Building in the same old ways won’t end the housing crisis. We need innovation to boost productivity

Mathew is a Professor of Architecture at Monash University. He led the establishment of Monash University’s Future Building Initiative – a team of interdisciplinary practitioners and researchers who aim to transform the traditional building industry.

He is also CEO of Building 4.0 CRC, an industry-led research initiative co-funded by the Australian Government. Working collaboratively, the consortium strives for innovative research outcomes that translate into commercial, technological and efficiency benefits for its industry partners, and improved environmental, safety and cost performance for the community.

Have we reached peak affordable-housing-debate in Australia? Or is it a case of that old mountaineering saying: the fog is thickest just before the summit?

As someone who has been involved in building innovation for the past decade, what strikes me about the current debate is not its height, but its flatness. By this I mean how something as complex as housing can be reduced to one or two issues of the moment. Is the key to ending our housing woes really just “supply”? And will the Albanese government’s new $A10 billion Housing Australia Future Fund (HAFF) solve that problem?

Yes, this flatness is inherent to politics, but if we don’t attempt to unflatten the problem we’ll be stuck in the very public game of housing affordability “Whac-A-Mole” for quite some time. It goes something like this: release more land … ease planning restrictions … end NIMBY-ism … rent freeze … build-to-rent … early access to super … negative gearing … prefab housing … developer greed … skills shortage … gentrification … supply-chain disruption … inclusionary zoning … capital gains tax reform … industrial action … and so on and so forth.

So much froth for so little beer. So how do we build the industry’s productivity and capacity? The answer is the same as it has been in every other sector: the building industry desperately needs to innovate.

But what about the new housing fund?

The federal government says its new fund will provide A$500 million a year to build much-needed social housing. The opposition says this will fuel inflation. The Greens are demanding more direct funding of housing (at first $5 billion a year, now reduced to $2.5 billion) and a rent freeze.

Is the new fund inflationary? Yes and no.

Unless the bill is coupled with measures that increase the industry’s productivity and capacity, it will be inflationary. The industry lacks the capacity to build as many dwellings as the market needs, or the extra 30,000 social and affordable homes the government says the fund will deliver in the first five years. Remember, property prices are just off an all-time high, with construction costs up by more than 50% over the past decade.

To meet our housing targets, we need to find new ways of building more with less.

Supply is only one piece of the puzzle

The problem with seeing housing provision solely as a matter of “supply” (read “funding”) is that this accounts for only one phase of the process. It takes more than dollars to deliver a building. We must address all the phases: development, design, construction, operation and, after all that, end of life.

If we don’t do that, we won’t solve the root problems. And we risk missing opportunities ripe for innovation.

Let’s consider some innovative ideas for each of the building phases.

Development

New business and ownership models are needed. These include:

• housing-as-a-service (HaaS) – the space between short-term rental and long-term hotels, which suits mobile or itinerant populations and which AirBnB is increasingly exploiting

• co-housing – residents band together to develop housing themselves or with help from an agent, such as Nightingale or others

• build-to-rent – instead of building to sell to residents or investors, housing is retained for the purpose of renting it out, with recent federal tax changes supporting this approach

• rent-to-buy – residents have the right to buy (progressively or outright) their rental housing

• shared equity schemes – a way for buyers to own a more “affordable” fraction of the home and get a foot in the door.

These alternative approaches will change the calculus of property development. Let’s not aim to centralise housing development. Rather, we should crowd-source it to as many organisations as possible.

A final area for innovation in the development phase is planning. We can use digital tools to make the planning system more transparent and efficient.

Design

Make houses more efficient. Australian houses are among the world’s largest even though households are shrinking. As the Swedish saying goes: “The cheapest square metre is the square metre you don’t build!”

Make houses more flexible and diverse. Housing could then accommodate different uses, such as home offices or sublettable units, and various family structures and sizes, including extended families.

Construction

Develop new building systems and supply chains. We need faster, cheaper and higher-quality ways of building.

In contrast to building on site from the ground up, prefabricated, modular or industrialised house-building happens in factories. These approaches could increase capacity, on top of traditional approaches.

More people, more people, more people: the industry needs a new generation with different skill sets.

Up entering Swedish and German house-building factories, it is clear these are more inclusive workplaces. A key benefit of industrialised building is it promotes greater workforce participation. These are the diverse and high-skill jobs of the future.

Operation

Improve building performance through better development, design and operation of housing. Occupants won’t be left with unaffordable “utility timebombs” with high running costs.

Make houses more durable and easy to maintain. Well-designed and well-built housing can be used for decades past current buildings’ “use-by” dates. Longer-lived buildings will help to plug the holes in the leaky bucket of housing provision.

End of life

An increased focus on decarbonisation and sustainable use of resources will enable new approaches to reusing and recycling building materials.

Re-using existing and obsolete buildings for new housing – adaptive re-use – is another way to provide more housing.

Where to from here?

Innovations like these could be applied tomorrow to help us do more with less.

A final challenge to government: as we prepare to spend billions on building housing across the country, is it too outlandish to imagine we could invest a mere 1% of those vast sums in innovation programs? Innovation can deliver the increases in building productivity and capacity that Australia so badly needs.

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

THE FUTURE OF OUR PUBLIC HOUSING TOWERS

Instead of demolishing Melbourne’s ageing public housing towers, clever refurbishments could save millions of dollars and provide high-quality public housing

Chris Barnett is an architect with over 25 years experience working on collaborative design and sustainability leadership projects, with his work having won both architectural and wider building industry awards. Chris has sat on the Australian Institute of Architects National Sustainability Committee and represented the AIA on the Australian Sustainable Built Environment Council w Sustainable Housing Task Group.

Monolithic in scale and nature, Melbourne’s 47 public housing towers have become aging assets that present great challenges to the state government of Victoria. This has been amplified by Australia’s current housing affordability issues and 30 years of under investment in public and affordable housing.

These behemoths were designed in the 1950s in the internationalist modern architecture style as part of a bold public housing vision to redevelop inner slums of Melbourne.

Built throughout the 1960s, the towers have provided a backbone to Victoria’s public housing system for the past 60 years.

Born in an age when state governments built public housing directly, the towers were innovative in their prefabricated design – constructed like a pack of cards from concrete panels precast in a government facility at Holmesglen.

The towers have provided accommodation for thousands of families and integrated waves of new migrants into our suburbs over the years, but it’s undeniable that the monolithic design, uninsulated concrete walls and low maintenance of the buildings has led to a range of poor health and social outcomes.

The towers’ poor connectivity to surrounding communities, harsh and meagre communal areas, and drab pebble-crete façades now commonly stigmatise them as a symbol of our neglected public housing system.

The government has undertaken rolling foyer, hot water system and apartment interior upgrades over the years, but the towers have never been significantly upgraded over their now long life.

A 2018 Victorian parliamentary report found years of chronic under-investment.

The last public attempt to design a future for the towers was the ‘Tower Turnaround’ competition to rejuvenate a building in Footscray in 2007.

A prototype of an innovative ‘pod’ apartment extension designed by BKK Architects was built as an outcome of the competition, but the further retrofitting of the building or any further application of the approach did not proceed.

This year, architecture students at the Melbourne School of Design have taken up the challenge of imagining futures for Melbourne’s public housing towers in their final design thesis subject.

In the meantime, the Victorian Government’s Big Build strategy is taking a demolish-and-rebuild approach to updating our public housing, and the open grounds surrounding the towers are currently being filled by new medium-density public and affordable housing.

But with no coordinated process for the towers themselves, this strategy creates further equity issues by taking away the public open spaces designed to compensate the tower residents for the lack of private outdoor spaces like balconies.

With a depth of both social history and embodied energy (this is a calculation of all the energy that’s used to produce a material or product) in their pre-cast concrete structures, can these ageing buildings have their life extended, avoiding the need to re-house thousands of existing tenants, or is it time to pull them down?

DEMOLISHING THE TOWERS

New housing has the potential to provide better social amenity, healthier homes and lower energy bills for residents – and the removal of the monolithic towers from our wider urban landscapes is also likely to be considered a positive move by many.

However, demolishing the towers will involve moving and re-housing thousands of residents, either temporarily while sites are developed, or permanently if the sites are redeveloped at lower densities.

This will cause a huge upheaval to the lives of the people living there – especially the elderly and infirm.

It will also cost tens of millions of dollars per tower to temporarily rehouse these people while sites are redeveloped.

Demolishing such tall buildings will be a long, complex and disruptive process which I estimate will cost additional tens of millions of dollars per site.

Environmentally, demolishing the towers will have a huge carbon emission and a range of other impacts, including the need to contain asbestos elements in the demolition and trucking huge amounts of construction waste to landfill through our suburbs.

As we move into an era of active carbon emission accounting in our buildings, the embodied energy contained in the towers’ concrete structures is a public asset that we should do everything possible to extend the life of.

EXTENDING AND REFURBISHING THE TOWERS

While the towers are poorly insulated and difficult to alter structurally, there are options to rejuvenate them for another 60 years without needing to decant the residents – providing much greater value to our public housing system.

Interestingly, the apartments in the towers are now considered relatively large by private market standards, with views developers would drool over.

If refurbishments could update and expand the poorly designed and maintained communal areas of the towers and provide some level of private or communal outdoor space, there’s no reason these apartments could not become public housing that residents could take pride in.

The towers’ prefabricated construction does not allow the alteration of walls or any further weight loaded onto them.

However, the towers are designed with apartments on one side with solid or screened corridors on the other. This single-sided corridor design presents the opportunity to add new structures to the corridor sides of the towers.

These new structures could be built from the ground up, providing additional bracing to the existing towers rather than adding any load to them. Most importantly, this could be done without interfering with the apartments, and without the need for residents to move out of the towers.

Existing narrow corridors could be widened out into more generous and social communal spaces, with light wells and garden elements.

New floor areas built in and off these spaces could provide flexible communal workspaces, educational spaces, areas for service providers and even new apartments, which, if private sector, could help pay for the works.

The new areas could include outdoor spaces for residents at different levels, including on the roof, with both attractive landscaping and productive gardens.

We could also consider fully rejuvenating the tower façades by investing in private balconies or glazed winter-gardens on the other apartment façades.

While this would create more disturbance for residence, it would improve the thermal performance of the buildings and humanise the huge scale of the tower façades.

Extending and refurbishing the towers would have a much lower environmental impact than demolition. By using the embodied energy already in the concrete structures and avoiding the material use and emissions impacts of building new structures, these stalwarts of the Melbourne skyline could have a new lease of life.

As part of a research-based thesis studio, students at the Melbourne School of Design considered the futures of the towers and how they could be refurbished for a further 60 year life-span. You can see examples of their work.

This article originally appeared in The University of Melbourne Pursuit. Read it here.

Building activity produces 18% of emissions and a shocking 40% of our landfill waste. We must move to a circular economy – here’s how

Dr M. Reza Hosseini is a Senior Lecturer in Construction Management at Deakin University. He is also a research fellow of the Centre for Research in Assessment and Digital Learning (CRADLE). With a background in Civil Engineering, an MSc in Construction Engineering & Management, and a PhD in virtual design and construction, Dr Hosseini's expertise lies in digital engineering and circular construction. He appears in the top 2% of researchers in 2021 and has contributed significantly to the field, publishing around 240 papers and book chapters on various aspects of sustainable construction engineering.

Architecture, engineering and construction employ 1.2 million people in Australia and account for 9% of GDP. But our biggest services sector also produces roughly 40% of landfill waste and accounts for 18.1% of Australia’s carbon footprint. The sector must change its practices fast for Australia to meet its commitments to cut emissions under the Paris Agreement.

A circular economic model can help solve the environmental challenges created by our built environment – water, waste and power systems, transport infrastructure and the buildings we live and work in. A circular economy involves sharing, leasing, reusing, repairing, refurbishing and recycling materials and products for as long as possible.

Circular economy principles have gained recognition from all levels of government in Australia. But there’s a big gap between acknowledgement and action. Progress towards systemic change has been very limited.

A new report by university and industry experts lays out a roadmap to a circular economy. Those working in the sector reported the top three barriers as: a lack of incentives, a lack of specific regulations, and a lack of knowledge. The top three enablers were: research and development of enabling technologies, education of stakeholders, and evidence of the circular economy’s added value.

So what are the world leaders doing?

Extensive research for the report drew on real-world experiences, including a survey and interviews with stakeholders. The report offers practical recommendations to drive the transformation to a circular economy, with examples from global front-runners.

The first recommendation is to learn from these nations. Most are in Europe.

A leading example is the Netherlands’ “Cirkelstad”. This national platform connects key players in the transition to a circular economy in major cities. It provides a database of exemplary projects, research and policies, as well as training and advice.

Cirkelstad highlights the importance of broad collaboration, including research organisations. One outcome is the City Deal initiative. It has brought together more than 100 stakeholders with the shared goal of making circular construction the norm. They include government bodies, contractors, housing associations, clients, networks, interest groups and knowledge institutions.

We rarely see such collaboration in Australia. Connections between government, research and industry practices have been weak. Our universities compete fiercely.

In Denmark and Sweden, rigorous regulations have been effective in promoting circular practices. Denmark has incentives for the use of secondary materials such as recycled brick. It also promotes designs that make buildings easy to disassemble.

In Sweden, contractors must give priority to using secondary materials in public projects. Suppliers are evaluated based on their environmental impacts

In Canada, Toronto is notable for its proactive approach. Measures include a cap on upfront carbon emissions for all new city-owned buildings.

Test beds and pilot projects have proven effective, too. A good example is the UK’s Waste House.

Waste House was built using more than 85% waste material from households and construction sites. Yet it’s a top-rated low-energy building. The project is an inspiration for architects and builders to challenge conventional construction methods and embrace circular practices.

Much of the focus of Finland’s circular economy initiatives is on construction and urban planning. Various policy tools and incentives encourage the use of recycled or renewable materials in construction. The renovation of Laakso hospital in Helsinki is a notable example.

Strategic zoning of public spaces can also be used to bolster circular economy activities. An example is the repurposing of urban land for activities such as waste sorting.

How can Australia create a circular economy?

Australia has been slow to adopt such measures. There are voluntary schemes, such as Green Star, that include emission caps for buildings. However, Australia lacks specific, well-defined requirements to adopt circular economy practices across the built environment sector.

Our report’s recommendations include:

• develop metrics and targets to promote resource efficiency

• adopt measurable circular procurement practices for public projects

• provide incentives for circular practices

• establish technical codes and standards that foster the use of secondary products.

