 Gurner and MaxCap have revealed plans for a $120-million apartment tower at Burleigh Heads after staking a claim in what it is calling “the hottest market in Australia”.

gurner Burleigh hero

<p>​​<span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_71794111471644831685011" aria-invalid="spelling" data-mce-highlight-id="mce-cram_71794111471644831685011" data-mce-bogus="1" data-mce-annotation="Gurner" data-mce-lingo="en_au">Gurner</span>&nbsp;has revealed plans for a $120-million apartment tower on the Gold Coast after staking a claim in what it is calling “the hottest market in Australia”.&nbsp;</p><p>The high-profile Victorian-based developer has put its foot on a beach side block at <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_33749876881644831685011" aria-invalid="spelling" data-mce-highlight-id="mce-cram_33749876881644831685011" data-mce-bogus="1" data-mce-annotation="Burleigh" data-mce-lingo="en_au">Burleigh</span> Heads.&nbsp;</p><p>It is <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_14335391191644831685012" aria-invalid="spelling" data-mce-highlight-id="mce-cram_14335391191644831685012" data-mce-bogus="1" data-mce-annotation="Gurner's" data-mce-lingo="en_au">Gurner's</span> second acquisition on the Gold Coast and a sign that the city is still riding a development boom despite soaring construction costs and land prices.&nbsp;&nbsp;</p><p>The 1012sq m site at 1929 Gold Coast Highway is earmarked for a Warren and <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_662297712881644831717166" aria-invalid="spelling" data-mce-highlight-id="mce-cram_662297712881644831717166" data-mce-bogus="1" data-mce-annotation="Mahoney-designated" data-mce-lingo="en_au">Mahoney-</span><span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_662297712881644831717166" aria-invalid="spelling" data-mce-highlight-id="mce-cram_662297712881644831717166" data-mce-bogus="1" data-mce-annotation="Mahoney-designated" data-mce-lingo="en_au">designed</span>&nbsp;22-storey tower comprising 80 apartments, featuring Japanese design elements and a Singaporean-inspired outdoor landscape.&nbsp;</p><p>It is currently occupied by a walk-up block of seven units.&nbsp;</p><p>The latest Gold Coast property play by <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_765645112101644831685012" aria-invalid="spelling" data-mce-highlight-id="mce-cram_765645112101644831685012" data-mce-bogus="1" data-mce-annotation="Gurner" data-mce-lingo="en_au">Gurner</span>—which has a development pipeline exceeding $10 billion—continues a decade-long track record of partnering with leading Australian non-bank lender <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_663140927111644831685012" aria-invalid="spelling" data-mce-highlight-id="mce-cram_663140927111644831685012" data-mce-bogus="1" data-mce-annotation="MaxCap" data-mce-lingo="en_au">MaxCap</span>.&nbsp;</p><p>“There is no doubt that <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_736878910221644831692056" aria-invalid="spelling" data-mce-highlight-id="mce-cram_736878910221644831692056" data-mce-bogus="1" data-mce-annotation="Burleigh" data-mce-lingo="en_au">Burleigh</span> Heads is the hottest market in Australia right now, and it’s a place we have to be in,” <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_872291179231644831692056" aria-invalid="spelling" data-mce-highlight-id="mce-cram_872291179231644831692056" data-mce-bogus="1" data-mce-annotation="Gurner" data-mce-lingo="en_au">Gurner</span> Group chief executive Tim <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_465604434241644831692056" aria-invalid="spelling" data-mce-highlight-id="mce-cram_465604434241644831692056" data-mce-bogus="1" data-mce-annotation="Gurner" data-mce-lingo="en_au">Gurner</span> said.&nbsp;</p><p>“We are very excited to be starting 2022 joining forces with MaxCap on such an important acquisition, as we continue to expand our Queensland footprint on the Gold Coast—it’s a market we have great confidence in, and one that will continue to play an important role in our company’s growth.”&nbsp;</p><div><div class="picture"><img src="//images.ctfassets.net/8pr762qjocl3/013sSpFycE3LF81p2ILhhd/64729657d69d04da7879d8744ddee270/gurner_burleigh_hero.jpg" alt="Gurner has puts its foot on a Gold Coast Highway site at Burleigh Heads." data-mce-src="//images.ctfassets.net/8pr762qjocl3/013sSpFycE3LF81p2ILhhd/64729657d69d04da7879d8744ddee270/gurner_burleigh_hero.jpg"></div><div><span style="align-content: center; opacity: 0.8;" data-mce-style="align-content: center; opacity: 0.8;"><span style="align-content: center; opacity: 0.8;" data-mce-style="align-content: center; opacity: 0.8;">&nbsp;</span></span><span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;" data-mce-style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">▲ </span>Gurner Gurner <span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;" data-mce-style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;">has puts its foot on a Gold Coast Highway site at </span>Burleigh<span style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;" data-mce-style="font-family: -apple-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen, Ubuntu, Cantarell, 'Open Sans', 'Helvetica Neue', sans-serif;"> Heads.</span></div></div><p><br>The property is down the road from a 2024sq m double-block at 1873-1875 Gold Coast Highway secured by Morris Property Group late last year for $13 million—reflecting a land rate of about $6400 per square metre.</p><p>Both holdings were sold through GV Property Group’s Antonio Mercuri, who has transacted 30 development sites on the Gold Coast during the past 12 months in deals ranging from $2.2 million to $27 million.&nbsp;</p><p>The sales are expected to deliver a $2-billion-plus development pipeline of residential and commercial projects, including1700 apartments from Broadbeach to Coolangatta.&nbsp;</p><p>“Demand is still strong for the Gold Coast and a lot of interstate developers are keen to get their foot in the door up here,” Mercuri said.&nbsp;</p><p>“To have a developer of the calibre of Gurner put their name in the mix just reinforces that.&nbsp;</p><p>“The foundations are set for the next couple of years … there’s certainly no fear in the market of a complete cool-off but, if anything, maybe just a bit of a levelling out.&nbsp;</p><p>“Development sites are getting harder and harder to get … and while I think there is still some left in it in terms of pricing, there is always a line in the sand where developers can’t pay any more because it gets too risky.”&nbsp;</p><p>The Burleigh acquisition follows Gurner’s entry into the Gold Coast market in 2019 after it picked up an entire Surfers Paradise block from Ralan Group, which was already approved for 1000 apartments.&nbsp;</p><p>It is planning to build <a href="https://www.theurbandeveloper.com/articles/gurner-plans-125bn-budds-beach-towers" data-mce-href="https://www.theurbandeveloper.com/articles/gurner-plans-125bn-budds-beach-towers">four towers up to 57 storeys on the 112 Ferny Avenue site</a> in a $1.25-billion joint-venture with investment house Wingate.&nbsp;</p><p>Plans for the Burleigh site are expected to be lodged with the Gold Coast City Council in coming months.&nbsp;</p><p>MaxCap executive director Brae Sokolski said the joint venture aligned with the group’s philosophy “to partner with only the highest calibre developers in the Australian market”.&nbsp;</p><p>“We have high conviction in the long-term fundamentals of the Gold Coast market and this project represents another important strategic investment by MaxCap into the region,” he said.</p>

