PR:
Hello and welcome to Talking Property, our CBRE podcast series where our team of experts, our clients, and industry specialists share insights into the way we live, work, and invest through the lens of commercial real estate. I'm Phil Rowland, CBRE's CEO for Australia and New Zealand, and I'm your host for this latest Talking Property episode. Today I have the absolute pleasure of speaking with Mike Zorbas who took the reins in January as Chief Executive of the Property Council of Australia. Prior to this, Mike was the PCA's Group Executive of Policy and Advocacy following leadership and advocacy roles that he held at Lendlease, Grocon and Stockland. Mike is a strong and respected voice for our industry who is very passionate about the role that property plays in shaping our future cities. Mike, thanks for joining me today.
MZ:
Mate. It's a huge pleasure. Thank you for having me.
PR:
Well, Mike, before I get started, I do have to ask you, are you loving your first six months?
MZ:
It's been brilliant. I've been blessed. The member response has been overwhelmingly positive, and of course I've been equally blessed by the huge number of policy challenges that have come our way from the Federal Government, at a state level. There's never been a more interesting time to be in property.
PR:
Yes, that's for sure. Well, certainly from my vantage point, it’s been extremely busy and we're very appreciative of the advocacy that you're driving forward. Well, look, there's plenty of ground for us to cover today, Mike, but I did want to start with the broader picture. You know, you've come into your role during a fairly tumultuous period in the world economy, and of course for the property industry in Australia, which does actually present some very real headaches. You know, revitalising our CBDs, adapting to the way people work, and of course, adjusting to this higher interest rate environment that we're finding ourselves in. Not to mention what you just referenced there, housing shortages and of course maintaining capital flows into Australia. And of course, it's easy to highlight all the challenges and of course easy to get into a bit of a slump if you believe everything that you read. But I did want to get your perspective. What's your world view if you will. When you think about the future and you think about what we have to navigate, how well positioned do you think Australia is?
MZ:
Very well positioned, very positive on Australia in the medium and long term as I think history would show us we should be. We've got huge people capability here in the country and great leadership across industry. There are skills gaps, which we can talk about a little later and we need to address those. But in the scheme of the world, one of the reasons that Australia has always done so well and weathered many storms, I think more ably than others, and it's quite possible there is a storm coming, but it hopefully will be relatively brief and less impactful for us is because, you know, we do have great talent here and we do have incredible natural resources and we work well to activate those in unison.
PR:
So I think something really important, what I would sort of term comparative advantages of Australia when we think about how we play on the world stage, you know, you referenced obviously natural resources and talent. Are there any sort of comparative advantages, particularly as we think about a period that we've been through and going through that stand out for you in Australia?
MZ:
Well, we've got very strong institutions here and we've got very transparent methodologies of welcoming in foreign investment. And in fact, it’s been the history of Australia for 70 years. And one of the reasons we've come out of global recessions better than others and in a more advantageous position than many other global economies is because we've had a great deal of reliance on super easy to invest in systems, you know, be they REITs or other vehicles in this country, we're a known quantity, a stable democracy. And you know, generally speaking, over time we haven't changed our rules too quickly or made ourselves repellent to overseas investment. That is the challenge, by the way, as we enter a potential downturn here, is how do we keep that welcome mat out? How do we make sure that investors of this country feel like they can pin their ears back and with confidence, go, 'This is the set of rules that I'm investing within and these are the returns that I can expect'. Because that's the way to get our cities built faster, is to really take advantage of that 70 years of very positive foreign capital that has built those big capital and regional cities.
PR:
Yes, well I think that's imperative, Mike. You know, when we think about future, there is a natural advantage to Australia on the world stage. I mean, the capital flows that you talk about are going to be critical for us to achieve what we want to achieve in the future. And combining that with the talent flow that you referenced earlier through migration, but they're both going to be really important, I suppose, channels for us to be able to capture what we need to capture. Mike, one of the last times that we caught up was at the Property Leaders Summit in Canberra. And of course the topic that dominated the conversation was housing. And rightfully so. We have an acute shortage. We've got a vacancy rate that is now the lowest on record - sub-one percent. If we look at apartment demand, the loan is 570,000 over the next three years in our main cities with supply only running at about 55,000 a year.
Right. So, we've got a challenge. And of course this has obvious knock-on effects into our society and of course this is exasperating our inflation challenge. First and foremost, the question I wanted to ask you on housing is, it's clearly not a one dimensional challenge, right? We can't think about housing as being one type. We need different types across the whole housing continuum. We need it in many different places. Can you elaborate a little bit more on the needs? You know, as you were consulting with industry and with government, what types of housing does Australia need? Where is it needed most and and when does it need to be delivered?
