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BUILDING WEALTH FOR GENERATIONS

The year 2016 has been one of global change. Not only in a political and economic sense, but through forward thinking technology that is challenging convention in the way we operate on a daily basis. At Intergen we believe it is important to not only be aware of potential disrupters but be confident on the implications these have on global and local trends, and be able to act in a way that shapes our investment decisions.

In this edition we highlight some of the main disrupters we believe will have a strong bearing on the way we operate within the property and wider business industry.

2 0 1 6 W R A P : A Y E A R O F D I S R U P T I O N

1,200KM/Hspeed the Hyperloop could reach

870K SQMof space opened up with elimination of carparks in the Sydney CBD

1ST

global block chain transaction took place in November 2016

3 START UPSare causing a stir in the residential market

TOPICS COVERED IN THE ISSUE

• Blockchain – Cutting out the middleman: Ithas thepotential todisrupttraditionalmethodsandhasbeen laudedasoneof themost significanttechnological inventionssince thePC in the1970’sand the Internet inthe1990’s.WecoverwhatBlockchain isandwhat impactswill ithaveontoday’sworld.

• Residential Real Estate – a disrupted business model? Operators in theresidentialmarketarebeing facedwith the introductionofnewbusinessmodelsand technologicalplatforms.Wediscusshowtheseground-breakingsystemsaredemonstratingapotentialnewdirection inbuyingandsellingresidentialproperty in the future.

• Driverless Vehicles – just around the corner:Driverlesscarsare thewayofthe future.Despite someuneasesurrounding the risks involved,manyagreethat the technology isdestined tobe themainstreamreality throughout theworld. In this segmentweoutline thewider implicationsof the technologyandhow itmay impactyou.

• The Hyperloop – bringing cities together? Enter theHyperloop,aconceptualhighspeed transit systemwhichclaims immunity toweather,collision freeoperation, speedswell inexcessofcommercialplanesandsignificantly lowerenergy requirements.Wewilloutline this forwardthinkingconceptanddebate its futurewithinmodernsociety.

2 I N T E R G E N I N S I G H T

For many years people have used a trusted middleman or intermediary such as a bank to make a transaction. Blockchain is set to change this through allowing consumers and suppliers to connect directly, removing the need for a third party. Using cryptography to keep exchanges secure, blockchain provides a decentralised database of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.

It has thepotential todisrupt traditionalmethodsandhasbeen laudedasoneof themost significanttechnological inventions since thePC in the1970’s andthe Internet in the1990’s.The technologycanworkfor almostevery typeof transaction involvingvalue,includingmoney, goodsandproperty. It’s possibleusesare almost limitless.

Thepowerofblockchain is itsprogrammability. Forinstance, youcreate adigital ID for aperson, companyor real estate asset. Properties couldeffectivelybegiven theirowndigital identities,whichcould includethe chainofownership, adocumented listof repairsand refurbishmentsorprojectedcosts associatedwithowningand running theproperty.

Manyglobal companies are incorporatingblockchaininto their future systemsand investingmillions tomakesure theydonot fall behind.CommonwealthBankofAustralia,WellsFargoandBrighannCottonhaveundertaken thefirst global trade transactionbetweentwo independentbanks inNovember2016 suggestingthatBlockchain technology is closer thanweexpect.

Sowhat impactwill this haveon theproperty and thewiderbusiness industry?

Wehavealready seenBlockchainbegin to streamlinelegal documentation in real estate transactions, aswellasproviding thepotential toworkas aplatform tofacilitate crowd funding,or toprovidecertainty andtransparency inhigher riskmarketswhich lack these

B L O C K C H A I N – C U T T I N G O U T T H E M I D D L E M A N

“Blockchain is set to allowconsumers and suppliers toconnectdirectly, removingtheneed for a thirdparty.”

qualities.Theseare just someof theapplications inwhichBlockchain couldbecomepartof everyday life atall levelsof the real estate industry.

WhileBlockchain technology in real estatewill taketime togain support and trust, the technologyhas theability to challengeconventionalmethodsandpushtheboundariesof theway that transactions takeplace.Companies that areembracing the changewill staycurrent,while those that stick to traditionalmethodswillinevitablybe leftbehind.

Source: FinancialTimes

3 I N T E R G E N I N S I G H T

Blockchain is not the only potential disruptor seen across the property markets, with operators in the residential markets faced with the introduction of new business models and technological platforms. These ground-breaking systems are demonstrating a potential new direction in buying and selling residential property in the future.

