Social Distancing in Victorian Melbourne…

At the time of writing Victorians, like most of Australia, are living under a Covid19 “stay at home and practise social distancing” regime in attempt to “flatten the curve” and reduce the spread of this contagion. I have been working from home for 3 weeks, only going out for essential food shopping and a daily walk for exercise (since my gym is closed). This perambulation has revealed some lesser-seen aspects of Melbourne (apart from the empty streets), including the way the modern city’s 19th century founders went about their approach to urban design – including some examples of built-in social distancing.

The first example is the number of public parks and gardens close to the CBD that were established in the 1800s, and which have managed to survive the onslaught of developers. As we know, public parks, with their trees and green spaces act as the lungs of the city, and provide a place to exercise, relax and get some fresh air. So we need these facilities more than ever in times like these. (Strange why the Victorian Government still insists in allowing vehicles to use the culturally and historically significant Yarra Park as a public car park on so many days, with all the horticultural and environmental damage that this causes…)

Second, the decision to incorporate lane-ways into the grid design of the CBD, as well as throughout the 19th century expansion of the inner city suburbs. While their design was mainly pragmatic (ease of access for night carts, storm drainage), the result is that in densely-built areas such as Richmond, Carlton, East Melbourne, Fitzroy and Collingwood, lane-ways mean even terraced houses can have ample space between them and the next block, allowing for better ventilation, natural light and reduced risk of disease. (For an example of the lane-ways importance to Melbourne’s character and psyche, check out Daniel Crooks’ video, “An Embroidery of Voids”.)

Third, the decision not to build right up to the urban banks of the Yarra River (and the straightening and leveling of the river itself) has left them accessible to the public, both as a means of cycling and walking to/from work, and for recreational purposes. In many cities, riverfront access has largely been blocked off as adjacent land has been appropriated for private, commercial and industrial use.

At a time like this, I truly appreciate the foresight of Melbourne’s Victorian town planners – I just hope we can continue to enjoy their legacy in the coming weeks and months!

Next week: #Rona19 – beyond the memes

 

The State of PropTech

Among the many strands of X-Tech that we have come to hear about, PropTech is currently emerging as something of a hot topic, judging by a recent Meetup in Melbourne organised by MessageMedia. With the ambitious goal of exploring the “Past, Present and Future of PropTech in Australia”, it was clear that the field can mean very different things to different audiences.

Facilitated by Bec Martin, the panel comprised Shelli Trung, APAC lead for the Reach PropTech Incubator; Mark Armstrong, CEO of RateMyAgent; Alan Tsen, seed round investor with a focus on disruptive FinTech startups; and Nigel Dalton – ex-REA Group, who also gave a key note address.

Given the format and nature of the discussion, I won’t attribute specific comments to particular individuals. Instead, here are some of the panel’s observations (in no particular order), including some pitfalls for the industry, and key points that all market participants will need to consider.

