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Australian Property Development Industry


  • Industry contribution to the economy

  • Industry, firms and markets

  • Development as a process

  • The development team

  • Regulatory framework: Planning and zoning

Industry Profile

  • The Property Council of Australia reports on the economic significance of the property industry at the national and state level.

  • The property industry includes construction contractors and trades, real state services, professional services, finance and insurance.

  • Their econometric model uses ABS input-output data on the contributions of different industries to the economy.

NSW Economy

The Gann and Salter Model (2000)

Gann, D.M. and Salter, A.J. 2000. Innovation in project-based, service-enhanced firms: the construction of complex products and systems, Research Policy 29 (7-8), 955-972.

Regulation and Certification

Source: Cole Royal Commission into Building Industry, Discussion Paper 1, 2001.

Industry, Firms And Markets


  • Property development is usually seen as an industry made up of firms that buy land to build on, but it has a wider scope.

  • The industry is responsible for the continual creation and renewal of the built environment. Therefore it plays an important role in determining the quality of life, health and lifestyle choices for people, opportunities for businesses and employment, and the growth of communities.

  • Because development occurs one project at a time the overall importance of the industry is often overlooked. Typically1 to 2 per cent of the built environment is replaced or created through new build each year.

  • There is a long tradition of international investment in property, but it has often been unprofitable.

• Examples are Canada’s Olympia and York 1980s Canary Wharf development in

London’s docklands, the British land companies in Sydney in the 1970s,

Japanese resort developments in the 1980s in Australia, and Australian REITs’

investment in the US and Japan in 2007-08.

Variety of Firms

  • Some firms specialise in a sector like Westfield in retail.

  • Some on types of building, e.g. Grocon does high-rise.

  • Stockland restructured from three divisions (industrial, retail, residential) to integrated teams because many projects are now multipurpose.

  • Large developers look for long term projects where they can leverage the assets in their balance sheets, to master plan and develop in stages.

Lend Lease in Ultimo and Darling Harbour, Mirvac at Harold Park, Frasers

Central Park.

  • Many firms are local, and stay within a geographical area or region where local knowledge is a competitive advantage. Big projects and PPPs attract international firms.

  • Joint ventures and partnerships are common across the industry:

• Sekisui House has JVs with Lend Lease in Qld and Frasers in Sydney;

• AMP and Westfield jointly own a number of shopping centres;

• Federation (was Centro) did a series of deals in 2013 in the ongoing

restructuring after Centro’s collapse: ISPT with $370m and Challenger with

$600m transactions.

Two Types of Opportunity

There are two versions of development, but the second is often overlooked:

  1. A site looking for a use –this is the traditional highest and best use analysis, where the aim is to maximise development returns by getting the type and timing of a project right.

  2. A use looking for a site –many organisations have specific requirements for their operations, often with a need for large sites:

• Retailers looking for new locations, for example supermarkets or hardware

stores (like Aldi, Costco or Bunnings);

• Transport and logistics companies looking for sites for warehouses or distribution

centres with good transport links;

• Industry clusters like IT, medical and educational precincts;

• Data centres and cloud computing facilities (in the US desert locations are

popular because they use solar power for running the air conditioners).

Two Types of Developers

Visionaries and others. Some developments actually do change the world:

  • The first high-rise buildings in Chicago in 1890s;

  • New York skyscrapers between 1900 and 1933;

  • Shopping malls, invented by European socialist Fred Gruenin 1947, who hated cars and came to despise his creation;

  • Disney and theme parks;

  • Canary Wharf in 1990s London;

  • Dubai and the Gulf Emirates in the 2000s;

  • In Australia Robina (Qld), Docklands (Vic) and Central Park (NSW) are examples.

Technology has come a long way since Elisha Otis invented the elevator safety brake in 1853, which made tall buildings possible.

Great Success ….

Harry Triguboff started building 3 story walk-ups in the 1970s and ended up, many billions later, with Meriton the largest apartment developer in Australia.

Henry Pollack was an architect and co-founder of Mirvac, and used design and quality to capture the top end of the residential market.

There are many long-term survivors in the industry that have been consistently successful.

Spectacular Failures

  • A land boom in Melbourne led to the collapse in 1896 of banks, building societies and the state government.

  • In 1974 many developers crashed into receivership -Mainline, HUA, ParkesDevelopments, Regional Land. Followed by finance companies ASL and FCA.

  • The 1980s Australian boom was based on extremely aggressive bank lending to unlisted property funds focused on speculative CBD office developments. When rents in the oversupplied residential and commercial markets fell in the late1980s commercial and industrial property prices plunged by 50 percent and more. Failures included Aust-Wide, Growth Equities Mutual and Armstrong Jones in 1989.

