Ready Media Group’s Managing Director Rob Langton recently sat down with Burgess Rawson (Canberra) Managing Director Guy Randall for a compelling chat about the Canberra property market.
From the ACT property market to the drivers or supply and demand, along with the rise of the Burgess Rawson Canberra office, the Podcast provides a fascinating insight into Guy Randall’s views on the current market.
The Podcast transcript can be found below.
Rob Langton: This morning we’re speaking with Guy Randall, Managing Director of Burgess Rawson Canberra. The guy offers more than 25 years of experience working in both public and private sectors and is widely regarded as one of the ACT’s foremost real estate specialists owing to his expertise and direct involvement in land-marked transactions that have shaped the city today. Guy was also named National Salesperson of the year at the 2021 Australia Real Estate Institute of Australia Awards, where he also won the 2020 edition as well.
Guy pleasure speaking with you this morning.
To begin, let’s talk about the broader ACT market, which sectors are performing strongly at the moment?
Guy Randall: Hi Rob, and thanks for having me on. The broader at the moment is well into the development stage, there is a lot of development happening in Canberra. Canberra is a really diverse market with a really strong backing of residential mixed-use off-plan type of development. In addition to that, we’re finding the industrial sector. The industrial sector is really lacking in opportunities in Canberra at the moment. A lot of those are being essentially made - there is not a lot of land opportunities. Anything that is sold, we’ve already sold large industrial parks completely off-market. We haven’t been given the opportunity to take them to market yet. Everything that is coming up for sale or lease in that sector is essentially being paid overs, the square-metre rates are increasing dramatically. Now we’re trying to transition that to more of a net-lease type of arrangement as well, which is only helping the yields. The yields are contracting dramatically in that sort of sector. We’re still finding that the retail sector mainly in there investment opportunity is absolutely booming. There is a flux of investment opportunity - cash available. Investors are really pushing those yields down dramatically at the moment. And they’re really looking for opportunities they can get their hands on to transition their cash in this market.
Rob Langton: What are the major drivers of demand?
Guy Randall: I think there’s cash. There’s a lot of cash sitting around at the moment with not much opportunity to spend it in some respects. That’s obviously been from the low interest rates that have happened and Covid has seemingly turned everyone back to their belief in property as the solid basis for all their future investment. We’re just seeing that there is an abnormal amount of people who have a lot of cash sitting around. They want to get out. They want to get yields more than what they are getting in the back, which is 1% effectively, so they are really really driving demand with an unprecedented amount of buying sitting out there unfulfilled, that we can't simply get enough product on the market to deal with that.
Rob Langton: Which pockets and sectors are offering the greatest opportunities for both developers and investors in the current environment?
Guy Randall: In Canberra here and I suppose in my sort of niche where we in work in we found there’s a lot in the mixed-use sector, we found there’s a lot of development in that range at the moment from that large residential and commercial precincts and developments. So we’re seeing a lot off-plan assets are being taken up, pre-DA, pre-commencement of construction. And that’s for future investment as well as businesses are trying to take control of their destiny and actually find their own spaces in great locations. But essentially, I think for them it’s really looking to those essential services like medical. Medical is a very fast growing sector. Yields are compressing dramatically. Large funds, private equity are looking to invest into them straight away, into 'fund throughs’, that sector is going fantastic. Childcare is booming, the governments announcement with new incentives and rebates for parents. That sector is essentially transitioning from a lot of the old childcare type services to early learning with a lot more services being provided; brand new builds and a lot more outdoor spaces - that sector is doing really well. And then your typical favourites like your fast foods and your service stations. And what we’re finding as well is surprisingly in regional assets, there is a really big demand for regional assets because traditionally they are a higher yield but they still come with national covenants, which still gives you the security of it, you just get a slightly better return in this market as well.
Rob Langton: To what extent are you seeing appetite for investment amongst foreign groups?
Guy Randall: That’s not really a space we play in as such, whilst a lot of our buyers still do get money from overseas, we really play mainly internal to Australia. We’re seeing that big interest from private super funds, private equity groups, a lot of investment funds are really trying to get a long WALE opportunities, and there's some extremely wealthy individuals who’ve made their life in property and have a lot of cash at the moment willing to do that. Whilst we are still getting foreign investment, I think that’s really sitting in the capital transaction space, rather than the lower end $20 million space at the moment.
