Industrial

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Prime Minister Malcolm Turnbull has said he will call a July 2 double-dissolution election if the Senate does not pass legislation aimed at restoring the Australian Building and Construction Commission (ABCC).
The PM has said that:
<ul>
<li>since abolition of the ABCC, days lost to industrial disputes have increased by 34 percent;</li>
<li>two-thirds of all industrial disputes in Australia are in the construction sector and;</li>
<li>industrial disputes in Australia are at their highest level since 2010.</li>
</ul>
Are those assertions correct? Let’s check the data.
Are days lost to industrial disputes up 34 percent since the ABCC was abolished?
The ABCC was introduced in 2005, under the Howard government. Labor abolished the ABCC in March 2012 and replaced it with the Office of the Fair Work Building Industry Inspectorate.
When asked for a source to support his assertion about the 34 percent increase, the PM’s spokesman sent a table drawing on figures from the Australian Bureau of Statistics (ABS) data set on industrial disputes:
The spokesman said that:
ABS data suggests the introduction of the ABCC in late 2005 helped to reduce the rate of industrial disputes in the construction industry.
<ul>
<li>Pre-ABCC, the number of working days lost per 1000 employees in construction was five times as much as for all industries (56.1 versus 10.4 days).</li>
<li>During the ABCC’s operation, this dropped to around two times as much (9.6 days versus 4.2 days).</li>
<li>Since the ABCC’s abolition, the number of working days lost per 1000 employees in construction has averaged around 4.5 times the rate for all industries.</li>
</ul>
Indeed, we can clearly see from the graph below that, in construction, working days lost due to industrial disputes fell after 2005 and stayed low to 2009. Then, there was an increase in 2010 and big spikes in 2011 and 2012.
The big spikes in construction sector working days lost due to industrial disputes in between 2010 and 2012 coincided with several large construction sector <a href="https://www.fwbc.gov.au/fwbc-secures-200000-finding-against-cfmeu-and-mcdonald">disputes</a> and strikes.
As reported elsewhere, a 2014 Productivity Commission report concluded that:
The evidence that the ABCC stimulated material improvements in aggregate productivity or achieved cost reductions is weak… The ABCC is likely to have had its primary impact on unlawful conduct and on local productivity and costs at particular sites.
By taking the average number of working days lost in the construction industry (per 1000 employees) during the ABCC era and comparing it with the average number of working days lost in the construction industry (per 1000 employees) in the post ABCC era, it is possible to conclude it has risen 34% (or 3.3 days).
The PM’s statement is supported by ABS data.
Are two-thirds of all industrial disputes in Australia in the construction sector?
This assertion only true for the December 2015 quarter – which happened to be unusually high.
In other quarters, construction accounted for a much smaller proportion of working days lost, as the chart below shows:
Working days lost in construction due to industrial disputes has been consistently higher than the average across all industries since 2012.
It’s worth noting though, that the same data set, at certain time points, puts working days lost due to industrial disputes in the coal mining sector at much higher than construction.
The coal mining industry disputes were happening at the peak of the mining boom. Days lost due to industrial disputes spiking in 2010 and 2012 when a shortage of workers on major projects put unions in a strong bargaining position.
To sum up: the PM’s assertion that two-thirds of all industrial disputes in Australia are in the construction sector is correct for December 2015 only.
Overall, however, his comment is misleading because he is using the unusually high December 2015 quarter as a benchmark. The long run average for construction for 2010 to 2015 is just under 30% of all days lost (still the highest share of any industry). The average between 2005 and 2009, with the ABCC, was around 10% of all days lost.
Are industrial disputes in Australia at their highest level since 2010?
As shown in the chart below, ABS data shows the total number of industrial disputes in the 12 months ending December 2010 at 227. For the 12 months ending December 2015, the figure is 228.
What that time frame doesn’t show you is that, overall, the number of industrial disputes has declined greatly in the last few decades. The longer term trend is depicted in the chart below:
So the PM’s assertion that industrial disputes in Australia at their highest level since 2010 is correct, but relies on a selective choice of time periods.
The rate of industrial disputes has been trending down in recent decades, basically following the fall in trade union membership.
Verdict
It’s true that days lost to industrial disputes in the construction sector (reported to the ABS) have increased since 2010. They are now running at a higher level than when the ABCC was operating – at about 34% higher for the time periods indicated.
The PM’s statement that two-thirds of all industrial disputes in Australia are in the construction sector is correct for December 2015 only. Overall, his comment is misleading because the PM is using the unusually high December 2015 quarter as a benchmark. The long run average for 2010 to 2015 is just under 30 percent of all days lost (still the highest share of any industry). The average between 2005 and 2009, with the ABCC, was around 10 percent of all days lost.
The PM’s assertion that industrial disputes in Australia are at their highest level since 2010 is correct, but relies on a selective choice of time periods. There were more disputes in March 2010 and December 2009 than December 2015. However, for the time period he referred to, the claim is correct. 
Gerard de Valence is senior lecturer, University of Technology Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/gerard-de-valence-105933" target="_blank">here</a>.
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Are two-thirds of all industrial disputes in Australia in the construction sector?