​​Gurner Group has revealed plans for a $120-million apartment tower on the Gold Coast after staking a claim in what it is calling “the hottest market in Australia”. 
The high-profile Victorian-based developer has put its foot on a beachside block at Burleigh Heads. 
It is Gurner’s second acquisition on the Gold Coast and a sign that the city is still riding a development boom despite soaring construction costs and land prices.  

[+] Gold Coast Heat: Brief Spark or Slow Burn?

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Crunch the numbers on high-rise projects popping up across the booming Gold Coast and it’s a wonder the city’s developers are not complaining of chronic sore necks.</p><p>It’s not so much the constant craning of their heads to survey their towering creations that would be the cause, but rather the portentous reflex of repeatedly looking over their shoulders.</p><p>Given the notoriously volatile reputation of the <a href="https://www.theurbandeveloper.com/articles/gold-coast-housing-market-update">Gold Coast’s property cycles</a>, who could blame them.</p><p>Surging approvals for apartment towers, new benchmark prices for beachfront development sites, frenzied off-the-plan project sell-outs, skyrocketing building costs—it all seems ominous.</p><p>After years out in the cold following the global financial crisis, the city’s development sector has aggressively come back on the boil during the past 18 months, begging two questions: has the latest boom hit its peak and is the Gold Coast about to take another dive?</p><p>Truth be told, with borders yet to fully reopen and the global impact of the pandemic still playing out, nobody really knows for sure.</p><p>But according to developers and property experts who spoke with <em>The Urban Developer</em>, the market fundamentals are holding strong and there are no signs of an imminent bust or even a significant simmering.</p><p>In fact, flying in the face of any instinctive foreboding, there is the very real possibility of a further strengthening in the market.</p><p>“When people can get to Queensland again, I think it will accelerate,” Sherpa Property Group chief executive Christie Leet says.</p><p>“I imagine there will be an awful lot of people who will choose not to live in Sydney and Melbourne ... and I think we’re just starting to see that and we’re in for a good run going forward.”</p><p>Nevertheless, Leet says regardless of the <a href="https://www.theurbandeveloper.com/articles/sherpa-property-group-development-gold-coast">prospect of doubling down on a looming migration</a> tsunami, he is still not prepared to bet the family home on long delivery projects.</p><p>He says development site prices nudging $20,000 per square metre and beyond along some areas of the beachfront are “towards the top end, well and truly”.</p><p>“There’s a fair argument that we might have hit a peak,” Leet says. “But there’s still plenty of people out there buying tower sites that are going to take three or four years to develop.</p><p>“No doubt not all those are going to get off the ground. Even if you can get them sold, you’ve still got to get them funded and, most importantly, you’ve got to get them built.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8d0e4318-19ae-42da-9630-bc177d4e6738.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ We’re in for a good run going forward: Sherpa Group’s Christine Leets, whose The Perspective 202 Bilinga, is pictured.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><br><strong>Opportunities, value remain</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Leet says, however, as a developer—notwithstanding the escalating development costs—the opportunities and value are still there.</p><p>“You can still drive up and down a street and say ‘Geez, I’d love to get a hold of that old shack and really do something quite special’.</p><p>“We just bought a new site and we’ll probably buy another one before Christmas ... but certainly, from our point of view, we’re a bit risk averse in terms of taking on projects that have more than a two-year delivery cycle.</p><p>“We think things will be okay until 2023 and after that there’s still a bit of a question mark ... but if there’s anything that’s going to drive the market past that it’s going to be that net interstate migration and international migration.”</p><p>At last count, there were more than 50 residential projects with an estimated investment value of $4.8 billion under construction and with firm pipeline commitments.</p><p>In the first three months of this year, approvals ramped up by 33 per cent and the Gold Coast recorded almost $800 million in new apartment sales, just $112 million shy of the total sales in 2020.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>A very different boom</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“It’s a very different boom—I’ve stopped speculating,” CBRE Gold Coast director Mark Witheriff says. “Obviously, in the background, there’s a global pandemic going on ... so, who knows?”</p><p>But he says unlike previous booms driven by massive investor sprees and developer over-exuberance—ultimately leading to market oversupply— this time around the Gold Coast is “not getting carried away with itself”.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/89f2a790-925f-4840-8a9a-d72c74e6a431.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Lacey Group’s The Monroe at Jefferson Lane in Palm Beach on the southern Gold Coast.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Instead, a seismic paradigm shift in population created by Covid is at play and Witheriff believes it will be the catalyst for “real” and sustained growth.</p><p>“The last boom was driven by money being freely thrown around ... it’s not the same now. We are growing because people are moving here from the higher density cities and if they’re not here now they’re planning to be here.”</p><p>He likens the city’s pandemic-induced boom to the upshot from Queensland’s abolishment of death taxes in the late 1970s by then-Queensland premier Joh Bjelke-Petersen.</p><p>“There was a flood of money and people that came over the border and I suspect this pandemic is going to have the same effect.”</p><p>As for the city’s soaring development site prices, Witheriff says: “There’s still value to be had and there’s strong demand and requirement for accommodation—and we haven’t even seen the borders reopen yet”.</p><p>“Subject to something globally changing that causes major issues, we should have a period of sustained growth but not silly growth, not out-of-control growth,” he says.