Innovative new companies are set to shake up some aspects of property transactions through new approaches to doing business.

Anestablishedagencyoutof theUKandanewAustralianstart-upcompany,haveboth re-invigorated theflatagency feebusinessmodelwithin the residential salesagencybusiness.Bothhavegained traction in themoreheatedmarketsaround thecountryalthough theyhaveencountered resistance in themorechallenging,orbuyerfriendly,marketselsewhere.Reading between the lines, we suggest that the role of an experienced negotiator will always be a valuable one in real-estate transactions.

R E S I D E N T I A L R E A L E S T A T E – A D I S R U P T E D B U S I N E S S M O D E L ?

Anewproperty investmentplatform in residential realestate launchedearlier this year.The service allowsinvestors topurchasea fractionof aproperty (for as lowas$68)and receivea returnbasedon their contribution.The serviceprovides theability topurchaseaportionof a tangible assetwhilst having theflexibility to selltheportionwhenneeded.Theplatformallows theopportunity for a largerpoolof investors to access themarketdue to the lowerprice.

Thegrowthof these innovativeand refreshedapproaches to traditional residentialRealEstateprovethat the industry is prime for innovative companies andtechnology toenhance thewaywe invest, buy, and sellproperty inAustralia.Webelieve that theseplatformswill continue to recordgrowth, however, traditionalsellingmethodswill continue tooperate catering forvendors andpurchasers that require the fullRealEstateAgent service.

“Theseground-breakingsystemsaredemonstratingapotential newdirection inbuyingand selling residentialproperty in the future”.

4 I N T E R G E N I N S I G H T

Driverless cars are the way of the future. The benefits are clear: a more efficient flow of traffic which reduces congestion and accidents, the ability to perform other tasks while “driving”, and in time increased access to point to point transportation by individuals who cannot drive themselves (the youth and elderly). These are all pros of what appears to be an impending rollout of driverless cars.

Anumberof theworld’s largestfirmsare investingsignificantamountsofcapital into researchinganddevelopingdriverlesscars,displayingastrongbelief in thetechnologiesability.A largenumberofcarmanufacturerssuchasToyota,Tesla,HoldenandVolvoarealsocommittingsignificantamountofcapital intoexploringtheirautonomousdrivingstrategy tostaycompetitive.Therace to release thefirstcar ison,with theexpectationsthat thefirstcarswillbebrought to themarket in2020.Anecdotalevidencesuggest thecostwill range from$70,000to$100,000,butcouldbeas lowas$20,000.

Fromamacroview, the introductionofdriverlesscarswillimpactdrivingpatterns,whichwill transformour trafficandparkingpatterns,andultimatelycityplanning.We fullyexpect thesechangeswill impact realestateatall levels.

Forexample, imaginebeingdroppedoffatworkandhavingyourcardrive itself toaparking lotoutsideofthecity.Thisisa likely future scenariowhichwill reduce theneed forcities toprovideparking that is relativelyclose towherepeoplework,making innercitycarparksnearobsolete.

A recentUKstudyhas lookedat the impactsof self-drivingvehiclesoncities.Theauthors found that sharedautonomousvehiclescould increaseavailableurban

spaceby15%to20%, largely through theeliminationofparkingspaces. Ina local context, aColliersResearchreportoutlined in2015 therewere28,939non-residentialcar spaces in theSydneyCBD.Applyingageneric rateof30m2 percar space(includingarticulationspace)suggestsa totalof868,000m2 of space thatcouldbebetterutilisedwithoutaddingany furtherbulkordensity.

Wearecurrently in themidstofaglobalautomotiverevolutionandself-drivingcars&autonomoustechnology isclearlythewayforward.Despitesomeuneasesurroundingthe risks involved,manyagree that the technology isdestinedtobethemainstreamrealitythroughouttheworld.With theamountof investmentcurrentlybeingput in toresearching itspotentialcapability, it is littlesurprisethatthepaceofdriverlesscar innovation isacceleratingandwillbe in full swing in thenot toodistant future.

“Despite someuneasesurrounding the risks involved,manyagree thatdriverlessvehicles aredestined tobe themainstream reality throughouttheworld.”

2020the first

driverless car could be sold

28,939non-residential

car spaces in the Sydney CBD

$20KA driverless

car could cost as low as this

870K SQM of CBD space

could be better utilised

D R I V E R L E S S V E H I C L E S – J U S T A R O U N D T H E C O R N E R

$ M22020

5 I N T E R G E N I N S I G H T

G O I N G V E R T I C A L !Innovation in the automotive sector and the flow on ability to store vehicles separate to the passenger’s destination is expected to provide an opportunity to revolutionise the way in which we think about car parking.