The report finds funding for collaborative projects is badly needed too. Regrettably, the Australian built environment is not seen as a research funding priority. But more funding is essential to foster the innovation needed to make the transition to a circular economy.

Innovation can help us reconcile the public demand for spacious homes with sustainable construction practices. We can achieve this through a mix of strategies:

• moving towards modular construction techniques

• creating incentives to adopt circular design principles

• making adaptive reuse of existing structures a priority

• designing multi-functional spaces that makes the most of resources.

Integrating circular economy principles into education and training at universities and schools can embed a culture of innovation. Equipping students with this knowledge and skills will enable the next generation to drive change in our built environment.

Currently, there are few Australian-based training programs that focus on the circular economy. And available courses and programs overseas are costly.

There is also a need to promote inclusivity in the built environment sector. Circular solutions must incorporate cultural considerations.

By embracing the above strategies, Australia can foster a harmonious balance between cultural values, environmental sustainability and efficient resource use.

Collectively, these initiatives will lay the foundation for a circular economy in the built environment sector. The growing need for housing and infrastructure underscores the urgency of achieving this goal in Australia. Ultimately, consumers, industry and the environment will all benefit.

This article originally appeared on The Conversation. Read it here.

Australian Real Estate Investment- Medium/Longer Term

Scott Keck is Chairman of Charter Keck Cramer, a leading Australian independent, strategic property consulting firm. Scott has over 50 years property valuation experience within the Melbourne market, having begun with the firm in 1968, becoming a Director in 1978, Managing Director in 1984 and Chairman in 2010. As an experienced independent practitioner Scott provides specialist strategic and mediation consulting, including an emphasis on land acquisition for major infrastructure projects.

Fundamental to the performance of the real estate markets will be the impact of progressive population growth and cultural change over the long term. Currently, Australia’s population of approximately 25 million is, according to various sources, about 78% Caucasian and 22% Asian, comprised predominantly of 1st to 3rd generations originating from China, Southeast Asia, India and Pakistan. It is projected this may progressively transition naturally to 30% Asian, 70% Caucasian over the next 40-50 years.

The longer-term economic prosperity and substance of Australia will depend on significant population growth, which is anticipated to be mainly sourced through immigration, predominantly from Asia. As Australia predictably moves towards a population of 45–50 million by 2075, the additional 20 to 25 million residents will, given current geopolitical and trade policies, as well as social and cultural initiatives, be from the broader Asian region, mainly India and China, representing up to 95% of future migration. By around 2075, through this continued process of ‘Asianisation’, Australia’s population will have then transitioned to at least a 60% Asian majority. Australia will then, in every sense, truly be part of Asia, and the cultural, commercial and community sense of being an Asian society will begin to envelope us much earlier.

As Australia’s population increases, the focus will be on the east coast, mainly New South Wales and especially Victoria, igniting population growth in Melbourne and regional areas. In the Australian context, it is noteworthy that Victoria is unusual, being a relatively small state but with the soon to be largest city, which is why it’s regional areas will continue to benefit more than in other states. Into the future, Victoria’s regional areas and townships will strongly benefit by responding to the economic heartbeat of Melbourne as it surges to a of possibly nine million over the next 30 years, and Victoria to 11 million. These growth estimates may likely prove to be conservative as global socio-economic and territorial challenges, especially in the closer Asian region, increasingly contrast Australia as a nation of safety, future prosperity and low sovereign risk.

Melbourne has the capacity to grow to meet its share of national population growth and other responsibilities, as do Victoria’s regional centres notably at Geelong, Ballarat, Bendigo, Shepparton, Albury, Wodonga, and elsewhere. Not only the regional cities, but also many smaller but well-located townships with functional road and rail infrastructure, will contribute to the solution for accommodating and sustaining Victoria’s growth. 

Residential supply in all forms, whether for ownership, private or institutional investment, or in response to rental demand including land subdivision, house/land packages, townhouses, apartments, build-to-rent (BTR) student accommodation, retirement, aged and health care, will be in high demand and therefore offer a depth of development opportunity and the conditions for strong capital growth. This demand will be generated not only due to immigration, but also within the existing population, due to generational changes in household formation and the ageing population. Aligned with this major residential expansion will be the need for retail, commercial and industrial accommodation servicing many new growth centres. For patient capital prepared to take a long-term view, now is the time to acquire development sites, significant land banks for future development, and to form appropriate local joint venture (JV) business arrangements and consultancy relationships.

Viewed from another perspective, the prospects for Australia, particularly Victoria, due to the medium to long-term impact of population growth, are likely to be greatly enhanced by a very significant external factor. Since the end of the Second World War, Asian investment has primarily focused on the growth of the region’s own various economies- Japan, Singapore, South Korea, Hong Kong etc. Over  the last 10 years, however, the sovereign risk across Asia has increased and many countries are now considered to be of higher investment risk due to concerning political and military regimes or corruption, weakening economies, population collapse, territorial challenges and geopolitical turmoil. In a period that is now strengthening, characterized by ever greater uncertainty and instability, it can be anticipated that a significant portion of Asian investment will shift towards much greater security, but in circumstances that will be familiar and comfortable. This shift is likely to favor Australia as it emerges as the NEW ASIA.

Victoria bites a $117 billion bullet, and begins the long march of land tax reform

Dr Isaac Gross is a lecturer in economics at Monash University.He has a DPhil and a MPhil from Oxford University in Economics. From 2011 to 2013 he worked as an economist for the Reserve Bank of Australia.

The Andrews government’s ninth budget is its toughest. The bill from Victoria’s COVID experience, as well as the state government’s ambitious infrastructure spending, has finally come due.

The pandemic has added more than $30 billion to the state’s total net debt, bringing the total to a whopping $117 billion. (New South Wales’ state debt, by comparison, is about $80 billion.)

Victoria’s floods in 2022 have added to the debt. But so, too, has the Andrews government’s borrowing for its $90 billion “Big Build”, encompassing projects from removing Melbourne’s level crossings, extending Melbourne’s underground rail network, and building a suburban rail loop.

The state’s debt load was manageable when interest rates were low. But with borrowing rates now almost 4% and rising, interest payments are swallowing increasing amounts of the government’s budget. Interest payments on the debt are expected to be $5.5 billion in the 2023-24 financial year, rising to $8 billion by 2026-27.

There are only two ways to fix this – reduce spending or increase taxes. Andrews and Treasurer Tim Pallas have chosen to do a bit of both, with a 10-year plan to pay down the $30 billion COVID debt.

Less infrastructure spending, more taxes

The Victorian government has already announced it will delay several infrastructure projects. The Melbourne Airport rail link and the Geelong rail upgrade have been put on ice due to the federal government’s ongoing review of infrastructure projects. If they’re delayed, as seems likely, they’ll lower the debt burden of the state.

This will be a shame for Melbourne’s frequent flyers, but is probably the right call. Infrastructure Australia says the construction sector is already at capacity on large infrastructure projects. This significantly increases the likelihood of cost and time blowouts.

Infrastructure Australia expects the (recently widened) Tullamarine Freeway won’t reach capacity for at least another decade, so delaying the rail link is probably the best course of action.

To help pay down the debt, a suite of tax hikes has been implemented, primarily rises in payroll tax (falling predominantly on large businesses) and land tax (which is largely paid by landlords).

The measures are expected to raise more than $8 billion over the next four years, although they’ll be put in place for a decade.

Reforming land tax

Beyond the immediate task of paying down debt, the Victorian government has taken on the task of land tax reform, proposing to eliminate stamp duty on all industrial and commercial land in favour of an annual land tax.

No changes affect residential land, at least for now. But this could change if the reform proves popular.

Land taxes are the most efficient, and hardest to dodge, form of taxation.

Taxes on labour, such as income tax, can discourage work. Taxes on company profits can discourage investment and lead businesses to set up shop elsewhere. Land cannot be moved, and taxing it does not discourage its use.

The biggest problem with replacing stamp duty with land tax is that it often takes a lot of time and money for a fair transition to occur. In the Australian Capital Territory, a transition that began in 2012 is taking 20 years. The Victorian government proposes doing it in 10 years, with further details to be released later this year.

The next transaction to occur after July 2024 will still attract stamp duty, but transitions after that initial one will be shifted to an annual land tax model.

Phasing out business insurance

The Andrews government also has a plan to phase out taxes on business insurance over the next 10 years.

This small, but highly inefficient tax has long been criticised by economists, as it’s punished businesses that seek to mitigate risk by buying public liability or professional indemnity. Removing it, albeit slowly over the next decade, will help the Victorian economy grow over the coming years.

Budgets are all about choices. The Victorian government has no easy choices.

Faced with a mountain of debt, it has outlined a plan for paying down the debt with a mix of tax hikes and spending cuts. The job remains far from complete, but this budget is a decent first step to get Victoria’s finances back on track.

This article originally appeared on the Monash Lens. Read it here.

Commercial property returns under threat

Shane Oliver is the Head of Investment Strategy and Chief Economist, AMP. Shane joined AMP in 1984 and has extensive experience analysing economic and investment cycles and what current positioning means for the return potential for different asset classes.  

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Key points:

• Australian unlisted commercial property returns have been very strong over the last two decades thanks largely to the “search for attractive yields” by investors.

• With the back up in bond yields, this driver is reversing leaving retail and particularly office property vulnerable to significant capital loss in the face of reduced space demand.

• Key to watch will be bond yields, whether the economy avoids recession and where “work from home” settles.

Introduction

Over the last 10 and 20 years, returns from Australian unlisted commercial property have averaged 9% pa. This in part reflected the search for decent income bearing investments by investors in response to falling interest rates & bond yields that pushed up property values faster than justified by rents. However, it’s now vulnerable from the rise in bond yields over the last two years and reduced space demand flowing from “work from home” for office property and online retail for retail property.

Commercial property and the investment cycle

Just as shares lead in the investment cycle, unlisted assets like commercial property, being more connected to the real economy, tend to lag. The next chart is a stylised version of the investment cycle – the thick grey line is the economic cycle. (Note that residential property has become more interest sensitive and now tends to move ahead of commercial property.)

Bonds do well in the economic downturn phase as interest rates fall and when inflation is still falling. Shares tend to lead the economic recovery as they respond first to easy money and as far-sighted investors sniff out recovery and continue doing well as profits rise before coming under pressure from eventual interest rate hikes & fears of a new downturn. Real assets tend to do relatively well later in the cycle as: it takes longer for easy money to flow into them; the valuation process results in a lag; & they tend to move more with current economic conditions which drives rents. This benefitted unlisted commercial property returns in 2021-22. However, the investment cycle is now turning against commercial property with interest rates up sharply and economic growth slowing. The slump last year and ongoing volatility in share markets has at least partly anticipated this with commercial property starting to follow with a lag.

A-REITs show the way…with a lot of noise!

This cyclical relationship can also be seen by comparing the returns from Australian Real Estate Investment Trusts (A-REITs) and directly held (ie, unlisted) non-residential property returns. The former are correlated with the share market. This makes them highly volatile but means they often provide a good lead for unlisted commercial property. Their weakness since January last year signals rougher times ahead for unlisted commercial property and returns have started to slow to reflect this.

The “search for yield”

Commercial property is arguably more vulnerable now because it benefitted from the decades long downtrend in interest rates and bond yields that may now have come to an end or be reversing. As interest rates and bond yields fell it drove a search by investors for decent income bearing investments – the “search for yield” - that pushed property values up faster than growth in rents and hence pushed property yields to record lows. The next chart shows yields for unlisted commercial property. With each 0.25% fall in property yields translating to a roughly 4% capital gain and with average commercial property yields having fallen from 7.3% to 4.89% between December 2009 to December 2019 this provided a huge boost to returns, averaging roughly 4.3% pa and pushing values nearly 50% higher over ten years. This is now starting to go in reverse.

Of course, while the decline in yields since the 1980s was big, unlisted non-residential property was not alone. In fact, while the grossed-up dividend yield from shares has been range bound over the last 40 years, yields on bonds, residential property and listed property have fallen more than unlisted commercial property yields. See the next chart. 10-year bond yields have fallen from well above commercial property yields in the 1980s to well below. And in the 1980s the rental yield on residential and commercial property was similar, but today the former is far lower.

The commercial property risk premium – is it enough?

This suggests that while unlisted commercial property is vulnerable to an ongoing back up in yields other assets are arguably even more vulnerable. But there is a catch as commercial property is facing an oversupply problem in office and retail whereas the other asset classes are not, eg, Australian housing is facing chronic shortages as immigration surges.

But first to get a better handle on the relative attractiveness of unlisted commercial property compared to bonds we calculate a property risk premium. Comparing the bond yield with the average property yield is not strictly correct as the former is a nominal yield while the latter is a real yield. So, a better comparison is to look at the risk premium offered by commercial property over bonds. The next chart shows a proxy for this.

It assumes that rental and capital growth will average 2.5% pa over time (ie, in line with targeted inflation) and adds this to the average unlisted non-residential property yield to give a guide to potential total returns. The 10-year bond yield has been subtracted to show a property risk premium. Despite the collapse in property yields in late 2020 it reached a record high of more than 6.7% thanks to plunging bond yields at the time below 1%. Since then, the rise in bond yields has seen the risk premium plunge to levels not seen since the 2000s, but at around 4% it’s still relatively high. But there are two threats here. The first is if bond yields continue to rise reversing the yield chasing investor flows that commercial property has benefitted from over many years. And even if bond yields don’t rise further there is a risk that the reduced property risk premium may not be enough to keep investors happy given the outlook for deteriorating leasing conditions ahead.

Work from home and space demand

Leasing conditions typically deteriorate when the economic cycle turns down as companies lay off workers & cut hiring, retail spending slows and economic activity slows generally impacting industrial property. This time around it could be made worse by structural considerations in the case of retail and particularly office property. Retail property has been adjusting for years to the rising proportion of activity which is transacted online. The share of retail sales online has gone from around 7% pre-pandemic to around 11% now and this is acting to constrain retail space demand and rents. While there has been a return to the office post the pandemic lockdowns, many office employees are averaging two days a week in the office with Mondays and Fridays often near deserted. There are huge benefits to working together physically around culture, collaboration, idea generation and learning from others but there are also benefits to working from home in terms of no wasted commute time, more focussed work, less damage to the environment, better family flexibility and life balance. Once the pandemic revealed these benefits, they can’t then be unseen. And cost focussed companies with hot desking, laptops and work anywhere IT have pushed their staff in that direction anyway. The ideal for most is probably somewhere in between the extremes at say 2-3 days a week in the office but a return to the pre-pandemic norm of 4-5 days is most unlikely. This means that many companies will likely give up space when their leases expire, as they accept that balanced work from home is here to stay and they use it as a way to save rental costs. Over time this could mean a 30-40% reduction in leased office space demand. Average Australian capital city office vacancy rates are at 15% - their highest since the mid-1990s. But because this measures leased space, significant upside is possible if companies bite the bullet and cut leasing requirements. And rising vacancy rates mean lower office rents and falling values.