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<img src="https://counter.theconversation.edu.au/content/68143/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
The announcement of the closure of Hazelwood power station in 2017 adds further complexity to an uncertain future facing the Latrobe Valley community. 
Owners Engie and Mitsui said of the 750 employees at the power station, 250 will remain between 2017 and 2023 to manage the site rehabilitation, while the remaining workers will receive a redundancy package. 
The state government has pledged a package of A$22 million for “personalised support” for workers which includes TAFE training, financial counselling and other forms of support and a further A$20 million to set up a Latrobe Valley Authority to lead the economic transition. In addition to this A$224 million will go towards the establishment of a “economic growth zone”. 
The federal government is offering A$43 million including A$3 million for active assistance, retraining, and other forms of financial services. 
Adversity is not new to this Victorian region. Headed by the towns of Moe, Morwell and Traralgon, this one-time thriving energy generating region has experienced continual power job losses since the 1980s. And despite continued government support, the Latrobe Valley’s economic decline and higher than state average unemployment is yet to be halted.
Fluctuating demand for mining exports and reductions in manufacturing output across Australia require regional areas like the Latrobe Valley to consider their options. A 2016 OECD report states that Australia has a relatively strong capacity to provide new jobs for redundant workers, citing examples of 80% re-employment within two years.
But does this experience hold for regional locations? Looking back, a 2001 Monash University report showed that structural changes to the power industry saw the Latrobe Valley suffer from a loss of almost 10% of its residents, sustained withdrawals from the labour force and unfavourable conditions for local businesses.
Recovery has been slow. Within the Latrobe Valley community, the challenges of reversing economic decline have been exacerbated by recent events such as the Hazelwood Mine fire and the impact of the milk price downturn on the dairy industry. The power station closure had been foreshadowed for some time and further job losses from the power industry will add to community concerns. 
There is an emerging gulf in living standards between country and city-based residents. For example, according to a 2011 state government report, regional Victoria is relatively disadvantaged in several ways including lower educational participation and workforce skill levels, when compared to metropolitan Melbourne. In this same report, the Latrobe Valley towns of Moe and Morwell are named among the most disadvantaged localities in regional Victoria. 
Those working in the power industry represent nearly 10% of the Latrobe Valley workforce and the announced job losses may add to an unemployment rate, currently standing at 7%. 
The immediate focus must be on the welfare for affected employees and their families. In the longer term, this event could be the trigger for new opportunities to revitalise the Latrobe Valley’s economic outlook. 
Alternative pathways for economic and community development have been on the agenda for the Latrobe Valley at least since privatisation of the power industry in the 1990s. These include a future economic strategy that supports a more diversified economy. 
Lack of real community consultation and engagement has meant that workers perhaps haven’t felt empowered to take up other opportunities. 
There are some alternatives that could be taken advantage of, such as new service and manufacturing industries and others that build on the Latrobe Valley’s natural advantages in agriculture and scenic locations. Ideally, these initiatives require focused retraining or other forms of support for displaced workers. But such short-term measures are, of course, obvious. 
With the closure of the power station, there will ongoing work for some time as the site moves from a productive mine to rehabilitated site. However there are significant issues that have to be considered first, such as the future use and stabilisation of the site prior to undertaking major works. 
Whatever the future of the Hazelwood site, it’s critical that this is determined in consultation with the community to provide access to facilities and services of benefit to local residents. Importantly, as rehabilitation of the site will be a long-term process, it will be necessary that the community contributes both to the vision and the progress toward this for it to succeed.
State and federal governments may look also to other communities that have experienced industrial plant closures internationally to inform their plans and actions.
Michelle Duffy is senior lecturer, Humanities and Social Sciences, Federation University Australia and can be contacted <a href="https://theconversation.com/profiles/michelle-duffy-313639" target="_blank">here</a>.
Damian Morgan is senior lecturer in Management, Federation University Australia and can be contacted <a href="https://theconversation.com/profiles/damian-morgan-313685" target="_blank">here</a>.
Jessica Reeves is senior lecturer, Environmental Management and Sustainabilty.
All are authors for The Conversation.
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Hazelwood’s closure calls for a rethink on Latrobe Valley solutions