MZ:
Fantastic question and a broad one. I think for me, if I look at the fundamental stats, and you framed it very nicely, we're about 1.3 million homes behind where we need to be taking some of the research that was done recently by an ex-RBA economist. And that gap is set to grow across the spectrum. And the Federal Government in particular has taken a strong line on addressing that gap, I think with affordable and social housing. But there is something like 280 or 290 billion worth of social housing and key worker housing, if you like, needed over the next 20 years. And that is a phenomenal number next to a Federal Budget of about 600 to 700 billion dollars in a hot year. So bridging that gap requires all of industry and all of government. It requires state and territory actors in particular to set themselves very strong housing targets that are quite public and that they are accountable for.
And that's what's been missing over the past 20 years in the buildup of those deficits on housing supply. You rightly identify apartment supply in particular, which is really where you've seen that unhealthy 1% vacancy, healthy vacancy in the apartment market is about 3%. That's where we need to get back to. You won't get back there unless we've got far faster planning regimes and you've got far more encouragement. And there are a couple of ways you can do that, but we won't bore our listeners with that. They know what they are in terms of encouraging investment into renting stock, and that's about not changing taxes, negative gearing, CGT settings. And that's also about not rent capping, right? Because what do we need right now when all this supply is so low, we need the maximum number of people coming into these private supply pipelines and injecting their hard-earned cash in so that we can drive down the overall cost of renting and buying by increasing supply. And it's as fundamental and as basic as that.
PR:
Yes. Well Mike I know the government are acutely focused on this. We heard that loud and clear at the Property Leaders Summit in Canberra, and they'll obviously be an active in either setting or positioning a range of policy settings whether that's the build to rent tax, obviously the, the Housing Australia Future Fund that's trying to get up. Can you just for our listeners just walk through what you see as the bigger policy changes that the government are making. And I suppose the question is it going to be enough from your vantage point and where are you really focused on your kind of advocacy around that?
MZ:
Yes, well huge on housing, obviously on the advocacy front, also ESG and very keen to support in the, you know, migration of highly skilled workers that we really do need, you know, and that 1.5 million that are coming in over the next five years, that's critical. We need to support that. Migration has built this country. It is very welcome in this country and it should always be very welcome in this country to do that. Well, you come to the crux of the matter. You need to house people close to those jobs where they can be a productive part of the economy and not be priced out of our market either. We shouldn't be repelling talent internationally because they can't afford to put down roots here and be well accommodated. So in that, the Federal Government, and I should say at all points, the Property Council supports any government that brings on more supply because it's such a critical issue.
And we did support the last government when they set up NHFIC and we support this government as they're charting their course. Their course looks like a national housing accord with state and territory planning ministers designed to turbocharge our planning systems, make them more efficient and create, you know, far more efficiently planned urban environments. They've got a particular focus on housing targets, which I really hope they stick to, but they're also doing direct injection of funding into the social and affordable side of things. So some 30,000 dwellings are part of the Housing Australia Future Fund currently locked up in the Senate. And we certainly would urge the Coalition and the Greens to get on board and pass that through, because it's not the end of the journey, but it's certainly a very good first step to get that stuff done as quickly as possible.
As I said, the size of the gap is actually 280, 290 billion over 20 years. So getting 30,000 houses on the ground is a modest ambition and we should be quickly, quickly waving that through the parliament. The other thing that is very, very important about what the government is trying to achieve here is really create the data around this. Quite often the reason that we find ourselves in these housing supply deficits, if no one agrees on exactly the size of the task that's required, and that's why we really need to pin these targets very clearly onto state premiers and state treasurers and state planning ministers chests and say, you are responsible for this many next year. This is how many, you know, at market, this is how many social housing, this is how many key worker houses you need to bring out of the ground. And that could be in the form of apartments or detached dwellings.
You know, obviously there's always going to be a mix and that housing choice is very good. And then we also need to encourage that absolutely critical element, which we'd never think about, you know, from a decision maker's point of view, how do we get more specific housing for different parts of this wonderful demographic that we're trying to welcome into the country? So of course we've got an aging population and for a long time, retirement living has sort of been a very strong way of delivering aggregated government goods and services to about 220,000 people around this country. Now, the Retirement Living Council will tell you that they're up for more of that. They want to invest more heavily into the healthy aging of Australia and provide more of those services, you know, in a really good environment where people are far happier than they are if they end up aging at home.
