brunoconsiglio, Author at Cromwell Property Group
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February 14, 2024

Cromwell’s European Market Monitor – Q1 2024

Market Monitor gives our views on the latest data and trends from the financial markets and their impact on commercial real estate. The latest one covers ECB rates, credit standards and rate decline indicators.

View the full report here.

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Cromwell releases full scope 3 inventory, sets short and long-term emission reduction targets

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Real estate investor and fund manager Cromwell Property Group (ASX:CMW) has today released for the first time its full scope 3 emissions inventory, becoming one of the few Australian commercial property organisations to publish its emissions footprint across 100% of its global network and supply chain.

The inventory release covers all Cromwell scope 3 emissions across upstream and downstream activities, covering its entire supply chain of tenant activities; funds under management; joint ventures; and embodied carbon sources. It goes further than general sector reporting practices, where disclosure is often limited to scope 3 emissions where a company possesses operational control.

Alongside the disclosure of its scope 3 emissions inventory, Cromwell has today also released new short and long-term emission reduction targets which will help underpin future decarbonisation efforts.

This includes a net zero target across Cromwell’s entire portfolio for scope 1, 2, and 3 emissions by 2045, which includes tenant emissions and embodied carbon. In addition, Cromwell has also set a short-term target of a 42% reduction in scope 1, 2 and 3 emissions by 2030, along with a net zero target for new developments by 2030 and 2035 for all assets under Cromwell’s operational control.

Group Head of ESG, Lara Young, said: “Developing a full scope 3 inventory provides us with an accurate and meaningful picture of all emissions across our supply chain for the first time. It enables us to make more informed investment decisions on decarbonisation activities, working with our partners.

“Specifically, we have now shifted our focus to asset-level decarbonisation. In the last year, we have started to undertake assessments at specific sites to identify emissions sources and create bespoke plans to reduce these emissions, which we will do working in partnership with our service providers. We’ll continue this process going forward.”

Case studies

Cromwell has recorded positive progress across its current decarbonisation and emissions reduction activities, with scope 1 and 2 emissions reducing by 44% since FY22 and a 19% reduction across scope 1, 2, and 3 emissions since FY22. Examples of initiatives include:

  • The large-scale electrification upgrade of the 24-storey McKell Building, converting the existing commercial gas-fired heating system to an electric heat recovery reverse cycle heating, ventilation, and air conditioning (HVAC) system. This was a first of its size for the Sydney CBD and will achieve a 5% reduction in total building electricity consumption.
  • Cromwell’s solar programme which now includes 502kw of solar installation in Australia, which has reduced annual emissions by 538tCO2e, or up to 52% at each site. Cromwell is planning an additional five solar projects in Australia and three in Europe in FY24 to further reduce emissions.
  • Investing in sustainable technology and materials, including the refurbishment of CEREIT Nervesa 21 in Italy, where innovative and low-carbon glass was used instead of standard glass, which helped to record a significant reduction in the building’s embodied emissions.

ESG Report

The information above has been released today as part of Cromwell’s FY23 ESG Report. The full report can be found here.
In summary, the ESG Report highlights Cromwell’s long-term targets which include:

  • Achieve net zero operational emissions (scope 1 & 2) by 2035.
  • Achieve net zero operational emissions for the entire portfolio (scopes 1, 2, & 3) including tenant and embodied carbon by 2045.
  • Significantly reduce our gender pay gap year on year.
  • Achieve 40:40:20 workplace gender diversity at all levels.
  • Integrate ESG into risk registers and business strategy, including objectives and key results.

“Cromwell recognises the challenges that the property industry faces; however, we also recognise the opportunity to deliver tangible positive impacts. The Group has a global in-house ESG team and dedicated Australian and European teams that support all Cromwell activities,” said Ms. Young.

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Michelle Dance announced as new Cromwell CFO

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Real estate investor and fund manager, Cromwell Property Group (ASX:CMW) (Cromwell), has announced its current Fund Manager and Executive Team member, Michelle Dance, will be promoted to the role of Chief Financial Officer (CFO) from Monday, 1 January 2024.

The appointment follows a comprehensive search process, which included a strong field of external and internal candidates.

Ms. Dance brings more than three decades of corporate experience to the role, having held high-profile positions at some of Australia’s largest real estate and financial institutions.

