CEO’s address

Land is the scarce and finite resource which anchors all structures from houses and unit blocks through to inner city office towers, industrial developments and retail accommodation. 

While built structures inevitably depreciate, land rarely diminishes in value and is frequently repurposed as property cycles continue, and cities evolve. Land is the scarce and finite resource which anchors all structures from houses and unit blocks through to inner city office towers, industrial developments and retail accommodation. 

This month’s contributions in our residential space explore how this basic component is being treated by buyers and sellers across the nation. Because land is fundamentally the same resource, our report could well be regarded as the ultimate exercise in relativity.

While we have covered the end product in terms of vacant homesites in this report, it’s interesting to also consider the foundational raw resource that is greenfield englobo land, i.e. original sites prior to subdivision or development.

We live in unusual times. In major capital-city growth corridors, rapidly rising construction costs would ordinarily render development of many sites unfeasible, and negatively impact englobo land values. However, the relentless population surge currently being experienced continues to drive developable  land markets higher, and essentially overpowers the impact of higher construction costs. However, where is the break point? 

The reality is that it is still far cheaper to create housing in outer suburbs and fringe areas. Increasing supply in such locations is far quicker and cheaper than more central medium density urban development. This is bolstering englobo land prices, and developers are continuing to land bank accordingly.

We are however possibly starting to see the break point come in the inner city areas of major cities, where construction activity is well below the levels required to satisfy current demand, and only sites which can command premium end prices are stacking up. 

On the commercial side, the greatest user and driver of demand for land is the industrial market. In recognition of this, entry-level industrial investment is the theme we’ve homed in on in this issue of Month in Review. While now moderating, there has been exceptionally high demand for land in strong growth areas. Across most major centres, good quality developable land in the industrial sector is scarce and this has driven price growth. Demand and price growth for the end product is, however, strong enough to justify higher construction costs and longer development time frames.

For other commercial asset classes, land take up is far more gradual as the increased construction cost environment has impacted the feasibility of new development with lesser levels of demand and extremely tight profit margins now being the norm.

Comprehending the complexities and nuances of land markets is a skill earned via years of experience and repetition, and Herron Todd White has the most comprehensive team of high-level professionals in the nation. It is essential for stakeholders to talk to our specialist teams in any given asset class to determine their most profitable property strategy.

Finally for our rural readers, one of Australia’s most respected professionals, Graeme Whyte, delivers comprehensive coverage of horticultural property markets around the country. For those with an interest in the sector, this month’s rural report is essential reading.

Please enjoy our September edition of Month in Review.

Gary Brinkworth

CEO