Build it and they will come

The Housing Australia Future Fund and other planning reforms and infrastructure funding are critical, but action is needed to ensure new homes are delivered, says Mirvac’s Campbell Hanan.

Mirvac group chief executive and managing director Campbell Hanan. Picture: Nikki Short

How is inflation and the prospect of higher-for-longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?

Given the current conditions, we have tightened our lens on capital allocation and we are increasingly selective in the new projects we commit to.

As the cost of doing business continues to increase, we’re focused on leveraging our in-house design, development and construction capability to find innovative solutions (such as prefabrication) and drive efficiencies and cost savings (for example, through procurement), while maintaining quality and value for our customers.

The single biggest impact of inflation is on our construction costs, which affects the industry’s ability to bring new homes to market efficiently.

Our customers are taking longer to make purchase decisions, particularly within our residential business.

Retail sales growth has moderated, but remains supported by population growth in the catchments around our centres. While the impact of higher rates is translating into slower decisions from tenants in the uptake of new office space, we are seeing strong inquiry for our high quality, modern, and predominantly prime-grade assets, and quality industrial precincts continue to see strong demand, driven by the record low vacancy in Sydney.

How would you rate the shape of the Australian economy as we head into the New Year?

A tight construction labour market is putting pressure on costs and the rising number of insolvencies is putting pressure on tier 1 and 2 subcontractor availability.

We currently have 89 per cent of costs secured for our construction projects in FY24, helping to mitigate the risk to our business.

The ability to adapt to the market and be flexible and selective in our deployment of capital is a key strength of our integrated model.

What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?

There is an urgent need for housing planning reform in Australia to help unlock much-needed supply into the market. Projected new apartment starts next year are at the lowest on record at a time when we need housing the most.

This year was a significant turning point, as we saw the federal government committing to clear housing targets alongside state governments, with incentives on the table, for the first time.

The Housing Australia Future Fund and other proposed planning reforms and infrastructure funding commitments are critical, but action is needed on the ground to ensure new homes are delivered to meet record demand. It’s encouraging to see that all governments recognise the need for increased density around existing infrastructure to address our growing population.

Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?

The highest impact choice we can all make is to electrify. Homeowners can upgrade to electric as old systems reach their end of life. At Mirvac, we are doing the same within our high-performing, sustainable portfolio – designing out fossil fuels, buying 100 per cent renewable electricity to power our assets, and progressively removing gas from our operating assets. That’s how we achieved our net positive in scope 1 and 2 carbon emissions target in 2021.

What level of adoption is your business currently at with the use of AI technology?

We were early adopters of analytical AI (traditional AI) at Mirvac, which we used to enhance our business processes – for example, rent forecasting in market research, infrastructure optimisation across our commercial assets, and computer vision across the construction of a project.

We recognise the immense potential for AI throughout our value chain to create new revenue streams, while deepening customer loyalty. We’re experimenting with Generative AI across our business, with a focus on customer engagement, content creation, and qualitative data analytics. We have strict cybersecurity and privacy guardrails in place and protections around intellectual property. Importantly, we meticulously review AI outputs before commercial use to ensure accuracy and relevance.

What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3am thought?

The increased impacts of climate change are something we take seriously. We’ve seen the effects that extreme weather can have at our projects – for example, lost construction days to wet weather – and we’re now entering into an El Nino event, which we expect will put pressure on our communities and our assets.

We are also facing an ageing construction workforce. Construction workers made up less than 2 per cent of all permanent migrants, and the number of completed construction apprenticeships in our cities isn’t rising in line with the volume of work. We need a greater focus on growing construction workforces through targeted skills programs and migration occupation intakes.

Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?

We know that stakeholder expectations are growing, particularly around scope 3 emissions and social sustainability, and we are adapting and refining our strategy based on input from our employees, customers and investors.

We are also seeing increasingly more sophisticated reporting requirements and growing demands for data, along with better integration of ESG strategy into business processes, such as procurement, debt, and insurance.

There is an increased awareness around the value of trust and being trusted to do right thing in the community – trust is what will give businesses the social license to keep operating successfully into the future.

How has your organisation’s approach to staff working from home evolved since the pandemic?

Mirvac had flexible work practices embedded well before the pandemic and it remains a core part of our employee proposition. After lockdowns eased, we quickly realised that there is no one-size-fits all approach – particularly given the range of work sites and roles in our business.

Instead of mandating that employees are required to come in for a set number of days, we’ve indicated that we expect all employees to work for some time at a Mirvac site/office each week.

We encourage our leaders to have discussions with their teams to determine what works best, recognising that flexibility will vary depending on what’s best for our customers, teams, and individuals, as well as the mix of collaborative and focused work required.

Campbell Hanan is chief executive and managing director of Mirvac