Commenting on the appointment, Cromwell Chief Executive Officer Jonathan Callaghan said: “We are delighted to welcome Michelle into the role of Cromwell CFO from January. She is an established professional within our business who has an impressive financial and real estate background. Michelle’s well-honed treasury skill set, and long history of successfully managing significant debt portfolios through several market cycles, will be crucial in helping us meet our strategic objectives.”

Ms Dance added: “I look forward to using my experience to drive Cromwell’s financial strategy and performance to become a capital light fund manager. I’m grateful for the opportunity to progress my career further with Cromwell; a company that welcomes new perspectives and open discussion. Using our shared values as a foundation, I will work with my colleagues to continue to build strength in the Group’s balance sheet to drive the business forward.”

Michelle will be supported by seasoned financial professional Andrew Pallas, who will be promoted to Deputy Chief Financial Officer from 1 January 2024.

Her previous roles have included Treasurer for AMP Capital Investor’s Listed Property division; Group Executive, Corporate Finance and Strategy at Investa Property Group; Head of Capital at Leighton Properties; Executive Director of Institutional Real Estate for the Commonwealth Bank of Australia. Prior to joining Cromwell as Fund Manager for Cromwell’s Australian office portfolio in March 2022, Ms. Dance was Fund Manager for the Dexus Office Partnership, a A$5.3billion joint venture between Dexus and the Canadian Pension Plan Investment Board.

Michelle holds a Master of Commerce, majoring in Economics and Finance, has been a regular lecturer in Real Estate Finance at the University of Technology Sydney, and is currently Chair of the Board of the Sydney Skin Hospital.

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Annual results for Financial Year ended 30 June 2023

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Real estate investor and fund manager Cromwell Property Group (ASX:CMW) (Cromwell or Group) today announced the reorganisation of its European operations to be more aligned with its investors’ strategies, and to improve efficiency in the current challenging market environment.

The reorganisation involves the creation of a regional structure comprising two European regions, which will be headed by Pontus Flemme Gärdsell for Northern Europe, and by Michael Bohde for Southern Europe, both reporting directly to Andy Creighton, Head of Investment Management, Europe. These two regions will replace the former structure, where each country had its own country head.

Pontus will be responsible for managing Cromwell’s investment and asset management activities in the Nordics, the Netherlands, the UK and CEE while Michael will be responsible for managing Germany, France and Italy.

Commenting on the changes, Pertti Vanhanen, Managing Director, Europe at Cromwell Property Group, said: “By streamlining our European business, we will be able to provide a greater focus on the countries our investors are showing most interest in. It will also enable us to improve operational efficiencies in the current challenging macro-economic environment, providing our clients with more integrated cross-border investment and asset management services”.

In the past 18 months, Cromwell has been active across Europe and the UK servicing longstanding mandates with clients such as CEREIT, the Singapore-listed REIT, as well as several new international mandates and marketing new strategies to investors.

Vanhanen, added: “Since the onset of higher interest rates, the market has changed significantly as investors and managers adjust strategies to cope with the higher cost of finance and structural changes impacting the sector. Foremost among these are how we improve the sustainability and carbon footprint of real estate assets and how we reposition buildings in sectors like offices where behaviours have changed”.

Cromwell has made significant progress in these areas, implementing a sustainable finance framework to support the transition to more sustainable borrowing across its portfolio and is currently premarketing a value-add office repositioning strategy in the UK.

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November 7, 2023

Cromwell’s European Market Monitor – Q4 2023

Market Monitor gives our views on the latest data and trends from the financial markets and their impact on commercial real estate. The latest one covers ECB rates, credit standards and rate decline indicators.

View the full report here.


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September 14, 2023

Industrial: Still delivering the goods

Colin Mackay, Research & Investment Strategy Manager, Cromwell Property Group

Industrial has been Australian real estate’s star performer for a decade, notching up an annualised 10-year return of 14.2%1. While the rate of new supply has increased, the availability of space has been unable to match pace with surging demand. Australia has become the lowest vacancy industrial market in the world2, contributing to record rental growth of almost 25% in the year to March 20233. The sector’s strong momentum continues, and the outlook is bright, as several long-term tailwinds drive demand.



The shift in retail activity from physical stores to digital channels drives demand for industrial space in several ways:

  • warehouse space is needed to store inventory which would have otherwise sat in a store;
  • e-commerce tends to offer a wider range of products, rather than the curated selection that a specific retail store might be limited to, necessitating more storage space; and
  • goods purchased online have higher rates of return, and space is needed to handle the reverse logistics.