  • In light of recent events, it was perhaps unsurprising to hear the view expressed that WeWork is “not very prop, not very tech”, as its business model and funding challenges became apparent. Generally, the view was that the co-working space fad has had its day (although Melbourne still manages to support numerous co-working spaces and models, not all like WeWork, since the local demand is there?).
  • We face significant local economic challenges (low inflation leading to minimal GDP growth and negative interest rates; declining wages/purchasing power in real terms; falling retail spending; over-extended household debt; and underemployment in the wider job market).
  • On the other hand, Australia still hasn’t had a recession since 1991, and house prices have just seen the biggest monthly increase since 2003, yet banks are imposing more stringent lending criteria.
  • Depending on which economic theories you favour, this either means easier access for first time buyers thanks to lower interest rates; or more rent arrears, increased mortgage stress and greater homelessness because of a lack of affordability and/or deteriorating lower cost housing options.
  • PropTech is not just two-sided online residential market places (although data analytics and digital marketing capabilities are integral to that particular segment).
  • PropTech should also embrace sustainability in terms of environmental efficiency and affordability. Social impact will likely mean adjusting home owner expectations in terms of dwelling size and carbon footprint. Equally, smart cities and more mixed use development is also being increasingly factored into urban planning and infrastructure design.
  • The increase in higher rise and higher density housing has also led to cost cutting in the choice of materials (flammable cladding), and deregulation and other factors have exacerbated structural defects where there is inadequate insurance protection for home owners.
  • What is happening where PropTech and FinTech intersect, such as the notion of fractional ownership? While this is something that is increasingly more likely (especially with Blockchain technology and tokenisation) if first time buyers have no other way to access the property market, what should be the appropriate licensing regime for these new financial products? What should be the credit risk criteria, lending models, prospectus design, funding structure and tax & accounting treatment? What if such developments include social and inter-generational housing? Or achieve the highest environmental standards/lowest greenhouse emissions?
  • For Australian PropTech startups wanting to go global, there were some warnings about the lack of cross-border tech transfer, and an absence of cultural awareness and curiosity by founders.
  • Meanwhile, on some measure, Facebook is probably the largest residential rental marketplace in the USA. What does that signify for future markets and property transactions?
  • Despite the success of real estate market places in Australia, the model does not easily transfer or scale in other countries. Equally, models from overseas might not work here. There was some scepticism about the so-called “iBuyer” model, and also the agency aggregation approach by firms like Compass (“you can’t buy relationships”). Plus, even local brands can go sour (e.g., Run Property and its subsequent merger with Little Residential to form LITTLE Real Estate).
  • IoT-enabled solutions are a growing theme, especially in aged care, and where AI learning patterns are being applied to energy efficiency, for example, or to improve facilities management (another PropTech segment ripe for disruption). This also links to the use of and intersection between On-line/Off-line data, such as CAD and 3D modelling, and “digital twins” (real-time databases of building design files) for mapping and monitoring physical structures. While in the UK, the concept of, and need for, Digital Twins has led to a raft of industry-wide initiatives and collaboration.
  • Despite Australia’s impressive work in creating standard data structures for residential property, there is still a lack of transparency when it comes to the results of private auctions (but isn’t that the idea – they are “private”?). According to the panel, similar data overseas is considered to be quite “dirty” (unstructured and non-standard).
  • The panel anticipated new PropTech opportunities for those companies offering “high touch/high end” services, and those providing “low touch / high tech” solutions.
  • One common data and infrastructure management challenge is dealing with legacy information systems, and sluggish internet speeds (despite, or because of, the NBN), meaning there will inevitably be some bifurcation in service and quality, depending on building design, purpose, age, location, value etc.
  • Finally, there were concerns that as security data and facial recognition technology becomes increasingly algo-based, it raises questions of privacy and misuse of personal and confidential data.

Next week: Pitch X – Launch Into A New Decade

 

 

Infrastructure – too precious to be left to the pollies…

With its 3-year Federal parliamentary cycle and fixed 4-year terms in each State and Territory*, Australia is never too far away from an election. South Australia and Tasmania are both currently in full election mode. Victoria doesn’t go to the polls until later this year, but the informal campaigning (rather like a phony war?) is already underway. And although the next Federal election is not due until 2019, the stump speeches are already being wheeled out.

Fiction imitates (or even predicts) fact in ABC TV’s “Utopia” (hard hats obligatory)

With so much focus on “infrastructure”, it’s going to be a bumper year for hard hats, hi-viz vests and photo opportunities in front of big “stuff”. It’s just such a shame that even with the real life Utopia, Infrastructure Australia (and respective statutory and quasi-independent bodies in each State), so much of the decision-making is left to politicians. Because this “stuff” is far too important to be left to the short-term priorities, self-serving tactics and party preservation shenanigans that most of our elected representatives are forced to succumb to.

Hot infrastructure topics this time around are energy (especially in South Australia), water (Murray Darling Basin), resources (what do we do after the mining boom?), and the call for “jobs” linked to putting up or digging up “stuff”.

I understand that we need employment opportunities both sparked by, and as a driver for, economic stimulus. But there has to be more than simply creating short-term jobs on unsustainable projects (Adani, anyone?). Of course, one could argue that the powerful construction and mining unions (and their infrastructure owning superannuation funds) have a vested interest in maintaining this trajectory.

But if these projects need to take on long-term debt, with the 3 or 4 year election cycles, you can see how difficult it becomes to manage budget priorities. Worse, incoming governments may strive to cancel, overturn or curtail projects of their predecessors, which won’t endear them to the private sector companies (and their banks) who have successfully bid on the contracts.

Roads represent a large chunk of the infrastructure “stuff” in my own State of Victoria, and are already shaping up to be a key election issue (at least in the minds of the parties). For a major city that still doesn’t have a dedicated train service connecting the CBD to its ever-growing international airport, Melbourne probably needs fewer roads, and more planning (especially as we move to ride-sharing and self-driving vehicles). Besides, while we are in an urban and population growth cycle, given the rate at which some of the current new roads are being built, they will be under-capacity before they are even finished.

