The Covid-19 crisis has forced the property industry into unchartered territory, but we’ll emerge as one of the world’s leading “recovering economies” said a panel of property leaders on Friday.
More than 900 people dialled in to the Property Council’s first national online forum on Friday to listen to Charter Hall’s managing director and group CEO David Harrison, AMP Capital’s global head of real estate Carmel Hourigan and JLL’s CEO for Australia and New Zealand, Stephen Conry AM.
“We’ve never seen anything like this – and we didn’t see it coming,” Conry, the Property Council’s national president, said.
But Australia had entered the Covid-19 crisis with very strong economic fundamentals, including low levels of debt, unemployment and vacancy rates.
Relative to the rest of the world, Australia would “come out of this crisis better than other regions both from an economic point of view and a property perspective,” Harrison, the Property Council’s national vice president, said. But he cautioned that it “won’t be a V-shaped recovery and we’ll have to ‘lean in’ at all levels”.
Each of the leaders applauded the federal government’s interventions, amounting to 20 per cent of Australia’s GDP. The $130 billion JobKeeper program was particularly important as sustained unemployment is the “biggest risk to any economy,” Harrison said.
“We can afford to be spending this money,” Hourigan said. The fiscal stimulus would “push us into a U-shape recovery, not an L-shape,” she said.
Conry said the crisis had changed his mind about economic surplus. “What started off as stimulus has become survival packages,” Conry said.
Demand for real estate will continue and international capital could continue to look to Australia, Harrison added, and our downturn will not be as deep or as prolonged as other parts of the world. But “there is no doubt any of the cynics who thought we weren’t in a longer for lower environment have been put to the sword.”
“We were all wondering what the black swan would be,” Hourigan added. Covid-19 would force the property industry to “reboot,” but she remained optimistic. “I’m not in the camp that thinks there is going to be a deep recession.” There will be a hit to valuations, but real estate will remain an attractive asset class, Hourigan added.
Scrutinising the opportunities for each sector, the panel remained relatively upbeat. The death of the office was unlikely, for example. Harrison thought the reality of remote working – “where everyone is living 24/7 in an environment of isolation” – would drive everyone back to the office “as quickly as they can”.
Some sectors would take time to recover, notably hotels, but the panel agreed that domestic travel would eventually be a big beneficiary. “I think there will be less travel, but I hope we have two airlines,” Conry said.
Retail, already undergoing a rapid transformation, would be reshaped by the escalation of ecommerce but Harrison thought the biggest winners would be omni-channel retailers with both online and bricks-and-mortar.
“I think we’ll see a reversal in the decline of manufacturing in Australia, as people look to source suppliers domestically, even if it costs more money,” Harrison said. Charter Hall had already seen an uptick in enquiries from customers looking to expand their footprints in response to growing demand for local products.
Covid-19 would also drive a rethink on offshoring of call centres, Hourigan mused. “Maybe people will hedge their bets and we’ll see more employment coming back to Australia.”
Conry was concerned about the infrastructure deficit. “I worry that governments may say they can’t afford infrastructure projects. Let’s hope they do the reverse and go hard on infrastructure, because that will be important for our economy.”
Hourigan had her eye on the residential housing market. A large fall in house prices would affect confidence because Australians are “so psychologically connected to the residential market”.
What can leaders do in this turbulent time?
Look to the future, Hourigan suggested AMP Capital has already established a team “that is just focused on positive opportunities”. This group is separate from the day-to-day operations, “so not everyone is in crisis mode,” Hourigan explained.
“Culture, leadership and collaboration” were the “dominant KPIs” for leaders during this period, Harrison advised.
Conry’s call to arms was clear. “Be prepared to hold your nerve,” he said. We are in “uncharted waters” and “people are looking for strong leadership from property sector.” Property makes a “massive contribution to the economy” and that means it is up to everyone to make sure that continues.
If you missed the Property Council’s first live stream event, don’t miss the next one! Navigating the unknown will be held on Friday 17 April at 1pm AEST. ANZ’s head of Australian economics, David Plank, joins industry leaders Susan Lloyd-Hurwitz from Mirvac and Mark Steinert from Stockland in a frank and fearless discussion about how the recovery will take shape. Register today.