Return outlook and what to watch?

The combination of the back up in bond yields resulting in a stalling if not reversal of “search for yield” demand for commercial property, slowing economic activity and structural threats to office and retail space demand leaves unlisted commercial property at risk of significant capital loss (15% plus) ahead. Industrial property has benefitted more from the plunge in bond yields but not does face the same structural threats to space demand as office and retail do so is better placed.

This risks a flow on to banks. Particularly in the US where commercial property loans make up about 40% of smaller banks lending and 13% of bigger banks lending at a time when property owners will be finding it harder to borrow with recent banking stress. In Australia, commercial property loans are only 6% of bank assets and lending is far more prudent suggesting less risk of a re-run of the damage to banks seen in the early 1990s property collapse. Key to watch will be bond yields, whether the economy avoids recession and where “work from home” settles.

If you would like to listen to this as a podcast, listen here.

This article originally appeared on the AMP insights hub. Read it here.

Despairing about climate change? These 4 charts on the unstoppable growth of solar may change your mind

Andrew Blakers is Professor of Engineering at the Australian National University.He was a Humboldt Fellow and has held Australian Research Council QEII and Senior Research Fellowships. He has published approximately 300 papers and patents. His research interests are in the areas of silicon photovoltaic solar cells and solar energy systems. He has extensive experience with basic and applied research and was a leader of the team that developed PERC silicon solar cell technology, which currently has approximately 30% of the worldwide solar market and cumulative module sales of around $30 billion (mid-2018).

Last year, the world built more new solar capacity than every other power source combined.

Solar is now growing much faster than any other energy technology in history. How fast? Fast enough to completely displace fossil fuels from the entire global economy before 2050.

The rise and rise of cheap solar is our best hope for rapidly mitigating climate change.

Total solar capacity tipped over 1 terawatt (1,000 gigawatts) for the first time last year. The sector is growing at around 20% a year. If this continues, we’ll hit 6 terawatts around 2031. In capacity terms, that would be larger than the combined total of coal, gas, nuclear and hydro.

Fewer and fewer new fossil fuel power stations are now being built. As the rest of the global fleet age, most will retire by mid-century.

Australia is finding the path

It might surprise you to learn that Australia is a global renewable energy pathfinder. Most solar panels use Australian-developed PERC technology, for instance.

All the leading countries for per capita solar and wind generation are in Europe – except Australia. In Australia, 99% of new generation capacity is now solar and wind because it is cheap.

But unlike European countries, Australia cannot share electricity across national boundaries.

Instead, we have to cope with rapidly increasing levels of solar and wind by sharing it across state boundaries. This is proving to be relatively straightforward. Solar and wind have reached a share of 31% of the national electricity market, while the grid remains stable.

Already, three states or territories are at very high penetration of renewables. The ACT has built or bought enough renewables to cover 100% of its use. Tasmania, too, is at 100% renewable power, thanks to hydro and wind, and is aiming to double this to export to other states. And South Australia will soon become the world’s first gigawatt-scale grid to run on renewables. Currently, it’s sourcing around 70% of its power from solar and wind.

This matters because of Australia’s location. Like 80% of the world’s population, we live at low to moderate latitudes where there is plentiful sunshine, even in winter. That means the methods we pioneer or test can be readily adopted by nearly everyone else.

Where will the era of ubiquitous solar take us?

Solar capacity has been growing at 20% a year for decades.

Elimination of fossil fuels from the global economy is straightforward: electrify everything using clean electricity from solar and wind. This includes:

• electric vehicles replacing conventional vehicles

• electric heat pumps replacing gas space and water heaters in homes and businesses

• electric furnaces replacing gas burners in factories

• electrolysis of water producing green hydrogen for the chemical industry, allowing for clean production of ammonia, metals, plastics and synthetic aviation fuel.

To run our homes, industries and vehicles with electricity, we’ll need to double electricity production. Why not more? Because electricity is usually much more efficient at producing an energy outcome. For example, 85% of the petrol you put into your car is wasted as heat.

In countries with a significant chemical industry, electricity production might need to triple.

If these trends continue, by mid-century we will be in a very different – and better –  energy world.

Many developing countries – including population giants such as Indonesia, India, China and Nigeria – could catch up with Europe or Australia for per capita energy consumption. Given electricity consumption is strongly correlated with affluence, access to cheap electricity will be a major boon for many nations.

But is it possible?

By 2050, Earth will have a population of about 10 billion people. To supply everyone with enough electricity to live a good life, we’ll need about 200 billion megawatt-hours per year (equal to 200,000 terawatt-hours per year).

Let’s assume that solar does the heavy lifting for decarbonisation, completing two-thirds of the task with the remaining one-third left to wind, hydro and everything else put together. Is it possible?

Yes. If sustained, solar’s growth rate of 20% per year is easily fast enough to reach 80 terawatts of installed capacity in 2050 – enough to provide 130,000 terawatt-hours per year and (with help from wind) to entirely decarbonise an affluent world.

That would see global electricity consumption reach 20 megawatt-hours per person per year – double Australia’s current consumption per person.

As well as eliminating most greenhouse emissions, we will also get rid of car exhausts, smokestacks, urban smog, coal mines, ash dumps, oil spills, oil-related warfare and gas fracking.

The main short-term bottlenecks are likely to be building enough transmission lines – and ensuring we have enough engineers and installers.

We have the space and the raw materials

Long term, there are practically no constraints on vast deployment of solar.

The sun will shine for billions more years. Raw materials for solar panels are abundant – silicon from sand and common metals like steel. There are no toxic metals or no critical materials like cobalt in them, and they are highly recyclable. Energy storage is now a solved problem.

Most countries have vastly more solar and wind resources than needed to be energy self-sufficient. This, in turn, will boost their resilience in the face of war, pandemics and the changing climate.

Densely populated regions without much free land such as Japan, Europe and the northeastern United States have enormous offshore wind resources, while Indonesia and west Africa have enormous offshore solar resources – picture solar farms floating on calm tropical seas.

We have plenty of space. Eighty terawatts of solar translates to 8 kilowatts per person. This is the size of a typical Australian rooftop solar system, which is usually shared by a family rather than an individual.

The required area of solar panel is about five square metres per kilowatt (40 square metres total for 8 kilowatts). Some of the panels will be on house roofs. Others will be on ground-mounted solar trackers and operated alongside agriculture. Some crops and grass like the partial shade given by panels. Other options include floating on lakes and seas.

For our energy intensive lives in Australia, we’ll need perhaps 15 kilowatts of solar and wind per person, which run reliably for 30 years and can then be dissembled and recycled.

In the 1950s, nuclear energy advocates talked of a future when energy was too cheap to meter. That didn’t happen with nuclear. But solar offers cheap, unlimited energy, available forever with minimal resource, environmental and social constraints.

This article originally appeared in The Conversation. Read it here.

THE STATE OF MENTAL HEALTH IN THE INFRASTRUCTURE CONSTRUCTION INDUSTRY

Long work hours, high-pressure project targets and fixed-time contracts contribute to the infrastructure industry being deemed at high-risk for mental ill-health. Supporting mental wellbeing is vital to the industry's continued success, writes Grant Fuller and Professor Luke Downey.

Professor Luke Downey

Grant Fuller

The construction industry is a significant driver of Australia’s economy. It is our third largest industry, behind only mining and finance, and produces around eight per cent of our Gross Domestic Product (GDP) in value-added terms. In the 2022 fiscal year, the total value of infrastructure engineering construction work in Australia amounted to more than $40 billion.

What is not necessarily considered in generating this economic benefit is the value of the mental wellbeing of the individuals responsible for delivering this core industry. But supporting their mental wellbeing is vital to its continued success. Unfortunately, the industry is deemed at high-risk for mental ill-health and suicide.

The factors behind this are undoubtedly multi-faceted and complex. But if we consider that a job in the construction industry requires employees to be present or available for six to seven days a week, engaging in long work hours to deliver complex projects, dealing with ever-changing demands of high-pressure project delivery targets, while on fixed-time contracts, it’s unsurprising that something must give.

In 2018, a survey conducted by Professor Luke Downey from Swinburne University confirmed the suspicions of many in the industry that the state of mental health within the infrastructure construction industry was not what it should be. Almost half of the 683 respondents to the survey met the criteria for burnout; 85 per cent of respondents reported suffering from moderate to high levels of stress, and unsurprisingly, 59 per cent of respondents reported being dissatisfied with their work-life balance.

These results were accompanied by significantly elevated levels of depression and anxiety, indicating that drastic change was needed to address the personal toll of working in this industry.

The Cost of Doing Nothing Report also demonstrates that urgent change is needed to address cultural issues within the industry, which cost the economy close to $8 billion annually due to workplace injuries, mental illness, suicide, long work hours and a lack of diversity.

Currently, Australian construction workers are six times more likely to die from suicide than from an accident at work, with young construction workers more than two times more likely to take their own lives than other young Australian men.

The Downey-Swinburne and The Cost of Doing Nothing reports identified modifiable aspects of work conditions, organisational factors, and the culture underpinning work within the industry as contributing factors.

In a series of focus groups conducted by the authors, the drivers for the concerning mental health data from the Downey-Swinburne report were examined in detail by industry leaders. Several key themes emerged, with demand for construction resourcing being pegged as a significant driver of reduced wellbeing. The leaders observed that workload and resourcing pressures had been intensified by the volume of work and the pipeline of large-scale infrastructure projects underway or in planning.

Industry leaders identified the procurement environment and competitive tendering strategies as contributing factors to various stressful work conditions experienced in project delivery. In the competitive construction environment, timelines for project delivery may not always be realistic or achievable – despite the confidence they are presented with in tendering documents.

The leaders emphasised that numerous factors can adversely impact delivery timelines and create conditions in which people are required to work harder and longer to satisfy project requirements.

In an industry where more than 60 per cent of employees report working more than 50 hours per week, work hours are the most consistent and potentially improvable factor identified as driving reduced wellness. The leaders identified long work hours as a critical risk factor for mental ill-health in the industry.

Leaders also argued that, although tight timelines result in people needing to work long hours, long working hours should not be regarded as an inevitable feature of project-based construction work. How this could be reasonably and fairly implemented across the industry given the existing procurement, tendering, and resourcing challenges was, and still is, overwhelmingly beyond any solution individuals and companies have applied since 2018.

But pilot programs such as The Integrated Approach to Wellness demonstrate what is possible when taking a preventative approach to mental health and wellbeing. WorkSafe’s WorkWell Mental Health Improvement Fund supported the Integrated Approach to Wellness, which focused on preventing mental injury and illness by building a positive culture and transforming leadership practices.

The program was piloted on McConnell Dowell’s Mordialloc Freeway Project and ran for approximately 12 months, with an initial focus on culture and leadership interventions and shifting in the latter part of the pilot to focus on embedding new behaviours across the project. The participating employees reported a 60 per cent improvement in ‘work/life balance’, a 41 per cent reduction in ‘burnout’ and an average decrease of 39 per cent in levels of ‘depression, stress and anxiety’.

In addition, initiatives such as Culture in Construction, Wellness in Infrastructure, and Roads Australia’s Fellowship programs continue to focus on moderators of mental health within infrastructure. This highlights that there’s a groundswell of committed individuals, clients, and organisations advocating for change and attempting to address these systemic issues for a happier, healthier future within the infrastructure construction industry.

If you or someone you know are feeling overwhelmed, phone Lifeline on 13 11 14. 

This article was originally posted on CEDA. Read it here.

3D printing promises to transform architecture forever – and create forms that blow today’s buildings out of the water

James Rose AIA is director of the Institute for Smart Structures and a distinguished Lecturer & assistant professor of the University of Tennessee College of Architecture and Design. James is an architect, educator & industrial designer with a keen interest in the intersection of material and process. His research/practice focus on sustainability, design/build education and the architectural implications of emerging technologies. He is the recipient of numerous awards & he has co- authored numerous papers.

In architecture, new materials rarely emerge.

For centuries, wood, masonry and concrete formed the basis for most structures on Earth.

In the 1880s, the adoption of the steel frame changed architecture forever. Steel allowed architects to design taller buildings with larger windows, giving rise to the skyscrapers that define city skylines today.

Since the industrial revolution, construction materials have been largely confined to a range of mass-produced elements. From steel beams to plywood panels, this standardized kit of parts has informed the design and construction of buildings for over 150 years.

That may soon change with advances in what’s called “large-scale additive manufacturing.” Not since the adoption of the steel frame has there been a development with as much potential to transform the way buildings are conceived and constructed.

Large-scale additive manufacturing, like desktop 3D printing, involves building objects one layer at a time. Whether it’s clay, concrete or plastic, the print material is extruded in a fluid state and hardens into its final form.

As director of the Institute for Smart Structures at the University of Tennessee, I’ve been fortunate to work on a series of projects that deploy this new technology.

While some roadblocks to the widespread adoption of this technology still exist, I can foresee a future in which buildings are built entirely from recycled materials or materials sourced on-site, with forms inspired by the geometries of nature.

Promising prototypes

Among these is the Trillium Pavilion, an open-air structure printed from recycled ABS polymer, a common plastic used in a wide range of consumer products.

The structure’s thin, double-curved surfaces were inspired by the petals of its namesake flower. The project was designed by students, printed by Loci Robotics and constructed on the University of Tennessee Research Park at Cherokee Farm in Knoxville.

Other recent examples of large-scale additive manufacturing include Tecla, a 450-square-foot (41.8-square-meter) prototype dwelling designed by Mario Cucinella Architects and printed in Massa Lombarda, a small town in Italy.

The architects printed Tecla out of clay sourced from a local river. The unique combination of this inexpensive material and radial geometry created an energy-efficient form of alternative housing.

Back in the U.S., the architecture firm Lake Flato partnered with the construction technology firm ICON to print concrete exterior walls for a home dubbed “House Zero” in Austin, Texas.

