Ramifications of Post GFC Climate on Commercial Property Managers

This report evaluates the impact of the global financial crisis on the commercial property market in Australia. It discusses the current and future implications for commercial property managers due to structural changes within the economy. The report also provides future forecasts and recommendations for the industry.

Running head: PROPERTY ECONOMICS
Property Economics
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Table of Contents
Introduction................................................................................................................................2
Analyse and evaluate the ramifications of the post GFC climate on commercial property
managers....................................................................................................................................2
Future forecasts within commercial property management sector of the industry....................6
Conclusions and Recommendations........................................................................................10
References................................................................................................................................11

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Introduction
The global financial crisis had a major impact on international property markets. This
report with evaluate the post GFC climate in present-day terms. It will also evaluate the
future strategies of commercial market in the coming years. The impact of GFC crisis made
the situation of option developing countries like Australia vulnerable (Bech, Gambacorta and
Kharroubi 2014). Property market is dependent on retail funds which late to further decline of
property market. This also late to the decline of equity market in Australia post GFC period.
Every firms and companies suffered huge losses during this period. Due to this housing
bubble, Sydney and Melbourne suffered the most.
Analyse and evaluate the ramifications of the post GFC climate on commercial
property managers
The global financial crisis which began in 2007 on property market had a wide impact
on Australian markets. With huge number of borrowers not paying off their loans,
commercial banks were facing difficult situation in liquidity. Despite the strong housing
sector, GDP of Australia in 2008 decline considerably. Investors were reluctant or
completely unable to acquire and progress the real estate industry without the aid of debt.
However in current situation most of the companies are active in restructuring projects rather
than in acquisitions. It can be also informed that if the real estate market where more robust
the companies could have helped their clients to buy sell and develop real estate (Xu et al.
2011).

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Figure 1: Change in GDP post GFC climate
(Source: Deloitte.com. 2018)
Figure 2: Sales revenue from 2006-2010
(Source: Deloitte.com. 2018)

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The Government of Australia took some positive steps by keeping the rate of interest
of house loans at a lower level in order to with the crisis situation. The government also
intervene to recover the real estate market from this financial crisis. Presently the situation is
way better than it was 5 to 6 years back (Mishkin 2011).
The long term transformations tend to affect the all over stages of demand and supply
for several kinds of real estate within various locations however these transformations also
have a major qualitative influence on the existing market. International trains can be
influential on the real estate sector in two different ways. Firstly it can affect the impressive
values of any location and it can also affect the implicit values of any building. In either way
the appeal to the customers can be changed which may have a direct influence on the value
and the income stream (Rey 2015). However there is a major difference between both of
these impacts which refers to the ability of the owners in reacting to the situation. The quality
of any building can be balanced to match these new changes to some extent however it
should be noted that changing a location is generally impossible. Therefore the international
Trends which affect the quality trend of the location have severe consequences on the owner
for investing long term then it affects the building characteristics (Milner, Niven and
LaMontagne 2015).
It can be said that due to the structural changes in the economy the commercial
property managers are highly influence therefore this paper will discuss the current and future
implications for the commercial property managers because of the structural changes within
the economy of Australia (Harvie and Van Hoa 2016)

