Property predictions from our rising stars

From the evolving world of work to proptech, and from red tape to the retail revolution – the property industry’s young guns share the trends that they expect to take hold in 2018.

The world of work evolves

The “evolving nature of the workplace” is a trend to stay on top of, says Lucy Burnitt, development and investment manager at Dexus.

Galloping progress in technology is changing the nature of work – where we work, how we work, and who we choose to work with.

“Property owners have been forced to challenge the notion of the traditional office and its role in the future of the workplace,” she says.

Burnitt points to value-adds like priority access to childcare, smart car-parking solutions, high quality meeting and event spaces, and wellbeing initiatives, as a response to this trend. And she expects the product and service offerings to expand to “keep pace with the ever-changing needs of our customers”.

Leah Azar, a property manager with Brookfield Property Partners, agrees that adapting to tenant expectations should be squarely on the industry’s radar in 2018.

“We have seen end-of-trip facilities become the ‘norm’ and the standards tenants expect is ever-increasing. Concierge services are expanding, business centres and conference centres are in high demand within office buildings and add to the services offered to tenants.

“The challenge is maintaining a competitive edge,” she says. And that requires a point of difference.

Catering to the needs of millennials will occupy the minds of workplace designers and managers throughout 2018, Azar adds.

“The millennial generation is increasingly driving the world’s economy and attitudes about the ideal office environment are changing.

“The workplace environment is important to millennials and the majority see workplace quality and office location as important when choosing an employer.”

 

Technology takes off

Rapid technological change will be the “key disrupter” next year, says Jessica Stewart, sustainability manager at Riverview Projects.

In an industry that builds “long-term, static assets” – homes, high rise buildings, roads and other infrastructure –  rapid changes in technology need to be carefully considered.

Property Council’s ACT Future Leader of the Year says communities and buildings constructed today will need to adapt to a “multitude” of technologies over their lifetimes.

Stewart thinks the most important will be autonomous vehicles, which will “change house designs, road networks, suburb layout and community attitudes to commuting”. This future may be a decade away, but the industry must start planning now.

Probuild’s head of business development, Huy Chau, agrees with Stewart – and he thinks technological advancements that streamline processes will improve site safety and boost industry productivity.

“PropTech will embed itself in our industry,” Chau says. “But we haven’t fully understood its usefulness.”

Virtual reality, the Internet of Things, artificial intelligence, robotics, smart buildings and big data will all transform business processes, but the biggest disruptor might be “putting together elements of existing concepts in the marketplace to create new functionality,” Chau speculates.

The challenge for our industry is to grapple with the “speed to market for new technology”, which demands agility to “maximise the first mover advantage”.

 

Retail sector revolution

The retail sector is in the middle of what AMP Capital’s assistant fund manager, Magda Zieba, calls a “major transformational moment” as online retailing gains market share.

“Strongest performing centres will look to expand their convenience or experience-based offerings to customers,” Zieba says.

An investment analyst with QIC, Daniel O’Driscoll says the biggest surprise this year has been the “continued compression” of the capitalisation rate for prime assets in the retail sector.

“This compression will test the bigger landlords on how they manage their capital returns – either banking the uplift or fast tracking their capital programs”. 

Competition has never been more apparent in the retail sector with landlords needing to evolve from the traditional retail footprint to stay ahead of the pack in 2018 and beyond, O’Driscoll says.  That may mean planning for and moving to new uses within the centre footprint, such as residential, hotel or commercial.

Looking forward, Zieba says shopping centres must “adapt to cater for omni-channel delivery and last mile distribution to combat the impacts of current and future structural changes”.

“Retailers, including Woolworths, have announced strategies to open ‘dark stores’ which are used to cater for online orders in preparation for Amazon, and shopping centres could potentially assist in this process”.

How storage space is maximised, concierge services evolve and car parking adapts to offer a “click and collect service” are in the mix for 2018.

 

Affordable homes on the horizon

For Rhiannon McClelland, head of communications at CHC, the industry’s biggest challenge is also its greatest opportunity in 2018 – developing homes that meet the market.

“I don’t think we have adequately addressed how to create the diversity of products that our changing society needs and to remove stigma associated with lower cost housing for members of our community, such as key workers,” she says.

“This needs to be a much bigger conversation than what and where to build.”

In 2018, McClelland expects the industry and community to “play a more active role in the delivery and design of more attainable products – learning and adapting concepts from cities with proven models for success.”

Housing affordability is undoubtedly a “hot issue” says WSP’s senior sustainability consultant Paolo Nicolas.

The big challenge for 2018 is to develop a “growth framework” for each of Australia’s cities and regions that “finds the right balance between the ‘ideal’ density while addressing mobility issues, for example. Part of the challenge is accepting there isn’t a single solution applicable to all cities”.

“Affordability is greater than the upfront cost of a house,” adds Stewart.

“We have the ability to use technology to reduce ongoing costs to residents, and by incorporating energy generation, management and storage into our urban frameworks, we can reduce cost for our communities and our environment”.

 

Wrapped in red tape

The industry’s young lawyers, who have been wrapped up in government red tape in 2017, have policy on their minds.

Lauren Evans, a senior lawyer with Clayton Utz in Darwin, says this year has been characterised by “unstable policy settings” particularly around the possible introduction of new land taxes in her neck of the woods.

“If brought in, this could reduce investor confidence in the market and cause issues for existing landowners.”

Alex Bobbi, a senior associate with commercial property law firm Dobson Mitchell Allport in Hobart, says 2017 “saw another layer of regulatory obligations imposed on the property sector”. Among these are tightening legislation around foreign investment, increased data collection requirements and a more onerous withholding tax regime.

“The costs for businesses to adapt and the ongoing compliance costs are a drain on resources. Ultimately clients end up paying more,” he says.

But there is a sliver of light on the horizon for 2018, and Bobbi is optimistic that electronic settlements will enhance productivity.

“PEXA, or Property Exchange Australia, has been around for a while now in some states, but uptake has been slow. Over the next couple of years paper settlements will be increasingly phased out and electronic settlements mandated for more transactions and jurisdictions.

“Hopefully the inefficiencies of attending settlements with bank cheques will soon be a thing of the past, or at least the exception.”

 

Shift to sustainable thinking

Sarah Scruby thinks the industry is at a “turning point” when it comes to sustainability, and is looking forward to seeing real changes in the year ahead.

Frasers Property Australia’s development manager says sustainability is no longer a “buzz word”, and feedback from purchasers indicates that energy efficiency is “not just something on their wish list”.

“With the cost of living rising, people are definitely concerned with things like energy efficiency and smart wiring to reduce electricity bills. And the uptake in electric powered cars is seeing more developers install electric car charging stations.”

The trendline is pointing in one direction, and developers need to give sustainability “serious consideration” in 2018, Scruby adds.

WSP’s Paolo Nicolas is excited about the increasing “electrification” of our cities in 2018.

“As more renewable energy technology emerges into the market, the cheaper and more environmentally friendly it is to power a building using electricity.” Natural gas has had its day, he says.

Scott Jansen, development and acquisitions manager with Arise Developments is also excited by the potential for renewable energy.

“With projects such as South Australia’s new energy storage facility in partnership with Tesla and Landcorp’s White Gum Valley research project with the University of Western Australia, I think commercially-viable sustainable energy solutions will come along in leaps and bounds.”

 

So, there you have it. The evolution of the office, changing shape of retail, technological advances, red tape, as well as affordability and sustainability, are the headline trends from our rising stars in 2018.

But the biggest lesson of all? Keep an eye on the horizon at all times.