The 2,000-square-foot (185.8-square-meter) home demonstrates the speed and efficiency of 3D-printed concrete, and the structure displays a pleasing contrast between its curvilinear walls and its exposed timber frame.

The planning process

Large-scale additive manufacturing involves three knowledge areas: digital design, digital fabrication and material science.

To begin, architects create computer models of all the components that will be printed. These designers can then use software to test how the components will respond to structural forces and tweak the components accordingly. These tools can also help the designer figure out how to reduce the weight of components and automate certain design processes, such as smoothing complex geometric intersections, prior to printing.

A piece of software known as a slicer then translates the computer model into a set of instructions for the 3D printer.

You might assume 3D printers work at a relatively small scale – think cellphone cases and toothbrush holders.

But advances in 3D printing technology have allowed the hardware to scale up in a serious way. Sometimes the printing is done via what’s called a gantry-based system – a rectangular framework of sliding rails similar to a desktop 3D printer. Increasingly, robotic arms are used due to their ability to print in any orientation.

The printing site can also vary. Furnishings and smaller components can be printed in factories, while entire houses must be printed on-site.

A range of materials can be used for large-scale additive manufacturing. Concrete is a popular choice due to its familiarity and durability. Clay is an intriguing alternative because it can be harvested on-site – which is what the designers of Tecla did.

But plastics and polymers could have the broadest application. These materials are incredibly versatile, and they can be formulated in ways that meet a wide range of specific structural and aesthetic requirements. They can also be produced from recycled and organically derived materials.

Inspiration from nature

Because additive manufacturing builds layer by layer, using only the material and energy required to make a particular component, it’s a far more efficient building process than “subtractive methods,” which involve cutting away excess material – think milling a wood beam out of a tree.

Even common materials like concrete and plastics benefit from being 3D-printed, since there’s no need for additional formwork or molds.

Most construction materials today are mass-produced on assembly lines that are designed to produce the same components. While reducing cost, this process leaves little room for customization.

Since there is no need for tooling, forms or dies, large-scale additive manufacturing allows each part to be unique, with no time penalty for added complexity or customization.

Another interesting feature of large-scale additive manufacturing is the capability to produce complex components with internal voids. This may one day allow for walls to be printed with conduit or ductwork already in place.

In addition, research is taking place to explore the possibilities of multi-material 3D printing, a technique that could allow windows, insulation, structural reinforcement – even wiring – to be fully integrated into a single printed component.

One of the aspects of additive manufacturing that excites me most is the way in which building layer by layer, with a slowly hardening material, mirrors natural processes, like shell formation.

This opens up windows of opportunity, allowing designers to implement geometries that are difficult to produce using other construction methods, but are common in nature.

Structural frames inspired by the fine structure of bird bones could create lightweight lattices of tubes, with varying sizes reflecting the forces acting upon them. Façades that evoke the shapes of plant leaves might be designed to simultaneously shade the building and produce solar power.

Overcoming the learning curve

Despite the many positive aspects of large-scale additive manufacturing, there are a number of impediments to its wider adoption.

Perhaps the biggest to overcome is its novelty. There is an entire infrastructure built around traditional forms of construction like steel, concrete and wood, which include supply chains and building codes. In addition, the cost of digital fabrication hardware is relatively high, and the specific design skills needed to work with these new materials are not yet widely taught.

In order for 3D printing in architecture to become more widely adopted, it will need to find its niche. Similar to how word processing helped popularize desktop computers, I think it will be a specific application of large-scale additive manufacturing that will lead to its common use.

Perhaps it will be its ability to print highly efficient structural frames. I also already see its promise for creating unique sculptural façades that can be recycled and reprinted at the end of their useful life.

Either way, it seems likely that some combination of factors will ensure that future buildings will, in some part, be 3D-printed.

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

Australia’s Growing Intergenerational Housing Wealth Divide: Trends And Policy Implications

Rachel Ong ViforJ is currently an Australian Research Council (ARC) Future Fellow and Professor at the School of Accounting, Economics and Finance. She is also Chair of the School's Research Committee and a member of CEDA's Council on Economic Policy.

Rachel was the recipient of the 2018 Economic Society of Australia Young Economist Award and the 2019 Professor Mike Berry Award for Excellence in Housing Research.

Australia’s intergenerational housing wealth gap has widened in recent years, with those fortunate enough to receive help from the ‘Bank of Mum and Dad’ having higher chances of becoming homeowners, writes Professor Rachel Ong ViforJ and Dr. Christopher Phelps from Curtin University.

Australia’s intergenerational housing wealth gap (HWG) has widened in recent years, with those fortunate enough to receive help from the ‘Bank of Mum and Dad’ having higher chances of becoming homeowners.

Although the housing wealth of older Australians has always exceeded that of younger Australians, as is to be expected given higher home-ownership rates in later life, this widening gap has important implications for housing policies in Australia. 

Wealth gap growing across several divides 

Estimates from the 1997-98 Australian Bureau of Statistics (ABS) Surveys of Income and Housing show that the primary home equity of older people (Australians in their 50s) was 161 per cent greater than for younger people (Australians in their 30s). This gap had widened to 234 per cent by 2017-18.

Housing wealth gaps don’t only exist across the age divide. As shown in Figure 1 below, the housing wealth of the income-rich was 94 per cent greater than the housing wealth of the income-poor in 1997-98. This had doubled to 191 per cent by 2017-18. The HWG between urban and regional areas also doubled from 46 per cent to 93 per cent, favouring those in cities. However, the age-based HWG remains much higher than those for income and geography. 

Figure 1 also shows another alarming divide between people who are both young and income-poor and people who are both older and income-rich. In 1997-98, the HWG between these two groups was a massive 532 per cent, favouring older income-rich income units. Over the next two decades, this had more than doubled to 1230 per cent. 

Figure 1: Housing wealth gaps (HWGs) in Australia, 1997-98 and 2017-18

A ‘leg up’ the housing ladder 

The gulf in homeownership between young and old is the main culprit behind the widening intergenerational HWG. The ability for young people to step on to the housing ladder is then central in diminishing this age divide, and this is being supported by the 'Bank of Mum and Dad' (BoMD). 

Estimates from the Household, Income and Labor Dynamics in Australia (HILDA) Survey show that those who receive a cash transfer or inheritance in excess of $5000 from the BoMD are more than twice as likely to enter into homeownership than those who do not receive assistance.

As shown in Figure 2, during 2001-2018, 4.5 per cent and 2.6 per cent of young non-owners received a parental cash transfer or inheritance respectively. Among these, 23 per cent became homeowners the following year. However, intergenerational transfers are not limited to direct cash transfers. Parents can also assist their children in non-cash ways. For example, 4.5 per cent of young non-owners lived independently but in rent-free dwellings provided by family or friends during 2001-2018. Among these, 26 per cent became owners the following year. These tenure transition percentages were much higher than those who received no parental assistance, whose chance of becoming homeowners the next year was only 10 per cent.

Living with one’s parents may assist transitions into ownership if it allows the young to save a deposit more quickly than in the private rental market. However, alarmingly, the percentage is extremely low for those living with non-owning parents, suggesting that those from disadvantaged backgrounds are likely to follow their parents in being left out of homeownership.

Figure 2: Intergenerational assistance for young non-owners aged 25-44 years, 2001-2018

What does this mean for Australia’s housing policies?

As life expectancies continue to lengthen, housing policy will need to be formulated through an intergenerational lens to meet the needs of co-existing generations. 

For instance, abolishing stamp duties and replacing them with a broad-based land tax will reduce the upfront cost of home purchases for both the old and the young. This will incentivise downsizing by older “empty nesters” and may free up larger family homes that meet the space needs of younger growing families. However, this needs to be accompanied by supply-side initiatives that increase housing choice for older downsizers in their local areas.

Private-rental sector reform will also need to become a priority as more people – old and young – become lifetime renters. Currently, Australia’s private rental market offers fewer tenant protections than countries such as Germany and the Netherlands, where these markets are more tightly regulated.

To prevent further fraying of Australia’s social and economic fabric, the national policy focus must widen beyond homeownership to promoting housing security and affordability across all forms of tenure and all generations. To achieve this, a comprehensive package of policy reforms is required. There is simply no single policy bullet available to solve this intergenerational challenge. 

References

Ong, R. (2017), Housing futures in Australia: an intergenerational perspective, in Committee for Economic Development of Australia (2017), Housing Australia, CEDA, Melbourne. 

Ong ViforJ, R., Clark, W. A. V., & Phelps, C. (2023). Intergenerational transfers and home ownership outcomes: Transmission channels and geographic differences, Population, Space and Place, 29, e2624. https://doi.org/10.1002/psp.2624

Ong ViforJ, R. & Phelps, C. (2023), The growing intergenerational housing wealth divide: Drivers and interactions in Australia, Housing, Theory and Society, https://doi.org/10.1080/14036096.2022.2161622

This article originally appeared on CEDA. Read it here.

What made rents soar? It might have been COVID, and pairing off

Peter Martin is Business and Economy editor of The Conversation and a visiting fellow at the Crawford at the ANU. A former economics editor of The Age, he has reported economics since 1985.

So, you think you know why rents climbed.

You probably think was skyrocketing interest rates and a tsunami of migration.

It’s true that interest rates have jumped more over the past year than at any time on record, and it’s true that migration has roared back – in the six months to September 2022 (the latest month for which we’ve official figures) arrivals exceeded departures by 170,000.

But here’s the thing. Advertised rents began climbing sharply in late 2021 – six months before the Reserve Bank began pushing up interest rates, and at a time when it was forecast not to.

And “net migration” was negative back when rents were taking off – meaning the number of arrivals didn’t even match the number of departures.

It’s supply and demand

Something else made rents move.

As it happens, there’s no particular reason to think interest rates would have quickly affected rents even if they had been climbing. If higher rates force some landlords to sell, and they sell to other landlords, the number of properties for rent won’t change. If those landlords sell to owner occupiers who would otherwise rent, they cut both the number of rental properties and the number of renters.

What matters for rents, as for any price, is the demand for and the supply of the product being priced. More demand (more renters wanting properties) and the price climbs. More supply (more properties available for rent) and the price falls.

Read more: $1 billion per year (or less) could halve rental housing stress

On the face of it, neither demand nor supply was changing much during COVID as rents started climbing. Australia’s population was growing more slowly than at any time in modern history. And, as best as we can tell, the number of properties available for rent was climbing, albeit weakly.

What did change during COVID, according to the research department of the Reserve Bank, was the average number of people per household.

The change doesn’t sound big – the average fell from a bit above 2.6 residents per household to a bit below 2.55 – but applied to millions of households it meant about 140,000 more houses and apartments were needed than would have been.

The sudden change was awfully for hard for the building industry to respond to, especially when it was laid low by COVID.

Why did we suddenly want to live with fewer people?

The head of the Bank’s economic division, Luci Ellis, thinks it was COVID itself, and lockdowns. We suddenly became more precious about sharing space.

‘Love the one you’re with’

Ellis says proportion of Australians living in group houses declined and stayed low. Faced with the choice of living with a large number of housemates and just one other person, perhaps a romantic partner, a lot of renters left group houses and shacked up with each other.

As she put it last year:

On the question of who you would rather be locked down with, at least some Australians have voted with their removalists’ van, by moving out of their share house and in with their partner.

There’s more to it of course, but where the supply and demand for anything are roughly in balance (rents had been increasing by less than 1% per year in the four years before COVID, and fell in the first year of COVID) any sudden change in either supply or demand can move prices quickly.

Advertised rents aren’t typical …

Having said that, for most renters prices are still moving slowly. Advertised capital city rents are up 13% over the past year, and advertised regional rates up 9%. But average rents (the average of what all renters pay) are up only 4.8%.

The rents charged to ongoing tenants climb much more slowly than the rents charged to new tenants, in part because landlords often like their tenants, and in part because for the first year renters are usually on fixed contracts.

But over time as renters move home, and landlords become less squeamish, more and more renters tend to pay the rents advertised. It makes the increase in advertised rents an unwelcome sign of what’s to come.

… but they’re a sign of rents ahead

And it might get worse. Reserve Bank Governor Philip Lowe says population growth is set to climb to 2% – near the peak reached during the resources boom.

We won’t be able to build houses anything like that fast. Lowe says the last time Australia’s population surged it took about five years for housing supply to fully respond to housing demand.

We’ve ways of dealing with it of course. One is to re-embrace group homes, another is to delay moving out of our partents’ homes, or to move back in.

But even if this does happen, Lowe says, with typical understatement, that rent inflation – ultra-low before COVID – is likely to stay “quite high” for some time.

This article originally appeared in The Conversation. Read it here.

How your postcode predicts your health and life expectancy

And what governments can do to help

When it comes to our health, the cards are stacked against us - 50 per cent of Australians now live with chronic disease.

The Victorian Health Promotion Foundation (VicHealth) is a pioneer in health promotion – the process of enabling people to increase control over and improve their health. Our primary focus is promoting good health and preventing chronic disease.

At almost every point throughout our day, things make it harder for us to be healthy — and easier for us to increase our disease risk. 

The worst part? Most of that disease is preventable – and it starts with planning laws, zoning laws and the environments we live in.

Key points: 

• We want to see fair equitable and accessible infrastructure that promotes the health and wellbeing of all Victorians, regardless of their postcode, bank balance or background.

• Community-demand for healthier environments is growing locally and globally.

• In Victoria, we need our Government policymakers to take action and create healthier environments to reduce chronic disease. 

How does urban planning impact health? 

One of the strongest predictors of our life expectancy is our postcode. This is because the built environment shapes our health in many ways. Access to parks, healthcare services, public transport, education, and employment, all affect our ability to access and achieve good health. 

Exacerbating the issue is the fact that cities around the world are growing and increasingly more people are moving from rural to urban areas. Today, 55% of the world’s population lives in cities, and by 2050, the number is expected to be about 68%. And the resulting health issues are shocking. 

Kids in Australia could be the first generation in history to have a shorter life expectancy than their parents. So how do we turn this around?

This confronting revelation came up in an episode of ABC Radio Melbourne’s Conversation Hour with Richelle Hunt, where VicHealth CEO Dr Sandro Demaio joined the discussion. 

What's interesting is if you move to a new area, you take on the risk of that area... That is either helping us to be healthy or potentially making us sick... if you move to an area that has a much lower life expectancy, you will take on the risk and the life expectancy of that new area very quickly, which shows, again, it's about the environment

In wealthier suburbs of Melbourne like St Kilda, the average distance to a fresh food store is 400 metres vs 14 kilometres in some lower-income postcodes.