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A property leased out to industrial equipment maker Alfa Laval at Huntingwood fetched a cool $7.475 million at Burgess Rawson's 100th portfolio auction.
Alfa Laval has occupied the building at 14 Healey Street for the past 15 years. It lies 10 km west of Parramatta.
The property occupies 2,956 square metres for its office and warehouse. It is located on 7,658 square metres of land that includes car parking for 60.
The net income is estimated at $435,000 pa plus GST, giving a yield of about 5.8%.
The lease is for 10 years with a further five-year option.
Alfa Laval is a Swedish multinational company employing 18,000 people and is well-known for its heat transfer, separation and fluid handling technologies. 
It made sales of circa $6 billion in 2014.
The property has scope for "Stage 2 Warehouse" development.
There are annual rental increases and the tenant pays all outgoings.
The property was sold by Simon Staddon and Dean Venturato.
 
Beginning in 1975, Burgess Rawson established a nationwide network of offices and is Australia's largest locally owned and operated commercial property agency, marketing more than 10,000 properties and generating sales in excess of $25 billion over the past 40 years. For more information, <a href="https://www.burgessrawson.com.au/portfolio-auctions" target="_blank">click here</a>.
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Huntingwood Alfa Laval building nets about $7.5 million at auction

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Savills have advised clients on what they see as the four advantages of utilising SMSF for direct commercial property investment, in preference to other asset classes.
<ol>
<li>Commercial property is one of the few assets that can be bought by an SMSF from its members. Your SMSF can potentially buy your own business premises and then you can pay rent to your SMSF. A residential property, on the other hand, cannot be lived in by a fund member or any fund members’ related parties, nor can it be rented by a fund member of any fund members’ related parties.  </li>
<li>
The MoneySmart website details the strict rules against using borrowed funds to make improvements to residential property that forms an asset in your SMSF portfolio, so don’t even think about buying a renovators’ delight. This can severely limit potential capital gains as you cannot renovate it to increase its value. In contrast, an investment such as a bulk storage unit or warehouse has very low capital expenditure requirements. 
</li>
<li>Commercial leases are typically for a longer period than residential leases – usually around five years with a further option for another five years with incremental rental increases built into the lease. If you choose the right property and tenants with stable businesses which are unlikely to be adversely affected by an economic downturn you won’t have to deal with a regular turnover of tenants and can rely on a steady rental return.  </li>
<li>Many industrial properties are purely functional in design and construction, so there is less concern about tenants maintaining them or investors having to pay for costly renovations, which is often the case with residential property investments. That said, it’s important to ensure any essential, expensive upgrades, such as those required to meet new fire safety or health and safety standards, have already been carried out before investing in a commercial premise.</li>
</ol>
Visit the <a href="https://www.asic.gov.au/" target="_blank" title="Australian Securities and Investments Commission ASIC">Australian Securities and Investments Commission (ASIC)</a> website to familiarise yourself thoroughly with all the rules and regulations surrounding SMSFs and property investment.
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Four reasons why commercial and industrial property suits SMSFs: Savills

