Lendlease CEO Tony Lombardo says construction costs finding a new normal
Tony Lombardo says material price increases have slowed to near pre-pandemic levels, though labour costs remain high. While price increases are stabilising, the new baseline is likely here to stay.
Economy
How would you rate the momentum of the Australian economy as we head into 2025? Official forecasts have Australia trimming interest rates from the first half of calendar 2025, is that consistent with your view? What are you seeing around inflation in your own business?
In our own business, we’ve seen cost pressures ease in certain areas. In Construction, material price increases have slowed to near pre-pandemic levels, though labour costs remain high. While price increases are stabilising, the new baseline is likely here to stay across the economy.
In regards to the Australian rate cycle, although it has pushed out with rates holding steady now for over 12 months, we’re seeing capital investor confidence return as other global markets commence their rate cutting cycles. This is improving sentiment around real estate valuations more generally and contributing to an improvement in transaction volumes.
Outlook
What excites you heading into 2025? Are you likely to increase, hold steady, or trim your investment spend?
Our focus in the new year is realising opportunities across the residential sector in Australia, in particular luxury and build to rent where we are a market leader. This year, we partnered with Nippon Steel Kowa Real Estate for the first time on a new build to rent project in Melbourne, and we acquired 1 Darling Point Rd in Sydney with Mitsubishi Estate Asia. We expect residential to be a key source of growth in 2025 and beyond.
Our global office portfolio is currently 95 per cent leased, evidence that high-quality and well-connected workplaces are in demand. And now that the Victoria Cross Station is open in North Sydney, we’re seeing increased leasing momentum at our new workplace precinct there. The new metro has been a game changer for Sydney.
Reform
As we move into an election year, in your mind, what’s the single biggest lever that can/should be used to lift Australia’s competitiveness or productivity? This could be across any area from labour market, tax reform, training or other areas to encourage investment.
Removing unnecessary red tape and expediting regulatory approvals would make Australia a more attractive destination for offshore capital.
The Federal Government’s Future Made in Australia Front Door Policy is set to accelerate the renewable energy industry. Expanding this approach to other industries would help Australian businesses remain competitive in the global race for capital.
Tax reform also plays a pivotal role and the recently passed Build-to-Rent bill demonstrates how targeted policy changes can effectively encourage investment and unlock growth opportunities.
Geopolitics
Will a Donald Trump presidency have a potential impact on your business or sector (tariffs or streamlined regulation)? Does geopolitics drive a bigger part of your decision-making?
Australia has long benefited from, and remains an advocate for, free and open trade. It underpins global investment and growth, supports our projects, customers and the communities in which we engage.
People
Has your organisation’s approach to flexible working – including working from home – evolved during the year. Is this likely to change further into 2025?
Our approach to flexible working hasn’t changed – we’ve always supported flexibility where it makes sense for our customers and people. More than half of our employees are in front line roles, such as construction and retail, so they work from the workplace the majority of the time.
In the office people are in three to five days, and our leaders four to five. Leadership visibility is important for building team culture and connections. The NSW Minns government has the right idea in mandating its people to come into the workplace. Teams perform, collaborate and achieve better outcomes when they’re together.
Technology
Where is your organisation along the AI journey – is it in the developmental stage, or are you now using the technology at scale across your business? If so, are benefits matching the promise?
We’re in the early stages of leveraging AI, but the benefits for productivity and efficiency are already clear. We’re using generative AI to analyse data from previous bids, streamlining bid preparation while enhancing accuracy and efficiency. This allows our bid teams to focus on winning new work.
Our People Team is also using AI to automate responses to common questions about policies and forms, saving time and improving service.
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