Times are changing fast and it’s important to check in on each other. Good time to take a pulse of the market.
Executive managing director at CBRE, Amanda Steele, was a breath of fresh air on Thursday when we finally managed to prise open a crack in her back-to-back meetings, including endless Zooms with something scheduled for the wee hours of Friday morning (or very late Thursday) and 7 am starts that have been “going on for weeks”.
It was relief to have a phone conversation where “no one can see you lean against a wall”, she laughed.
“There’s never been a busier time for a property manager,” she said. “Buildings are still open, and they still need to be run. I’ve got survivor guilt.”
There’s still about 50 per cent occupancy rate and almost every building is open thanks to the number of essential services in government, banks and telcos. And governments are about 30 per cent of the tenant market, she pointed out.
Even partial shutdowns, such as New Zealand has embarked on, brings complications. “In building management, safety can’t be underestimated. Airconditioning needs to keep running so you don’t have mould and legionella.
“So my fantastic facilities team turn up every day, making sure people are safe.”
Special measures include a heavy focus on cleaning. “The cleaners have been fantastic; they’ve really stepped up.” In the lobbies,
property managers make sure tenants keep moving through and there are provisions in lifts with quadrants marked out or limits on passengers for each ride.
Even at the best of times, running a building is never about how many people are in it. There are contractors’ access to manage, to make sure all are are properly signed in and adhere to insurance policies or laws so that the building is running as efficiently as possible. At the same time, there’s a lot of liaising with tenants.
Are people still focused on energy efficiency in such a scenario?
“They absolutely care about efficiency,” Steele said. They’re still worried about their sustainability ratings. They’re asking, “if we do this forensic cleaning are we going to ruin our WELL rating?”
There’s the NABERS assessment to continue with as well, without site visits. NABERS have been great in the workaround, she said.
One of the responses has been to put buildings onto weekend mode. It has a big impact on energy consumption.
But in retail property, the story is different. “It’s a very difficult time.”
“Many people have closed; food and beverage has been hit very hard.”
There are upsides
On sustainability there are some major upsides. With fewer people travelling to work, we’ve got cleaner air and energy use is dropping significantly, Steele said.
“I know people are very despondent. But I feel incredibly hopeful, particularly from a sustainability perspective. I can see it in my business, I can see it in the industry. I think the necessity to collaborate is being tested more than ever and more than ever I think we will come out the other end and say ‘of course we can solve climate change’.”
“It’s been amazing. What’s interesting is how people give back and how people who are financially challenged are finding opportunities to contribute to others.
“I feel really positive, I really do. And of course, the sickness and the concern is absolutely palpable but we will get through it and will be a better community at the end of it.”
Jane Fitzgerald, NSW Property Council of Australia
For so many people, NSW Property Council of Australia executive director Jane Fitzgerald echoes the reality of the daily and sometimes hourly drama that’s unfolded in the past few weeks.
Never in her career, she said on Thursday, has she experienced the drama of the past few weeks, even when she was chief of staff to a senior minister during the Port Arthur massacre in 1996.
“This is a whole other level, every day something dramatically shifts and the world turns more on its axis. I never thought I would crave a no news day.”
But still she feels we’ve only scratched the surface of the impact.
Her members are responding strongly to the alerts being sent by the council and craving feedback. We say The Fifth Estate too has noticed a surge of demand and readers.
“It’s extraordinary that after 10-plus years of social media, people want curated content. They trust you for balanced content, and the same with us.
“Our members are really relying on us in a way they have not before to communicate the important things for them.
“It’s a crisis like no other. I think the thing that everyone wants and we just can’t have is certainty: how long will it last; what does it mean for my business?
“The pace of decision and change is drastically different from life just two weeks ago.”
Fitzgerald says the biggest issue for the property sector is trying to keep the business of property safe through the health crisis.
“And I think it’s not just about keeping construction going, though that’s what most people are talking about.”
Simon Draper, who is chief executive officer of Infrastructure NSW, appears to be taking leadership in the state government and “doing an amazing job of keeping members and industry informed … and to keep construction going and to keep it going as long as the health advice says we can.”
In a meeting with one member who has a large residential portfolio what become clear is that also critical is the food chain that leads up to construction as well.
Fitzgerald said that there were thousands of people who could keep working from home in property as part of that food chain, so it was important to keep the processes of development approvals and planning operating.
In NSW, there are 400,000 people working in the property sector and nationally 1.2 million, she said.
Many people were happy with the planning minister Rob Stokes who extended construction hours to seven days a week to deal with delays imposed by social distancing rules. (But then, she hadn’t heard yet about the bitter complaints from people stuck working at home with kids in the inner west with around-the-clock jack hammering and concrete crushing from 24-hour construction generated by the Westconnex and other projects).
Fitzgerald also says that it was important to keep smart green buildings functional.
“You can’t just lock building doors and go home. These are smart buildings that require levels of maintenance, even if they’re not fully utilised.”
Some of the agents have been great at disseminating information from Singapore and Hong Kong, which has more advanced systems put in place to deal with issues such as this virus.
“This industry is awesome in terms of innovation.”
There were many hard questions to be answered, but the property industry is nothing if not creative and innovative, Fitzgerald says.