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EXPERT OBSERVER
The changed retail and consumer landscape are driving the boom in the industrial property market. This uprise of activity is resulting in higher property costs for occupiers, however these rising costs will not be a zero-sum game for occupiers. Occupants who are seeking efficiencies within their supply chains will thrive.
The convergence of several influential factors, including the rapid growth in e-commerce and the need to service customers directly, has led to unprecedented levels of heightened activity in the industrial property market. It is forecasted that the market will grow 30-40% per annum for the next three years, according to research by TM Insight, Australia’s leading consultancy to corporate occupiers within the sector. This growth is likely to result in dramatic increases in property values and rents.
Currently online retail sales in Australia accounts for 7.5% of total retail spend and this is predicted to increase by 30% in 2022. This transition in the retail landscape includes grocery, food and beverage, pharmaceutical and FMCG. This is forcing significant change within the entre retail ecosystem to adapt to evolving consumer demand and most importantly be able to service the customer directly. For brands to bypass the traditional bricks and mortar retail stores it requires a complete transformation in their supply chain design and operation. 
Occupiers need property solutions which are built to service direct to customer demand, however there is a significant undersupply of suitable property. TM Insight is currently managing requirements for clients across Australia totalling in excess of 600,000m2 and is in discussions with organisations for a further 500,000m2 of new space. This is leading to a proliferation of greenfield development and the repurposing of antiquated existing property in locations close to where people live.
The sheer demand in industrial property is placing significant pressure on land supply, particularly in Sydney and Melbourne’s south east where land prices have soared over the past 18 months. Even Melbourne’s west which has had no rental growth for 15 years, is increasing. With rising land values and tightening supply, the increases in rents is likely to continue with a downward pressure on occupant incentives. 
Investment yields are at record low levels, and it is hard to imagine any further significant levels of yield compression to prevent cost increases at a real estate level for occupiers along the Eastern Seaboard. While at face value this appears to be good news for property owners and bad news for occupiers, that is not necessarily the case. The current retail landscape and increase in property costs is forcing occupiers to innovate and look upstream in their supply chains to operate far more efficiently and potentially reduce their physical footprint in Australia.  
In order to service customers directly, companies must create efficient supply chains. Many occupiers are managing ever increasing exposure to costs and demands from customers by investing considerable capital into purpose-built warehouses and fully automated supply chains. In some instances, investment levels in automation and purpose-built facilites in excess of $300 million are showing returns on investment in as little as 3 years when compared to current people-intensive methods of operation. Additionally, developers are taking on an active role in the financing of automation and other bespoke tenant elements helping occupiers become far more efficient in the way they operate. 
These changes in industrial property through a focus on efficiencies will create substantial operational savings. This means occupiers will be able to absorb higher property costs when they are considered in the full spectrum of costs from an optimised business case. Additionally, these efficiencies driven by automated and advanced warehouses may lend occupants the ability to work their inventory in smaller spaces and ultimately reduce their footprint. 
Under the rising costs of industrial property, companies will continue to thrive if they optimise their entire supply chain network. However, a company approaching their distribution network with a fragmented property-driven approach will fall victim to rising rents. 
At TM Insight, we have recently assisted with the investigation and implementation of new highly advanced and efficient distribution networks across Australia for brands such as Kmart (5 new facilities and 230,000m2 of development), Bunnings (5 facilities and 190,000m2 of development), Fisher and Paykel (3 facilities and 33,000m2 of development) and PFD Food Services (4 facilities and 60,000m2 of development).
It would be a shame to let the fear of rising property costs prevent companies from exploring other opportunities that may significantly improve operations and lower costs. This isn’t a zero-sum game if occupants know how to leverage the market dynamics in their favour.
Nathan Bingham is the director of property at TM Insight.
 
