perfect, what we learnt was that when established appropriately, there is significant opportunity to deliver large volumes of work in short timeframes that deliver benefits such as:

1. Economies of scale

2. Consistency in design and material selection

3. Application of innovation in design, construction and ESD

4. Connecting programs to large training and employment programs

5. Incorporating employment and training outcomes, including indigenous outcomes.

By applying the lessons learnt from previous programs of work, the proposed social housing investment will play a significant role in stimulating Australia’s economy.

At APP our Program Solutions division specialises in delivery of large, complex programs of work across multiple sites and multiple states. With appropriate planning, we’re confident that an integrated design, procurement and delivery strategy for the large programs of work required, will go a long way to addressing Australia’s social housing needs.

Is investing in Biophilic Design in the workplace worth it? – Amelia Cameron

Amelia works as a Performance Consultant for Stotan Group, a human performance consulting group that specialises in individual, team and organisational development. Amelia has a passion for employee wellbeing, and is responsible for implementing performance improvement initiatives that enhance and sustain the wellbeing of teams and individuals. Amelia is currently completing her Masters of Psychology (Organisational), and has chosen to conduct her research thesis on investigating the benefits of biophilic design (i.e. nature contact) in the workplace.

Growing up on a farm in country Victoria, I have always been drawn to nature. As a child, I spent a copious amount of time playing and exploring the outdoors. Once I moved to the city, I frequently found myself escaping to a nearby park, walking in freezing temperatures and gravitating to the outdoors. Without realising, nature became my escape to reduce my feelings of stress and to assist my productivity.

As a result, I made a straightforward decision to incorporate my two passions; nature and helping organisations be the best they can be, as my primary psychological research focus. My research focuses on the benefits of incorporating elements of biophilic design into the workplace, with a specific emphasis on prosocial and positive employee behaviour.

Biophilic design is aimed at providing building occupants with an increased connection to the natural environment. It incorporates features such as plants, natural ventilation, extensive natural lighting, views to the outdoors, water features and interior designs that mimic shapes and forms found in nature.   

Over the past few decades, the amount of time that people spend in traditional office spaces has increased.  Many employees facing high demands at work tend to skip scheduled work breaks and can often go an entire day without stepping outside. Therefore, the need to address health, productivity and wellbeing in workspaces has grown, and an abundance of research has begun focusing on incorporating elements of biophilic design into the built workplace. 

The health benefits of nature have been known for centuries. However, more recently 'ecotherapy', which involves the use and discussion of one's relationship with nature as a healing process, has started to rise in popularity. Nature contact, or biophilic design, has been positively associated with benefits in a virtual environment (online immersions), an indoor environment (plants) and an outdoor environment (parks, vegetations, green spaces).

From a theoretical perspective, these benefits emerge due to restorative properties. Following an interaction with nature, individuals are likely to be less vulnerable to stress and mental fatigue and perform better on tasks that require direct-attention abilities. Office workplaces typically require extensive directed attention, which if not replenished, can cause mental fatigue. As such, research examining attention restorative theory has revealed that indoor plants provide cognitive benefits through enhancing concentration and productivity.

Although in a time where ‘employee trends’ are front and centre, it’s difficult to cut through the noise to truly identify what ‘employee engagement trends’ are truly worth your investment. 

From my perspective, incorporating nature into the workplace feels like a common-sense solution.

The empirical research literature has identified a multitude of workplace benefits for incorporating elements of biophilic design, such as;

·      Increased job satisfaction;

·      Stress reduction;

·      Improved health and fewer sickness-related absences;

·      Enhanced employee wellbeing;

·      Improved productivity and concentration;

·      A reduction in symptoms of anxiety, and cognitive benefits; and

·      Increased attentional capacity.

These benefits transpired from window views of nature; 40-second microbreaks of green roofs; indoor plants; natural light, and nature posters. As such, workplace contact with nature can be low cost, easily accessible and beneficial after both short immersions and longer durations.

The research literature has presented powerful evidence that many traditional design strategies that ignore incorporating nature can lead to negative impacts on health, job satisfaction and productivity, which directly translates to reduced profit margins.  If you start by investing in indoor plants, window views of nature, natural light and natural air ventilation, studies have shown that your workplace will begin to reap the benefits.

For instance, research indicates that in a workplace, 10 % of employee absences can be attributed to architecture without a connection to nature.

To elaborate on the impact of nature, several research studies conducted on hospital patients resolved that patients who stay in sunny, daylit rooms with nature views have consistently shorter stays than those who stay in dull rooms with artificial lighting.

