Optus Business Real Estate Industry Pulse

Edition 1 - September 2021

Overview Welcome to the Optus Business Real Estate Industry Pulse for 2021 – this industry report is part of a series published by Optus Business.

Optus Business endeavours to help owners to grow their businesses. We believe we have an opportunity to help businesses accelerate the use of new technology, connect to next generation network infrastructure, improve customer experiences, create new ways to differentiate in the market - and grow.

Using new research conducted by Optus Business, with insights from business leaders and owners, and validated by Kantar, the report showcases how connectivity plays such a critical role in improving outcomes for businesses in Australia. The report focuses particularly on the adoption of technology by businesses, how technology can support them and where technology investments should be made for each industry segment. The Australian real estate industry is an area of special focus for Optus Business. With assets worth $8.1 trillion1 in the residential housing market alone, around four times Australia’s GDP, residential real estate is now worth more than the combined values of the companies listed on the ASX, the superannuation industry and the commercial real estate sector. Given the impact of the pandemic, the commercial real estate landscape is more challenging, but as we continue to adapt to the hybrid work reality, new opportunities will, no doubt, present themselves.

The Optus Business Real Estate Industry Pulse for 2021 is a snapshot of the challenges and – more importantly - demonstrates opportunities for, and within, businesses that exist in the Australian real estate industry today.

Libby Roy Managing Director, Optus Business

September 2021

Contents

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The Australian real estate sector has, by most measures, bounced back from the challenges it faced from the COVID-19 pandemic in 2020. That’s not to downplay the impact of COVID-19 over the past 12-18 months. Many real estate businesses retain concerns about the markets they operate in, particularly as lockdowns remain a risk and a reality (as at August 2021).

As restrictions and uncertainty first hit in early 2020, real estate businesses felt the impact, with 24% confirming that the pandemic was undoubtedly the most pressing challenge of the past 12 months.2 What’s more, the impact varied by company size, with smaller businesses affected more than their larger peers and competitors.

Vibrant growth, continuing challenges

2Optus Business Real Estate Industry Pulse Research 20211

Factors include reduced demand for commercial real estate, difficulties amongst tenants to meet rental obligations, and lockdowns of commercial premises. Physical distancing measures (still in place in a number of states as at August 2021) have also affected the industry’s ability to meet face-to-face with clients, a particular challenge for an industry that routinely conducts property tours and inspections. The impact of COVID-19 restrictions has driven Optus Business real estate customers to spend over 200% more minutes on video calls during this time than other Business customers.3

Optus Business real estate customers make >20% more local mobile calls and use >200% more minutes on local video calls in comparison to the average Business customer3

Real estate industry business challenges in the last 12 months2

Looking ahead, the continued impact of COVID-19 will remain a concern over the next 12 months, however most real estate businesses are optimistic. Nearly 7 in 10 real estate companies surveyed express confidence in their financial growth over the next 12 months.2 The positive outlook can be seen off the back of strong developments in both the residential and commercial real estate markets since the start of 2021.

Alongside sales and revenues, the priorities for real estate companies over the next year will likely include the introduction of technology to improve operations. The impact of this uptake could be seen in areas as varied as increased automation, driving customer centricity, and improving cyber security. This is reflected in their business investments planned for the next 12 months, where nearly 40% call out new technology, and training and development, as the most important areas.2 Larger businesses have bigger ambitions and expectations for their technology investments than smaller companies.

3Optus Business Industry Data 2021

2Optus Business Real Estate Industry Pulse Research 2021

Impact of COVID-19

24%

Ability to meet with clients/customers

16%

Increasing sales

15%

Business development/gaining new

clients

14%

Finding new sources of growth in

current market

13%

Maintaining positive mental health

12%

Creating stronger customer

relationships

12%

Gaining access to new

markets

12%

Keeping staff

employed

11%

Loss of business

11%

2

In adapting to COVID-19 and physical distancing measures, the real estate industry has quickly taken up remote working, digital tools and new technology to conduct their business operations. Cloud-based software and documents, digital contracts, client meetings online, and virtual property showings and auctions are all now very much part of the real estate industry’s armoury. Accelerated by the pandemic, the industry is undergoing a digital transformation with a focus on improving customer experience and business productivity - and real estate companies are interested in meaningful innovation around new business models. Advanced technology options that include network management and work automation tools, built on top of 5G connectivity where available, are being actively considered by many of the businesses interviewed.

