Lift to Wages coming for Property Sector
Lift to Wages coming for Property Sector
An estimated $50 billion wall of capital to cope with the logistics boom set the stage for a strong rebound in 2021, along with still-strong demand for other high-income real estate asset classes.
As property companies begin to look at rewarding staff while also looking at expansion opportunities including new hires, the booming housing market rages on and a flood of capital pouring into sectors such as logistics.
According to a survey by Avdiev in march, a property sector is poised for recovery. The difficulty of the past 12 months is evident, but the results reveal how quickly and effectively property businesses adapted and suggests they are now looking to the future with cautious optimism.
“The Australian economy is returning to growth, thanks to our successful containment of COVID-19 and the government’s record levels of economic assistance. Our economy grew 3.1% in the December quarter, on the back of a 3.4% gain the previous quarter, the first time growth has exceeded 3.0% in two consecutive quarters”.
Unemployment is back to 5.8%, which is a far cry from the 10% rate some predicted at the height of the COVID-19 crisis. Consumers are at the helm of the economic recovery, with retail spending up 11% in January compared with January 2020, showing not only the pace of recovery but also the impact of the bushfires at the beginning of last year.
The property market is also picking up.
The property investment sector has experienced mixed results. The industrial sector is booming, with strong growth in demand for warehouses and logistics facilities. The office market is facing a period of uncertainty, but rent relief has not created the heavy burden many feared. While some tenants are downsizing, others are requiring extra space to allow for social distancing.
Property developers have been buoyed by the strong recovery in residential housing, but the huge reduction in migration is weighing on the sector.
Real estate agencies are benefitting from the surprisingly strong recovery in the housing market. Stock on the market is still thin, but there is still plenty of interest in real estate. Agents in regional centres are benefitting from the shift to working from home.
Retail managers have had to grapple with the shift to e-commerce, which has eroded both rents and values. Working from home has also meant people are shopping locally, rather than travelling to large centres. The end of JobKeeper could put further pressure on the retail sector, which will continue to face uncertainties in the year ahead.
Architects, planners, project managers and quantity surveyors have seen project cancellations and delays, and firms have had to look for cost savings. However, conditions are now returning to pre-COVID levels.
The current business climate can be seen in the report below
As reported in the AFR, almost three-quarters (71 per cent) of property businesses surveyed by remuneration consultancy Avdiev in March said they were planning to give their staff modest pay increases this year, up from 55 per cent who said they would in 2020 after many implemented pay freezes during the pandemic.
Almost all (96 per cent) of the development, investment, design and construction companies surveyed by Avdiev said they were doing moderately to very well, while a third said they were doing better now than they were at this time last year.
For those who got increases in 2020, the average across the sector was 2 per cent down from 2.5 per cent in 2019 but above the 1.4 per cent Wage Price Index for the general workforce.
John Wise, CFO of ASX-listed valuation firm Acumentis, said the company would review its remuneration policy in June with a view to providing 1-2 per cent pay rises this year after providing minimal increases last year as it looked to conserve cash.
“The market really started to pick up in September and October, when the number of cases got under control, a bit more sense of normality returned and the stimulus measures like HomeBuilder kicked in,” Mr Wise said.
“Our valuations, which are driven by mortgage volumes, are up about 20 per cent year-on-year which is driving stronger revenue for us.”
The company, which survived not only the pandemic but also a high-profile data breach in 2019 that is now the subject of court action, is back on the expansion path, Mr Wise said, after opening new offices in regional Victoria and acquiring a business in Tasmania, all of which require the hiring of new staff.
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REFERENCES
- Pay rises back on the menu as property sector revives
By Larry Schlesinger
- Avdiev Report March Update
- Industrial demand lifts commercial real estate deals to $27.8b
By ESR
- INDUSTRIAL DEMAND LIFTS COMMERCIAL REAL ESTATE DEALS TO $27.8B