The research literature demonstrates that nature incorporation and elements of biophilic design can have a myriad of benefits that can be achieved in versatile, accessible and affordable means, in a multitude of capacities.

Thus, the evidence is there; our human instinct to be close to nature is there. So now, as humans, we must lean in, take the plunge and start investing in built environments that encourage a human-nature connection.

Most residential markets experience a return to form – Craig Godber

As Associate Director at CBRE, Head of Residential Research, Craig is responsible for managing the company’s Residential Research activity in Australia, covering residential markets across the country. His role includes monitoring and interpreting market trends, data collection and database management. Outputs are directed to both internal and external clients and take the form of MarketView publications, reports, client presentations and consultancy reports.

Even ahead of last week's interest rate decision by the Reserve Bank of Australia, Australia's residential markets were already showing positive signs of improvement.

New residential finance in September, at $22.5 billion, had grown for the fourth consecutive month. In fact, the monthly total was the highest lending figure in over two years. This was driven by owner-occupiers, with the past two months recording the highest monthly owner-occupier results on record. Although slower to react, investor finance was also showing some promising signs.

The number of new owner-occupier loan commitments has risen strongly across the board (up by around 30% in the September quarter compared with June), but particularly so for the construction of dwellings (up 35%) and the purchase of land (up over 80%). This has been driven by a booming first home buyer market.

There is no doubt now that the combination of record low interest rates, federal government stimulus (HomeBuilder and the First Home Loan Deposit Scheme) and state government subsidies is proving to be exceptionally strong, despite concerns remaining with regards the jobs market heading into 2021.

The number of owner-occupier first home buyer loans over the past three months is approaching the record levels witnessed in 2009 and is likely to remain elevated until at least the end of the year, or for however long Federal government stimulus remains available.

Refinancing levels have also been high, with strong competition amongst lenders, particularly for high-quality borrowers.

These trends are largely reflected across all states.

Residential building approvals were also up, with a noted jump in house approvals. At 10,466 nationally in September, the monthly total has increased for three months now, and has topped 10,000 for the first time since mid-2018. Again, these numbers should strengthen further over the remainder of 2020 at least and provide support to the residential construction industry in 2021.

Medium/high density approvals volume also rose in September, interestingly driven by higher volume in Perth and Brisbane. On an annual basis, however, medium/high density approvals volume remains at its lowest levels since 2013 and 46% below the 2016 peak. It will take a combination of sustained growth in investor demand and the reopening of international borders before a prolonged upturn can be expected.

The Reserve Bank of Australia, in their interest rate decision and subsequent statement on monetary policy, highlight that residential market conditions across the country are still uneven. Prices in Sydney and Melbourne had declined in the three months since August, but had grown in other capitals and regional locations. Vacancy rates remained elevated in Sydney and Melbourne, which was impacting rents, largely in the apartment sector. This may negatively impact returns. New listings and auction clearance rates were recovering; however, with the exception of Melbourne. That recovery will come as lockdowns ease.   

Low interest rates are here to stay, and while the RBA stated they are not contemplating further reductions to the cash rate, they also do not expect to see any rises for at least three years. This provides some degree of certainty for borrowers. 

The Bank did make some pertinent points that still serve a note of caution for the residential markets heading into 2021, however. These include:

• that while Australia's economy has performed better than had been anticipated, the outlook for growth still involves considerable uncertainty related to the course of the pandemic, both in Australia and overseas;

• recovery is expected to be extended and bumpy;

• the expectation that the unemployment rate will increase in the near term as some workers return to the labour force and support such as JobKeeper tighten and then lapse. While a peak unemployment rate of a little under 8% is forecast by the end of 2020, only gradual improvement is expected, with the rate still expected to be just over 6% by the end of 2022; and

• as a result, wages growth (and inflation) are expected to remain low.

The first quarter of 2021 remains the litmus test for the residential markets. This is when government support packages such as JobKeeper are slated to end, while most outstanding bank mortgage deferrals will need to be resolved. The pent-up demand that has been released as lockdown restrictions are eased will also taper.

This may still see negative pressures grow in some markets. A continuation of some forms of government stimulus may still be necessary to keep recovery on track.

Nonetheless, If the markets can work through the inevitable challenges that will come in the first half of 2021, it is likely they will have come out of the COVID-19 pandemic downturn in a much better shape than had been anticipated.

A Phoenix rising from the ashes — Raoul Salter

Raoul Salter, a Partner at Gross Waddell, has over 25 years of experience in the property industry. Raoul’s early career included being responsible for high net worth clients at Knight Frank and acting as the Commercial Manager for Linfox, being responsible for the company’s management, leasing, disposal and acquisitions.