</p><p>“In 2022, I don’t think we’ll see the price growth that we’ve seen in the last 18 months but we’ll certainly still see population growth and development continuing at a reasonable pace.”</p><p>Of the people moving interstate, almost a third have been upping stumps to come to Queensland, ABS data shows.</p><p>According to the latest Commonwealth Bank Regional Movers Index—despite Sydney being in lockdown the entire September quarter and Melbourne for two-thirds of it—net migration to regional areas rose by 14 per cent.</p><p>The Gold Coast remains the most popular destination, welcoming 11 per cent of all capital city residents who moved to regional areas during the September quarter.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/e4eaec70-393b-4f6a-852a-4b1b0111d665.jpg" width="1984"/></picture><div><span style="align-content:center;opacity:0.8">▲ A render of the pool area at Royale Gold Coast at Northcliffe Terrace.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Witheriff also expects that while most of the development focus so far has been on luxury owner-occupier product, other “markets within the market” will start to get stronger—in particular, the investor market.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Return to affordability on the way</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“There has to be a push back to the affordable,” he says. “There is a shortage of accommodation throughout the city. The residential vacancy rate has hit historic lows.  We need more apartments and homes than we can currently rent.”</p><p>Real Estate Institute of Queensland data indicates the city’s vacancy rate plunged to 0.6 per cent in the March quarter, the lowest level on record.</p><p>Lacey Group director Adam Lacey says the “missing middle” will inevitably be on the radar for the city’s development sector going forward.</p><p>“Affordability is getting worse and it’s pushing a lot of people out,” he says.</p><p>But as he well knows, it is becoming increasingly difficult for development sites to be acquired and <a href="https://www.theurbandeveloper.com/articles/gold-coast-supply-construction-feasibility-development">for product to be delivered </a>that can feasibly meet that price point.</p><p>“We’ve got two projects in delivery mode and are starting to hunt around for more sites to fill the pipeline but acquisitions at the moment are a very challenging scenario.</p><p>“It has been pretty much a perfect storm up here and a lot of the southern developers have now got their eyes on the Gold Coast.</p><p>“We’ve had a massive influx of those guys and, as you can imagine, more competition has just raised things dramatically ... sites have doubled in price but compared to Sydney and Melbourne they are still cheaper and that’s a huge driver.</p><p>“So, at the moment I can’t see anything slowing us down for at least another 12 to 18 months.</p><p>“All the buyers we’ve had so far primarily have been buying off-the-plan sight unseen. Once the restrictions are lifted around Christmas time and people can actually get up here and see the properties, and once international borders open up ... it’s just going to be another wave.</p><p>“Typically, the Gold Coast has been boom-and-bust and runs that cycle but it feels this time around there’s more substance to it and if there are going to be any adjustments, I don’t think we’re going to see the same sort of highs and lows.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/0664299f-a034-40d3-83be-05d05679e042.jpeg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Iris Capital’s planned Gold Coast debut, a twin-tower development at Broadbeach.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“Also, because of what has been happening globally over the past 18 months I think the Gold Coast is now being taken a bit more seriously as a city. It is becoming a far more attractive proposition to people and they want to do business and live here.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Smaller projects, lower volatility</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Urbis Gold Coast director Matthew Schneider says there is also much less volatility in <a href="https://www.theurbandeveloper.com/articles/gold-coast-apartment-market-boom">the city’s property market</a> because the scale of the projects is much smaller.</p><p>“We’re not in a situation now where the strength of the property market is dependent on a half dozen large-scale projects, each taking four or five years across multiple cycles to build and carrying a much higher value and risk profile.</p><p>“That shift to smaller scale projects, to boutique apartments, I think is the reason we’ve seen that volatility come out of the Gold Coast market and a much more stable set of circumstances.</p><p>“So, if you look at the drivers of those booms and busts previously it’s hard to see the fingerprints of those forces at the moment—it’s quite a different cycle.”</p><p>Schneider says notwithstanding the current strength of the market, the city’s apartment supply is sitting at only four to five months and the 4500 dwellings being delivered per annum across the Gold Coast is still well short of the 6000 dwellings required to meet population forecasts.</p><p>“There’s some really positive forces over the foreseeable future,” he says. “We have very strong conditions in terms of demand for product, there are still sites available and, yes, construction costs have escalated but so have sales revenues.</p><p>“As well, internal and international borders are only just starting to open up and so, given there is still such strong value on the Gold Coast relative to other markets, we can expect to see demand continue and perhaps even strengthen.</p><p>“That, in all likelihood, will get us to mid-decade and by then we should be seeing the Brisbane Olympics shadow starting to cast its positive effect.</p><p>“So, if people are looking over their shoulders at the moment it’s really just because of that dark cloud of uncertainty being felt everywhere ... but where there doesn’t seem to be much uncertainty is that there are strong levels of demand on the Gold Coast for the foreseeable future.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans"><strong>Click here to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800"/></picture><div></div></div></div></div></div></div></div>

The new proposals for the Gold Coast’s beach strip have been coming thick and fast over the past few months. But is it just another boom cycle?