Increased storage and space needs mean pure-play e-commerce requires three times the distribution space of traditional retail4. Customer preferences are primarily driving the shift to online, particularly as demographic change sees ‘digital natives’ become the dominant consumer segment. As scale and investment lead to greater efficiencies and profitability, the shift may gain another momentum boost.

E-commerce in Australia is following a similar trajectory to Great Britain – it is on track to hit a market share of 20% of all retail sales by 2030 despite growth slowing from pandemic peaks. With 70,000sqm of logistics space needed for every incremental $1 billion of online sales5, e-commerce alone could generate industrial space demand of almost 600,000sqm p.a. over the next seven years6.

Supply chain resilience

As explained in last year’s Supply Chain Adaptation paper, one of the most immediate and lasting impacts of the pandemic has been supply chain disruption, with erratic swings in demand exacerbated by congested ports and border restrictions. The pendulum is now swinging from the prevailing ‘Just-In-Time’ supply chain philosophy, where goods are shipped on demand and arrive just before they are needed, back towards a ‘Just-In-Case’ approach. Under this approach, higher volumes of inventory and production are stored and undertaken locally, where it can be better guaranteed.

Supply chain experts estimate the majority of Australian occupiers are currently holding approximately 30% more inventory compared to pre-pandemic levels7. While this degree of buffer will likely decrease as supply chain disruptions ease, a full return to previous inventory levels is unlikely, meaning more warehouse space will be needed on an ongoing basis for storage.




Infrastructure development is a key priority in Australia as we contend with ongoing urbanisation and densification, along with surging population growth. Across the 2022-23 Budgets, $255 billion in government expenditure was allocated to infrastructure for the four years to 2025-26, an increase of $7 billion or 2.7% compared to 2021-229. In dollar terms, NSW has the highest allocation to infrastructure ($88 billion), while QLD saw the largest increase on the previous year ($5.7 billion). The three East Coast states of NSW, Victoria, and QLD account for 83% of the committed infrastructure funding.


Infrastructure investment stimulates demand for industrial real estate in a couple of ways. As new infrastructure is built, congestion and connectivity improve, lowering transport and operating costs and allowing more efficient movement of people and goods. This helps businesses to grow and increases the supportable population base. More activity and more people, mean more demand for industrial space to power the ‘engine room’ of a bigger economy. The more direct source of infrastructure-related industrial demand occurs during a project’s construction phase, as space is needed to manufacture, assemble, and store materials and components.

Customer proximity

The time it takes to reach the customer is of critical importance in modern supply chains. Customers increasingly expect products to arrive faster, more flexibly, at the time promised, and with lower delivery costs. While not a driver of aggregate space demand, the focus on customer proximity does contribute to stronger rental growth for well-located properties.

Transport accounts for 45-70% of logistics operator costs compared to 3-6% for rent10. This low proportion of cost means well-located industrial assets with good transport access and proximity to customers have long runways for rental growth, as occupiers prioritise lower (cheaper) transport times – an up to 8% increase in rent can be justified if a location reduces transport costs by just 1%.



But what about supply risk?

While the demand drivers for industrial are clear, the supply-side response is just as important in determining asset performance. In previous cycles, downturns have arisen from excess speculative development creating too much stock and dampening rental growth. But there are several reasons why the sector is insulated from a supply bubble this time around. Firstly, labour and materials shortages are making it challenging to physically build new assets, even though development is commercially attractive. Secondly, there is a lack of appropriately zoned, serviced land available for development. While land is becoming available farther out from metropolitan centres (e.g. Western Sydney Aerotropolis), this land is not appropriate for many occupiers or uses which require closer proximity to customers. It will also take time for this land to become development-ready, due to planning, infrastructure (e.g. road widening), and utility servicing (e.g. water connection) delays. Finally, the sector has matured and become more ‘institutional’ over the current cycle, with a shift in ownership from private capital to large, sophisticated owners and managers. Institutional owners take a more cautious approach to development, contingent on higher levels of tenant pre-commitment, reducing the risk of a speculative supply bubble. These factors will make it difficult for supply to keep pace with – let alone surpass – demand.


Demand story remains intact

Industrial has been the “hot” sector in recent years, and it’s reasonable to question whether it’s been squeezed of all its juice. The pandemic provided a boost to many of industrial’s demand drivers (e.g. e-commerce) and introduced new ones (e.g. supply chain resilience). While these tailwinds have abated somewhat from their pandemic highs, they continue to contribute to a positive demand outlook. Arguably more importantly, the supply response remains constrained by shortages (e.g. labour/materials/land) and delays (e.g. planning), and it will take several years for the sector to return to a more normal supply-demand balance. As a result, Cromwell expects healthy rental growth to be a key driver of industrial returns, and for the sector to remain attractive despite expansionary pressure on cap rates.