Surrounding all of this change and transformation is security, and understanding and managing cyber risks and cyber threats. Responsible for large amounts of personal and financial data, 68% of those real estate businesses surveyed are acutely aware of these risks, and their responsibility to manage them.2

Employment of new/relevant

skill sets

Greater ability to work

remotely

Training in new and

available tech

Bigger budget for investing in new tech

Tailored software support

Upgrade of current software

Better cyber

security

Dependable telecom provider

Dependable network

Upgrade of current hardware

Resources needed to achieve business goals in the next 12 months2

2Optus Business Real Estate Industry Pulse Research 2021

28% 28% 27% 27% 25% 25% 24% 24% 24% 22%

5G real estate demonstrationTo showcase the timesaving ease of virtual open homes, Optus organised Australia’s first real estate VR inspection in collaboration with local tech innovators Hatch Avatour and Samsung. The Hatch Avatour technology was used by the agent to guide a virtual house inspection.

3

Off the back of over 12 turbulent months of COVID-19, real estate industry confidence about keeping businesses open has increased by 6%.4

Larger businesses (200-300 FTE), affected less by market turbulence, are the most confident, ranking their ability at 7.9/10, compared to 7.0 for medium-sized companies (20-199 FTE) and 6.6 for small businesses (1-19 FTE).4

Businesses recalibrate with renewed optimism

At presentThis time last year

6.0 6.6 7.0 7.97.0 7.2 6.8 7.2

1-19 FTE 20-199 FTE 200-300 FTE Overall

Confidence in keeping business open4

4Optus Business Real Estate Industry Pulse Research 20214

Confidence in financial growth in the next 12 months4

20%

5%

2%

9%

52%

67%

68%

82%

1-19 FTE

20-199 FTE

200-300 FTE

Overall

Quite confident or very confident

Not very or at all confident

Nearly 70% of all companies surveyed expressed confidence in their financial growth over the next 12 months.4 Again, real estate businesses of different sizes had different views - but even for small companies, 52% were planning to grow financially over the coming 12 months.4

In the residential market, pent-up demand for property, perhaps bolstered by accrued savings in households as a result of being locked down for large parts of 2020/21, as well as the decline in mortgage interest rates, continues to drive massive price growth in Australia.5 Growth has been as much as 150% higher than would have been the case without the pandemic.5

In the commercial sector, investment activity has continued to rebuild, according to Australia National Investment MarketBeat (2021).6 Investment volume in Q1 2021 was 50% above Q1 2020, although still below 2018 and 2019 levels.6

Challenges remain, though, and real estate companies are recalibrating their businesses accordingly.

Cash flow management sits alongside sales growth as priorities. Smaller real estate companies have larger revenue gaps to close - 44% see it as a primary goal, well above the overall proportion of 29% across all companies surveyed.4

Business goals in the next 12 months4

Increase sales

Better manage

cash flow

Increase automation

of daily tasks

Develop digital

marketing and communications

Increase move to online

working

Set up new telecom

tech/products

Keep all staff

employed

Improve work/life

balance of employees

Improve cyber

security

Take advantage

of tech advances

4Optus Business Real Estate Industry Pulse Research 2021

29% 21% 21% 21% 18% 18% 17% 17% 17% 15%

5

According to Deloitte7, 23% of APAC commercial real estate companies expect rental collection declines of more than 20% in the next year, creating another big gap to close.

Yet the realisation of how technology can play a pivotal role in growth is high, as is the intent around investment in technology. Technology related goals are more frequent amongst medium and larger businesses. Large companies are focused on increasing productivity by automating daily tasks (26%).4 Medium-sized businesses have a different set of priorities, focusing on developing their digital marketing and communications (26%).4

What’s clear from the research is that real estate businesses are attuned to the importance of technology and are considering new investments even during challenging market dynamics.

1. Ensure that technology, applications, and networkare up to the task of supporting the business

2. Maximise revenue, cash flow and profit using newapplications, automation, and advanced workflow

3. With business survival assured, plan for growth and security

Business recalibration summary

4Optus Business Real Estate Industry Pulse Research 2021

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Even as they battle through the latest round of state-wide lockdowns (August 2021), real estate companies are transforming their business for growth.

