Peter Holland, the director of international property economics at Urbis, has been tapped to organize ULI in Australia. Holland works with a wide range of clients in mature and emerging markets for Urbis, a professional consulting firm operating in Australia, Asia, and the Middle East. Recently, he sat down with Urban Land contributor Lew Sichelman to discuss his plans to build ULI’s presence in the country.
You’ve been asked to be chairman for ULI Australia, which will become part of ULI South Asia. How far along is the effort?
We are still in the initial planning stages. We’ve been discussing this idea about Australia becoming part of ULI South Asia for about a year. Now we are trying to determine if there’s enough interest there to do it. We already have a base of 100-some members in Australia. We have our publications, but not much more. There hasn’t been a lot of interaction between ULI and Australia itself. You have to remember, we are very remote and distant from the U.S. But we think there is certainly potential for increasing the membership base in Australia.
There are a lot of lessons to be learned from projects around the world, and ULI is a very good conduit for shedding light on world-based best practices, be they from North America, Europe, or Asia. Initially we see ULI’s role here as being primarily research. That’s where its strength is. In terms of networking and lobbying, Australia is already extremely well provided-for through a number of different bodies, so that is not what ULI will try to serve or where it will try to compete. Rather, the intent is to strategically align ourselves with the Property Council of Australia so the PCA can supplement its activities with what ULI does in the international arena.
At the start, we will be doing lessons-learned type of sharing. That sharing philosophy is probably not as prominent or as well developed in Australia as it is in North America, and ULI has been very much in the forefront of that. We’re not at the Asian or the Middle Eastern ends of the spectrum, where there is just no sharing of best practices; there is a degree of sharing, but not to the same extent as in North America.
At the same time, ULI in Australia has to be more than a publication every two months; that isn’t enough. We will have some forums and we will be a fairly significant contributor to the PCA annual congress. We also hope to initiate some research, mainly by ULI, but possibly also with some other bodies. There are a lot 0f potential topics. One that we’re probably going to pursue will take What’s Next? and Australianize it—put it in an Australian context. That’s a very simple one to the extent that it has a lot of ideas and thought, and it will certainly put ULI out there in the public domain. It’s a very good way of showing what ULI can provide to Australian companies.
Other possible topics include affordable housing and the regeneration of inner-city brownfields. Currently, there’s a big information gap here on those kinds of projects, so whatever we can bring to the forefront on those issues would be very helpful to the development community and encourage greater public sector participation.
Historically, the public sector has taken a very active role in ULI. That helps make complicated projects happen—projects that involve a significant public good as well as a commercial aspect. The Property Council doesn’t do much of that. Basically, it’s an advocacy body, so it represents the industry’s interests and lobbies. PCA doesn’t have the resources or have the research capabilities that ULI does. They do an audit of property markets and some other reports, so there’s a bit of an overlap there. But I see research as a great way for ULI to leverage into a market very simply and at low cost. That would push ULI forward.
Tell us a little bit about yourself.
My title at Urbis is director of international property economics. For the last six or seven years, I’ve just worked on projects and markets offshore. Our clients are probably 90 percent offshore as opposed to being Australian. We’ve had offices in London; we’ve had offices in Dubai. Over the last three years, we’ve done work in China—in a lot of cities there. We’ve done work in South Korea, Japan, Hong Kong. I’ve done work in Malaysia, in Singapore, Indonesia, India, Sri Lanka. I’ve done work in Pakistan, the United Arab Emirates, Saudi Arabia, Amman, Qatar, Morocco, and Fiji. We are quite opportunistic; we will be in a market if there’s enough work.
We are quite proficient at valuations, which is what you call appraisals. And we have public policy, which is really social research. There are a lot of these kinds of evaluations which go into such programs. They’re not property related, but they are a very interesting part of our business. Another aspect of our business is telecommunications: we do a lot of work for Telco, a company in Asia, particularly on their requirements for towers and facilities. And we do a lot of master planning for new communities—parks and landscaping.
Let’s get back to Australia. It’s a big country.
Yes it is. Geographically, we’re as large as the United States, but our population is not big. We’ve got just 23 million people. Most ULI members are on the eastern seaboard, scattered between Melbourne, Sydney, and Brisbane. We have a few members in Perth and few in Adelaide. ULI Australia will be national in coverage, but the basic thrust and concentration will be on the eastern seaboard, where the bulk of the population is located and most of the development takes place.
How are the Australian economy and real estate market holding up?
From a macro view, Australia has weathered the storm. Australians have been fortunate in that we have benefited by being able to piggyback on China’s growth. We provide money to China in a big way. In fact, we have all sorts of things that China wants, so that has helped the economy greatly.
Our banking system is far more regulated than that in the U.S., so we didn’t have the kind of problems and turmoil you had there. We’ve had modest economic growth, so we’re not in a recession. We’ve had a few more [labor] strikes than usual, and manufacturing has clearly been hit and will continue to be hit. A lot of retail is down, too, because consumer spending is down, and the finance sector is on hold awaiting new regulations later this year. So in that regard, the economy here is a bit fragile.
At the same time, you might say ours is a two-speed economy, and all that flows through to the property markets.
Our housing values are very high. We haven’t had the market correction that a lot of other markets have had. Housing is down, but prices haven’t fallen by 30 percent like they have in other places. Inner-city living has become increasingly popular here, too. The acceptance of high-density living is high, particularly close to the central business district areas. But the outer suburban markets have slowed down.
Banks have been very conservative in their lending. We didn’t have the subprime issues that you had in the States, but banks here are still very risk adverse, especially on commercial. The whole ballgame has changed.
Our commercial market is not bad, but there are big differences from city to city. Our smaller markets like Perth are very dependent on the money sector, but our larger markets are a little bit more diverse. New office buildings are still being built, and vacancies are typically around 5 to 7 percent, which isn’t bad.
The government has had programs to boost the economy, some of which were successful and some of which weren’t. For example, in the housing sector, first-time buyers were given a grant to encourage them to buy. That was fine in that it did increase sales, but it also worked to inflate values. So it is partly responsible for Australia’s high house prices.
One good thing about Australia is our strong population growth. Typically, our population growth represents 50 percent migration and 50 percent natural growth. But at the end of last winter, migration was very high—much higher than normal. Traditionally, 100,000 people come to our country every year. But at the end of last winter, it was double that.
So, our economy is working pretty well. We’ve had around 1.2 to 1.5 percent per annum growth; that’s helped out.
Most of the office stuff is institutionalized. We have probably one of the more advanced credit markets in the world. All properties are very much performance oriented because they are publicly owned. If it’s not financially responsible, it’s not publicly acceptable. It’s not like an Asian market, because in Asian markets, invariably properties are not publicly owned, so they are not publicly accountable and not always financially responsible. That’s one of the challenges going forward: a greater degree of sophistication still has to be introduced into the Asian markets.
We come from one of the most transparent real estate markets in the world, and it’s hard to duplicate that elsewhere. It’s just not very transferrable.
Has the euro crisis slowed the financial system here?
This is general, but I guess everybody is upset about what’s happening with euros. That uncertainty has put a bit of a damper on getting some projects financed and going forward. So we’re more thrifty now and it takes longer to obtain funding. It’s not as difficult as it was, say, six months ago, but there is a degree of contagion. Right now, we’re sort of treading water. When there’s uncertainty, you pull back. But hopefully, things will be better by the latter part of this year.