But many government settings at a state territory, federal level preclude the development of that class of investment in those communities. And at the same time, you've got a whole bunch of students coming into the country again supporting our third largest export, which is education, fantastic news. Where are they going to be co-located? Well best next to the universities, best in high density areas. And at that time of life in particular, you're perfectly happy living in very high density places as long as you've got your pool table down the hall or there's a kitchenette that's available nearby, et cetera, et cetera. You know, some of us have actually lived in environments like that and thoroughly enjoyed them. So there are great new opportunities that the Federal Government, I think is starting to look at around really incentivising specific asset classes. And so they should,
PR:
I've got one final question on housing. Like I think the way that you describe the sort of spectrum of needs is great. The only thing I would say is, you know, policy is one thing, right? And sort of action is another. And you referenced before how does government at all levels commonwealth, state local, properly engage, you know, with the private sector to deliver this? Because it's one thing to set a policy, know the targets, but it's another to execute. Are there any barriers you see around that?
MZ:
Look, there are. I think the first thing to bastardise Tony Blair is what gets measured gets done. So it's very pleasing to have seen in the October budget, the first budget of the Albanese-Chalmers interregnum that there's a target of a million well located homes by 2029. And I think having put that boldly out there and then asked all the states and territories to essentially help support them get there, they've now at least got something that we can all clearly see in the distance. There's something to be held account to. So I have a relative degree of confidence that it would be, if they intend to try and govern for more than one term, pretty unwise for them to undershoot that. And I like the fact that they've given themselves their own sense of urgency because it's much needed really this federal overlay in the space.
And that that was recognised too by the current shadow minister Michael Sukkar when he was a part of the previous government. There is an increasing role for the feds in getting housing in this country right. The essential element that is additional to all of this is the build to rent space. And you will have seen past budget a policy intention operative next year in 2024 to bring on far more in investment into build to rent, essentially because the playing field has been levelled with other asset classes that people can invest in from overseas. We want that money in there. It's the sort of money that's productively built so many other asset classes in Australia and left us with really great property legacy assets around the country, really need the housing stuff to come on through BTR. We estimate through EY's work for us about 150,000 homes would come on if these rigs are set up in the right way and in the right way means that there's a pretty pure funnel and 15% coming through from the feds and then what's being done at the state and territory levels around build to rent, housing, planning and taxation settings meshes with that.
And the feds look as though they're very intent on getting that balance right.
PR:
Shifting to commercial Mike, which can't have a chat about property without touching on that. We obviously need resilient and vibrant inclusive CBDs to drive the economy and our recovery out of the pandemic, again relative to the rest of the world has been pretty strong. And I certainly from my standpoint, I feel like we're on the right trajectory, but of course much work remains on that. How do you feel our CBDs are adjusting to the needs of tomorrow?
MZ:
Yes, we're still in that transition period. You're absolutely right. It is very much city by city. So around this great nation of ours, different capitals experience the pandemic in very different ways. They responded in different ways. Their bounce back has been at different levels. I think the long-term fundamentals, you know, for CBDs are incredibly strong. And that is population growth as well as just the aggregation of opportunity. I mean, let's not forget, you know, there are plenty of examples in history where people have called the death knell of a given city for some catastrophic reason or other. You could think of New York in, you know, September 11 and then of course being totally wrong three to five years later when people come flocking back as they have done for 5,000 years to the superior opportunities that cities present. So I am very confident that those human drivers haven't gone away just because of that pandemic.
But in the short term there's been a big readjustment obviously, and the tech side of things has influenced how people engage in the workplace. I do see more people coming back in our CBDs and I travel around the country fairly regularly, so my own anecdotal barometer certainly gets a work out when I walk around city streets in each of the major capitals. But I feel like that will continue over the next couple of years. In the meantime, of course there's going to be adjustments and different segments of the market too at the top end are going to be in a better position to be fully leased and others will find it more challenging. But then change will occur there too. And you know, there'll be different investment patterns, there might be changes in use for some of these buildings. If I believe half the things I read in the paper these days. People including Premiers and Lord Mayors very interested in repurposing office stock into residential.
I think that's a big challenge, that one. But you know, there's certainly enough smart people in our sector who could meet that challenge. They may well in the next couple of years be overtaken just by a sheer press of people back into the, the city who want to work in an office. And there'll be new businesses that start up. Because when you bring 1.5 million people into a country with 26.3 million people, that's a big injection of new talent. They've got to work somewhere. They won't all be working at your local neighborhood shopping centre. You know, there'll be quite a few that'll be heading into the CBD that weren't there a couple of years ago.
