For our second chat in our industry leaders insights series, we caught up with Simon Wilson, Director of RDT Pacific, a leading Project management and Cost management Consultancy.
What are the current trends shaping the property industry?
While the property sector as a whole faces challenges due to government spending restraint, there are several trends shaping the property industry.
1. Environmental Social and Governance (ESG): Although ESG has gained international traction, its progress in the Aotearoa property sector has been slow. Given that buildings account for 30% of global energy consumption, it’s crucial to prioritise ESG initiatives. Companies must collect and analyse power usage data, improve baseline metrics, and compare against industry standards to enhance operational performance.
2. Data-Driven Decision-Making: To improve energy efficiency, companies need automated data collection. Installing sub-meters capable of tracking detailed energy usage is a critical first step. Analysing this data allows for actionable steps, which are incentivised by banks offering preferred lending rates to companies effectively managing their assets. Standards like NABERSNZ or Green Star Performance verify these efforts.
3. Local Commitment to ESG: It is worth recognising the Leading property portfolios in New Zealand, including Stride, Goodman, Auckland Airport, Argosy, Precinct Properties, and Air New Zealand, align with international ESG standards. As these companies grow, they increasingly rely on global benchmarks for reporting. Recognising that climate change impacts both the environment and finances, they prioritise sustainability.
Despite economic challenges, RDT Pacific has Alex Cutler and Cristina Larrea, experts available to drive ESG and sustainability initiatives. Embracing ESG isn’t just about following a trend; it’s a strategic move toward a sustainable future.
How are technological advancements influencing the industry?
AI is fascinating and is full of possibilities, so long as you remember that AI cannot think for you. With 10-20% of the information being produced estimated to be incorrect or hallucinations, this presents a paradox. While AI can greatly enhance our capabilities, it requires careful oversight and understanding of its limitations.
Where we see the strength of AI within our business is its ability to automate data analysis and decision-making processes, enabling faster and more informed decisions. It's important to recognise that AI is not true intelligence; it is based on algorithms, not independent thinking.
As we enter this space as a business, we are taking a ‘caution is necessary’ approach.
What are the biggest challenges your organisation is encountering?
The construction industry is currently grappling with a challenging "Holy Trinity" of factors: high land prices, high interest rates, and historically high construction costs. While there has been some relief, with construction costs decreasing by 10-20% from their peak, these elements continue to significantly impact the sector.
This "trifecta" of challenges presents a complex scenario. If interest rates were to decrease, it would provide some relief, potentially easing the strain on the market. Additionally, as construction costs continue to decline, some pressure on the industry could be alleviated. The looming concern is if the sector continues to decline, the talent in the market will be redeployed, and all the growth in the expertise we have had will shift offshore or into another industry.
Here at RDT Pacific, we are in a fortunate position, and we don’t take it for granted. We are an established business with strong and long-term client relationships which has helped mitigate the impact of the current market.
What opportunities is RDT Pacific working towards?
Even within a broader macroeconomic trend, there are always slivers of opportunity. A downward trend doesn't eliminate the presence of "green shoots"— pockets for potential growth. Even in challenging times, there are individuals and businesses bucking the trend, finding ways to innovate and succeed.
One key strategy during this phase is preparation for the next upturn. For instance, if we anticipate that construction pricing will bottom out within a quarter to a maximum of two quarters, now is the time to start planning. How long does it take to design a new project? If you can capture the design possibilities now and develop something market-ready in the next 3-9 months, you could be perfectly positioned to capitalise on the recovery.
Our expertise spans the full asset lifecycle—from technical due diligence and land acquisition to eventual divestment. In this part of the cycle, there are certainly ways to support our clients in positioning themselves for the next phase of growth.
What is the future outlook you are working towards?
As we look ahead to the next 12 months, we anticipate a gradual recovery in the industry. For the remainder of this year, we expect the industry to navigate a relatively flat phase with minimal fluctuations.
We are predicting acquisitions to remain consistent throughout this period, providing a steady flow of activity. We anticipate a significant increase in projects being brought to market for tender next year, likely driven by the design work happening this year.
We are cautiously optimistic about a positive shift as we move into the next year. It's a period of preparation and positioning, setting the stage for a more active market in 2025.
What will impact RDT Pacific in the next five years?
Role of Technology: The construction industry has historically underinvested in technology and development, averaging less than 0.5% annually. This cumulative underinvestment over the past century has left the sector significantly behind other industries in terms of technological advancement. As we consider the role of technology in the coming years, predictions need to align with the reality of an industry that is deeply established and often slow to adopt innovation.
Biodiversity crisis: One of the key discussions among our clients revolves around the climate crisis and the biodiversity crisis. While these issues are well understood internationally, there's a growing recognition here in Aotearoa of the need to address our role in maintaining and protecting biodiversity. A few of our clients are proactively examining their responsibilities as corporate citizens, recognising that biodiversity protection will become an important focus area, potentially emerging as a distinct category within the broader ESG framework.
There is also a significant opportunity in Aotearoa New Zealand to integrate the principles of Te Ao Māori as part of meaningful partnerships with Iwi. Embracing these cultural perspectives can provide a unique approach to business, allowing us to explore new possibilities and foster genuine partnerships.
Thanks so much to Simon for his insights. Keep an eye on the Assemble LinkedIn page for more chats with Industry Leaders.