Almost 2.5 times as many unhealthy food outlets in poorer postcodes compared to wealthier ones. 

These stark differences between postcodes has created health issues all around the world.
This was emphasised in Lives on the Line: Life Expectancy at Birth & Child Poverty as a Tube Map, a version of the London Tube (train) map showing life expectancy from station to station. 
There is a 20-year difference in life expectancy between those born near Oxford Circus (a wealthy area) and others born close to some stations on the Docklands Light Railway (DLR) (poorer areas).

Beyond the shocking life expectancy gap, the map showed people living in poorer communities were more likely to experience delayed early child development, lower levels of education and employment and higher rates of smoking, obesity and harm from alcohol. 

Healthy and affordable food options, parks and accessible infrastructure make a difference to everyone – but a gigantic difference to some. Imagine the healthy lifestyle opportunities it could create for those on low incomes or experiencing any number of life situations that create health barriers? This is how we break the cycle of  circumstances beyond our control affecting our health. So it should be a priority.

Healthier planning and zoning

We can think about planning laws, zoning laws and the environments we live in in terms of food environments and how connected neighbourhoods are. 

Food Environments 

Where we live and the places we go as part of our daily routines have a big influence on the foods we buy and eat. 

Known as ‘food environments’, they typically play an even bigger role than our individual food preferences. 

The World Health Organisation officially defines the food environment as the surroundings that influence and shape consumers’ food behaviours, preferences and values – and prompt decisions. 

What does a food environment include?

• Economic access (are they affordable?) 

• Marketing (are unhealthy options more visible than healthier ones?) 

• Nutrition labelling (do food products have clear, easy to read information to support consumers to choose healthy food options?) 

• Food quality (is it fresh, prepared without too much factory processing?) 

• Food safety (is it prepared and stored hygienically, in safe temperatures?) 

• Digital food environments (as with marketing, are unhealthy options more visible than healthy ones?) 

Easy access to nutritious food choices where people live, work, study and play can help to maintain health and prevent diet-related chronic disease.

And with ultra processed food options bombarding some neighbourhoods more than others, governments must plan healthier environments as a disease-prevention priority. 

In the abovementioned episode of ABC Radio Melbourne’s Conversation Hour with Richelle Hunt, caller Sue tested the program about her son's new housing estate which is surrounded by fast food outlets with no ready access to healthy food store.

So how can we make sure that people like Sue's son don't live in places that compromise their health?

Governments, planners and urban designers can positively influence access to nutritious food by changing food availability and access at the local level through land use planning. 

Our latest report Land use planning as a tool for changing the food environment outlines further case studies and presents some specific recommendations in regards to promoting healthy food environments: 

1. Ensure local planning authorities have a (food) retail classification system and data visualisation tool 

2. Adopt combined approaches that discourage retailers selling predominantly unhealthy options and encourage retailers selling predominantly healthy options 

3. Focus on reducing inequalities and providing opportunities for all 

4. Use a health in all policies approach 

5. Better understand the barriers to adoption (of healthier lifestyle activities such as healthy eating, physical activity etc.) and the feasible steps to overcome these barriers 

6. Stronger evaluation of land-use initiatives.

Connected Neighbourhoods

Safe and accessible neighbourhoods that locals can move around without solely relying on a car promotes health and wellbeing.  

Infrastructure including green spaces, street lighting, footpaths, bike paths and pedestrian crossings can all affect leisure time and physical activity levels. Whether that’s for pedestrians, wheelchairs, prams or bikes. 

So it follows that planners can help to promote physical activity by improving the design of the built environment, for example through dedicated green spaces, better street lighting and redesigning stairs and ramps. 

The added bonus is that this can also improve safety and access for a range of social groups, including people with mobility requirements. 

Future Healthy Community Champion Jessi is regularly impacted by limitations of the built environment. 

“There's physical barriers everywhere for wheelchair access. Footpaths are broken everywhere, a wheelchair is very hard to get around in. It can be painful, I can get stuck.” 

Of course connected neighbourhoods aren't just about mobility, but about spaces to gather and enjoy recreation outdoors. 

Over the last few years Victorians became hyper aware of just how essential outdoor green spaces near your home are to your health and wellbeing. 
So planning that prioritises green spaces over commercial development is also hugely important to improving mental health and wellbeing.  

Growing community demand

“There is an increasing recognition by governments all around the world, and both state and local governments, that we can do better and need to do better for both existing and growing communities..”

- Dr. Jonathan Spear, CEO of Infrastructure Victoria (ABC Conversation Hour interview) 

Victorian community opposition to fast-food developments 

• Tecoma saw protestors mobilise with more than 1,170 written objections sent to Yarra Ranges Council when McDonald's wanted to open a new franchise there. Despite these concerns and after ongoing legal action, McDonalds opened three years later. This was met with protests at the opening. Without significant government legislation to support them, the people of Tecoma could not stop McDonalds from opening in their town. 

• Mansfield saw similar community opposition, with an online petition that opposed a new drive-through McDonalds gaining more than 1000 signatures in the first hour, building to around 3300 signatures (from a population of around 5000!). This time, VCAT sided with the Mansfield Shire’s refusal to grant a permit for a drive-through McDonalds. Although the people of Mansfield successfully stopped McDonalds from opening there, it took almost the entire population to do it. 

Without significant government legislation to support them, the people of Tecoma could not stop McDonalds from opening in their town. And although the people of Mansfield successfully stopped McDonalds from opening there, it took almost the entire population to do it. Policymakers can make all the difference in giving communities a chance to create healthier environments. See suggestions for policymakers here.

Further examples of change 

• Western Australia also has released a report that outlines the positive impact of prohibiting unhealthy food outlets near schools. 
  

• The City of Los Angeles passed a 2008 bill that stopped new fast food restaurants from being opened in low-income areas. 
  

• World Health Organisation's Healthy Cities Initiative looks at urban governance for health and wellbeing, detailed in their 2020 report Healthy cities effective approach to a rapidly changing world. 
  

• No Fry Zones in Wicklow, Ireland aimed to promote healthy living and reduce childhood obesity by excluding the construction/operation of new fast food retailers near schools or playgrounds. 
  Projected benefits included:  
  - Reduction in obesity rates by limiting easy access of school children to foods high in unhealthy fats, sugars or salt. 
  - Reduction in the promotion of fast food to school children 
  - Consistency in local planning regarding fast food outlets 
  

• Sweden works to create smart cities where social sustainability plays a major part. Green areas help create meeting places, and they also play the role of air cleaners, water collectors and noise reducers. By building in favour of bikes and pedestrians, car traffic has been reduced in the city centres, leading to better health among the residents. 
  

• There are many good Nordic initiatives and experiences, such as combining urban development with public transport, preserving biodiversity and cultural elements, foresting the city and calculating the balance between the green and built areas. 
   

How can Victoria’s State Government help? 

Planning schemes in Australia are developed under state enacted overarching planning laws, setting out objectives and policies, which are in turn implemented and overseen by local governments. However, at this point in time there is no provision for the inclusion, let alone prioritisation, of health impacts in planning decisions.  

There have been two Parliamentary inquiries on the topic and no action yet (2012 Inquiry into Environmental Design and Public Health in Victoria and 2022 Inquiry into the protections within the Victorian Planning Framework). 

State Government has a clear role to play in managing chronic disease and our planning laws and regulations could significantly help to keep people healthier for longer. 

Policymakers must change the current laws so health is in sharp focus when it comes to zoning and planning approvals.  

Principal planning instruments overarching planning law in most states, including Victoria ... do not allow for preventative health considerations to impact planning decisions.

- The Obesity Policy Coalition

Ultimately, we need our State Government to pass legislation that changes the planning act to 1) embed health as a priority consideration in planning and 2) allow consideration of community voice into the decision making process of planning and zoning.

This amendment should seek to promote and enable:

• The prioritisation of healthy food retail outlets 

• Local government and planning authorities to respect the wishes of community when they raise concerns about new or expanding footprints of harmful industry retailers including alcohol retailers, fast-food outlets and gambling venues

• Green spaces for mental and physical health

• Infrastructure that prioritizes active transport options and safe physical activity.

Without a health lens, postcodes will continue to determine preventable disease outcomes across Victoria. The future is in the hands of Victoria’s state and local government policymakers.

This has been republished with permission from VicHealth. Read the original article here.

Australians paying $6 billion for unused apartment parking

Experts are calling for planning policy to ‘unbundle’ parking spaces from apartments to reduce housing costs and alleviate street parking woes.

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RMIT University’s  goal is to bridge the gap between research and impact. RMIT was established, not just to pursue 'knowledge for knowledge's sake' but to apply research and innovation for the benefit all. Our distinctive capabilities deliver positive change. This is what we mean by passion with purpose

A new RMIT University study surveyed more than 1,300 apartment residents across Melbourne, Sydney and Perth to assess the adequacy of off-street parking for apartment households. 

Lead researcher Dr Chris De Gruyter from the Centre for Urban Research said two thirds of households owned the same number of cars as their allocated parking spots.

However, 20% of households had too much allocated parking, while 14% did not have enough.

De Gruyter said the imbalance of off-site parking for apartments reflected residents not having a choice in how many parking spots they needed when renting or buying an apartment. 

In Victoria, there are minimum parking provisions that state every one and two-bedroom apartment must have at least one parking spot, and apartments with three or more bedrooms must have at least two. 

“We found in our study that people living in larger apartments tend to have an oversupply of parking because of this policy, which means they’re paying for a space they’re not using,” De Gruyter said.

De Gruyter said 13.4% of the surveyed households did not own a car but most were still allocated a parking space.

With each parking space worth up to $100,000, he estimated the price of unused off-site parking is costing residents more than $6 billion.

“This oversupply is not just an inefficient use of space, it is exacerbating housing affordability issues,” he said. 

“Meanwhile, apartment households with an undersupply of parking are forced to park on the street, competing with visitors in the area.”

“It is very clear that there is actually plenty of apartment parking - it’s just allocated incorrectly.”

Unbundling for more choice

De Gruyter is calling for state and local governments to allow for unbundled parking in planning policy to help balance the over and undersupply of off-site parking.  

He said unbundling parking was not about taking away parking from residents – it was about giving people the choice to own or rent parking spaces in line with their needs.

“We can choose the number of bedrooms we want in our homes, yet we have no say in how much parking we need,” he said. 

“We want people to have the option to choose not to have parking instead of it being imposed on them. Similarly, those who wish to have additional parking can have this.”

Unbundled off-street parking in apartment buildings is still uncommon in Australia, but they can be seen in several newer complexes, such as Melbourne Square, Indi City Sydney and Arklife in Brisbane, choosing to unbundle parking from apartments. 

De Gruyter said it was promising to see the renewed Arden precinct in North Melbourne introduce planning policy to facilitate unbundled parking for their new buildings. 

“Unbundled parking is going to help with housing affordability, reduce car use and on-street parking issues,” he said. 

“We’re also going to see better health for residents as there will be more physical activity due to more public transport use, and better air quality from less car use.”

But waiting for the market alone to bring this change would be too slow, said De Gruyter, and state and local government had an important role to play. 

“Do apartment residents have enough car parking? An empirical assessment of car parking adequacy in Australian cities” is published in the Journal of Transport Geography (DOI: https://doi.org/10.1016/j.jtrangeo.2023.103542)

This research was led by RMIT University in collaboration with the University of Western Australia.

Chris De Gruyter, Paula Hooper and Sarah Foster are co-authors. 

This article was originally posted on the RMIT website. Read it here.

Why knocking down warehouses is on the rise

JLL are property financiers with a diverse range of clientele. With sustainability at the core of their ethos, JLL are working toward creating a world-leading sustainable property development firm.

Redeveloping industrial real estate in a strong market aims to address modern demands

The idea of demolishing and rebuilding warehouses in a flourishing industrial real estate sector may sound counterintuitive.

But for a growing number of warehouse owners, the old buildings just don’t have what their tenants need.

Demand is surging for high-quality industrial space at reasonable distances from city centres. In Australia, one of the tightest industrial markets in the world, last year’s take-up of 3.2 million square metres was the second highest ever, surpassed only by the 4.3 million square metres leased in 2021, according to JLL data. 

And year-on-year rental growth of 15% globally, as recorded last October – one of the highest lifts ever – reflects the appetite for industrial space.

But ESG-credentialed buildings can be a dealbreaker. Businesses want warehouses that are automation-ready and with sustainability features to help them meet their net zero carbon commitments, says Annabel McFarlane, head of strategic research, Australia, JLL.

Investors are taking note, pouring cash into sites that have older buildings, with a view to redeveloping.

“Many investors adopted ‘income-producing land banking’ strategies in 2021 and 2022 and as a result the volume of capital invested in income-producing industrial sites that are redevelopment-ready totalled A$2.3 billion (US$1.5 billion) over the past 24 months,” McFarlane says, speaking to the Australia market.

“Investors are cognisant of the strong demand for well-located assets for last mile distribution, along with the risks associated with greenfield developments, including the absence of income and potential increases in land holding costs,” she adds.

Proximity is everything

Industrial rebuild projects have been more common in ultra-high-density cities such as Tokyo and New York City, where developable land is scarce. Online shoppers are increasingly demanding same-day delivery, so traditional warehousing on the fringe of cities has had to be modernised and centralised via demolition and rebuild.

But even in Australia, where more land is available, proximity to major customer bases is a key driver of the knockdown-rebuild trend.

For example, in Melbourne there was the A$95 million purchase of the 12.21 hectare IVECO site in Dandenong South, where the Aliro Group and ISPT are set to establish a premium logistics estate. Then there’s the A$230 million transformation of the former Woolworths distribution centre in Broadmeadows to support e-commerce, distribution, food and cold storage.

“We expect the redevelopment theme to pick up over the medium term and obsolescence of some older stock to be brought forward as building sustainability features become essential considerations for occupiers,” McFarlane says.

Design benefits

The economics behind redevelopment projects make sense due to the improved capacity of new builds and their lower running costs, says Richard Phillips, JLL Australia's head of supply chain.

He points out that older assets will be up to 11 metres high, while new assets can be 15 metres high and hold 40% more product on the same footprint.

Automation is only appropriate in new-builds or retrofits where properties are expected to be functional for 15-plus years, Phillips says.

“You can’t even put some of the simplest automation into older warehouses because the infrastructure doesn’t enable their deployment,” he says. “So, you’ve got buildings that are 35-plus years coming up for refurbishment anyway, plus the appeal of automation and increased cubic capacity all driving owners and developers to look at the viability of knock down and rebuild.”