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Rising industrial property costs not a zero-sum game for occupiers: Nathan Bingham

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An industrial office/warehouse in Rowville has sold for $13 million for the first time in 20 years to a local owner-occupier, highlighting the tightly held nature of Melbourne’s south-eastern industrial precinct. 
Savills Australia’s Kosta Filinis and Lynton Williams brokered the off-market deal for 800 Wellington Road at a land and building rate of $1,600 per sqm. 
“The sale demonstrates the current strength and depth for established, large-scale facilities in this tightly held, fully developed industrial precinct of Melbourne,” Mr Filinis said. 
Mr Filinis went on to say that due to the proximity to Eastlink, assets in the Rowville precinct were in strong demand from both owner-occupiers and investors.  
“The precinct is highly regarded and with very limited supply, industrial values are on a strong upward trajectory.” 
The 20,940sqm site enjoys a main-road position and encompasses an 8,140sqm building, including 774sqm of office space and multiple loading docks. 
The building also has a canopy and a 9.5-metre internal height clearance with early suppression, fast response (ESFR) sprinklers. 
The vendor was represented by Charter Keck Cramer.
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Rowville office warehouse fetches $13 million through Savills

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The growth area in commercial building remains warehouses.
Approvals to build new warehouses are up 39 per cent over the last year and near record highs.
More warehouses are being built to support the online spending sector. 
Overall, commercial building is booming – just below record highs.
Over the year to March, building approvals totalled $117.09 billion, 15.8 per cent above the decade average.
The value of all commercial and residential building approvals fell by 6.5 per cent in March after rising 3.3 per cent in February.
Residential approvals fell by 5.9 per cent with new building down by 7.2 per cent, but alterations &amp; additions were up by 3.3 per cent. And commercial building fell by 7.3 per cent.
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Warehouse building boom carrying commercial property sector: CommSec

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An expanding Shaw Fabrics is the first new tenant to secure space in the 60,502sqm Forrester Distribution Centre in St Marys. 
The Stockland-owned facility at 40–88 Forrester Road was the home of O-l Glass.
Window-blind material manufacturer Shaw Fabrics has moved into a 5,540sqm space in one of the three buildings, for a net rent of $105/sqm +GST.
A five-year lease accompanies the firm’s existing, 11,000sqm building in St Marys.
Forrester Distribution Centre’s remaining 54,962sqm represents one of the largest A-grade industrial vacancies in Sydney this year, with CBRE’s Cameron Grier, Moshe Greengarten and John Micallef the leasing agents.
The 12ha site occupies a prime location near the St Marys town centre and train station, M4 and M7 motorways, Great Western Highway and backing onto the proposed St Marys Intermodal freight terminal.
It is also within range of key industrial and commercial estates at Eastern Creek, Erskine Park, Wetherill Park, Arndell Park and Marsden Park, and 16km from Sydney’s future second airport.
“With limited stock in core markets such as Eastern Creek, we are seeing significant interest in Forrester Distribution Centre due to the cost-effective nature of the A-grade space,” Mr Micallef said.
“There is significant flexibility in the configuration of the warehouses, and options from 5,000sqm to 55,000sqm can be available by October this year.”
Shaw Fabrics has moved into Building A at Forrester Distribution Centre, a 24,450sqm warehouse, with Buildings B and C offering 24,116sqm and 11,935sqm respectively. 
All feature full drive-around access, internal clearance of up to 11.2m and multiple roller doors and dock levellers.
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