Floods on east coast likely to delay settlements, commercial operations

Developers face with extended delays on settlements and many tenants are locked out of buildings in the wake of disaster.

Flooding on Creek Street in the Brisbane CBD following three days of torrential rain. Picture: Getty Images

Developers are facing extended delays on residential settlements and commercial tenants have been left unable to access buildings as the true impact of the flood disaster on Australia’s east coast is realised.

Short-term delays in production could affect the earnings of large-scale listed developers such as ­Lendlease, Mirvac and Stockland, particularly as the second half of the financial year is usually the busier period for settlements. The bigger issue is the potential risks to future planning outcomes, which could cause a slowdown or result in approvals not being granted, due to risk of flooding.

However, UBS real estate analyst Tom Bodor does not believe the impact to earnings will be material, noting the resilience among property investors.

“In the near term, there is some risk in the second half that this is so excessive that it causes some settlement delays,” Mr Bodor said.

“Any notable sort of slippage (in settlements) puts (full-year results) at risk. If there is a month of continually heavy rain and they can’t operate onsite or there are delays because of it, that’s a risk.

“The market’s not likely to react materially if a few hundred settlements fall into fiscal 2023.”

One of the biggest challenges for players in the residential and industrial sectors that have already come through the other side of the flood disaster was accessing key transport routes in and out of sites, said UDIA national president Max Shifman.

“Some of the bigger concerns for members in the affected areas wasn’t the housing and structures but access points to these areas,” he said.
“Flood plains are really complicated but one thing we really need to look at is bottlenecks and infrastructure.”

The issue is understood to have been a consideration for Stockland when examining an opportunity at Sydney’s Marsden Park last year. While the land itself was not prone to flooding, it is understood a mooted deal failed to go ahead because of the limited infrastructure that would make evacuation difficult in the event of a natural disaster.

Meanwhile, in Brisbane, asset owners and commercial tenants are assessing the damage. Commercial buildings in the CBD fared better than they did in the major floods a decade ago. In the rebuild, work was done on garages and basements to help alleviate some of the longer-term issues associated with flooding. Some of the changes included repositioning plant rooms and elevators higher in buildings.

Despite this, similar issues have led to up to 10 per cent of JLL’s managed commercial buildings in the CBD remaining closed to tenants, according to the firm’s senior director of engineering and operations in Queensland, David Maughan.

“While we were able to use learnings from the 2011 floods to evacuate garages and basements, damage to infrastructure is currently being rectified,” Mr Maughan said. “Cleaning and repairs are underway; however, we are also assessing and replacing infrastructure that may be operational now, but after a risk assessment, could cause issues at a later date.”

Mr Shifman said already pressured councils had to find ways to streamline approvals to cater for new development approvals and repair works.