The big squeeze is on in the rental market and Australian renters have been feeling the intensifying pain of skyrocketing rents over the first half of 2021.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The big squeeze is on in the rental market and Australian renters have been feeling the pain of skyrocketing rents over the first half of 2021.</p><p>According to a survey of 1500 households by ME Bank, rent stress has soared in the six months to June with renters, on average, spending 41 per cent of their income on keeping a roof over their heads.</p><p>This represents a significant extra hit to their hip pocket of 8 per cent.</p><p>More than two-thirds (68 per cent) of renters reported rent stress, which is typically considered to be rental payments of more than 30 per cent of household disposable income.</p><p>ME’s consulting economist Jeff Oughton said a combination of factors was contributing to the rise in the nation’s rent stress.</p><p>“Rental markets have tightened markedly across the majority of Australia and rents have risen significantly due to falling vacancies,” he said.</p><p>“Renters are now facing some of the biggest rent hikes we’ve since the global financial crisis.”</p><p>The survey results indicate the current level of rent stress is 3 per cent higher than in December 2019, before the onset of the Covid-19 pandemic.</p><p>It also shows the pain is being felt most by single parents, couples with young children, retirees, and households on low incomes (less than $40,000 per annum) and below average incomes ($40,000-75,000 per annum) reported higher levels of rent stress.</p><p>Additionally, more women (75 per cent) reported rent stress than men (60 per cent).</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/ebe922e3-027f-4962-92bb-758c8d1a066d.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ More Australians are feeling the squeeze as rental stress increases.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>The <a href="https://www.theurbandeveloper.com/articles/regional-rental-prices-outpace-cities">latest figures from Corelogic</a> show that in the six months to June, the median rent of houses and units jumped to $476 per week, a 6.6 per cent increase compared to the same time last year.</p><p>“While wage gains, on average, have picked up slightly from the historical lows recorded at the onset of the pandemic, government income support has gradually unwound, and rental moratoriums have ended,” Oughton said.</p><p>“We may see more renters facing hardship as lockdowns continue, particularly among low-income, low-saving households reliant on government support.”</p><p>Compared to rent stress, mortgage stress is lower, with 42 per cent of mortgagees reportedly paying more than 30 per cent of their household disposable incomes on mortgage repayments.</p><p>“A recovery in economic activity, very low interest rates and the deferral of loan repayments by some households have helped contain mortgage stress,” Oughton said.</p><p>“Furthermore, households are well ahead of their minimum repayments and have significant net equity or savings in their home loans.”</p><p>Recent analysis by Corelogic suggests servicing a mortgage is now cheaper than paying rent on 36.3 per cent of Australian properties, which is higher than the pre-Covid proportion of 33.9 per cent reported in February last year.</p></div></div></div></div></div>

he big squeeze is on in the rental market and Aussie renters are feeling the intensifying pain of skyrocketing rents… 

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>A Canberra office building housing the control centre for Australia’s Covid-19 response is set to change hands in an $83-million deal.</p><p>The acquisition by Brisbane’s Sentinel Group is due to settle next week and will inject a second slice of the nation’s capital into the Brisbane-based fund manager’s portfolio.</p><p>Scarborough House, a 14-level A-grade office building in the Woden Town Centre, will be part of the Sentinel Regional Office Trust, which also holds assets in Townsville, Cairns, Brisbane, Darwin and Newcastle.</p><p>Sentinel also owns Tuggeranong Homeworld in Canberra’s south, which it purchased for $31 million in 2014.</p><p>It has secured Scarborough House on a 7.7 per cent yield from Centuria Capital. The building has a weighted average lease expiry by income of about four years.</p><p>The $83-million deal was negotiated through JLL’s Tim Mutton and Colliers International’s Paul Powderly.</p><p>The federal government-occupied property at 8 Atlantic Street, Phillip, comprises a net lettable area of 16,755sq m, which is fully leased and almost 100 per cent occupied by the Department of Health.</p><p>The building, which has 5-star Nabers Energy and 3.5-star Nabers Water ratings, underwent a base building upgrade and refurbishment in 2005 which brought the property up to a modern standard.</p><p>Sentinel executive chairman Warren Ebert said Scarborough House represented a highly desirable investment opportunity.</p><p>“Nationally, there continues to be strong investor demand for quality office assets, which has been driven by low interest rates and pent-up investor demand,” he said.</p><p>“The Canberra office market has seen robust positive net absorption tightening the vacancy rate to 7.6 per cent which is down from 8.2 per cent last quarter. This is the lowest headline vacancy figure in almost 12 years.”</p><p>Woden Town Centre is recognised as Australia’s public health hub and is surrounded by significant infrastructure projects, tenant amenities and public transport.</p><p>Sentinel Group Australia, which was established in 2010, has a national portfolio of 59 retail, industrial, office, land, tourism infrastructure and agribusiness assets with a total value in excess of $1.2 billion.</p></div></div></div></div></div>

A Canberra office building housing the control centre for the Australia’s Covid-19 response is set to change hands in an $83-million deal...