Now at Gross Waddell, Raoul is active in Sales, Leasing and Corporate Services. He also is Gross Waddell’s Principal auctioneer.

Raoul’s experience across the commercial sector provides interesting insight into the evolution of commercial property through the recession and COVID-19.

Property activity is key to our economic wellbeing. So, what can we expect of this industry as we adjust to living with COVID?

We can reflect on the effects of past challenges; the recession of the '90s, the 'tech wreck' of 2000, the GFC and others. Each time, the property market has found a way to navigate the negative and come out the other side, stronger and more resilient.

This time will be just as testing.

Residential

If we look at it objectively, it is clear that from a residential perspective, we will eventually reach a position where there is an undersupply in the market and savvy developers will continue to secure opportunities for the potential pipeline.

Offices

Likewise, due to the current environment, commercial space may well undergo design changes that will lead to more activity in this sector.

The demand for office space in the future may be reliant on technology and innovation that facilitates social distancing solutions and healthy building strategies.

Increased planning of common areas, access, timing and travel will be essential. Air filtration systems that can keep workers safe from COVID-19 and other illnesses into the future will be an integral part of these changes.  Vertical transportation is a more complex feature to manage.

What businesses and tenants expect from their office accommodation is changing and these needs will most likely be met in new developments, and where possible, integrated into existing buildings.

Retail

Retail is also clearly changing and, as has been the case over the past decade, will continue to reinvent itself with the focus, perhaps, on more service-based retail, as a result.

The retail market has been one of the heaviest hit sectors. Widespread lockdowns have meant people have increasingly been adapting to shopping online.  This may result in retail properties being redeveloped or repurposed, perhaps to offices, coworking spaces or ‘dark stores’.  On the other hand, it may see an increased interest in customers to shop in open air traditional retail strips.

Industrial

The industrial landscape is also undergoing changes with increased automation and logistics requiring design alterations and larger sites.

Specifically, Australians are expecting industrial space to increase with a recent report released by UBS predicting warehouse space needs across the country to increase by 7.5 per cent during the next two years; with the potential incremental demand for industrial space growing to one million sqm.

High demand for consumer staples and growth in E-commerce has also driven strong leasing performance in the industrial sector. 

For example, in June, Amazon signed a 20-year lease to open the country’s first robotic fulfilment centre in Western Sydney. The fully automated facility will span over 200,000sqm, and will hold up to 11 million items distributed by 2000 robots.

The message here is that the property industry, whilst being key to our economic health, is also robust and adaptive. 

Investment

Of all of the asset classes, bricks and mortar remains one of the most popular. Perhaps the fact that it is tangible, you can see it, touch it, feel it and know that it will still be there tomorrow, next week and next year makes it desirable to many.

Property investment is also dynamic with the ‘moving parts’ requiring monitoring and attention from time to time. As mentioned above, the dynamics of each of the property categories, commercial, retail and industrial, continue to evolve and undergo change. Perhaps more so now than ever. 

Initially, the existence of COVID 19 led many to believe that we were heading into a state of Armageddon. Like the Phoenix, the property industry will rise from the ashes and continue to be a major contributor to our economic recovery.

Jamie Sormann — Sydney Policies Driving Excellent Design

Jamie is a co-founder and director of Foomann Architects and a director of ArchiTeam Cooperative. Foomann is devoted to realising beautifully simple, sensitive spaces that are underpinned by utility, context and sustainability. Jamie has expertise across a diverse range of commercial, hospitality and residential projects. ArchiTeam, with over 800 members nationally, has a mission to empower and support small practice architects to help them thrive. Jamie is committed to collaboration and to sharing ideas with students, clients, colleagues and the architecture community.

In Melbourne, over the past two decades, countless single-dwelling, retail and hospitality projects have been widely published, awarded and praised internationally. These celebrated projects have been predominately designed by small-practice architects. However, a number of large, architect-led developments in Sydney suggest that we could benefit from broadening the scale and positive impact of our local experts.

In Sydney, since 2000, legislative guidelines require that the design of projects above a certain scale or cost have to ‘demonstrate design excellence’ to attain development approval. Projects that are granted approval through this process can be eligible for up to 10% extra height and/or floor area. To qualify, relevant projects must involve a competitive design process and every joint venture proposal must involve a small scale or emerging architecture practice. The resulting built works have been, well, excellent.

