SIGNS OF A RETURN TO SHORE
JONES LANG LASALLE CHIEF STEPHEN CONRY SAYS THE INVESTMENT TIDE IS TURNING IN FAVOUR OF DOMESTIC PLAYERS.
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
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.