After more than thirty years working across every aspect of residential project marketing, I am convinced that real estate is not for the faint-hearted. And for those with the metal and foresight, the dynamics in this market are both challenging and exciting.
Under the current conditions, the success of any undertaking will be driven by a deep appreciation of complex and endlessly varied factors. Some like supply, demand and price are easily measured, whilst establishing a clear view on the macro demographic and lifestyle shifts is a more nuanced exercise.
If we just take Sydney, my hometown, as an example; this city is always changing, and the pace of change is by no means slowing.
You see it traveling across the city or through suburbs like Parramatta and Chatswood. Drive along the Pacific Highway through Sydney’s North-Shore. Walk the streets of Double Bay in the city’s east or along beachfront locations as diverse as Bondi and Manly – transformation is everywhere. It is inevitable. And if Sydney, and other major centres, really do want to succeed in today’s technologically and environmentally driven world, it must be embraced and nurtured.
The question is how best to capitalise on it and pinpoint those opportunities and development initiatives that support and lead this phenomenon.
Responding to Rapid Growth
It certainly fair to say that the rapid growth we’ve seen over the past five to six years in respect to major residential development projects has been unsustainable.
The froth of the bull market that saw 100-150 people in a room, all anxious to buy an apartment off-the-plan was never going to present a long-term model, with the over-hyped market distorting prices, quality and planning.
Now buyers who were caught up in the frenzy of the last few years have become much more selective, with most buyers drawing the conclusion that there is currently an ample supply, sidelining any sense of urgency.
Prepare for the next cycle
As we move out of the current cycle, buyers are going to have a very different attitude to apartment projects and that will help create opportunities for developers willing to take the lead.
Over the next few years key factors will be project quality, location and infrastructure – a trend that will impact at every price level.
Quality will be key
Quality needs to be addressed across the full spectrum of the market. This will be a base requirement irrespective of geography – and comprises any attribute that makes an apartment a good long-term home or investment. It is a mistake to suggest that somehow investors care any less about quality – in today’s market quality matters to every buyer.
It is safe to say that the era of the quick turn-around or ‘template’ approach has come to an abrupt end, except in those cases where a high degree of creativity and attention to detail underpins the design.
Transplanting project designs from one location to another will raise red flags amongst a buyer audience that has developed a discerning eye over night.
Location and infrastructure will become ever more important
The dialogue in the media as to population growth, government infrastructure spending and precinct amenity has set an expectation among buyers as to the range of services that should be available. Developers and planners need to think beyond the cliché of cafes and supermarkets.
While transport is always key, so is access to employment and in some areas apartments that have access to a school gate. This is important as increasing numbers of families make the move into 3-bedroom apartments, without future aspirations of relocating to a detached home.
The wisdom of staged developments
I would like to see more staged developments with an ability to adapt product to a varied demographic, while responding to feedback through the sales process.
Apartment projects that reflect the wider community offer better long-term value – and the luxury of multiple stage releases over a number of buildings helps to better examine and understand the requirements of the broader community, which in turn means developers can tailor product to a wider audience.
The trend towards infill sites will continue
The trend favouring infill sites will continue for the sensible reason that these sites usually have better access to established services and infrastructure.
These same locations will often appeal to local buyers keen to upscale in quality or ‘right-size’ from a larger home. This trend then allows neighbourhoods to transition across different generations which is important in keeping the area vital.
These infill sites will continue to vary in size, presenting strong opportunities for smaller scale projects. But economic scale is also important and sites that can accommodate 100-150 apartments in stages look very appealing.
Sites may be limited, but Sydney does have some excellent examples in Rushcutters Bay, Randwick and Summer Hill. There will also be vertical sites in CBD locations where commercial buildings can be redeveloped.
Limiting growth is not the answer to development pressures
With cooperation and vision from both developers and government, our cities can be dynamic. We ignore the inevitability of population creep at our own peril – and while in the short term it may be curbed to some degree, in the long term we would be better served to prepare for it’s inevitable arrival.
To achieve the best development outcome, we need to see government planning onside and engaged with the community in order to play a constructive role in shaping the inevitable growth and development of our suburbs.
In turn, developers must play their part by bringing quality and innovation to our vertical communities, and maximising local and state government planning and infrastructure initiatives.
Relevant legislation that helps deliver quality communities also needs to keep pace. Sydney’s burgeoning population can ill afford to have legislation lagging for years.
As an industry we have the experience and expertise. What we need is greater commitment to going beyond current standards and to exceed buyer expectations. Those who do will reap the rewards through the next cycle.
This is an exciting market and developers have the means to respond creatively and constructively to shifts in demand. As we look to emerge from the current market we need to be bold.
Peter Chittenden
Managing Director | Residential
Colliers International