As a measure of excellence, awards programs are sometimes imperfect and often involve a challenging process – I should know, I run the awards program at ArchiTeam. But the numbers from Sydney are compelling; between 2000 and 2017, 50% of proposals that were granted planning approval through Sydney’s design excellence policy have won national awards from the Australian Institute of Architects [1].

An intended outcome from Sydney’s design excellence policy is increased diversity of the city’s built form. The cornerstone of this strategy is the involvement of the emerging architectural practices in the joint venture competition entries. As a result of this competition pre-requisite, between 2000 and 2017; an impressive 88 different firms participated in competitions, with 52 emerging firms winning in their own right or in partnership [1]. This scenario is markedly different to that in Melbourne where a limited number of well-known practices are responsible for so many major projects.

The success of these joint ventures in Sydney has helped create an appreciation of, and demand for collaborative projects. In July 2020, at the Australian Institute of Architects NSW Awards; seven of the fourteen top categories were awarded to architect collaborations.

In Melbourne, similar plans are afoot. Participate Melbourne has published for comment its 'Design Excellence Program 2019–2030' and, in the short term, the City of Melbourne has drafted planning amendments (Amendment C308: Urban design in the central city and Southbank) with a range of minimum standards to improve the public interface and design quality of new developments.

While we wait for ‘design excellence’ to be legislated in Victoria, private developers can take the lead to ensure that significantly better, more diverse projects are built in Melbourne. Firstly, when a project is sufficiently large, impactful or culturally significant to justify the resources, private developers should take Sydney’s lead and run equally rigorous design competitions that encourage architect collaborations. When projects are not appropriate candidates for a design competition, developers should seek out potential architect joint ventures. Ask that a preferred architect create a team between an emerging or small practice and an experienced larger practice; both with outstanding design pedigree. Small practices provide fresh ideas while working with a large practice mitigates the perceived risks in relation to successful project delivery.

The resourcefulness and charisma that the work of small practice architects display is what consistently captures the imagination of home owners. This should be considered as part of a general strategy to promote development properties above the status of commodities. Apartments are often described by agents and developers as 1 or 2 bedroom ‘products’. This pejorative term is part of a culture that puts a cap on the value of smaller homes. A design excellence approach promoting architect collaboration in the residential sphere would result in developments that transcend the norm whilst providing genuine substance to the marketing campaign.

All participants in the building industry have an opportunity and responsibility to positively contribute to the built fabric of our city, the lives of its occupants and the public realm. It’s time that our local talent is given the opportunity to prove that, just like in Sydney, we can demonstrate award-worthy design excellence through effective collaboration.

Jamie Sormann Foomann Architects ArchiTeam Director

---

References:

[1] Reshaping Sydney by design – few know about the mandatory competitions, but we all see the results.

Thank you to Jennifer McMaster, Trias, and Andrew Burns, Andrew Burns Architecture, for the inside knowledge of Sydney processes. Both are small practice architects contributing excellent work on big Sydney projects.

Participate Melbourne Design Excellence Program 2019-2030

Sydney Local Environmental Plan 2012

City of Sydney Competitive Design Policy 2013

Draft NSW Design Excellence Competition Guidelines 2018

The Conversation - Reshaping Sydney by design – few know about the mandatory competitions, but we all see the results

Current notable collaborations in Sydney between small and large practices:

• Green Square Site 15 - SJB, Andrew Burns + CHROFI

• Circular Quay development - MAKE Architecture, Silvester Fuller and SJB

Is now the time to shine for WA property market?

Deon White is a Perth based Partner in national planning, design and placemaking practice Roberts Day. Roberts Day have recently merged with Hatch’s global Urban Solutions team to launch Hatch RobertsDay in Australia, adding urban economics and global reach to some of the brightest minds in city shaping.

The Mining Boom from 2011-2015 injected an average $45bn annually into the WA economy and with that came a significant flow-on of secondary investment and population growth. 

Unfortunately, from 2016 that level of investment dropped more than half, stalling population growth and bringing down the momentum of the property market, with the median house price dropping over 10%.

But after years of sleeping off the Mining Boom hangover, Perth could be emerging as a bright spot in the national property market – we are leveraging the benefits of isolation to sidestep the worst of the COVID-19 fallout. The lowest mainland capital median house price sits at $475k, so things are looking promising.

Mining investment has seen its first positive growth since 2012, population growth returned to 1.5% over the 12 months to March 2020 (3rd only behind Victoria and Queensland) and rental vacancies over the last two years has dropped from 3.8% to less than 1%!