PR:
Yes. And of course the great transport infrastructure that's being laid down in many of our capital cities is just going to only enhance that sort of connectivity of talent. And the comment I made earlier about creating CBDs that are inclusive to all walks of life or parts of our society. So just jumping to, I suppose another topic we haven't touched on yet, Mike, and that is the role that the property industry is playing on decarbonisation and the journey to net zero - improved sustainability credentials. It has the sort of dual effect of reducing industry's carbon footprint, but it's also making our built environment more competitive and more attractive to international capital and to occupiers. So on the topic of sustainability, do you think we're doing enough as an industry and what do you think we could be doing better?
MZ:
Great question. The answer is we are global leaders and the big listed players in particular in our country have just been so very much at the forefront of advances in commercial property over the last 25 years. And kudos to those of our leaders at the turn of the century who saw this opportunity well in advance of many other industries. Set up the Green Building Council of Australia, with which the Property Council enjoys a very, very strong partnership to this day, but also a sequence of alliances across the built environment, more broad than just our own advocacy interests that have really allowed us to tap into the best expertise from around the world and make sure that we can continue to be at the forefront. And you see those great GRESB results, you see, you know, in past decades, DJSI and other metrics of ESG performance.
I mean, we are right at the top of those league ladders with incredibly good reason. And that's because the industry are themselves passionate about this. Many of our members have made commitments that are well in advance of what governments are asking for indeed capable of delivering themselves. So we are in some ways quite an exemplar. That's not to say that more can't be done, and that's not to say that everyone in the industry is moving at the same speed. Of course that's not the case. It never is in any population of people that are engaged in a capitalist environment. There are always choices about where you put yourself in the market. But for the vast majority of Property Council members and the teams that work with us in ecosystems that are not necessarily deploying their own capital, but supporting that, there's only one goal. And that is really to put us very, very firmly on that target to get to zero as quickly as we can.
And that is being lived out across the country. Governments are certainly trying to support that. Our narrative into those governments is we want to get the trajectory right with you. We do share a very strong ambition to really make, you know, our built environment as efficient as possible. We do need to signpost those changes so that everyone in the industry can make their way along that journey very clearly. And so that it's not just one great big scary goal at the end, but broken down into manageable chunks that people can digest, that their businesses can, you know, stretch to adapt to. And we get there through that. And we also have to eliminate worse practice, you know, and increasingly we're going to see governments moving in that space. That's something that's been coming for some time. And we'll see even more of that I think going forward. And as long as we get all the international accounting standards lined up with domestic practice and there's no gaps there and it's a perfectly transparent environment for foreign capital to come in and see that, you know, we've adapted neatly to international regimes and that we're also doing our own work in particular around electrification across the industry, every aspect of the industry, then we're well and truly lifting our heavy share.
PR:
So staying with a theme of social impact, Mike, it's altruism that, you know, society today looks well beyond its government institutions for guidance and solutions to many of the social issues that we're facing today. The PCA and many great organisations in our property industry are very alert to that responsibility. And while I have you, I do want to get your perspective on a couple of things which I know that you care about and that is gender equality and reconciliation. So I did want to grab you on this one while I had you. So look, you're a very active member of the Property Champions of Change, which works towards building inclusive workplaces and promoting more women into leadership positions in property. In your view, where do you think the most progress has been made and and where do you feel the biggest gaps remain?
MZ:
Look, I think if I look at the, in globo figures for our industry as a whole taken top to tail, there are still huge challenges. If you look at the construction industry, we're still in that one quarter to one third women, the scenario that's too low. We've just, we've really got to quickly change that. If I look across the leaders of the industry and particularly the people that sit around the property champions of change, that wonderful process in itself kicked off, you know, so auspiciously in the middle of the last decade has already driven change around that table, has driven changes to the C-suite in most of the listed funds and quite a few of the unlisted over the last five or 10 years. And so there is progress being made there, but it is something that requires vigilance. And it's not just about making sure that everyone is paid equally and recognised equally and has those equal opportunities or in fact the opportunities that suit their need on their trajectory through the workplace.
It's also about some of the very visual aspects of leadership in the industry. So if you think about the panel pledge, something that I'm quite keen to make sure I'm upholding at every possible opportunity, how do you make sure that every time, you know, you are putting together an event, you've definitely got a woman not just as the moderator, but as the source of expertise on the panel. And of course it's easy because there are plenty of leaders out there and plenty of experts out there to source as many women as you want from. And, you know, we look at that, you know, when we run a property leaders summit or we run a congress, but also increasingly I see across the industry, you know, people are recognising their obligation to make sure that women's leadership in our industry is both very visible and very celebrated. And we won't be done until we are at that 50/50 that reflects the population. So that is our charge, I think as property champions of change, it's both obviously an important responsibility, but I think it is a pleasure to be involved in that because, you know, it's something that really is very positive.