I would argue that there is just as much demand to upgrade and refurbish existing infrastructure, (which will probably generate just as many employment opportunities) rather than feeding the insatiable demand for shiny new toys. Or revisiting (and even restoring) some “old” ideas that might actually make sense again today, such as the orbital railway concept connecting Melbourne’s suburban hubs. Sure, we have the new Metro Tunnel project under the CBD, and this may lead to extensions to existing suburban services, and even the airport itself. But future projects have not been scoped, and are subject to prevailing party ideologies (not to mention the NIMBY brigades…) – rather than serving  the interests or greater good of the population (and environment) as a whole.

Finally, some sobering news came out of the UK recently, where London is actually experiencing a decline in passenger numbers on public transport. There have been a variety of explanations for this drop (the first in more than 20 years) – from the threat of terrorism, to new work patterns (more people working from home); from changing lifestyles (more Netflix, less Multiplex), to the “on-demand” economy (more Deliveroo, less dining out).  With fewer people likely to commute to the CBD (40% of the population will have self-directed careers), governments, their infrastructure boffins and their policy wonks will need to think about what this does actually mean for roads and rail…. and how much longer must I wait for the NBN in my suburb of Richmond (and will it already be obsolete by the time I have access)?

* For the breakdown see here.

Next week: Blockchain, or Schmockchain?

 

Richmond 3121

What makes a great suburb? Location? Infrastructure? Public transport? Affordable housing? Great coffee? Schools, shops, restaurants and amenities? Probably all these and more…. Although housing costs are comparatively high, Melbourne is frequently rated as one of the world’s most livable cities. I would argue that part of its success lies in the distinct personalities of many of its key suburbs, such as Richmond (postcode 3121).

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I have lived in this inner city suburb for the past 14 years, which is by far the longest time I lived in one place. I love the convenience (within walking distance to the CBD, close to the river and parks, and well served by trains and trams) and the diversity (it’s comfortable yet retains a somewhat grungy character). I must admit to feeling spoiled at times, because I don’t need a car, and often take for granted the proximity to Melbourne’s cultural and sporting precincts.

Although there have been some enormous changes in the past 10 years, mainly thanks to more apartment developments that have brought in high-end restaurants, hipster bars and cafes, and artisan food outlets, even I was surprised when a new branch of Avenue Bookstore opened on Swan Street a few months ago. Maybe this was the missing ingredient? It turns out that the most popular categories are cooking titles (inspired by all the new eateries?) and children’s books (a result of the recent influx of younger couples starting families?). In any event, this probably plays up Richmond’s aspirations to being a bit intellectual – after all, it is within the administrative boundaries of the People’s Republic of Yarra…

A while back, in a Saturday newspaper article on Melbourne’s trendier suburbs, Richmond was described as being like Switzerland: neutral territory between the hipster-filled Bo-Bo* land of Fitzroy and Collingwood to the north, and the fashionista playground of South Yarra and Toorak to the south. And although in the Corner Hotel, Richmond has one of the best live music venues in Australia, it no longer has any record stores (which are now clustered in Collingwood’s Johnson Street, and Fitzroy’s Brunswick Street).

In recent times, Richmond (along with the adjacent suburb of Cremorne) has also become an epicentre for Melbourne’s thriving startup community and co-working culture. Co-working spaces such as Inspire9, Lennox Street Exchange and Launchpad, along with a multitude of shared creative spaces, have helped to host, incubate or entice local and global startups like LIFX, Stripe, Culture Amp, Uber, Tablo, CareMonkey, RomeToRio, etaskr and CoinJar to set up in Melbourne. Much of this activity has grown to occupy the factories, warehouses and light-industrial spaces once home to the local textile industry – and along with the increased apartment living has been a spur to the area’s urban renewal. So, for an increasing number of people, Richmond is both home and workplace.

Finally, while Richmond’s median property prices have maintained pace with recent growth rates for Melbourne’s established suburbs, they are still more favourable than some of the leafier neighbouring suburbs. True, plots and properties here are generally smaller, and you would be hard placed to find any McMansions – but I think this just adds to the area’s appeal.

*Bo-Bo = Bourgeois-Bohemian

Next week: Summing up the FinTech summit