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<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The record $620-million sale of the Travelodge hotel portfolio is the latest sign of soaring demand from global investment giants looking to check-in to Australia’s property assets on the verge of a market rebound.</p><p>Contracts were exchanged late last week to secure the deal, which is expected to be settled by the end of the year.</p><p>The acquisition of one of the largest hotel portfolios to be offered to the market in Australia is the first in a joint venture between Melbourne-based Salter Brothers and two of the world’s biggest property investment powerhouses.</p><p>Backed by Singaporean sovereign wealth fund, GIC, and Swiss global private markets investor, Partners Group, the purchase is an investment coup for Salter Brothers and a major confidence boost for Australia’s hotel and property sectors.</p><p>It includes 11 hotels—eight in Sydney, one in Melbourne’s Southbank, one in Brisbane and one in Perth—comprising 2032 rooms.</p><p>Significantly, a total of 18 bids for the portfolio were put on the negotiating table—the majority being strong offers from investment groups in the UK, Europe, Asia and the US.</p><p>“The Travelodge sale underscores the fact that Australia is now a recognised global investment destination,” said McVay Real Estate’s Sam McVay, who negotiated the deal.</p><p>“It’s recognised in the same way that America is, and Hong Kong is, and Europe is. </p><p>“There’s just so much demand for real estate in Australia at the moment. It’s attracting a lot of interest from international investors, more than we’ve ever seen.</p><p>“I think that’s got a lot to do with the fact that Australia, for the most part, has handled the pandemic very well and there is now a widely regarded view that when things reopen it’s going to bounce back stronger than it was.”</p><p>In a single transaction, the Travelodge acquisition almost doubles the number of rooms Salter Brothers has under management in its portfolio of hotel assets in Australia.</p><p>“We’d now have the most rooms under management in Australia,” said Salter Brothers founder and managing director, Paul Salter. </p><p>“It’s about 4200 rooms.”</p><p>Among its other assets are the Intercontinental Melbourne, Crowne Plaza Melbourne, Crowne Plaza Coogee, Holiday Inn Potts Point, Crowne Plaza Canberra, Hyatt Regency Brisbane and Voco Gold Coast.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8d5fa3b7-3bdd-4a20-87a5-5477a9fbf9f2.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ Eight of the 11 hotels in the portfolio are in Sydney. Image: Travelodge, Martin Place.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Salter said the latest transaction created a platform of scale and geographic diversification across Australia, enabling the group to position for growth and add value to the portfolio via targeted capital expenditure and rebranding where appropriate.</p><p>He said following an operator selection process, the majority of the Travelodge portfolio of mid-market hotels would likely be “upscaled” and rebranded post settlement.</p><p>“Our view of it is that post vaccination, whether international travel opens up quickly or slowly, we think demand in the Australian domestic market will support strong rebound,” he said.</p><p>“That’s the way we underwrote this (deal) ... the vaccines will get rolled out in the next three to four months and then, hopefully, no more border closures and domestic demand can do its thing.</p><p>“And, if it turns out that international travel comes back quicker than expected, that’s an upside.”</p><p>Salter said the joint venture and its offshore partners were now looking to acquire more hospitality assets in Australia with a focus on “quality, well-positioned CBD hotels where we think the bounce back is going to happen”. </p><p>“They see this as a good market to be invested in, that’s for sure,” he said.</p></div></div></div></div></div>

The record $620-million sale of the Travelodge hotel portfolio is the latest sign of soaring demand from global investment giants looking to check-in 

DFO Cairns

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Vacant retail centres are being reinvented as places not just to shop and eat but also provide office space for a post-Covid workforce.</p><p>Sentinel Property Group is the latest of a growing number of owners of retail assets that are converting vacant and unused portions of their properties to office and professional space.</p><p>The Brisbane-based fund manager’s chief investment officer Warren Ebert said the retail sector was undergoing significant changes due to the advent and challenges of Covid-19.</p><p>As a result, it has recently commenced works on repurposing part of its DFO Cairns retail complex for office and medical services space.</p><p>“We are currently in the process of converting a portion of the centre to offices for government tenants,” Ebert said.</p><p>Sentinel owns a total of 13 retail assets in suburban and regional locations in Queensland, New South Wales, ACT and Western Australia.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/2fc240b5-bdd4-4316-9ace-d43d86078b73.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ he DFO Cairns retail centre is set on a large 8.15ha site at Westcourt outside the Cairns CBD. </span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Ebert said the economic impact of the Covid-19 pandemic had prompted owners of retail assets in regional and suburban areas to provide more space for offices as well as medical and professional services.</p><p>“The one thing that shopping centres have is a lot of car parks,” he said.</p><p>“And if you can convert some of the bigger space into offices, it’s a good utilisation. </p><p>“Additionally, most larger retail centres have a good food precinct along with public transport.”</p><p>Ebert said despite disruptions caused by Covid-19 and the growth of online shopping, there were still sectors of the retail market such as homemaker centres performing strongly and some regional areas are “really booming”.</p><p>“Retail is a dynamic business which is always changing and if it wasn’t we’d still be shopping at corner stores instead of Woolworths or Coles,” he said.</p><p>The repurposing of retail space into offices has become a global trend and strategy for shopping centre owners to fill the void left by store closures as a result of the pandemic and generate foot traffic for remaining retail tenants.</p><p>Sentinel has a total national portfolio of more than 50 retail, industrial, office, land, tourism infrastructure and agribusiness assets with a total value in excess of $1.2 billion.</p><p>Ebert said that earlier this year the group moved its 90-strong Brisbane workforce to a larger floorspace to ensure Covid-19 safety measures by providing proper social distancing standards at workstations and meeting rooms “something many business and government agencies will need to do to get homebound staff back in the office”.</p></div></div></div></div></div>

    One Australian sub-regional landlord and developer is converting part of its DFO retail complex into office and medical services… 