Thecapabilitiesof automatedvehicles, togetherwiththeexpecteddemand for vehicle storage facilities innear city areas is likely tomakeadvancedcar stackingsystemsmore feasible.Theprimaryadvantageofthese systems is the spaceefficiency theyare able todeliver,with a rotary carouselparking systemwhichcanstore12carparks in thegroundspaceof twocars.

Also fromadevelopmentpointof view,nocarbaysresults innobasement carparkingallocation,which inturnwould result in faster construction times forbothcommercial and residential buildings.

Thebenefitsof incorporating car stacking systems intocityplanningwill ultimatelymake room for greaterutilisationof urban space.The sooner landlords,developers and the city council introduceverticalstacking intobestpractice for the city and surroundingareas, themoreattractiveandefficient the landscapewill be.

SpeedyTower RotaryCarousel

Multi Parking

OptimaParking

Lift&SlideParking

“Thebenefitsof incorporatingcar stacking systems into cityplanningwill ultimatelymakeroom for greaterutilisationofurban space.”

An extended trip in a driverless car would undoubtedly be almost as tiresome as an extended trip in a conventional vehicle. Enter the Hyperloop, a conceptual high speed transit system brought onto the global stage when Elon Musk and SpaceX openly published the designs. The system claims immunity to weather, collision free operation, speeds well in excess of commercial planes and significantly lower energy requirements.

Travelling fromSydney toMelbourne in less thananhour could soonbecomea reality via theHyperloop.While the foundershaveenvisionedhypersonic speedstobeachievable, preliminaryanalysispublished suggestsa speedof1,200km/h tobemoreattainableunder thecurrentdesign.While the technology is currentlymoretheoretical than real, fundinghas alreadybegun tomakethe concept a reality.

T H E H Y P E R L O O P – B R I N G I N G C I T I E S T O G E T H E R ?

Source:Parkmatic

6 I N T E R G E N I N S I G H T

HyperloopOne isoneof threecompanies looking todevelop the technologyand is themostprogressedthus far.HyperloopOnehas secureda totalof$160million in fundingand isaiming to start thefirsteverfull-scale testingof the technology in thefirstquarterof2017. Ifeverythinggoes toplan, thefirsteverpassengerHyperloopcouldbe inplaceasearlyas2020.

HyperloopOnehas stated thatAustralia is on its radar for testing, given that the Melbourne to Sydney route is the third busiest air corridor in the world.

A transport system like theHyperloophas theabilitytomergecities.No longerwill SydneyandMelbournebe rivals, buthave thepotential to formamegacity.This couldhave implicationson the commercialpropertymarket,with rents andpropertypricesbetween the twocities converging.

Despite theexcitement surroundingHyperloop, thereare significanthurdles tobeovercome.The sheer costtoproduce the system in the requiredcorridors is themost apparent. In addition, theability todevelop thetechnology is not guaranteed, and thedependenceona convenient andcentral loadingpointwillunderstandably causeproblems.That said, thebenefitsof a high-speed transit system like theHyperlooparehard to ignore.

NOW WHAT?

While all of the topics we have covered represent significant innovation, or at least have the ability to significantly shift the way real estate operates, is transacted or is appreciated in this country, none of them, at least at this point, have the ability to disrupt the underlying value of well-located and easily accessible real estate.

Thank you for your readership through 2016, we look forward to hearing from you in the new year!

Disclaimer:The informationpresented isof a generalnatureonlyand isnot intended for anyparticular individual.Noconsiderationhasbeengiven to theinvestmentobjectives,financial situationandparticularneedsof any individualperson. Investors should independentlyassesswhether theadvice is appropriateto theirowncircumstances.Although the information in thispresentation is taken fromsourcesconsidered tobe reliable, IntergenPropertyPartnersPtyLtd, itsdirectors, employeesandconsultantsdonot represent,warrantorguarantee, expresslyor impliedly, that the information is completeor accurate.Furtherwedonotacceptany responsibility to informyouof anymatter that subsequentlycomes toournotice thatmayaffect the informationdisseminated in thispresentation.

CONTACT DETAILS

Kegan ShawGeneral Manager, AdvisoryKegan@intergenpp.com.au

Jonathon BayerProperty AnalystJonathon@intergenpp.com.au

“Travelling fromSydney toMelbourne in less thananhour could soonbecomeareality via theHyperloop.”

Source:Smith’sLaywers