Rob Langton: As i understand it, you pursue quite a different approach than others in terms of working with developers throughout the lifecycle of an asset. Can you tell me a little bit more about how that works and how that’s been received by the market?
Guy Randall: I think as a commercial agent and consultant you really need to give yourself the opportunity to show your value to a property, and I think that’s really what we do a lot. That’s what we’ve really dedicated our space in Canberra, as well as my expertise in that space where what that really means is we go out and find assets. Whether that’s a block of land, we work through that. I get a really strong team of lawyers, town planners and architects on board and what i generally do there is, I go out and do a feasibility on the site. I’ll work out what’s going to be the best-use that we could possibly pull-off that site. We then go and get some plans drawn up or some schemes that we can stack on there. And then I’ve either have a developer that we're working with, or we effectively look at that and then give it to a developer who's pretty much going to give themselves a turn-key opportunity. Along that path as well we already try and find the tenant who is going to be there and we give them the first opportunity. One’s we’ve been working with - new tenants that come along, people who are looking for great opportunities. We try to really package that up, whether that’s a brand new asset in terms of a land release program that the government is actually putting for auction. So we do a lot of work before we already get to auction. So by the time the developer gets to the auction hammer, their value in their property is dramatically more than anybody else they're bidding in, and generally we win those auctions and ultimately give ourselves work for the next period of time. Or the other way we’re working in at the moment is we just find any building. Any building that’s there, whether someone has owned it for 20-30 years, we do a feasibility on that site. And then we approach the owner and let them know whether it’s something they can redevelop and give a big upswing with their GFA, or whether they’re looking to sell and they have a buyer lined up ready to take that development opportunity for the upswings, so the vendor gets a great increase in the price that they would have normally gotten. And the new buyer or developer actually gets a larger asset with upswing that can happen and ultimately a much improved asset sale in the end or something to keep in their fund.
Rob Langton: And what sort of product, just off the back of that is selling well in the local market for developers, particularly focussing on, say residential development?
Guy Randall: Yeah, we’re seeing that residential development side which is what we’ve started going into now in that off-plan market environment where it’s still investor stock. Investor stock is doing dramatic increase in opportunity there in Canberra, so a lot of those 'one-beddies’ and ‘two-beddies’. We’re finding a lot of downsizes as well, however we’re looking at where there’s amenities, so a lot of those products we’re looking are in those big mixed-use opportunities. So, we’re already getting assets, whether that’s in a super market or a medical facility, childcare or some retail, a food eatery street or something we can provide. They’re actually looking for product that’s in those amenities so that they don’t have to walk too far, they can actually step out of their door. Those types of products are selling very very well. And across all agencies that are doing that are finding really good increase back to the market, there was obviously was a drop-off during Covid, but the market seems to be extremely strong right now.
Rob Langton: Walk us through the buyer profile for your campaign so far this year and has it changed this year as compared with previous years?
Guy Randall: I think the buyer profile probably hasn’t dramatically changed as such, there’s certainly been some different variants, but realistically it’s just more and more people interested in our auction portfolio campaigns. We’re putting on bigger campaigns each 6 weeks, and obviously the value of these properties are increasing dramatically and the yields are just sharpening so much. So we’re still seeing that come from small super funds, mum and dad investors, some investment funds at the higher and more institutional type level of product. But, you know, Bunnings are still selling to family groups that are putting money together, or they’re selling to wealthy individuals - they’re still selling to or a small super fund. So it’s not necessarily about the size of the asset, it really comes down to whether it’s a national tenant, whether it’s an essential service, whether it’s in a location at the moment. So that dramatically hasn’t changed - we just have a lot more people and a lot more cash that is sitting there ready to put it back into property instead of the share market, which they’re so volatile at the moment and they’re not really comfortable in that long-term investment in it, where property is the flavour again and everybody is just in love with it again, and it’s providing that good solid basis for your future investment.
Rob Langton: How are you finding the supply to the market of both development and commercial opportunities, and what are the benefits of taking properties on-market as opposed to off-market?