Decision makers in real estate businesses believe that digital transformation is a key to accelerating growth, and to introducing productivity. Improved remote collaboration is one key area: 1 in 3 businesses plan to invest in 5G internet, and 1 in 5 in network management.8 Alongside this, 25% of those interviewed are considering or planning new investments in work automation tools such as Amazon Echo and Google Home in the next 12 months.8

Digital transformation for growth

1 in 4 real estate businesses plan to invest in work automation tools (e.g. Amazon Echo, Google Home) in the next 12 months8

8Optus Business Real Estate Industry Pulse Research 20217

While industry observers including Deloitte9 point out that digital transformation remains a challenge for many real estate businesses, our research shows that real estate companies understand that using data and changing operating models can create better experiences for their clients.

Adopting electronic documents, cloud-based services, optimising workflows for efficiency, and using digital technology to innovatively solve traditional problems combine to improve productivity. Even as residential house prices continue to soar (as at August 2021), real estate companies are rebuilding their businesses around what may remain an unpredictable market for some time.

1. Ensure that network connectivity and infrastructure are fit for purpose. New connectivity technologies such as 5G and software defined networks could create new opportunities for real estate businesses to grow

2. Consider how cloud solutions embrace hybrid working, increase flexibility and increase security

3. As businesses invest in more devices to keep their employees consistently connected, the threat of cyber attacks grows. Optus Business works with world-leading partners such as McAfee to help mitigate this threat

Digital transformation solutions

With increased use of data, 1 in 3 real estate businesses plan to purchase 5G internet in the next year8

What does the phrase ‘Digital Transformation‘ mean to you?8

“Adoption of digital technologies to transform services or business growth”

“Changing the platform from premises to cloud”

“It will bring a different customer experience”

“Innovative use of digital technology to solve traditional problems”

“Optimising processes and making workflows faster, easier, and more efficient instead of spending hours processing paperwork”

“Digital transformation encourages independent innovation and new business models”

8Optus Business Real Estate Industry Pulse Research 20218

The biggest business investments over the next 12 months amongst real estate companies surveyed will be new technology (39%), and training and development (39%).10 Training in the right skills will also be important - and the gaps between what they have and what they need means that 28% of companies will be focusing on ensuring they have the skills needed to achieve their business goals.10

At the same time, hybrid working is a reality: 28% of those surveyed will focus on expanding their ability to work remotely.10 It seems that the experiences of reacting to the pandemic, as with other industries, will lead to hybrid working being a permanent feature in the real estate industry.

Skills and technology: investing for success

10Optus Business Real Estate Industry Pulse Research 20219

Connection to a reliable network via multiple devices ensures businesses never miss a customer or opportunity

New technology to conduct business, and the challenges in delivering results remotely, have accelerated the recruitment plans and activities of many real estate businesses. Acquisition and retention of talent are priorities.

Alongside skills sits technology. The priorities are broad, and embrace systems, devices, software and the skills needed to gain leverage from these important - and costly - commitments. For the businesses surveyed, the focus is on training in new technologies (27%), bigger technology budgets (27%), tailored software support (25%), and upgrades of software packages (25%).10

Training and development investments have the same priority across firms of all sizes. Technology investments however are more prominent amongst medium and large companies, with over 2 in 5 investing in new technology, compared to 1 in 4 amongst small businesses (1-19 FTE).10

According to Deloitte11 survey data, a majority (56%) of CRE respondents believe the pandemic has exposed shortcomings in the digital capabilities of many firms, leaving multiple gaps to be filled to achieve their objectives.

These plans reflect - and will support - the underlying business goals real estate companies have as priorities: increasing sales and improving operational efficiency through automation, whilst adapting to a new business reality based on social distancing and digital customer expectations.

As McKinsey12 pointed out when the pandemic first struck the commercial real estate industry in 2020, the sector will need to be proactive to create new strategies to promote growth.

10Optus Business Real Estate Industry Pulse Research 2021

10

Real estate companies large and small are pursuing technological advances to improve tenant attraction, tenant churn, commercial lease negotiations, asset valuation, customer experience, as well as overall operations, as best they can.

