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Why ‘office’ may no longer be a dirty word in 2024

By Orana Durney-Benson
01 February 2024 | 10 minute read
david southon michelle mcnally reb d4dzgu

The CEOs of two property firms have revealed that 2024 will challenge a lot of assumptions about Australian real estate.

Since COVID-19 sparked a major transition towards hybrid work, offices have fallen out of favour with investors.

“I think at the moment, office is a bit of a dirty word in real estate,” said David Southon, executive chairman of Aliro, in a recent CBRE podcast.

Now, however, Mr Southon believes Australia’s office sector could be on the brink of a major shift.

“We’ve seen the impact on other markets around the world of significant resets in value that we really haven’t seen here in a meaningful way in Australia as yet,” he said.

“Australia typically is a laggard market, so it does take a bit longer for things to filter through, but what I think we will see over ’24 is some deep value emerging in that sector.”

In particular, the broad lack of interest in office assets could open up opportunities for smart investors to snag buildings that would otherwise be inaccessible.

“There will be an opportunity to access product in the gateway markets where typically you couldn’t previously do that, particularly for global investors who want to hold some of the iconic buildings in gateway markets,” Mr Southon predicted.

“You will be able to buy those buildings at a discount to replacement cost and in some instances, possibly even a discount to construction costs – in other words, wiping the value of the land out altogether.”

Adapting to the changing times will require versatility, and Aware Real Estate CEO Michelle McNally warned that real estate companies have not always had the flexibility it takes.

“The property industry at some times has been slow to necessarily evolve,” said Ms McNally. “I like to call it a little bit of an analogue industry at times.”

Looking forward, Ms McNally emphasised the importance of keeping up to date with technological developments.

The rise of artificial intelligence (AI), in particular, will “be a big force within property over the next five to 10 years, and there will be winners and losers out of that,” according to Ms McNally.

With AI set to enhance the way Australians work, shop and live, Ms McNally stated that it will unleash both external and internal changes across the property sector.

Looking forward, Ms McNally and Mr Southon acknowledge that the year to come will bring challenges for many, but conclude that ultimately those with the know-how still have opportunities to succeed.

“For a new business like ours with capital to invest, we look at this as being a really positive time to be in the market in 2024,” said Ms McNally.

Why ‘office’ may no longer be a dirty word in 2024
david southon michelle mcnally reb d4dzgu
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