Professor Tony Arnel
Professor Tony Arnel, industry professor at Deakin University, global director of sustainability at NDY and president of the Energy Efficiency Council, on Thursday focused on the big changes ahead.
Key was keeping construction ticking over, and the need to keep the energy efficiency industry strong.
The virus crisis, he said, unleashed a whole new ballgame.
“Supply chains around the globe are going to be challenged. We could face a massive rebuild of the construction sector. Demand could be down for a year and I don’t know what the new normal will be.
“Right now, owners are sitting on their hands and the reality is that around the consulting space there are a lot of pause buttons being hit and a wait-and-see game, which will have a knock on effect.
“This means that a lot of projects that might proceed through to design and documentation will be put on hold.”
So much is not known but there is hope for better outcomes and practices.
“Out of this will be changes in how we live our lives. And it took a pandemic to do it. But we will come out the other side, and there will be another side.”
That might include a lot of empty buildings. Right now, the Energy Efficiency Council was working to encourage government to pursue and encourage policy initiatives in its sector.
Nicholas Burt, Facility Management Association of Australia
Nic Burt, chief executive officer at the Facility Management Association of Australia, said the focus on cleaning and hygiene has ramped up, with variations in intensity.
The cleaning routine in a supermarket or apartment building, for instance, is likely to be more stringent than a half-empty office building. His organisation is running a webinar on this topic, “Hygiene controls in buildings during COVID-19”, on Thursday next week.
Security protocols have been thrown into turmoil. Before the pandemic, you wouldn’t expect to see multiple security guards at the entrance to a supermarket, Burt said.
It’s also important to make sure that facilities now sitting empty are not damaged in any way. Besides they can’t be left sitting unattended for what might be six months and expect to be kicked into gear once the workforce returns.
“It’s important for everybody to understand that buildings and facilities are complex integrated systems. It’s not like everybody can leave the building and just flick the switch off.”
This means constant upkeep throughout the pandemic shutdown.
“This is one thing we’ve been advocating to governments.”
The other sleeper issue is that facilities managers also keep critical infrastructure, such as hospitals, apartments, and aged care facilities, in operation. And let’s not forget data centres when so many people are working at home and rely on good internet infrastructure.
Burt says that energy use is constantly “front of mind” given it’s used in a facility all the time. He expects facilities managers to be responding to the changes in occupancy and other alterations by turning off non-critical systems, for example.
Ken McBryde, Architectural Physics Pty Ltd
For small agile architectural practices like Ken McBryde’s Architectural Physics Pty Ltd, the move to prove income support from government and mortgage deferment by the banks are signs of generosity that won’t be forgotten when the recovery comes.
“What we will remember out of this are the people who are generous to each other and pass on goodwill. They are the people and the businesses who will do well.”
For practices such as his, stepping off the treadmill of daily life, is a rare opportunity to work out “how best to serve this pandemic world”.
And architects are nothing if not creative thinkers.
McBryde’s studio is already collaborating with a Melbourne based partner Dr John Stehle, formerly with Laing O’Rourke in the UK, on a range of projects including how to convert conventional architectural design for off-site and pre-fabrication manufacture and assembly.
In the view of so many people this is a way to the future in design and construction because of the potential for a factory to control for quality, safety and wastage.
Now there is the potential of automation to minimise biological contamination.
What’s missing, McBryde said, is certainty, an “an enduring pipeline” of work for multiple buildings that large organisations such as governments tend to continually need.
This would yield efficiencies, much like the car manufacturing industry had, where Toyota, for instance, would contract to a manufacturer to provide engine block for five years on the understanding that each year there would a 5 per cent efficiency – and price – dividend.
A win-win, McBryde said.
If construction is as critical to the economy as so many people believe, then there is no better sector for a stimulus, he said.
This is an opportunity to accelerate the things we’ve thought would be “good to have” to things that in this pandemic era will become essential.
Ken Morrison, Property Council of Australia
On the investment side, chief executive of the Property Council of Australia Ken Morrison reassured his members this week that in the coming six months banks won’t enforce terms for “non-financial breaches of the loan contract, such as changes in valuations”.
[That’s a tricky area in past downturns where developers and other property companies might have been paying all dues on lending but because property values fell, loans were suddenly breaching their loan to valuation ratios and many were called up and properties sold for losses, further eroding values. Banks tended to avoid that lose/lose scenario once that lesson had been learnt. But only if they deemed it in their interest.]
Right now, the deferral by the banks “an extra 30,000 thousand businesses by raising the threshold of those who qualify for the six-month deferral of loan repayments from $3 million to up to $10 million in total loan facilities,” is a good idea, Morrison says, citing Australian Banking Association CEO, Anna Bligh.
The measures apply to owners of local shopping centres, pubs, clubs and restaurants, “who must agree not to terminate leases or evict current tenants for rent arrears due to COVID-19 in order to access support,” Morrison said.
The Property Council welcomed the decision by the National Cabinet to introduce a six-month moratorium on commercial and residential evictions.
“It’s a sensible, fair measure and one that we have said should be taken,” Morrison said.
He promised to continue to advocate for land tax and rate relief.
- With Poppy Johnston