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The influence of globalisation on the real estate sector can be seen from two different
methods while the first one is the Global market convergence and the second one is the
developing significance of the international hubs. The past analysis points out that the latter
trend has been dominating the real estate sector over the past decade as a comparatively less
cities are considered as the Global cities along with particular transnational activities. This is
entirely reflected within the particular structure of retail and office markets. The focus of the
higher value business services and the activities of the retail sector as the international display
Windows have laid the rent going higher significantly in different locations (Xu et al. 2011).
In terms of the Logistic properties the international transportation abstained to fulfil same
kind of activities as the international cities for retail or office properties. As these are
significant segments of the international delivery networks and these are driven more by the
domestic economic factors than the Global ones. However it should be noted that even if it is
closely related to the international economy it is not necessarily meant that the value of the
higher income will grow in long term. It seems that the primary advantage of investing in the
international cities is the wild demand base and less risk of structural or long term vacancy
(Davis and Zhu 2011).
The effects of globalisation on the market of real estate can sure be looked at from two
angles; one is growing importance of the Global Herbs and the second one is convergence of
global markets. It has been seen that emerging importance of global hubs have been
dominating over the last 20 years where only a small number of cities played the role of
global cities with some specified transnational functions. It can be seen in the specific retail
Markets and the structure of the offices. It can be said that the concentration of function of
Real units as Global display Windows and high value business services has led to major rise
in the rent levels in other locations. It is seen that for the logistics properties the Global
transportation hubs satisfy a similar function to that of the Global cities for retail properties or

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office properties. It is a matter of fact that these are the vital parts of the network of Global
Delivery and it can be driven more strongly by global then the factors of regional economy
(Benetrix, Lane and Shambaugh 2015).
The factor of being associated with the global economy does not actually employee value
growth or higher income in the long term. It may appear that the major advantages of
investment in global cities can be looked at as broad base of demand and it can lower the risk
of structural vacancy in the long term (Reinhart and Rogoff 2014).
It has been seen that properties in various distance parts of the world somehow show some
likewise patterns in the rents and the annual returns can be somewhat puzzling. It can be said
that real estate is not at all possible and it predominantly satisfies the demands of the local
businesses does in some markets it could over heat when the others in a session for a long
time. This can take place because neither supply nor demand can be located easily. The core
movements should be attributable to the Global factors that an underlying and it has been
identified that the global GDP is the connecting factor in this case (Rey 2015). This work
shows that the increase in the international economic links resulted from a flow of services
goods and money can lead to a sizable degree of alignment in the behaviour of the market of
international real estate (Benetrix, Lane and Shambaugh 2015). It has been observed that a
presence of long run relationship among the office markets returns in three major financial
centres which are Tokyo New York and London which is the likewise conclusion for the
general real estate market which shows that International markets are integrated in the long
term in spite of seemingly low short term return correlations. It is a matter of fact that the
integration of international markets is prone to be hired for the publicly listed organisations
then the investments in private real estate market because of the generally lower entry
barriers for foreign investors (Herndon, Ash and Pollin 2014).

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Future forecasts within commercial property management sector of the industry
It can be said that that future of commercial property sector in Australia is sustainable.
Several initiatives and strategies have been implemented in order to do so. Australian interest
rates of 90 bank bill is expected to decline in the coming years. It can be further depicted with
the assist of the following graph:-
Figure 3: Trends in Australian interest rates
(Source: Deloitte.com. 2018)
However, it can be said that the banking industry may raise the costs of borrowing by
restricting themselves from risky initiatives in the overall sector. It can be also inferred that
the price growth has been uneven across the various cities of Australia, where, Sydney and
Melbourne are topping the charts.
Figure 4: Price growth across various cities of Australia

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(Source: Deloitte.com. 2018)
From the above graph, it can be seen that Sydney and Melbourne have top the charts in terms
of highest growth in house prices. Other cities could not matchup with them due to high rate
of unemployment and higher number of risks of oversupply of real estate apartments.
On the contrary, it can be also inferred that the ratio between household debts to income is on
the higher side. In fact, Australia has the second highest household debt to income ratio. This
is not a good sign for the economy as the position of the debt prices is vulnerable. This could
hamper the future growth in a negative manner (Milner, Niven and LaMontagne 2015).
Figure 5: Growth of Household debt to income in Australia
(Source: Deloitte.com. 2018)
However, it can be also inferred that the demand of residential markets is on the higher side
and it is also expected to be highest by the end of 2020. The population growth in Australia is
also expected to increase, therefore, the construction activity is also expected to increase as
well (Bech, Gambacorta and Kharroubi 2014). This can be further depicted with the help of
the following figure:-