Market consensus

Back in 2021, a survey of logistics experts in JLL’s The Future of Global Logistics report found 90% of respondents felt redevelopment of brownfield urban infill sites would be an important opportunity to meet growing demand.

“If you can’t do something to improve the building, then that will reduce its effective life, and demolition could be the answer. You need to look at how old the building is and how it can be adapted,” says Phillips.

“The automation journey will continue to push people harder than previously to review their buildings,” he adds.

Green goals

As important as automation to the evolving industrial and logistics landscape is the increasing imperative around sustainability.

This was reinforced recently by Germany’s Supply Chain Due Diligence Act, introduced this year, which requires large companies to observe social and environmental standards in their supply chains, including their real estate. With Germany being the fourth largest economy in the world, this will have global implications.

“Our research tells us that 54 out of the top 100 largest industrial occupiers have net zero targets,” says Renae Gasmier, JLL Australia’s head of sustainability consulting. “That means these gold-class tenants need to be in net zero carbon emission buildings and we are very aware there's an undersupply.

“The problem we're all trying to solve is how to retrofit and upgrade all those assets that are not net-zero ready. In the industrial space the answer will be a combination of demolition and reconstruction and retrofitting what's there already.”

This article was originally published on the JLL website. Read it here.

‘Are you asking us to sleep under the Harbour Bridge?’: 3 myths about international students and the housing crisis

Dr Angela Lehmann is a sociologist who has spent 15 years working in the Australian and mainland Chinese university sector. She holds honorary positions with the ANU and the University of Xiamen. Angela is the author of 'Transnational Lives in China: Expatriates in a globalising city' (Palgrave 2014) and editor of 'Destination China: Immigration to China in the Post-Reform Era' (Palgrave 2019). She has several years experience in the international higher education sector in both Australia and China.

There is a story doing the media rounds that international students – particularly from China – will now “flood” back to Australia. It is claimed this will push up already high rents for scarce housing in our major cities.

This story is one of three myths that risk setting up international students as scapegoats for Australia’s ongoing housing crisis. However, immigration data and our monitoring of social media, where international students share their experiences, simply don’t support these narratives.

Indeed, these students’ social media posts highlight the challenges they are facing, including scams that seek to exploit their difficulties in securing accommodation.

What’s behind this story?

Part of this story stems from a Chinese government announcement in January that students will no longer have their degrees certified if they study online. This means students who have been studying with our institutions while based in China during the pandemic are being encouraged to return to campus.

The announcement was made less than two weeks before the start of the university year. It left students and institutions rushing to make sense of the change.

Media reports have since warned “more than 40,000 Chinese students” are about to arrive in Australia as a result. This has heightened fears about their impact on rents.

We use AI technology to listen to what international students are talking about on open online platforms such as Facebook, Twitter, Instagram and online forums. We also monitor Chinese platforms such as Weibo. We read comments students make about media posts to determine their reactions to events and issues.

We also monitor what Australians are saying about international students on platforms such as Twitter, Facebook and YouTube. This allows us to understand how the local community is responding to international students and to better understand the challenges students are facing.

Lately we are seeing negative sentiment on social media towards international students in Australian cities. Some claim these students pose a risk to local housing security. For example, one post reads:

Australia more interested in housing overseas students in high rise dog boxes than in its own residents.

Another reads:

All these international students taking up homes meant for Australians. Why aren’t Aussies being prioritised here?

Fears like these are being fuelled by three key myths that are increasingly circulating during the rental crisis.

Myth 1: 40,000 arrivals from China are imminent

Many of Australia’s international students have already arrived in time for the university year. As for Chinese international students who are currently offshore, myriad challenges are delaying their return to Australia. These include high airfares, visa delays, Australia’s requirement they provide evidence of a negative COVID-19 test and difficulties leaving jobs they have in China.

Australia’s housing crisis is being widely reported on Chinese social media. Students are actively talking about difficulties with accommodation and are worried about arriving without first securing a bed. One student’s post directed towards the Chinese government, “Are you asking us to sleep under the Sydney Harbour Bridge?”, attracted hundreds of reactions.

At a recent Senate estimates hearing, the Department of Home Affairs confirmed there had not been a significant spike in visa applications since the Chinese government’s announcement. A full return of students to Australia’s universities is not expected until later in 2023.

Myth 2: all these students can afford inner-city apartments

Survey analysis by global education services provider Navitas recently found the cost of study has risen from the fifth-most-important consideration to the second-most-important consideration for Chinese students deciding where to study abroad.

While some students may be able to afford top-price inner-city living, many can’t. And many of those who are already here are struggling with the cost of living. As one student posted:

It already costs so much for us to pursue studies in Australia but now it costs much more to afford basic needs. Already on loan and not all of us students come from rich families. I hope this is raised and some help is offered to those of us who are struggling.

The cost of living in the inner city is leading students to seek advice online from their peers in Australia about living in suburbs further away from campus. There is a need for information to be provided to these students about alternative suburbs, including travel times and facilities, along with reassurances about safety and cost.

Myth 3: students can walk into properties

International students who have not been in Australia for the past few years lack the rental and financial history that landlords require. Online, students talk about feeling discriminated against, with landlords considering them “high risk”.

Some students recount being asked for two or three months’ rent in advance to secure a property. Others are voicing fears about being scammed as a result of their lack of a paper trail.

I was asked to pay 2 months rent on top of my bond to secure a spot. I was told international students are not trustworthy so they required more payment upfront. Is this legal?

In recent weeks, various scams targeting international students have been aired on social media. These range from “fake” real estate agents requesting hefty deposits, and agents charging a month’s rent to “hold” the property, to threatening students who do not comply that this will slow down visa processing.

In response, the Chinese consulate in Sydney has issued a warning to students. The notice urged students to be wary of rental scams and to take care to ensure their safety and security in their dwellings.

The return of international students is an important sign of economic and urban recovery in Australia. Students support local economies as tourists, consumers, taxpayers and a vital source of labour.

Unless the challenges they face on their return are seen and addressed, we risk this group of young people being turned into scapegoats for a housing crisis that is the result of domestic policy failures over many years.

This article originally appeared in The Conversation. Read it here.

Tiny houses and alternative homes are gaining councils’ approval as they wrestle with the housing crisis

Heather Shearer has a PhD, which investigated household response to water demand policy; a Masters in Environmental Management and BA (Hons) in Environmental Science. She is also a member of the Planning Institute of Australia. She’s currently researching various aspects of urban sustainability, including housing affordability, water and energy use, environmental behaviour and attitudes to climate change.

Australia’s coastal cities and surrounding hinterlands have long been popular with tourists, sea-changers and retirees. But they have a darker side. In the early morning you will often find car parks crowded with cars, vans, caravans and even tents, where refugees from the housing crisis have spent the night.

People of all ages, including families with children, are cooking breakfast, using the cold-water showers and packing up for another day, always trying to keep one step ahead of council officers or police. These unhoused people don’t conform to homeless stereotypes. Many have jobs and children in school and no serious mental or physical health problems. They simply cannot find an affordable home to rent, or have lost or are unable to buy a home of their own.

Soaring rates of housing stress are forcing Australians to explore new options, including living smaller and in tiny houses. At Griffith University’s Cities Research Institute, we are surveying local government planners on whether they allow, encourage or limit tiny, temporary or alternative houses in their area.

In early findings (from a response rate of over 50% to date), nearly all respondents agree affordability is a problem for both home buyers and renters. While not representing formal council views, their responses indicate most councils now approve modular, manufactured and shipping container houses, despite a public perception they oppose such dwellings. Some have codes specifically for tiny houses on wheels.

As one planner explained:

We will have to think differently about how we live, given housing affordability, inflation, susceptibility to emergency events and the like, and perhaps be more lenient on allowing these types of dwellings – whether on a permanent or temporary basis.

All housing must comply with the law

Local governments in New South Wales and Queensland were the most progressive. Many councils (41%) already approve alternative housing types for permanent dwelling. But they must comply with local laws, be in an appropriate residential zone and approved as a residential dwelling, connected to services and protect local amenity.

For example, a planner from a large regional city in NSW said options like tiny houses were possible, “subject to approval and compliance with Planning and Environment Act and Building Act requirements. All need to be approved for permanent use and hence comply with requirements for all dwellings.”

Another NSW planner said:

There are some temporary exemptions in the legislation for disaster event accommodation for up to two years, and [it] had to comply with planning and building act requirements. Local laws become involved if these structures are parked on council land e.g. on the side of the road or on public land. And environmental health issues arise when there is no waste management measure in place.

The Fraser Coast Council in Queensland recently allowed property owners “to accommodate family or friends in a caravan on the dwelling allotment for up to six months in a 12-month period”.

What are the concerns about tiny houses?

Many respondents did voice concern about false advertising by the tiny house industry. As one said:

Tiny houses are the Uber and Airbnb of the housing industry. The idea that such structures can be temporary is in many cases fanciful.

Some manufacturers market their tiny houses as not needing council approval. They fail to mention the requirements that apply to water supply, waste disposal, bushfire and flood risk, and avoiding conflict with agriculture.

[Alternative housing] should be regulated to some extent to ensure that occupants and adjoining neighbourhoods experience a reasonable level of amenity (i.e. not unreasonably put a strain on existing infrastructure, not detract from local character (if prevailing), not cause overshadowing to adjoining neighbours, be fit for purpose etc).

Another concern is tiny houses that don’t comply with building regulations.

Most of these buildings do not comply with the minimum 2.4m ceiling height of the National Construction Code/Building Code of Australia. Even if they do comply […] unless a compliancy certificate has been issued by the manufacturer, there is practically no way of approving them as a certifier has no access to the specifications, can’t visually inspect the frame prior to cladding etc.

Potential conditions of approval that apply to tiny houses and alternative housing types as indicated by survey respondents. Data: Cities Research Institute survey/Griffith University, Author provided

A quest for creative solutions

The tiny house movement, despite its limitations, could help deliver some of the creative solutions the housing crisis demands. It has sparked an important conversation about alternative housing solutions, with broader implications for housing design, construction, regulation, finance and insurance.

I personally would like to see more flexibility in allowing diverse house types (including temporary dwellings) to put less financial strain on people (put people into homes/home ownership who can’t afford traditional houses or can’t find a rental) and create opportunities for alternative lifestyles (i.e. more nomadic, work less, co-op). Keeping in mind there should be measures to preserve amenity.

A focus on good design, adaptability and affordability can make smaller dwellings more attractive to more people. Assembling prefabricated components on site can cut costs.

Tiny homes can be deployed and redeployed quickly if necessary. This is important for areas hit by disasters.

Their small scale offers a way of increasing density sensitively in built-up areas. They can also be clustered together to create new communities.

Conventional strategies such as more greenfield land releases, relaxed planning controls and subsidies for first-home buyers have failed to solve the complex challenges of a seriously dysfunctional housing market. We need to experiment with new approaches to housing, and learn as we go.

Unconventional dwellings like tiny homes can make an important contribution. Our survey suggests planners around the country are willing to join in the process of developing and regulating these news ways of living.

This article originally appeared on The Conversation. Read it here…

How the ‘rent-a-demic' will affect today’s Industrial and Residential markets

CBRE’s research analysts and in-field market experts investigate the current ‘rent-a-demic' gripping Industrial and Residential markets.

CBRE Research provides thoughtful, forward-looking insight into real estate trends, strategies and opportunities around the world.

Fluctuations in rental demand are nothing new in Australia's property landscape. While minor trends are expected, the latest research from CBRE’s Pacific Market Outlook report indicates a major pivotal shift playing out this year.   

“We’ll see a reversion of history in 2023,” explains Sameer Chopra, Head of Research, Pacific for CBRE. “We expect weaker values and strong rent growth, with tight vacancy rates likely to lead to a ‘rent-a-demic’ in the industrial and residential markets.” 

This ‘rent-a-demic' is a newly coined CBRE term that perfectly depicts the outlook for rising rents. More importantly, it’s an event that deserves further analysis so that stakeholders can understand exactly what this means for today's market and how the Industrial & Logistics and Residential sectors will be affected. 

These crucial insights will touch on perspectives from both CBRE’s research analysts as well as in-field experts with first-hand knowledge of occupancy and real-world activity around market supply and demand. 

What’s driving the ‘rent-a-demic'?

In-house research shows that lower levels of new supply accompanied by surging construction costs have helped drive the current ‘rent-a-demic’. 

In the Industrial and Logistics (I&L) sector specifically, constrained levels of supply and a country-wide vacancy rate of 0.6% - the lowest I&L vacancy rate globally – are helping to fuel high single digit rental growth in most Australian markets in 2023. This is being propelled by the fact that 58% of the 2023 I&L development pipeline is already pre-committed. And even with the substantial incoming 2023 supply pipeline, this surging vacancy demand will not be met.  

“It’s not enough supply to meet demand,” explains Cameron Grier, Regional Director of I&L Advisory & Transaction Services for Australia and New Zealand.  

“If you look at the supply pipeline and overlay that with demand, there is some supply pipeline coming this year. But in most cities like Sydney for example, the supply coming on is half of what we need. And as of today, one third of that is already under agreement or pre-committed.  

“Sydney has the tightest vacancy of anywhere in Australia. Demand basically will not meet new supply coming on. And it’s the same for other markets in Melbourne and Queensland. Supply that comes on will get soaked up this year. Even if demand was cut in half, it still wouldn’t keep up. 2024 will be a different story but this year, definitely not.” 

So, what does this ‘rent-a-demic' mean for the real-world market beyond the figures?   

“It’s great if you’re an owner of land, very challenging if you’re an occupier,” he says. 

Owners of industrial property will see significant rental growth while occupiers will feel this supply squeeze.  

Sass J-Baleh who is CBRE’s Head of I&L Research Pacific and Director NSW Research attributes several factors to the onset of the rental crisis.  

“Construction delays, supply chain disruption and poor weather placed a lid on new supply over 2022, and hence many projects have been pushed to this year. 

“As a result, the forward pipeline has a high precommitment rate of circa 60%. The remaining supply, if not taken up by year’s end will not move the vacancy needle by much.  

“Sydney and Perth have the lowest vacancy rates in Australia which has driven rents in these cities to the highest year-on-year growth over 2022. Sydney and Melbourne naturally benefit from higher population, and therefore greater throughput of goods and logistic requirements. Melbourne is attractive for occupiers given the large rental differential to Sydney’s average rents, as well as being home to the largest port in Australia.” 