Future international expansion is also a priority for real estate companies. With Australia’s borders closed (as at August 2021), current demand is being driven by foreign property buyers looking to capitalise on the strong market. Realestate.com.au data showed that international search activity for properties on its portal was up by 6.37%.13

Additionally, Optus Business data shows that real estate Business customers send over 20% more Multimedia Messaging Services (MMS) internationally in comparison to other Business customers.14

Finally, the third biggest investment of real estate firms is staff support and amenities (33%), an essential investment to ensure that staff can maintain productivity and engagement whilst working remotely with new tools in new ways.10

What will real estate companies invest in over the next financial year?10

New technology

Training & development

Professional insurances

SalariesOffice space expansion

International expansion

Mergers & acquisitions

Research & development

Staff support & amenities

Recruitment Client entertaining

1. Move from react mode to invest mode. Upgrades to newtechnology and network services are likely to be high priorities overthe next 12 months; a digital review could form part of the decision-making process prior to investment

2. Understand the interplay between technology and the skills neededfor leverage. Access to interactive documents acrossthe whole business at any time increases digital productivity.Smart use of market-leading devices on the Optus networkcan help businesses to run more efficiently

3. Understand how hybrid working influences skills, technology,recruitment, and retention

4. Today’s business needs are constantly evolving. The need to becontactable anywhere and allow your team members to workfrom multiple locations is a current and common scenario. OptusLoop is built to support your needs. As a cloud-based VoIP (Voiceover Internet Protocol) solution, it allows your team to connectanywhere using existing devices in a cost-effective way

Skills and technology adoption solutions

Optus Business real estate customers send >20% more internationalMultimedia MessagingServices (MMS)in comparisonto the averageBusinesscustomer14

10Optus Business Real Estate Industry Pulse Research 2021

14Optus Business Industry Data 2021

39% 39% 33% 25% 25% 24% 24% 22% 22% 19% 14%

11

Real estate businesses surveyed are aware of their responsibilities to keep customer data and financial information secure.15 They say that protecting customer and company data are the biggest cyber security concerns, with over 68% of businesses expressing some level of concern.15

Real estate companies surveyed are most concerned about protecting business and customer financial information (53%), and customers’ records (51%).15

Risk-reward: managing cyber threats

65% of real estate businesses have measures in place to defend against cyber attacks15

15Optus Business Real Estate Industry Pulse Research 2021 12

Concerns for all types of cyber attack grow with company size, with medium and large businesses being almost twice as concerned (57%) about cyber attacks as small companies (31%)15. As with other industries, this is perhaps no surprise, with larger companies simply having more technology, and more potential points of entry for hackers or malware.

Most real estate businesses are prepared for cyber attacks, with 65% having measures and resources in place.15 When it comes to actual attacks however, medium and large companies have experienced more attacks than small businesses, with over 40% being victims to a cyber attack in the past year, compared to less than 20% of small companies.15

As a result, 3 in 5 medium and large businesses either have security policies in place, or someone responsible for cyber security, compared to 2 in 5 in smaller companies.15

1. Understand the risks associated with hybrid workingby completing a technology audit on all points ofvulnerability

2. Investment into new technology should come with theright focus on security to help protect businesses fromdigital threats

3. An annual digital review with Optus can help ensurethat businesses are utilising devices in a smart,secure and effective way

Security technology solutions

Protecting customer

data

Protecting company

data

VirusesHackers stealing

information

Malware & spyware

Data theft via device theft/loss

Ransomware SpamEmployees

stealing information

Social media account attack

Phishing

Greatest cyber security concerns15

Extremely or very concerned about cyber attacks in the next 12 months15

Large (200-300 FTE)58%

Medium (20-199 FTE)

55%

Small (1-19 FTE)

31%

15Optus Business Real Estate Industry Pulse Research 2021

68% 68% 64% 64% 64% 62% 61% 59% 56% 55% 54%

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© Optus 2021. The Optus Business Real Estate Industry Pulse Research 2021 is based on a survey of 387 respondents in the Australian Real Estate industry, completed in August 2021. All businesses had between 1 - 300 employees and predominately worked across Property Operations, Real Estate Services, and Rental and Hiring Services.