The June and September median house price was stable at $475k. With a 20% reduction in housing stock and a 50% drop in the days on market compared to September 2019, REIWA is predicting modest price gains.

As the property market is showing signs of recovery in the uncertain haze of COVID-19 and stimulus distortions, the legacy of successive governments and industry leaders over recent decades is also starting to shine through; with a string of major developments now delivered or well underway.  These projects are shedding the “Dullsville” tag and starting to seriously reposition the City’s metropolitan-wide liveability and lifestyle appeal…

• Transport Revolution

Long known as the motor city, multiple contracts have now been let for Metronet – This is the largest urban rail expansion program ever for WA, adding 72km, 18 stations, associated redevelopment precincts and the return of rail car manufacturing. This is also coupled with significant regional road, freeway and city cycle network investment aimed at improving commuter, freight, tourism and recreational opportunities.  A large number of middle and outer suburban locations will benefit;

• Port Relocation

The State has committed to ‘Westport’ - the relocation of the main metropolitan container port from its colonial base at Fremantle to the Outer Harbour at Kwinana 20km south…….at least partially by 2032. This brings a significant boost to employment and residential growth in the southern suburbs and a major redevelopment boost for the historic port city of Fremantle, which is already going through an investment and development renaissance not seen since the 1987 America’s Cup;

• Big City Moves

Three major precincts have redefined the experience of the City, its connection to country and landscape. Elizabeth Quay brings the river to the city, Yagan Square and City Link bridges the great north-south divide between the CBD and the urbane inner north and the Stadium precinct on the Burswood Peninsula.  Each element provides significant associated commercial and residential growth and particularly connecting us to the long-forgotten eastern foreshore, which will be a major focus for residential growth;

• Accommodation Boom

After decades of no meaningful supply, the leading international brands and boutique curators have delivered some of the most creative concepts in modern hotel experience into the heart of the city. With the State Buildings, in particular, continuing to accrue international accolades, the Westin, Intercontinental, QT, Alex and Adnate Art Series are all reshaping the City psyche and destinational pull;

Westin Hotel in Hibernian Place

• The New (City) Deal

Announced this month, the $1.5bn investment brings an unprecedented focus back on the CBD, with a new Edith Cowan University campus right on Yagan Square, together with its world renown WA Academy of Performing Arts. There is funding support for Murdoch and Curtin University to expand their student numbers, a range of new and upgraded cultural facilities and recreational facilities all driving the residential amenity to support the newly announced population target of 90,000 people – a three-fold increase on current numbers. 

With the lowest density of the four main capitals, the residential growth will be particularly evident in the eastern end of the CBD. Several new projects will become essential to improving the living amenity of the urban area; including Perth Girls School, Wellington Square, WACA redevelopment, East Perth Power Station and Stadium precinct.   

With the State Commissioners having appointed a new CEO, new senior leadership team, and newly elected Mayor and Councillors, the City is refreshed and poised to continue to grow the depth and quality of experience for visitors, workers and residents alike.

Perth Girls School

• Cultural Milieu

Our greatest weakness is on the rise -  our Fringe Festival has emerged as the third largest in the world. This awesome feat supports a growing pool of creative performance venues, supplemented by the rebounding small bar and food scene which was hit hard after the post-boom evaporation of discretionary spending.

The new Hassell and OMA-designed State museum is due to open at the end of the year. This joins the upgraded Art Gallery in the revamped cultural precinct and the new Artrage base at the Perth Girls School precinct. Upgrades to the Perth Concert Hall and the preferred bidder status for the redevelopment of the East Perth Power Station redevelopment by Andrew Forrest and Kerry Stokes are also projects in Perth’s pipeline.

Perhaps the most exciting announcement is the funding to progress planning with our Traditional Owners for an Aboriginal Cultural Centre, celebrating our unique ancient culture and a symbolic reconciliation move; and

• Urban Neighbourhoods

After years of progressive policy reform, some of our most valued inner and middle neighbourhoods are finally attracting high-quality residential apartment development.  Projects are bringing housing choice and re-investment in tired and struggling retail village centres, signalling a cultural shift to apartment living, a major boost in amenity and value for established suburbs as well as infill development opportunities.

The current government heads to an early 2021 election with unprecedented levels of popularity, a solid budget surplus and a pro-development and employment stance. There is ongoing planning reform and new State Development pathway for major projects. 

With high affordability, the newly discovered benefits of being the most isolated capital in the world and the WFH phenomenon breaking the geographic lock of residency and employment, it might just be the perfect time for Perth to shine. 

Perth’s lifestyle might just be its greatest growth commodity yet.