Guy Randall: Yeah, the supply is there. It’s quite interesting, because we are showing the yields, so the benefits of the on-market campaigns is dramatic especially with Burgess Rawson. You have a truly national reach, you have a truly national marketing campaign. You can look at our auction portfolio’s and all the digital space we’re working in. And you can see the sheer volume of people that are enquiring that are looking there. To be on-market, essentially ensuring you're getting the best yield for your property. We have auctions where hundreds and hundreds and hundreds of thousands of dollars over reserve on something that is below 2 million or even below 5 million. The pressure of that auction portfolio, or even that EOI (Expression of Interest) is dramatic at the moment. The opportunity we’re finding is a lot of very astute institutional type private investors are trying to hold on to their stock. Yes, they might get a big uplift now, but still, they’re being very tight on it. Where others see the opportunity cost and that cost cannot be lost, as the opportunity cost to turn over your asset now and create another asset essentially in that development market is where you’re going to get that big upswing. If you can take the lower yield, which is probably going to be a twenty-year cycle, which we’ve never seen anything like it from a commercial agency perspective. You put something on the market, you do an amazing campaign and you’re going to get the best price - it’s as simple as that. But from a developer, if they've got assets and turning over, they can create a big windfall to then give them that opportunity cost they can put it into one or two more developments. And that’s what we’re seeing.
Rob Langton: What’s your grow outlook for the Canberra market over the next say 1-3 years? Do you think it’s going to continue onto the trajectory that it has been on recently?
Guy Randall: I think Canberra especially has got those fundamentals. It’s got the security of wages; high wages, dual income families, great disposable income, we’ve got a pipeline of construction - you only have to see the towers in Canberra all over. We’ve got a lot of investment in big developments in residential development estates and there’s a dramatic increase in population growth. So, I can’t see Canberra slowing down and especially not with interest rates tipped to stay, you know in this basis over the years I really can’t see Canberra going down. If anything over the next year I see some dramatic growth because we’ve kind of come out of that Covid nature, hopefully we don’t go back to that. But we found last year during Covid, for 3 or 4 months that you sort of lost all of your property management and you lost your leasing, but what we found from August/September on was that by the end of the year we had done more transactions that we'd ever done ever before. People were trying to skew their own assets, the investment was coming through, we simply just cannot keep up with it at the moment. I think I‘ve got about 80 opportunities on my board that we’re trying to get to market and try to get to development, and the time it takes is really putting into that to get them to market. But the buyers are there - they’re loving off-market opportunities. They’re really looking at anything at the moment. I say the growth for Canberra over the next 3 years to be very bright and dramatic. Couple that within our space where we’ve got the advantage over all the other markets in the country is that our stamp duty rebates in your first year - that is huge. And if you’re under 1.5 million - stamp duty free, and if you’re over $1.5 million then you’re allowed to claim your stamp duty in full in the first year. That makes a dramatic change to your yield that you do in any other state. So the opportunity for investment in Canberra is huge.
Rob Langton: And just one final one to finish. You’ve Managing Director at Burgess Rawson Canberra for the past 5 or 6 years, talk to me about the strength of the agency today and what some of the services you bring to the table are.
Guy Randall: When I first looked to the brand and see if we could purchase the Canberra rights, it was something that I loved for a long time. They [Burgess Rawson] were the leaders in what they did and their returns and actual responses to the market were so far above any other agency, so I fought pretty hard to get that opportunity, and was pretty blessed to be able to do so. It was two guys on some plastic tables in a very vacant office, which hadn’t been marketed. And that’s what we started with. Now, we’ve grown dramatically - we’ve already in this last year doubled in size and we’re going to double in size over the next year. So that is all just because of A, the strength of what we do (we’re a full service agent in Canberra) but also the strength or the brand. People are really now understanding that brand in Canberra. We’ve showcased Canberra to a national audience; 95% of all of our transactions have come from outside of Canberra, so we’re really showcasing Canberra to the national market well. The brand itself is a phenomenal brand; it’s a machine. It delivers for our clients time and time again here in Canberra as well, and nationally we’re doing record yields in asset classes. We’ve got record suburb yields consistently. This year we’ve broken a phenomenal amount of records, but we only see that continuing. We’re now a decent player - we’re not the same as tier 1s but we compete in those spaces that we own, and we own those spaces very very well. We’re a full agency now and I’m loving it. We’ve got a great upswing for the next 5 years and I can’t wait to experience it. We have got some amazing staff and I’m really looking forward to the next 5 years in the Canberra market. I think it’s going to be very exciting.