  • In 1991 developers Girvan Bros, Bond Corp, Estate Mortgage, Pyramid Building Society, Essington, Hooker Corp. and Concrete Constructions went into receivership. The three merchant banks at the centre of the property boom crashed – Spedley, Tricontinental, and Rothwell, followed by the SA and Victorian State banks in 1992. Two of the big four private banks incurred such large losses they had to be re-capitalised (Westpac and ANZ).

  • Over the financial crisis in 2007-08 failures included Westpoint, Centro, MFS, Record Realty, Rubicon Trusts and many other leveraged REITs, Craig McDermott, Beechwood, Excellence Homes.

Sectors With Character

Sir Leslie Hooker founded LJ Hooker, the largest residential property developer in 1960s Australia.

Dick Dusseldorp started Civil & Civic in 1951, later acquired by Lend Lease in 1961. They went on to develop many landmark buildings over the next 40 years with spin-off GPT (the first Aust. LPT listed in 1971, now divorced).

Frank Lowy co-founded Westfield in 1959, today the world’s largest retail owner and manager with 121 shopping centres in four countries. Westfield has 39 centres across Australia, holding a 50 per cent interest in 18 with joint venture partners.

Some Criminality

George Herscu built his fortune with shopping centres and the 1985 acquisition of Hooker Group for $450m. Jailed in 1990 for bribing Queensland National Party minister Russ Hinze.

Wollongong town planner Beth Morgan confessed to affairs with three property developers and receiving gifts and cash from two of them. ICAC’s 2008 report led to councilor Frank Gigliotti jailed for 4 months, with developers Glen Tabak fined $2500 and a 2 year bond, and Frank Vellar fined $3000 and sentenced to 10 months community service.

ICAC and the Liberal Party

  • In 2015 twelve NSW state and federal Liberal politicians resigned or stood aside following corruption inquiries by the ICAC as a result of Operation Spicer.

  • Another issue is a related Canberra-based organisation called the Free Enterprise Foundation, which allegedly washed almost $700,000 in illegal donations from property developers and channelled the money back to the NSW Liberal Party.

  • The NSW Electoral Commission withheld over $4 million from the Liberal Party for concealing the identity of some donors to its 2011 election campaign.

CFMEU and Developers

  • The 2015 Royal Commission into Trade Union Governance and Corruption, found evidence of blackmail, theft, intimidation and death threats. Also the use of motorcycle gangs and other criminal groups as hired muscle, interference in union elections, and illegal agreements with employers.

  • The Final Report highlighted poor union record keeping, false invoicing and destruction of documents, union committees which failed to enforce rules, payment of large sums by employers to unions for dubious ‘training’ schemes and other ‘services’, and influence peddling in the Labor Party through inflation of union membership figures.

  • The sums of money involved were also significant, with many officials benefiting from their positions through fraud or theft from the union (HSU in particular), or in the CFMEU through arrangements with employers for work on properties owned by officials.

Development as a Process

The stages a development project goes through

The Development Process

  • Development seen as a process, is an ‘event sequence model’. These stages are usually interrelated not linear, with a number of stages getting worked on at a time.

  • The process requires interaction between different functions –design, construction, finance, marketing, management, public relations and so on. Therefore the process is interdisciplinary and dynamic, and requires managing a multidisciplinary team, which also makes it complex.

  • There are a number of approaches to the process, with different phases, stages or steps used by different authors. No approach is necessarily better.

  • Patsy Healey (1991) Models of the development process: A review, Journal of Property Research, 8:3, 219-238 is a standard reference (in Online, also Healey’s (1992) Institutional Model.

Cadman (First ed. 1978)

  • This approach divided the development process into four generic phases:

• Evaluation

• Preparation

• Implementation

• Disposal

  • This assumes the initial investigation and acquisition of the site has been completed.

  • The phases are probably too broad to be very useful when analysing a specific development.

  • The book then added the missing detail on the content of the four phases.

Wilkinson and Reed (2008)

In their fifth edition update of Cadman’s Property Development they had eight main stages:

  1. Initiation

  2. Evaluation

  3. Acquisition

  4. Design and costing

  5. Permissions

  6. Commitment

  7. Implementation

  8. Let/manage/dispose

ULI Model –Miles, Berens& Weiss

Another eight-stage model of real estate development from the US Urban Land Institute:

  1. Inception of an idea

  2. Refinement of the idea

  3. Feasibility

  4. Contract negotiation

  5. Formal commitment

  6. Construction

  7. Completion and formal opening

  8. Property, asset and portfolio management

Paul Zahara Version


  • Sometimes a developer will take out an option to purchase the site, as a way of managing uncertainty and risk on a site that needs to be rezoned.

  • The option is often a small amount, but the developer carries the costs associated with getting planning approvals. Planning uncertainty is the big issue in property development.

  • The payout on the option is usually linked to the outcome of the approval process.

Paul Zahara’s Granularity Model

Ratcliffe, Stubbs & Keeping