1. The Property Council-MSCI Australian All Property Digest, June 2023 (MSCI)
2. Australia’s Industrial and Logistics Vacancy 2H22, December 2022 (CBRE Research)
3. Logistics & Industrial Market Overview – Q1 2023, May 2023 (JLL Research)
4. What Do Recent E-commerce Trends Mean for Industrial Real Estate?, Mar-22 (Cushman & Wakefield Research)
5. Australia’s E-Commerce Trend and Trajectory, September 2022 (CBRE Research)
6. Projection based on historical 15-year retail sales growth of 4.0% p.a. (Cromwell, Jun-23)
7. Is ‘Just-in-Time’ a relic of a time gone by in Australia?, March 2023 (JLL)
8. Global Reshoring & Footprint Strategy, February 2022 (BCI Global)
9. Australian Infrastructure Budget Monitor 2022-23, November 2022 (Infrastructure Partnerships Australia)
10. 2022 Global Seaport Review, December 2022 (CBRE Supply Chain Consulting)

About our managed commercial property funds

Our suite of funds offers access to unlisted property trusts, ASX-listed Real Estate Investment Trusts and internationally listed small cap securities, providing different methods of investing in commercial property and diversifying your portfolio.

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August 18, 2023

Cromwell’s European Market Monitor – Q3 2023

Market Monitor gives our views on the latest data and trends from the financial markets and their impact on commercial real estate. The latest one covers tightening credit standards, bank liquidity and green financing.

View the full report here.


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August 18, 2023

ESG and Investment Strategy: a virtuous relationship

Environmental, social and governance (ESG) is a high priority for real estate investors, but there is no agreed industry position on what ESG means in practice for investment strategy. In Cromwell’s latest analysis, Tom Duncan and the team review the ESG landscape and provide strategy-related advice on macro-sector allocations through asset selection and management to occupier profile.

View the full report here.


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August 3, 2023

Greenwashing: transparency is everything

Many companies have publicly declared their environmental, social and governance (ESG) strategies to formalise a commitment to net zero and align to the UN’s sustainable development goals. However, if these strategies are not backed up by solid, auditable data and acted upon in a meaningful way, then they are pointless. Making empty or misleading statements about the sustainability of a company’s products or services, whether intentional or not, is known as greenwashing.

Our latest briefing note looks closely at what greenwashing within real estate looks like in its many forms, and the steps businesses need to take to avoid significant reputational damage.

The full research briefing note can be found by clicking here.


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July 18, 2023

Ignore the noise: Australian office isn’t dead (or dying)

Colin Mackay


The future of offices in a post-pandemic world continues to be a topic of robust conversation.

Arguably, most airtime on the subject has been given to dramatic statements like “expect the death of the office” – perhaps recycling articles from the past decade that incorrectly asserted a retail apocalypse was nigh! The reality is that, as retail has adapted to the internet age – and survived – so too will office spaces adapt to these changing conditions.

It can be easy to fear the worst, especially as reports of landlords handing keys to the bank; assets sitting unoccupied; and valuations declining 80% take up the front page of newspapers.

It’s important, however, to understand that these events have been limited to the US, a challenged market with different financial, social, and real estate context. The outlook for office in Australia is markedly more positive for several reasons.


Higher office occupancy

The return to the office has been strongest in Asia-Pacific, where office occupancy is sitting at 70-100% of pre-pandemic levels1. Workers in North America have been the most reluctant to come back to CBDs (45-65%), with Europe (65-85%) splitting the two regions. At the individual market level, the likes of Shanghai and Beijing are back at pre-pandemic occupancy; Sydney has recovered to 70%; London is a bit weaker at 65%; and the major US cities are significant laggards with office-based work still below half of pre-pandemic levels in Chicago (49%), New York (46%), and San Francisco (42%).


Propensity to return to the office appears to be driven by a number of factors, including cultural expectations (e.g., Tokyo/Seoul); industry composition (e.g., finance vs tech); and ease of commute (e.g., rapid transit vs LA traffic). While commute time is highlighted by workers around the globe as the most important driver of returning to the office2, another critical factor is the micro-location of each office building. In addition to influencing commute time, different locations can vary significantly in terms of crime and safety risks, amenity (e.g., restaurants), and environmental desirability (e.g., proximity to water/green spaces).

