SIGNS OF A RE­TURN TO SHORE

JONES LANG LASALLE CHIEF STEPHEN CONRY SAYS THE IN­VEST­MENT TIDE IS TURN­ING IN FAVOUR OF DO­MES­TIC PLAY­ERS.

The Australian - The Deal - - Primespace - BY TURI CON­DON

STEPHEN CONRY WAS IN ARI­ZONA in Au­gust, part of a whistlestop tour on his way to global prop­erty group Jones Lang LaSalle’s in­ter­na­tional di­rec­tors meet­ing in Hong Kong, where the re­cent flood of off­shore money into Aus­tralian prop­erty and global real es­tate in gen­eral was one of the hot top­ics.

But Conry, JLL’s Aus­tralian chief ex­ec­u­tive and a three- decade vet­eran of the Chicagob­ased com­pany, says the trend to­wards such for­eign in­vest­ment is al­ready chang­ing.

“The re­al­ity is that the off­shore dom­i­nance of the past few years will be re­cast to­wards do­mes­tic play­ers,” he says. “The Aus­tralian real es­tate in­vest­ment trusts have re­cap­i­talised and have a bet­ter cost of debt. It’s hard to com­pete with strong, ac­tive, long-term lo­cal play­ers.”

Many big off­shore groups – in­clud­ing some of the world’s largest pen­sion and sov­er­eign wealth funds – have part­nered with Aus­tralian com­pa­nies. That is partly so they can ac­cess the sta­ble Aus­tralian econ­omy, but largely to spread their risk by tap­ping lo­cal ex­per­tise – “the eyes and ears on the ground”, Conry says.

For­eign in­vestors ac­counted for 20 per cent of the $12.6 bil­lion worth of Aus­tralian prop­erty deals in the 2011-12 fi­nan­cial year, ac­cord­ing to JLL. Among those div­ing in were the China In­vest­ment Cor­po­ra­tion, which has in­vested in in­dus­trial land­lord Good­man Group, and the Canada Pen­sion Plan In­vest­ment Board, which has in­vested with Good­man, Lend Lease and Colo­nial First State.

It was a very dif­fer­ent mar­ket in 1982, when Conry started in JLL’s Bris­bane of­fice at the age of 17. He was made its youngest di­rec­tor in 1988, an in­ter­na­tional di­rec­tor by 2000 and Aus­tralian chief ex­ec­u­tive in 2009. A con­fi­dant of Queens­land Premier Camp­bell New­man, Conry is the pres­i­dent of The Bris­bane Club and sits on the Gold Coast 2018 Com­mon­wealth Games Cor­po­ra­tion board.

Of the other big is­sues fac­ing the econ­omy, and by de­fault the prop­erty sec­tor, Conry sin­gles out low con­sumer con­fi­dence. Aus­tralia’s econ­omy might be “the envy of the world”, but that has not trans­lated into con­sumer con­fi­dence. “With job se­cu­rity and cost-of-liv­ing pres­sures, con­sumers are hoard­ing their money. Cost of liv­ing is the big­gest fac­tor fac­ing gov­ern­ments to­day and af­fect­ing con­sumer con­fi­dence and spend­ing.”

When lead­ing com­pa­nies such as Qan­tas and Tel­stra make

Primespace

Pub­lished in The Aus­tralian ev­ery Thurs­day.

head­lines be­cause of big lay­offs, con­sumers be­come un­der­stand­ably ner­vous, Conry says, adding Aus­tralians are also un­ac­cus­tomed to hav­ing a mi­nor­ity fed­eral gov­ern­ment.

“Busi­ness and con­sumer con­fi­dence has been im­pacted by that. Busi­ness and con­sumers are look­ing for more clar­ity and that will only be served by the next elec­tion.”

That low con­sumer con­fi­dence is flow­ing through to retailing and the re­tail prop­erty mar­ket. “For ev­ery dol­lar spent on elec­tric­ity, school fees and gro­ceries, they [con­sumers] have less for re­tail else­where.”

The emer­gence of on­line retailing is an­other fac­tor, and one Conry be­lieves will continue to influence the real es­tate mar­ket. “It [in­ter­net shop­ping] is one of the big trends, but I’m not overly anx­ious about it hav­ing a dra­matic or deeply detri­men­tal im­pact on shop­ping cen­tres or re­tail trade. It’s a re­al­ity of life. Re­tail­ers are in­creas­ingly and suc­cess­fully en­gag­ing in it.”

How­ever, he says the shift to on­line sales means shop­ping cen­tre own­ers and man­agers need to look care­fully at the struc­ture of their as­sets or risk be­ing hit hard by the phe­nom­ena. The trend also af­fects in­dus­trial prop­erty.

“The suc­cess of on­line re­tail is very much de­pen­dent on the con­sumer be­ing ab­so­lutely con­fi­dent they’ll re­ceive the goods pur­chased. That in­volves tran­sit from A to B, be it from Mel­bourne to Perth or Los Angeles to Sydney. It’s trans­port and ware­hous­ing and lo­gis­tics.”

In the Aus­tralian of­fice mar­ket, the big­gest in­flu­ences have been the min­ing boom and “hot- de­sk­ing”, or “ac­tiv­ity-based work­ing”.

Conry agrees the mar­ket has been tread­ing wa­ter, with over­all busi­ness de­mand for space weak. JLL has also de­tected a slow­down in de­mand from the re­sources sec­tor within the past cou­ple of months. He points out that it’s not just the min­ing com­pa­nies them­selves who have been dom­i­nat­ing of­fice mar­kets such as Perth and Bris­bane, but also the en­gi­neers, lawyers and ac­coun­tants work­ing for the sec­tor.

While he be­lieves that some com­men­ta­tors are be­ing alarmist about the out­look for the min­ing sec­tor, Conry says much will de­pend upon the rate and ex­tent of the slow­down. “And no one knows that,” he says.

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