CBD Office Market Road to Recovery Hits Another Bump 

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>All roads were leading to a recovery ahead of market expectations for Sydney’s CBD office sector with a significant uplift in leasing activity and the withdrawal of sublease space.</p><p>That is, until the city was hit by its latest Covid-19 outbreak and extended lockdown.</p><p> According to the latest JLL national office market research, the impact on Sydney’s CBD office leasing activity and its rebound rate will be determined by the length of the lockdown. </p><p>Overall, however, the signs are good for 2022 and beyond for Australia’s CBD office markets with the new figures showing positive net absorption of 16,00sq m.</p><p>“Rome wasn’t built in a day and this positive quarterly net absorption print is an important step towards a more sustained market recovery,” JLL’s head of research Andrew Ballantyne said.</p><p>“However, the Sydney lockdown has the potential to delay occupier decision-making in the short-term.” </p><p>Of the six monitored CBD office markets, five recorded positive net absorption in the second quarter of 2021—Perth (+8500sq m), Melbourne (+6600sq m), Canberra (+4200sq m) Adelaide (+1800sq m) and Sydney (+1200sq m).</p><p>Brisbane’s CBD was the only CBD office market to record negative net absorption (-6,400sq m).</p><p>The latest research also indicates the national CBD office market vacancy rate has risen marginally to 14 per cent as uncommitted and backfill space became available from new and refurbished office developments.</p><p>“Flash economic indicators and employment data are well ahead of market expectations and point towards a strong rebound in the Australian economy,” Ballantyne said.</p><p>“Leasing activity improved over the second quarter and we saw some organisations withdraw sublease space.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c6b0eb39-9fa3-48ef-80d7-e418cc58a49f.jpg" width="1000"/></picture><div><span style="align-content:center;opacity:0.8">▲ The completion of the 60,000sq m Brookfield Place pushed vacancy rates above 13pc in Sydney’s CBD.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>JLL’s head of leasing Tim O’Connor said in Sydney’s CBD the completion of Brookfield Place and associated backfill space had pushed vacancy higher to 13.2 per cent over the quarter.</p><p>But he said prior to the lockdown the market had “started to see a significant uplift in leasing activity from organisations in the 1000sq m to 7000sq m size cohort”.</p><p>“Another positive sign we saw in the Sydney CBD was the withdrawal of sublease space.</p><p>“While the hybrid-working model will be adopted by a number of organisations, the pre-lockdown return to worker figures some companies recorded were ahead of expectations resulting in the withdrawal (wholly or partially) of sublease space,” O’Connor said.</p><p>“The length of the Sydney lockdown will determine the impact on office leasing activity. However, the momentum we saw in labour markets and leasing inquiry over the second quarter showed that organisations are planning for expansion in 2022 and beyond.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Positive results in Melbourne, Brisbane CBDs</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The Perth CBD recorded the strongest quarterly net absorption result (+8500sq m) across CBD office markets over the quarter and JLL’s figures indicate its vacancy rate has tightened by 0.5 percentage points to 19.7 per cent. </p><p>“The sharp increase in commodity prices has improved mining sector revenue and profitability,” O’Connor said. “An increase in leasing inquiry from the broader resource sector would be an additional ingredient in the demand-side of the equation in the Perth CBD.”</p><p>With the second highest positive net absorption (+6600sq m) the Melbourne CBD recorded a minor reduction in vacancy to 14.1 per cent over the second quarter of 2021.</p><p>“The positive result in the Melbourne CBD was not at the expense of the metropolitan office markets,” O’Connor said. “The Melbourne Fringe (+11,700sq m) and Melbourne southeast suburbs (+7,900 sqm) both recorded positive net absorption over the same period.”</p><p>Canberra scored its fourth successive quarter of net absorption (+4,200sq m) and 33,500 sq m over the 2020-21 financial year. Its vacancy rate tightened to a 12-year low of 7 per cent and the prime grade is even tighter 4.1 per cent.</p><p>“The most recent Federal Budget confirmed that most agencies will increase headcount over the 2021-22 financial year,” Ballantyne said. “Headcount expansion is flowing through to new inquiry with a number of expansionary public sector requirements finalised over the quarter.”</p><p>Adelaide CBD’s positive net absorption (+1800sq m) had no impact on its headline vacancy rate, which was unchanged at 16.9 per cent over the quarter.</p><p>Meanwhile, Brisbane CBD’s negative net absorption (-6,400sq m)  was the result of a major consolidation of approximately 13,000 square metres. </p><p>“The Brisbane CBD has one of the highest workplace re-entry rates across major office markets,” O’Connor said. “As a result, sublease availability has been less pronounced than the level recorded in Melbourne and Sydney.” </p><p>JLL’s figures show the Brisbane near city market continued to recover with net absorption of 9400sq m and a reduction in vacancy to 17.2 per cent over the quarter.</p></div></div></div></div></div>

The signs are good for 2022 and beyond for Australia’s CBD office markets but the country’s latest lockdown confirms it will be a bumpy road...

ASX-listed property giant Stockland has bolstered its residential pipeline in Victoria by staking another big claim in Melbourne’s booming western corridor

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Property development giant Stockland has put its sizeable foot on another large slice of Melbourne’s western growth corridor with plans for an 800-home residential estate. </p><p>In an $82-million deal, the ASX-listed developer has bolstered its residential pipeline in Victoria with the purchase of Wattle Park—an 84ha development site at Tarneit. </p><p>The acquisition comes as the land banking “gold rush” continues in Melbourne’s west and beyond, driven by strong population growth, affordability and the recent shift in living trends from inner-city apartment-style residences to detached housing.</p><p>Among the other major property players recently staking multi-million-dollar claims in the region are Brown Property Group, headed by Carlton AFL legend Fraser Brown.</p><p>Wattle Park Tarneit is located 30km west of Melbourne’s CBD in the City of Wyndham, one of the fastest growing areas in the country.</p><p>The greenfield parcel at 85-87 Sewells Rd is close to Stockland’s 38ha Grand Central holding—recently acquired for circa $50 million—and is approved for development under the Victorian Planning Authority’s Riverdale Precinct Structure Plan.</p><p>“This acquisition aligns with our strategy to re-stock our residential pipeline at this stage of the cycle, in corridors with strong demand fundamentals and expected total returns above our hurdle rates,” Stockland Communities chief executive Andrew Whitson said.</p><p>“Wattle Park is in a great location with good access to transport, schools, open space and recreation facilities. </p><p>“With record-low interest rates continuing to underpin the residential market over the medium-term and customer preference for detached dwellings remaining strong across Melbourne’s greenfield areas, the acquisition of this site means we can get more new land to market to meet this demand.</p><p>“We expect the Melbourne greenfield market to outperform over the next 12 months given the extended lockdown has subdued growth over the past year,” Whitson said. </p><p>Stockland’s residential general manager for Victoria, Mike Davis, said the group has more than $2.7 billion invested in the state, including a significant portfolio of communities in Melbourne’s west now home to 1300 residents.</p><p>“We expect strong customer demand to continue in the western growth area which accounts for more than one third of all Melbourne’s land sales,” Davis said. </p><p>He said future amenity planned for Wattle Park and its surrounds included a railway station, major town centre and sporting facilities.</p><p>Stockland is planning to start development, marketing and sales of the Tarneit estate following settlement and once the planning permits are granted. Initial site works are expected to commence in 2022.</p></div></div></div></div></div>

  Stockland has bolstered its residential pipeline in Victoria by staking another big claim in Melbourne’s booming western corridor…

Sydney developer Fortis has added two prime development sites to its growing Melbourne portfolio.

