Rental market hit by student exodus: Gurnerby Larry Schlesinger
Financial Review Rich Lister Tim Gurner called state and federal governments' treatment of foreign students "the most insane thing" he has ever seen in his career, as he warned of its impact on rental markets and property values.
"I am definitely not very optimistic at the moment, the economic shock is coming. It won't bypass us," Mr Gurner said as part of a property webinar that included Melbourne lord mayor Sally Capp, fund manager Shane Quinn and Vicinity Centres head of development Caroline Viney.
If cities such as Melbourne wanted to bring back people to their CBDs, Mr Gurner said, they needed Chinese students back.
"They contribute $40 billion a year and we've just let them go.
"We didn't support them. We told them to go home. It's just the most insane thing I've ever seen in my career without a doubt," he told an Australia-Israel Chamber of Commerce property webinar.
"We have treated immigrants [which drive the residential market] like the second cousin, when they have built our economy and built our cities for the last five to 10, even 20 years,"
An exodus of students drove a tripling of residential vacancy rates in the inner city of Melbourne in April, according to new figures published by the Melbourne City Council.
"The rental market had taken a massive hit. It's my biggest concern," Mr Gurner said.
He said rents had fallen between 10 and 30 per cent, which if sustained would impact residential values.
"We've just completed 140 apartments with 100 of them in the letting pool.
"We'd normally lease them all in two hours with one inspection. We've leased half of them in six weeks," he said.
Mr Gurner said his own staff had taken pay cuts, while other builders and developers were dropping staff "left, right and centre" due to a lack of work.
Ms Capp said her biggest priority was to bring people back to the centre of Melbourne and reactivating its offices, shops, cafes, bars and restaurants.
"The city is the place where people come together. Our economy is based around the city being a meeting and gathering place."
Mr Quinn, founder of fund manager Quintessential Equity, said he was absolutely sure people would return and inhabit office buildings, which would be better designed in the future.
He added that a fall in office values would create buying opportunities.
"There is pain and suffering coming for those who bought B Grade office buildings at $20,000 a square metre.
"They need to demonstrate to the banks they can hold rents, but they can't. It will be like trying to catch a falling knife."
Ms Viney said the pandemic had focused attention on the design and use of office space.
She said space owned by Vicinity in the Melbourne CBD had recently come back for lease, courtesy of Myer's rationalisation.
This space, she said, had drawn "amazing" levels of interest from co-working and smaller office users because there were lots escalators running through the building rather than access via lifts.
"We may not even need to use a [leasing] agent," Ms Viney said.