Don O’Rorke from Consolidated Properties Group on developing during COVID

Our CEO Kirsty Chessher-Brown interviewed Don about development during the pandemic and what 2021 might hold for the industry.

Don O’Rorke from Consolidated Properties Group

Tell us about your COVID experience

I guess like everyone else we didn’t see this coming.  We actually thought we were going to come into a good period for the sector in 2020. Last year started off with the Hayne inquiry and the flow-on effects washed through the system and we saw banks being absolutely frozen in terms of their ability to lend.  Then we experienced the phenomena of the federal election and the inertia that always comes before that. This was probably compounded a real threat of Labor taking office, and the significant reforms they were proposing, none of which were good for the property industry.  So 2019 was a flat year up until the vote. The election of the Morrison Government was a tremendous shot in the arm for the industry. In the fourth quarter, we made lots of sales and were very optimistic about the market.  In fact, I am on the record as saying ‘get ready for the boom of 2020’!  Unfortunately, we came back to something we didn’t expect and COVID has placed a whole raft of new challenges in front of us. 

Half of our business is shopping centres and offices. During COVID our neighbourhood centres performed really well. We actually collected the rent and we haven’t lost any tenants.  We have a couple of hundred specialty shops, so that’s been an interesting experience and has taken a huge amount of labour time negotiating specific deals with each tenant to see them through difficult times. But all in all, I think we managed that aspect as well as we possibly could and I think there might be a repricing of that sector because of the resilience of neighbourhood centres, versus regional and sub-regional centres.

On the residential side, we had completed building product on the ground during the April-May period but we were able to sell those townhouses and apartments and settle existing contracts without any defaults.  We also have a small number of house and land packages, including one stage at Cornerstone. That product was difficult to sell during the April-May period but the product has been flying out the door since the announcement of HomeBuilder. I noticed that the listed companies like Stockland are happily reporting similar results, obviously on a much grander scale than ours, but the land business has been going pretty well.

We took a view during COVID to keep our sales offices open to continue to present to the market. However, we did pull back our marketing and advertising during that period. But in the last month we’ve really noticed an uptick in enquiry. So, my take on that is two things. One is that the stimulus packages seem to be targeted towards house and land, rather than apartments, and also house and land is very much a here and now experience, whereas apartments is a commitment to an acquisition in two years’ time, so there’s a different sentiment running through that product.

We are looking to be optimistic about things. We are seeing new enquiries and I think there is recognition that the supply won’t be there in the medium to long term. So there’s certainly no chance of an oversupply, and probably an undersupply across all sectors of the apartment market including both investors as well as owner occupiers.

What’s your view on the outlook for Queensland house prices?

I’m an optimist, so I don’t see house prices falling. There’s been quite a bit of media around the possible scenarios. At the pessimistic end, there is a situation where unemployment goes to 15% and all the normal markets for the economy fall, including a significant fall in house values.  At the other end is the positive scenario that sees JobKeeper maintaining people’s jobs, unemployment not getting any worse, and spending in the economy increasing.  While that may not result in price growth, it would certainly not result in a crash in house prices. But more importantly, if the employment numbers are there demand for housing will be good. At the end of the day I think housing is driven by two things. Population growth and employment. So, if employment rates are steady, there is at least one of those two indices is working.


In terms of stimulus, what do you think the industry needs to keep it running as an economic powerhouse?

I think the key measure is ensuring JobKeeper is tailed off gradually, rather than ended at one specific point in time.  It’s pleasing to see the Prime Minister make some comments recently indicating that might be the case.  A sensible rollback of JobKeeper that underpins the employment situation would be one of the most beneficial decisions for our industry.

What does 2021 hold for the property industry?

We’re all guessing. I think we can start to see how the health crisis ends. And I think, the Victorian situation in the last couple of weeks, has shown us that our governments are prepared to do the hard lockdown and prepared to take the hard measures to get these things under control quickly. And so long as a vaccine appears at some stage, the health crisis won’t always be a health crisis, the economic crisis though is however much more difficult to fathom. There are just so many variables, running through that both within Australia but also around the world.

So, 2021 will be the year of the economy, whether it’s a depression, a recession or something in between. I do take comfort from the fact that the Federal Government is listening to its advisors and watching the economy. So I’m heartened by the fact that they are reacting sensibly.

What will you take from COVID?

We’ve jumped forward 10 years in terms of our use of technology in 10 weeks. So I think one of the big changes for me is learning that we don’t necessarily have to get on an airplane every five minutes. There are things we can do remotely. I think we’ve also figured out that companies can work remotely and still get through their work.

I see our industry as a service industry. We’re providing housing and accommodation for our population and we’re providing places for people to work. And I think the service mentality that is required to meet our client’s expectations, has really been underwritten through this process – you need to know how to provide products for our markets and do that as efficiently as possible.

I’d like to think work life balance has always been part of Consolidated Properties Group, but hopefully you that will get a bit more traction in the wider community too.

The bad thing is, I’m not skiing in Canada in any foreseeable future. And I’m not sitting on a surfboard on an island in Indonesia any time soon. So that’s the downside to COVID!