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Sydney developer Fortis has doubled down in Melbourne, pushing the end value of its projects in the city to $1 billion with the acquisition of two new city fringe sites.</p><p>It has paid a combined $17 million for the prime development sites in sought-after South Melbourne. </p><p>Fortis is planning to develop $112 million worth of projects offering premium commercial and retail space on the sites at 313-317 Kings Way and 34 Eastern Rd.</p><p>It already has four other sites under development in the South Melbourne precinct.</p><p>The Kings Way site, spanning a total area of 330sq m, was acquired for circa $5 million and is earmarked for an 18-level office building valued at $65 million.</p><p>Featuring full floorplates, the 4600sq m building has been designed by Elenberg Fraser to offer views of Albert Park and the CBD, as well as dedicated end-of-trip facilities for tenants, basement parking and ground floor food and beverage activation.</p><p>An application for a planning permit for the Kingsway site will be lodged in August.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/bf999295-cda2-408d-9a33-88e4203dee2a.jpg" width="920"/></picture><div><span style="align-content:center;opacity:0.8">An artist’s impression of Fortis’ planned development for 313-317 Kings Way, South Melbourne, one of the developer&#x27;s two projects for the city.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p></p><p>Fortis’ second new site, on Eastern Road, spans 855sq m and was acquired from H. Co Property for $12 million. It will be redeveloped into a seven-level, 3890sq m office building also with ground floor retail space, with an end value of $47 million.</p><p>Designed by architecture firm Fieldwork it will feature cascading landscaped terraces, car parking and end-of-trip facilities.</p><p>A planning permit is already in place for the site and construction is expected to commence in late-2021.</p><p>The latest acquisitions reinforce Fortis’ strategy of developing well-connected fringe properties where demand is strong as organisations choose to move closer to where employees live and socialise. </p><p>“Our new sites in South Melbourne are a response to this demand for premium boutique offices that offer an enviable composition of location, quality and amenities,” Fortis director Charles Mellick said.</p><p>Fortis has acquired approximately $33 million of commercial assets in South Melbourne during the past 12 to 18 months. Together, the assets will have an expected end value totalling circa $180 million once developed.</p><p>Late last year it also purchased a site in the inner-Melbourne suburb of Richmond for $19 million with plans for a 10-level mixed-use project.</p><p>Among its other Melbourne projects is a 37,000sq m commercial precinct in Clifton Hill and the $38 million, nine-level Pallas House in South Melbourne.</p><p>Additionally, Fortis—the development arm of the private Pallas Group—has a further $1.25-billion pipeline of work in Sydney. </p></div></div></div></div></div>

Sydney developer Fortis has added two prime development sites to its growing Melbourne portfolio… 