The story isn’t too dissimilar on the residential front where there’s also a clear distinction between standard rental demand and the current fight for prized vacancies driven by slowing apartment construction, robust jobs growth and migration. 

“When seasonal demand impacts on supply, the market is usually aware and the trend and the impact is relatively short-term,” says Tim Frazer, Director, Quality & Risk Management, Valuation & Advisory Services. 

“Tenants, owners and agents can plan around the short-term impacts. From a landlord’s perspective, seasonal fluctuations may not be enough of an incentive to displace a longer-term tenant or overlook the benefits of a more stable rental income provided by longer-term tenants. The ‘rent-a-demic' is different; it’s not seasonal; it appears it will be a challenge for the next few years and it’s likely to worsen before it improves.” 

Will rising interest rates affect industrial rental demand? 

Not likely, according to CBRE’s market experts and research analysts, who say it will only be a minor speedhump at most.  

“No, we don’t think we’ll see a huge cutback because of interest rates and people spending less,” says Grier.   

“I think we’ll see certain types of demand contract. Market items like televisions, fridges, furniture and items people bought during the pandemic - you only need to buy those every so often. But in terms of all the other things, we’re seeing expansion in most groups. Anyone in food, pharmaceuticals, 3PL logistics space and non-discretionary spend, they’re all needing floorspace.” 

J-Baleh agrees with this observation.  

“Less discretionary spend will have a short-term impact on e-commerce as well as the throughput of goods moving in and out of warehouses.  

“We expect there will be a pause on decisions to commit to new space from some occupiers. However, other larger occupiers in the market are preparing their supply chains for long-term e-commerce growth and they will still be in the market looking for the right facilities in optimal locations for their particular networks.” 

Even over the long term, experts don’t see the demand for industrial space slowing. This is due to the fact that Australia is still roughly five to seven years behind countries like the US when it comes to speed of delivery and warehouse logistics efficiency.  

“We look at where those groups are now, how much space they have and the trajectory for growth. It’s huge and we think we’ll follow that same pathway,” says Grier.

Will natural disasters affect industrial rental demand? 

Natural disasters have wreaked havoc in recent years across both Australia and New Zealand. This in turn has impacted supply chains and warehouse space under the industrial umbrella. How will industrial rental demand fare in future climate emergencies involving floods, fires or earthquakes?   

“If you look back at past natural events like earthquakes, people were looking for warehouses and that was tough. The hailstorm in Sydney was a natural disaster which demolished sheds. That just meant other groups needed to take up massive warehouses and the rents spiked. When there’s any impact to supply, that’s what will happen,” says Grier.   

The extended rain season in Sydney in 2022 was a perfect example which delayed construction and pushed rent prices north. Grier says that this scenario and similar ones down the track will come down to the simple case of supply and demand. 

Which cities will be impacted hardest? 

With the surge in demand for residential vacancies across multiple major capital cities, it’s important to know exactly which areas will see the most growth and its impact on suburbs further out of CBDs that historically experience less occupier interest.  

Frazer doesn’t believe this ‘rent-a-demic' will be exclusive to only the high-demand suburbs in capital cities.   

“I don’t think it will just be limited to areas around the CBD or universities, but they will be more affected as migration increases, and more students continue to return. This is likely to force other tenants further from major centres and this sprawl will contribute to the issue being more widespread. 

“Increased demand in more sought-after areas will force some tenants out of their preferred location. Whether the competition is from other tenants or properties being sold by investors to owner- occupiers, the reduced supply will contribute to rents increasing across most areas.” 

The higher rental growth experienced on Australia’s west coast compared to its east coast, as indicated in the Market Outlook report, was down to multiple factors.    

Western Australia has benefited from a high net migration over the past few years on the back of a strong local economy, meaning more residents needing somewhere to live.  

“Whilst they have had a housing construction boom over this period, the low interest rate environment and government grants mostly attracted owner-occupiers into the market initially,” adds Frazer.  

How long will the residential rent crisis last?

Answering this question is subjective and based on an individual’s definition of ‘temporary’.  

“In my opinion, the broader issue won’t be resolved in the short term and it’s likely to be a challenge for the next two to three years,” says Frazer of the residential market.  

“It’s difficult to see a short-term solution. Queensland changed legislation to allow secondary dwellings to be leased and whilst every additional occupancy helps, it’s not enough to have a real impact on a national issue. 

“To find an effective shorter-term solution, governments need to get creative as the core of the issue is the lack of supply and that can’t be remediated quickly. With the recent publicity surrounding challenges within the building industry, there’s a reluctance from some investors to purchase land and build. This also needs to be resolved.” 

Key expert takeaways  

Residential takeaways:  

• The winners in the ‘rent-a-demic’ are landlords as they can secure a premium for their property, but they need to weigh this up against getting a quality (I.e., longer-term) tenant to avoid the costs associated with leasing after a shorter tenancy.   

• The real-world market reflects the Market Outlook data and shows tenants struggling to find and/or afford suitable accommodation. 

• For some investors, the increased demand is timely, with the higher rental income needed to cover increasing interest costs. 

Industrial takeaways:  

• Industrial experts are cautiously optimistic about 2023 and 2024.  

• Landlords will be able to take advantage of rental growth in 2023. 

• There will be a fair amount of supply coming in 2024 to bring the market back to normal conditions, but this will still be lower supply compared to historical levels.   

• Vacancies aren’t expected to rise significantly over the next few years, and therefore medium to long run rent growth will remain elevated as Australia is in the early phase of a strong rent growth cycle, supported by a continued undersupply of floorspace across most major markets. 

• There could be some risk to the demand side of the equation this year as the country enters an economic downturn and there is less consumption growth.  

• Higher rents coupled with weakening consumer demand will place pressure on smaller occupiers, driving the expectation for greater sub-lease activity (‘hidden vacancy’). 

This article was originally published on CBRE. Read it here…

The Meteoric Rise of Cross-Laminated Timber Construction: 50 Projects that Use Engineered-Wood Architecture

James Wormald is a freelance writer and a current Organic Content Editor for the DAAily Platforms. His writing covers multiple sectors and industries including advertising, architecture, finance, food, graphic design, insurance, medical, product design and science & tech.

This article originally appeared on the Arch Daily.

Timber is a natural, renewable material, easy to fabricate, and with low-carbon emissions. As a construction material, however, when put under enough directional force along its grain, sawn timber is structurally unstable, so deemed unsuitable under higher loads. In comparison, the manufacture of cross-laminated timber (CLT) involves simply gluing multiple layers of timber together at right angles. By crossing the direction of the grains, CLT achieves a far higher level of structural rigidity along both axes. CLT boards start with a minimum of three layers but can be strengthened further with the addition of more. Simply put, due to the complex physics involved in the perpendicular lamination, the strength of CLT board is similar to that of reinforced concrete, and has proven performance under seismic forces.

To read the full article access it here - Arch Daily.

Wormald, J - The Meteoric Rise of Cross-Laminated Timber Construction: 50 Projects that Use Engineered-Wood Architecture, Arch Daily, first cited February 20 2023

https://www.archdaily.com/996319/the-meteoric-rise-of-cross-laminated-timber-construction-50-projects-that-use-engineered-wood-architecture

Sleepwalking into Oblivion – or The Dark Side of AI

Neil Leach is a professor at Florida International University, where he directs the Doctor of Design program. He has published two books on AI and architecture: Architecture in the Age of Artificial Intelligence: An Introduction to AI for Architects (Bloomsbury, 2022) and Machine Hallucinations: Architecture and Artificial Intelligence (Wiley, 2022).

"AI is putting our jobs as architects unquestionably at risk”

In the near future, architects may become a thing of the past. Artificial intelligence is quickly advancing to a point where it can generate the design of a building completely autonomously. With the potential to create designs faster and with more accuracy than ever before, AI has the potential to revolutionize the architecture industry, leaving traditional architects out of the equation. This could spell the end of the profession as we know it, raising questions of what the future holds for architects in a world of AI-generated buildings.

I did not write the paragraph above. It was generated by ChatGPT, a highly impressive AI text generator that was launched recently. Make no mistake. Despite its innocuous sounding name, ChatGPT is no simple chat bot. Rather think Deep Thought, the massive computer in The Hitchhiker’s Guide to the Galaxy, designed to give us the ultimate answer to ‘Life, the Universe and Everything’. ChatGPT is astonishingly capable. The key difference, however, is that while Deep Thought took 7.5 million years to come up with an answer, ChatGPT can do it in 3 seconds.

Architects have now woken up to the extraordinary potential of AI. This is mainly because of the remarkable capability of ‘diffusion models’ – such as DALLE, MidJourney and Stable Diffusion – to generate images. The quality of the images generated can be simply astonishing. Amazing as they are, however, these images are a potential trap. Some architects have become obsessed with them to the point that they are overlooking the real issue. Ultimately, the AI revolution is not about image production, but about the assistance that AI can offer throughout the entire design process.

ChatGPT is based on GPT3, a massive pre-trained Generative Pre-Trained Transformer (GPT) that uses Deep Learning to produce human-like text. DALLE, MidJourney and the other diffusion models are also based on GPT3. Both use ‘prompts’ – verbal cues that generate an outcome. But whereas diffusion models connect text with images through the logic of captions found on the web, ChatGPT operates purely from text to text. As such, ChatGPT is more direct.

I first became alarmed by ChatGPT, when a Brazilian colleague, upset that Neymar had not been selected to take the first penalty in the World Cup shoot out against Croatia, asked ChatGPT who should have been selected. The answer was Neymar. The ramifications of this are somewhat startling. Could not football coaches now use ChatGPT for advice during a match, just as referees use VAR? Or could not others use it for more general advice. Could we not use ChatGPT, for example, for advice on which material to specify for a building? In fact, could not anyone else do so – including non-architects?

Social media is now awash with reports about the jaw-dropping potential of ChatGPT. US Congressman, Ted Lieu, is freaked out by it, and calls for AI to be regulated.[1] Canadian academic, Jordan Peterson, tells us about how stunned he was with the outcomes generated by ChatGPT: “I asked it to write an essay, written in a style that combines the King James Bible and the Tao Te Ching. That’s pretty difficult to pull off. You know, any one of those things is hard. The intersection of all three, that’s impossible. Well, it wrote it in about 3 seconds. . . grammatically perfect, and quite impressive philosophically.”[2] There are, however, systems under development right now – such as GPT4, a substantial improvement on GPT3 – that surely will make the next version of ChatGPT even more impressive. As Jordan Peterson puts it, “There are things coming down the pipeline on the artificial intelligence front that are just going to make your hair stand on end.”[3] 

ChatGPT is already putting some jobs at risk – and not necessarily the jobs that you might think. We have all seen distribution plants for Amazon, or the floor of a TESLA car factory, with hardly a human being in sight, and we might imagine that blue collar workers would be the first to go. But progress in robotics has been relatively slow. Simple tasks, such as selecting and picking up a brick, remain challenging for a robotic arm. Meanwhile AI has been racing ahead, to the point that ChatGPT is now quite capable of writing code. As software engineer, Metehan Ozten, puts it: “This is terrifying. What ChatGPT means is that probably within five years from now, software engineers will be obsolete.”[1] Be afraid! Be very afraid! 

And so what about architecture? Rumours of the death of the architect are greatly exaggerated – or so we are led to believe. In his recent article, Will Wiles reassures us, ‘Architects can rest easy that AI isn’t coming after their jobs just yet.’ Comforting words. I beg to differ, however. There are signs that AI is becoming not only good, but terrifying good, to the point that it is beginning to expose our own limitations as human beings, and putting our jobs as architects unquestionably at risk. 

Architecture, it could be claimed, is already under threat. Early research by two Oxford scholars, Carl Benedikt Frey and Michael Osborne, suggests that designers will be relatively immune from the dangers of being replaced by AI.[2] The mistake they make, however, is to assume that there would be a simple one-for-one replacement of a human worker by a machine. In fact, the way that AI actually operates is as a form of ‘prosthesis’ that extends and augments the abilities of the architect. Of course, this can be incredibly helpful. Using AI, a single person office can now compete with bigger offices, and enter large scale competitions. However, the corollary is that practices will no longer need so many architects. Wanyu He of Xkool estimates that a single architect using AI can achieve as much as 5 architects not using AI. Does that mean that 80% of all architectural jobs are now at risk?

But what about further into the future? An interesting comparison can be made with taxi drivers, now that driverless taxis have been introduced in San Francisco. Once a taxi is self-driving, we no longer need a taxi driver. What happens then, when AI can generate architectural designs completely autonomously – as will surely happen very soon? Will we also not need an architect? The problem with AI, then, is not how evil it is. For how can anything be evil when it is incapable of even thinking? Rather, the problem of AI lies in its very capabilities. It is already better than us in some areas, and will eventually be better in every single domain. As Garry Kasparov noted, following his defeat at Chess by IBM’s Deep Blue computer, “Everything we know how to do, machines will do better.”[3]

So what is the solution? Most obviously, architects need to start taking advantage of AI as a way of staying ahead in an increasingly competitive world – ‘If you can’t beat ‘em, join ‘em,’ as the saying goes. We need to familiarize ourselves with the potential of AI, and upgrade ourselves to become ‘superusers’ – to use a term coined by Randy Deutsch. Indeed Spacemaker already claims that there is no future for architects unless they can use AI: “We do firmly believe that in the workplace of the future architects using AI will replace architects that don’t.”[4]Or, as ChatGPT puts it, “AI offers powerful tools to automate tedious tasks, to optimize decisions, and to design new and more efficient solutions. AI will allow architects to design more efficient and cost-effective buildings, and will no doubt be the future of architecture. By utilizing AI, architects can create faster, smarter, and more efficient designs. By not taking advantage of these capabilities, architects are missing out on the opportunity to stay ahead of the curve and remain competitive in the changing world of architecture.”

The most important issue, however, is to be aware of a problem. For, once a problem has been recognised, it becomes a different kind of problem – not one by which we are trapped, but one which we can address. Surely, what we architects should be designing right now is not another building, but rather the very future of our profession.

I will leave the final words to ChatGPT: “Architects who choose to ignore AI will be left behind and ultimately forgotten as the industry evolves and advances. Therefore, it is imperative that architects pay attention to AI and its potential to revolutionize architecture, or they risk sleepwalking into oblivion.”