Australia measures up very attractively on these characteristics, offering reliable rapid transit, exceptional proximity to desirable environmental features, a high density of quality amenity integrated throughout the CBDs, and very low rates of crime. The return to the office will likely gather more steam in the coming months as large employers mandate a minimum number of days in the office per week, as announced recently by NAB and CommBank. However, over the long-term, locations and assets which can attract employees through choice rather than coercion will outperform.




Expanding space requirements

One of the forces expected to offset the impact of remote work is the expansion of workspace ratios – the amount of office space per employee. Forty years ago, in the days of private offices, Australian offices had more than 20 square metres (sqm) of space per employee. Over time, as occupiers sought more “bang for their buck”, desks became more tightly packed together and the corner office was sent to the scrap heap.

The result has been densification of the workplace, with the pre-COVID workspace ratio sitting at 11.1 sqm per employee for Sydney and 12.0 sqm for Melbourne3.


The experience of the pandemic has initiated a shift in the purpose of the workplace and workstyles. The office is increasingly becoming a place for collaboration and social connection rather than focus work, meaning a greater need for meeting, gathering, and collaboration spaces. There is also a need to lower density and make workplaces more comfortable from an employee wellbeing and retention perspective, as employers fight for top talent. Studies have shown that inadequate privacy and space is the dominant cause of workspace dissatisfaction4.

The office is increasingly becoming a place for collaboration and social connection.


In the US, markets such as Chicago and Los Angeles have ratios above 20 sqm per employee, with even New York at 16.0 sqm3. The pandemic-initiated evolution of the work environment can be achieved in these markets by simply recalibrating (and even shrinking) existing footprints.


Contrast this environment with Australia, where workspace ratios are below the global average of 13.3 sqm3 and potential space efficiencies are limited. In this market, the recalibration will likely require additional space, providing a source of demand and limiting the amount of rent-dampening excess stock.


Appropriate financing

Earlier in the year, some high-profile office defaults in the US by Brookfield, and a PIMCO-owned landlord, kicked off concerns about a real estate debt crisis. Risks are certainly elevated in the US, given the aforementioned demand challenges, which will pressure serviceability and put significant downwards pressure on valuations. While pockets of distress may emerge in Australia, the likelihood of a widespread crisis is much lower. Banks remain confident in Australian commercial real estate, increasing their exposure by 5% in December 2022 compared to a year ago5. Loan quality has also remained stable, with non-performing commercial property loans as a share of total exposure unchanged at 0.5%.

Most importantly, the office demand outlook in Australia is much more positive. Solid cashflow will support serviceability as debt rolls onto higher interest rates and help prevent valuations from declining to the extent that is expected in the US. Australia’s lending market is also well regulated, diversified, and strong, and doesn’t face the concentrated exposure or balance sheet issues that smaller regional banks in the US have been contending with throughout 2023.

Additionally, Australian gearing is more conservative with typical loan-to-value (LTV) ratios pre pandemic of 55%, compared to 72% for the US6. While lending conditions have tightened somewhat over the last six months (LTVs now 50%), the US has seen significant tightening (to 57%), contributing to a significant funding gap which will need to be plugged with discount-seeking capital.

The final word

Office is going through a period of change, and assets need to evolve to meet the needs of post pandemic workstyles. While there will be challenges – and opportunities – as a result, the current narrative erroneously extrapolates issues from offshore to the domestic market.


Australian office is well-placed to contend with increased rates of remote working and tighter capital markets given its resilient demand drivers, quality of stock, and sensible financing arrangements. Skilled managers with the expertise to identify underappreciated assets and adapt them to the future of work will continue to deliver strong investment returns.


1 The Future of the Central Business District, May 2023 (JLL)
2 The Global Live-Work-Shop Report, November 2022 (CBRE)
3 Benchmarking Cities and Real Estate, June 2021 (JLL)
4 A data-driven analysis of occupant workspace dissatisfaction, August 2021 (Kent, Parkinson & Kim)
5 Quarterly authorised deposit-taking institution property exposures, December 2022 (APRA)
6 Analysing the Funding Gap: Asia Pacific, May 2023 (JLL)

About our managed commercial property funds

Our suite of funds offers access to unlisted property trusts, ASX-listed Real Estate Investment Trusts and internationally listed small cap securities, providing different methods of investing in commercial property and diversifying your portfolio.