[+] Construction Industry a $360bn House of Cards

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Australia’s construction industry is a $360-billion house of cards teetering in a profitless boom in which builders big and small are going bust—and warnings from its coalface indicate the worst is yet to come.</p><p>According to industry leaders, long-established cracks in the sector’s foundation are now so wide that it is “totally unsustainable” and in need of urgent major reform if it is to have the capacity to build projects that need to be built.</p><p>Up to 25 per cent of all insolvencies in Australia are companies within the construction industry.</p><p>“It’s a bit of a shocking statistic,” says Australian Constructors Association (ACA) chief executive Jon Davies. “Particularly when you look at it in terms of the industry’s contribution to the economy (8 to 10 per cent of GDP) it’s a disproportionately high level.</p><p>“At the moment you are hearing a lot of people talking about a ‘profitless boom’ and it has been a reality.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“But the bigger issue is not so much the profit margins, it’s the willingness of our industry to accept risks that they really aren’t able to quantify, and they really shouldn’t be trying to, from clients that are more than happy to try to pass those risks onto them.</p><p>“So you have this race to the bottom where a lot of contractors, who are still trying to recover from years and years of under profitability, are saying ‘yeah, we’ll take on that risk, we’ll price that’.</p><p>“Then that risk comes to pass and suddenly they realise they’ve got a big problem and in a world of hurt.”</p><p>But according to Davies, the cracks in the industry run far deeper than boom-bust cycles and a lack of profitability.</p><p>“We have a real cultural problem within our industry,” Davies says. “We’re a very adversarial industry and that has created inherent issues in terms of productivity, mental health and diversity.</p><p>“And yet now you’ve got a situation where the government is relying on that industry with all these problems to lead the economy forward.</p><p>“However, there’s a real concern around capability and capacity to respond to and deliver on that record pipeline of work.”</p><p>One of the most recent casualties of Australia’s construction crisis is Perth-based <a href="https://www.theurbandeveloper.com/articles/singaporean-developer-picks-up-property-group-pindan" data-mce-href="https://www.theurbandeveloper.com/articles/singaporean-developer-picks-up-property-group-pindan">Pindan Group</a>—the head contractor for a number of WA government projects—which was placed in external administration in May owing creditors $80 million.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/087bf530-9a80-4db6-b1eb-a089d660177b.jpg" width="862" data-mce-src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/087bf530-9a80-4db6-b1eb-a089d660177b.jpg"></picture><div><span style="align-content: center; opacity: 0.8;" data-mce-style="align-content: center; opacity: 0.8;">▲ The administrator of collapsed building company Pindan Group says up to 1400 creditors are owed between $70 million and $80 million.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>It joins a growing list of high-profile company collapses, including one of the country’s biggest construction firms, Melbourne-based building empire Grocon.</p><h2><strong>‘It's a shambles’</strong></h2><p>“Much worse is to come. This is just the start … it’s a shambles,” says Scott Hutchinson, the chairman of one of Australia’s largest private construction companies, Brisbane-based Hutchinson Builders.</p><p>“It’s completely overheated. It’s getting ready to explode and for people to go down.</p><p>“In 12 or 18 months there’s likely to be a lot of builders going broke and most of them don’t know it yet. Then we’ll have a flight to balance sheets.</p><p>“But at the moment everybody’s just rushing to get trades and buy materials, costs are going through the roof … and that’s when it gets easy to win work because the builders who know what’s going on close their books or put up their prices, and the ones who are desperate for cash flow will bid low and then end up going down massively.”</p><p>Hutchinson Builders has a current workbook of 150 projects stretching across Queensland, New South Wales, Victoria, South Australia and Tasmania with a balance sheet of $350 million and an annual turnover of around $3 billion.</p><p>Hutchinson says unfortunately company collapses have become part of the “cut and thrust” of Australia’s high-risk, high-pressure construction industry.</p><p>“Everybody in the world knows it,” he says. “I was in Paris a few years ago and the big builders over there just said ‘We’re not touching Australia, it’s designed to fail’.</p><p>“It’s extremely competitive, there’s no barriers to entry and it’s not a scale game.</p><p>“It’s counterintuitive to most industries.</p><p>“When your turnover is falling it’s good and when it’s booming and your turnover is going up, it’s bad.”</p><p>Related: <a href="https://www.theurbandeveloper.com/articles/home-building-development-construction-costs" data-mce-href="https://www.theurbandeveloper.com/articles/home-building-development-construction-costs">Home-building at breaking point</a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c4459655-861b-41ba-81e4-83d5a5ee8759.jpg" width="862" data-mce-src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c4459655-861b-41ba-81e4-83d5a5ee8759.jpg"></picture><div><span style="align-content: center; opacity: 0.8;" data-mce-style="align-content: center; opacity: 0.8;">▲ Scott Hutchinson says he fears that in 12 months there will be a lot of builders going broke.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Gold Coast-based Condev Construction has a workbook of 80-85 per cent multi-level residential developments. Managing director Steve Marais says profit margins are currently “down to 1 per cent and still heading south”.</p><p>“With the erosion of profits there’s going to be a bloodbath at some point,” he says.</p><p>Marais says Condev has a turnover of roughly $250 million a year but in a recent two-week period alone it had closed its books to a total of $400-million worth of work.</p><p>“The boom market is where builders go broke if they take on too much work. I call it the seduction of work and ultimately it will be where the losses are incurred,” he says.</p><p>“It’s all about how you manage the risks associated with an upward market swing.”</p><p>But he also strongly believes that changes need to be made to help stem the industry’s unenviable and ever-growing list of company collapses.</p><p>“At the moment you can keep procuring work unregulated,” Marais says. “I strongly believe that every time a project of over $10 million is procured by a builder, the financial audits should have to be submitted for review.”</p><h2><strong>Push for change</strong></h2><p>Leading the charge for major industry reform by example is Alison Mirams, the maverick chief executive of Sydney-based construction firm Roberts Co.</p><p>“The risk profile from when I started in the industry 20 years ago is exponentially worse on contractors for no good reason,” she says.</p><p>“Contractors generally operate on margins of anywhere between 2 and 5 per cent, but if you fund a $100-million project you have the potential to lose $50 million to $100 million.</p><p>“And, unfortunately, they do take on risk that they can’t manage and if one or two of those come home to roost it can be pretty ugly.</p><p>“But tell me another industry where when it all goes wrong we essentially hand you the keys to liquidate the company? There isn’t one.</p><p>“So how has the construction industry got to the point where that is the accepted norm?</p><p>“The whole industry is unsustainable for so many reasons that it needs to recalibrate.</p><p>“It’s not just companies going down, you’re losing people out of the industry, you’re losing people to suicides, and we don’t have migration at the moment so we do need people to come into the industry from within Australia—but to get them in, things have got to change.”</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/61edce1c-15cf-4144-97f8-fdefeca7c3b4.jpg" width="862" data-mce-src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/61edce1c-15cf-4144-97f8-fdefeca7c3b4.jpg"></picture><div><span style="align-content: center; opacity: 0.8;" data-mce-style="align-content: center; opacity: 0.8;">▲ Up to 25 per cent of all insolvencies are companies in the construction industry.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>Mirams is pushing for a five-day working week in an industry where six-day working weeks and sometimes seven-day working weeks are the norm; a greater focus on bringing women into the industry (only 12 per cent of its workforce are women) to increase diversity; and “fair and appropriate” risk ownership on projects.</p><p>Among the $640-million worth of projects on the workbook of Roberts Co is the first stage of the Concord Hospital Redevelopment in Sydney, which it is delivering with a strict five-day working week as a pilot for the Construction Industry Culture Taskforce.</p><p>“In the interim report we have just received, 81.4 per cent of the survey respondents said it’s a better way to work,” she says.</p><p>“We have not only achieved better health and wellbeing outcomes but we have also achieved increased productivity on site by giving people back their weekends and the project will finish slightly ahead of time.</p><p>“This is a very hard industry. It takes a toll on people and I think the pandemic has provided an incredible opportunity to recalibrate and substantially reform how we work.”</p><p>Joe Barr, chief executive of Chinese-owned Australian contractor John Holland, last year warned about the dire impact of the massive risks being passed to contractors.</p><p>He declared that despite being in the midst of an infrastructure boom the industry was “teetering on the brink of collapse”.</p><p>Since then, he says, all key stakeholders have banded together and faced the Covid-19 pandemic, paving the way for change with a focus on developing fairer risk-sharing on major projects.</p><p>“We are having constructive discussions with our government customers, peers, and industry associations to reform the industry for the better,” Barr says.</p><p>“There is some way to go but I’m confident the industry is holding up well against the challenges of the past year.”</p><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>You are currently experiencing </strong><em><strong>The Urban Developer</strong></em><strong> Plus (TUD+), our premium membership for property professionals. </strong><a href="https://www.theurbandeveloper.com/membership-plans" data-mce-href="https://www.theurbandeveloper.com/membership-plans"><u><strong>Click here</strong></u><strong> to learn more.</strong></a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png" width="800" data-mce-src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/4fb872c4-2507-449c-af93-4c928c2ed849.png"></picture></div></div></div></div></div></div></div></div></div>

Australia’s construction industry is a $360-billion house of cards teetering in a profitless boom in which companies big and small are going bust...