This has been published with the permission of Neil Leach

To learn more about AI generated work follow @neilleach14

[1] Ted Lieu, ‘I’m a Congressman Who Codes. AI Freaks Me Out.’ New York Times, 23 January 2023. https://www.nytimes.com/2023/01/23/opinion/ted-lieu-ai-chatgpt-congress.html

[2] https://www.youtube.com/watch?v=WLehkWESDJ8

[3] https://www.youtube.com/watch?v=WLehkWESDJ8

[4] https://www.youtube.com/watch?app=desktop&v=1hHfoB4mSrQ

[5] Carl Benedikt Frey, Michael A. Osborne, ‘The future of employment: How susceptible are jobs to computerisation?’, Technological Forecasting and Social Change, Volume 114, 2017, Pages 254-280, ISSN 0040-1625, https://doi.org/10.1016/j.techfore.2016.08.019. https://www.sciencedirect.com/science/article/abs/pii/S0040162516302244

[6] Garry Kasparov, as quoted in Neil Leach, Architecture in the Age of Artificial Intelligence: An Introduction to AI for Architects, London: Bloomsbury, 2022, p. 50.

[7] Neil Leach, Architecture in the Age of Artificial Intelligence: An Introduction to AI for Architects, London: Bloomsbury, 2022, p. 124

Eight of the best: Celebrating some of Melbourne’s great buildings

Shane Murray is Dean of the Faculty of Art Design & Architecture at Monash University. BArch, MArch, PhD, LFRAIA, Reg. Architect. He is an award-winning architect and academic in the field of architectural design. Shane joined Monash in 2008 as Foundation Professor of Architecture to establish the university’s architecture program.

Cities are formed from streets, buildings, and the underlying landscapes on which they’re founded.

But they’re also formed from and for the myriad individual experiences that merge to create a city’s complex culture and identity; its stories and myths traced in urban structure, space and edifice, encompassing varied and shifting opinions about its essential character.

While each city building is part of an overall urban composition, its individual impacts are also important. Many remain largely unnoticed, but there are certain buildings that heighten our engagement with, and enjoyment of, urban life.

How well they work together; how they are conceived and resolved; how effectively they influence and create delightful spaces; streets, squares, courtyards, lanes and gardens – these aspects set them apart.

They are complex spatial and physical entities that balance multiple needs and elements to facilitate and serve people.

For us, the best city buildings are not only about a relevant conceptual and functional response, nor just an engaging aesthetic. The best city buildings fundamentally support and enrich our experience of place.

We’ve selected a few that we feel embody this view. None of them is perfect (no building is), but to us they’re all exemplars.

We’ve listed them in a rough walking order, from the city’s northeastern edge, looping down through the grid and south to King’s Domain.

Melbourne Museum, 11 Nicholson Street, Carlton

Architect: Denton Corker Marshall, 2000

DCM’s Melbourne Museum was completed in 2000, and is set in dialogue with the World Heritage-listed Royal Exhibition Building (REB), which opened in 1880 for the Melbourne International Exhibition. 

The REB was an emblem of architectural innovation in the days of “Marvellous Melbourne”, and the museum likewise communicates a powerful sense of ambition, vision and investment in civic life. 

Profoundly different from the REB in its contemporary style and architectural language, the museum is proud but also respectful, balancing its counterpart with its imposing size and assured presence. 

Its heroic canopy and generous plaza nod to the REB, while also inviting entry at a grand civic scale. The building is sensitively conceived and rigorously resolved.

Its architectural expression and detail work in concert with its planning to deliver an accomplished functional and experiential solution that seamlessly accommodates all of the complex functions associated with a major public museum.

Orica House (formerly ICI House), 1 Nicholson Street, East Melbourne

Architect: Bates Smart and McCutcheon (Osborn McCutcheon), 1958

Orica House was the first so-called “International Style” building in Australia, and the first to break the 40-metre height limit for Melbourne’s CBD.

While many now lament what the arrival of international commercial architecture eventually brought to the city, Orica House illustrates the optimism and beauty that was possible in that model.

Now presenting as somewhat diminutive in scale, it’s widely regarded as one of Australia’s first skyscrapers, and still stands as a benchmark for proportion, spatial flow, and the simple but expressive juxtaposition of materials.

True to International Style, its vision encompasses a landscape setting, and the northern garden, which was originally visible from Albert Street through an open ground-level undercroft, still provides a generous retreat from the surrounding traffic.

The masterful ensemble of rich materials, attentive detailing and flowing landscape setting demonstrates that, in the right hands, the abstract and restrained can be human and inviting.

The exceptional location, at the corner of Albert and Nicholson streets, gives it a commanding presence over the city below, and terminates the vista up Lonsdale Street, reminding Melburnians of the peculiar geometric collision between the CBD’s founding Hoddle Grid and the divergent street pattern beyond.

Monaco House, 22 Ridgeway Place, Melbourne

Architect: McBride Charles Ryan, 2007

Ridgeway Place is one of the many slender laneways that are so characteristic of Melbourne’s urban structure, offering people and industry a link between Collins and Little Collins streets.

Previously dominated by blank walls and an ambiguous endpoint, it was dramatically altered by the insertion of this small building, which is home to its client, the Honorary Consulate of Monaco.

It’s the product of a passionate and tenacious client who wanted to do something special – pertinent to its purpose and its context – working in close consultation with an excellent architect.

Monaco House’s distinctive character and integrity are idiosyncratic and authentic, responding sensitively to the structures and spaces that surround it.

The building is a delightful sculptural presence that brings vibrant colour and dynamic contemporaneity to the surrounding space. Its balconies overlook the street, creating activity, oversight and safety for laneway-users – a valuable contribution to the public realm that has reanimated the immediate precinct.

Well-considered down to the detail of its ground-floor cafe, it offers a place to pause and appreciate the beautiful historic masonry wall and mature tree canopies of the Melbourne Club’s private garden opposite.

The Urban Workshop, 50 Lonsdale Street, Melbourne

Architect: JWA (with Hassell and NH), 2006

This major commercial development is a six-star, 34-level office tower, but its power lies in the way the architecture works at ground and lower levels to create an engaging, inviting, layered and rich environment.

The tower is carefully placed, formed and set back to safeguard spatial proportions, access to sunlight, wind protection, and the pedestrian experience at street level. Here, the base structures are carefully planned and proportioned to create a lower street wall, delivering a series of lively, visually linked pedestrian laneways and diverse spaces that are activated through a curated mix of uses.

The lower-level architecture provides a strong edge and street presence. Each built element is located, scaled and carefully detailed to create warmth, texture and “grain” within a formal and spatial clarity that exposes and celebrates the former Black Eagle Hotel (1850), one of Melbourne’s oldest remaining buildings.

At the same time, spatial planning draws from the heritage of the site’s original lanes. A fluid, welcoming and connected public realm is created by clear lines of sight, and the continuity of textured, expressive bluestone and brick paving that extends throughout the foyer.

A significant public artwork by Rosslynd Piggott has been integrated within the design of the publicly-accessible foyer to honour archaeological artefacts that were unearthed during construction.

New Academic Street, RMIT University, Swanston Street, Melbourne

Architect: Lyons with MvS, NMBW, Harrison and White, Maddison,
with TCL Landscape Architects, 2017

Universities, and the vibrancy that student life brings to them, are an integral part of many great cities.

The RMIT campus has slowly become part of the CBD’s fabric, characterised by an eclectic range of buildings and styles, and an intriguing collection of streets, laneways, hidden courtyards and cul-de-sacs.

Recently, the importance of congenial and varied spaces for informal, flexible learning with peers has gained considerable traction, as has the importance of vibrant activation to make campuses attractive (or “sticky”) – inviting students to linger, as well as creating a seamless connection with the city.

The looming, blank walls of the three large modernist tower buildings 10, 12 and 14 on Swanston Street are the legacy of an incomplete masterplan that had worked against this desire. However, the New Academic Street is a terrific example of urban acupuncture, or regeneration, where rather than using a singular gesture, a range of strategic insertions and renovations have opened up the campus to Swanston Street.

This has created greater visibility and connectivity that enhances connections and seamlessly negotiates the challenging level difference between Swanston Street and the main operating level of Bowen Street.

The project creates a diversity of dynamic, active and engaging spaces by several different architectural firms, all coordinated by Lyons. The approach is sympathetic to the accretive nature of the campus, but provides cohesion through the larger spatial moves and their expression. This transformation of RMIT is an outstanding example of how successful cities entwine with their public institutions.

Former BHP House, 140 William Street, Melbourne

Architect: Yuncken Freeman (project architect Barry Patten), 1972

If Orica House was the city’s first International Style building, it prefigured the future from a vantage point just outside the city’s characteristic grid.

Conversely, 140 William Street represents the city’s commitment to its role as corporate centre, with the building proudly occupying a major corner in the traditional business end of town.

At the time of its completion, it was the second-largest tower in Australia, and it displayed significant technical advances, most importantly the column-free floors that aimed to provide as much internal flexibility as possible.

Most city buildings today are required to have a low-scale podium to provide street edge continuity and activation of the street frontages hard on the boundary.

The William Street development drew on earlier precedents in Chicago, and instead presents as an imposing, elegant tower set well back from both William and Bourke streets, on a sparse, free-flowing plaza running through to Little Collins Street via a generous pedestrian laneway and activated, landscaped spaces.

The overall arrangement detaches it from the surrounding city and heightens its sculptural presence and power. While notable for its height, it’s the purity of expression, exemplary proportions and attention to detail in both conception and execution that gives the building an enduring beauty, particularly pronounced in the context of more recent and lesser high-rise development on the edges of the CBD.

Sidney Myer Music Bowl, Kings Domain

Architect: Yuncken Freeman with Griffiths and Simpson (project architect Barry Patten), 1956

Demonstrating world-leading technical innovation at the time of its completion, “the Bowl” embodied new optimism and confidence as Melbourne emerged from a long period of post-war austerity.

It was Melbourne’s first major outdoor cultural venue and, like ICI House, its city-edge location gave Melburnians a unique perspective on the city’s core, which continues to this day.

But while ICI House provided a modernist anchor for the northeast corner of Melbourne’s grid, and a technically advanced alternative to the old CBD, the Bowl gave us an opportunity to look back from the extensive gardens sprawling south of the Birrarung, as the setting sun’s reflection illuminated its transforming skyline.

An intriguing icon for Melbourne, it remains an inclusive landscaped space, and holds a special place in the memories of many who have enjoyed performances under the canopy or in its wider spatial embrace.

It skilfully integrates land form, structure and a fluid connection with the extensive gardens of King’s Domain.

Currently marred by temporary fencing on the perimeter, we hope the new masterplan will achieve a more sophisticated security strategy that allows Sidney Myer’s gift to the people of Melbourne to live up to its ambition for public ownership and civic generosity by reinstating the sense of seamless connection with the gardens and cultural precincts beyond.

Collins Arch, 447 Collins Street, Melbourne

Architect: Woods Bagot and SHoP Architects, with Oculus Landscape Architects, 2020

In our choices of Melbourne’s best architecture, you’ll have noticed that most of the buildings are several decades old, with the most recent being completed in 2006.

This is partially because, in order to be convinced of their quality and their ongoing contribution to the city, we wanted to verify their endurance.

Another reason for the lack of recent examples is the scarcity of quality available. While architects have some responsibility for this, there has been considerable abdication of political will, policy and process to ensure quality in the oversight of the built environment.

Perhaps even more concerning is the enablement of a development culture to privilege expediency over civic responsibility.

Fortunately, we see signs of this abating, but the turnaround will require careful and sustained investment in the value and achievement of good design.

A reinvigorated desire to restore a quality agenda is evident to varying degrees within the Victorian state government. City of Melbourne is also taking positive and meaningful action with its recently-launched Design Excellence Program, comprising both the Melbourne Design Advisory Committee and Melbourne Design Review Panel.

One building that offers a significant contribution despite these governance shortfalls is Collins Arch.

The building occupies the site of the former National Mutual Building, which was important not least because of the generous and much-loved plaza that once occupied the northern section of the site fronting Collins Street.

A proposed heritage listing of the building and plaza was, regrettably, vetoed by a former minister for planning, and both are now lost.

The plaza in particular was important to Melbourne’s urban structure because it created a clearly demarcated open, accessible space that provided respite, northern sunshine, and a lung in the dense western end of the city.

In the context of financial pressures to maximise floor areas and without any legislative impediment to do otherwise, Collins Arch has still achieved a level of civic contribution and quality that is disappointingly rare in contemporary city development.

The scheme optimises its occupation of a whole city block to address each street differently, setting up localised responses suited to different scales, contexts and uses.

It consists of two towers, one holding the Collins and William Street corner, the other set back, and these are linked by an eight-storey “arch” elevated well above street level. The arch accommodates floor area that might otherwise have gone to height; instead, it mitigates overshadowing to the south, and allows more floor space for public functions.

The central set-back also hints at the original plaza, and reveals diverse, historic facades flanking Market Street.

In the context of financial pressures to maximise floor areas and without any legislative impediment to do otherwise, Collins Arch has still achieved a level of civic contribution and quality that is disappointingly rare in contemporary city development.

The strategy delivers true ground-plane porosity, creating multiple public routes throughout the site, and a variety of dwell spaces that cleverly navigate a major level change from Collins Street down to Flinders Lane.

These spaces are variously defined by landscape, terraced seating, fixed and loose outdoor furniture, and patches of lawn, and are activated by multiple ground-floor retail tenancies.

Through collaboration with the City of Melbourne, the open spaces are augmented by extension across the project boundary into half of Market Street, delivering much-needed public open space, and going some way to compensate for the generous plaza it has replaced.

The architecture is carefully articulated, considered and calibrated, offering a degree of dynamism within a singular language.

Like the towers, the upper-level facades are generally consistent in expression, but varied in their detail, providing diversity and visual movement. These meet the ground via a massive concrete colonnade that has a continuity across much of the site, strengthening the sense of spatial presence while creating a visual break from the tower language, and enabling a somewhat finer-grained street-level experience.

An open question

In the wake of emerging from the longest lockdown of any city in the world, there are immediate and long-term consequences for how Melbourne will develop, and be used and governed into the future.

The shift to online work has delivered many lessons regarding our engagement with technology and how we can occupy the city. In what way it is repopulated, and how we use and activate its buildings and public spaces into the future, remains an open question.

In the desire for reactivation, it will be tempting to accept development that provides short-term economic stimulus but fails to apply a focus on quality. To avoid this, we’ll need to be active and vigilant, and strive for outcomes that will best serve the city, its buildings and its people into the future.