PR:
Well, it's a pleasure to work with you on that, Mike. I had the opportunity to participate in a panel discussion that coincided with the release of the report from the champions of change coalition on power to create inclusive gender equality and the workplace. And I think you've seen this body of work, Mike, but it's throwing a spotlight on how power is attained, how it's used, and how the systems of power exist in an organisation, and of course how it can affect gender equality. There was a fascinating discussion. It is an amazing body of work that I will encourage all our listeners to access and read. You know, one of the big themes that that emerges when you do some personal reflections after studying the report, you do some personal reflections on your own career and in turn in your own organisation, one of these themes that emerges are the sort of the green lights that have brought you to power and that many of those green lights aren't universal for men and women.
But when I did my reflections, my green lights were effectively created through the mobility that I had through the early parts of my career. So I was supported by my wife and family who just allowed me to be mobile through different parts of the world and through I suppose a bit of affinity bias. I was presented with different opportunities in different places and I reflect on those as green lights through my career. But as you reflect on the property industry or as you reflect on your own journey, what do you think are some of the power dynamics in our industry that disadvantage women and, you know, any initial thoughts on anything we should tackle those?
MZ:
Yes, I mean, that is such a powerful question, Phil, and I like you, I've got four green lights in my life and they're Helen, Jane, Patrick and Emily, who have effectively supported and underwritten my ability to be open to opportunity in my career. And that's always been a very open and honest conversation between us all in our household. Not everyone has that, and I very much know that that is a privilege. And so I try to keep that in mind that these opportunities involve really quite a deal of personal privilege, which is supported by others. So I am privileged in that regard and I should name that and acknowledge that.
PR:
Well, I just wanted to get your reflections on one final topic and one of the comparative advantages that I certainly feel Australia has is its diversity of its population. You can feel it when you're moving around the country. 50% of the population were either not born here or their parents weren't born here. And the country has an enormous diversity dividend that I think has helped Australia in the past in order to continue to do so into the future. But of course, a big part of that diversity dividend that I think is yet to be realised is recognising the voice of Aboriginal and Torres Strait Islanders. The upcoming referendum is going to be a big step in our reconciliation journey and in my view, a watershed moment for the country to acknowledge the past and take a big step forward. You know, knowing the importance of country and the profound cultural connections of our First People and the course, the linkages that we have as a property industry to land. I just wanted to get your view on the role that the property industry can play in supporting reconciliation and helping the nation through, you know, this decision relative to the indigenous Voice to Parliament.
MZ:
Absolutely. From a broad perspective, the property industry is inherently attached to and a part of land. And what we do by creating communities is allied entirely, of course it is to our indigenous brothers and sisters and their, in many cases, you know, 60,000 plus year occupation of parts of Australia. And as a result of that incredibly close relationship, our members across the board, I think are becoming far better at placemaking intentionally with Aboriginal and Torres Strait Islander people's input and thinking really carefully about how they unlock opportunities within their workforces as well. You know, which is always going to be one of those areas, as you say, that sort of expertise gap. How do you make sure that you are not accidentally not inviting people into play a role in your organisations because of, you know, where they went to school, you know, if they have the capacity through some other methodology, how do you verify that and then encourage them in?
Those are the sorts of things that the reconciliation action plan process that almost all of our members are engaged in at some level or another, you know, encourage you to do and really open up those opportunities. So I think it is an incredibly important part of us all being very comfortable as Australians. You know, from whatever walk of life, whatever nation on Earth our own ancestors might have come from, living here together means owning and celebrating our 60,000 combined years together on this continent. And certainly that's something that I've always felt very strongly and proudly about. I'm incredibly proud of our Aboriginal and Torres Strait Islander history and, you know, that is something that increasingly, hopefully we as a nation can embrace and, and share in. And that's the point of all of this is the sharing.
PR:
Yes. Well, I think this is a moment for Australia to really cement this as part of the heritage of the country that they can be proud of. Well, Mike, we've covered some ground, as usual with you, you know, you can go to all corners and get some great perspectives. So I wanted to thank you so much for your time. And of course, Mike, thank you for everything that you're doing for the industry. You know, you've obviously been in the PCA for a long time, but certainly the first six months in your tenure as CEO. You're a man of action. So I wanted to thank you for that. Well, thanks for tuning into this latest episode of Talking Property with CBRE. If you like the show and want to check out more, visit
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