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Figure 6: Population Growth of Australia in the past 5 years
(Source: Deloitte.com. 2018)
It can be also inferred that the many real estate companies have failed to adopt
modern form of technology which further related in slower growth in this particular sector. It
has been seen that there are many operational inefficiencies that resulted in augment
productivity in the sector. There are many ineffectiveness and errors as well which increases
the possibility of fraud and risks related to this industry. However, on the positive side, it has
been seen that the industry has been taking several measures in order to minimize this
systematic and unsystematic risks. They are trying to optimize their costs. The companies are
also taking effective measures to improve their respective speed and accuracy in their
operations. They are also taking proactive steps to streamline record management and
enhancing compliance and monitoring the respective risks. They are also implementing
digital finance in their operations to minimize the risks and errors in their process of
operations (Benetrix, Lane and Shambaugh 2015).

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Figure 7: Employment growth in the real estate industry
(Source: Deloitte.com. 2018)
From the above graph, it can be seen that the employment status in the real estate industry
and commercial housing property sector is increasing. This can be considered as a positive
sign for the growth of this sector. Therefore, the future of real estate industry can be
considered as positive from this point of view (Zuo and Zhao 2014).
Conclusions and Recommendations
It can be concluded that the Global financial crisis has had a negative impact over the
real estate property sector due to changes in Australian economy. Though the government
and the organizations took some positive steps to resolve the issues, still, certain
recommendations can be given to them in order to overcome the crisis. Firstly, the
organizations needs to consider a holistic approach in order to resolve these risks. They must
try to enrich the experience of the employees to get maximum productivity from them. They
needs to operate on customer-centric models. In addition to this, the organizations need to
redefine leadership models in this sector. They are also need to focus on diversity by taking a
progressive approach in this sector. In this way, the risks and uncertainty in the commercial
property sector will be nullified.

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References
Bech, M.L., Gambacorta, L. and Kharroubi, E., 2014. Monetary policy in a downturn: are
financial crises special?. International Finance, 17(1), pp.99-119.
Benetrix, A.S., Lane, P.R. and Shambaugh, J.C., 2015. International currency exposures,
valuation effects and the global financial crisis. Journal of International Economics, 96,
pp.S98-S109.
Davis, E.P. and Zhu, H., 2011. Bank lending and commercial property cycles: some cross-
country evidence. Journal of International Money and Finance, 30(1), pp.1-21.
Deloitte.com. (2018). [online] Available at:
https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Real%20Estate/deloitte-au-
dre-real-estate-outlook-2018-australian-perspective-150218.pdf [Accessed 24 Apr. 2018].
Harvie, C. and Van Hoa, T., 2016. The causes and impact of the Asian financial crisis.
Springer.
Herndon, T., Ash, M. and Pollin, R., 2014. Does high public debt consistently stifle economic
growth? A critique of Reinhart and Rogoff. Cambridge journal of economics, 38(2), pp.257-
279.
Milner, A.J., Niven, H. and LaMontagne, A.D., 2015. Occupational class differences in
suicide: evidence of changes over time and during the global financial crisis in Australia.
BMC psychiatry, 15(1), p.223.
Mishkin, F.S., 2011. Over the cliff: From the subprime to the global financial crisis. Journal
of Economic Perspectives, 25(1), pp.49-70.

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Reinhart, C.M. and Rogoff, K.S., 2014. Recovery from financial crises: Evidence from 100
episodes. American Economic Review, 104(5), pp.50-55.
Rey, H., 2015. Dilemma not trilemma: the global financial cycle and monetary policy
independence (No. w21162). National Bureau of Economic Research.
Xu, Y., Jiang, A.L., Fargher, N. and Carson, E., 2011. Audit reports in Australia during the
global financial crisis. Australian Accounting Review, 21(1), pp.22-31.
Zuo, J. and Zhao, Z.Y., 2014. Green building research–current status and future agenda: A
review. Renewable and sustainable energy reviews, 30, pp.271-281.