I’ve long been an admirer of the Westfield group. It is arguably the most successful property investment story Australia has ever produced – an investment of $1,000 in Westfield in 1960 would have grown to roughly $440 million by the time the business was sold in 2017 (assuming dividends were reinvested). That result didn’t come from buying endless new sites (although they did do that, too). No, it came from using the same land better over time.
Last week Westfield announced plans to develop more than 16,000 apartments across its portfolio. Already Australia’s largest shopping centre landlord, it may soon become one of the country’s largest residential landlords too.
The real lesson, however, isn’t about shopping centres. It’s about housing.
Hornsby example
Westfield Hornsby opened in 1961 on a 60,000 square metre site. The centre contained just 22 stores in a single-level building surrounded by surface car parks. Only about 40 per cent of the land was used for buildings.
Today, the same site contains 314 stores across four levels. The building now occupies around 90 per cent of the land, retail floor space has expanded to nearly 100,000 square metres, and parking has moved underground and onto the rooftop.
The land hasn’t changed. The use of the land has.
Annual rental income today would be approaching $100 million from a centre that originally cost about $3.5 million to buy and build in 1961 (noting it has undergone major redevelopments since then).
The next stage proposes approximately 4,100 residential apartments be integrated into the precinct: potentially doubling income again from the same block of land.
The bigger housing message
Westfield’s success comes down to one idea: densification.
Australia now faces this challenge. Around 70 per cent of Australians live in detached houses, yet the population is expected to grow from today’s 26 million to about 40 million by 2050.
More people will need to live on the same amount of land.
Every developed country that has grown larger has moved toward higher-density housing. Australia will be no different.
A model to follow
It’s a pretty impressive model, isn’t it? The Westfield strategy isn’t limited to billion-dollar developers.
A 400 sq m block that holds one dwelling today could support multiple homes in the future.
Many Australians who purchased property decades ago already sit on land capable of accommodating duplexes, townhouses or even small walk-up developments.
The opportunity isn’t necessarily buying more property. It’s unlocking greater value from land already owned.
What it means?
Westfield didn’t build wealth by constantly expanding outward. It built wealth by acquiring land in growing areas and then adapting the use of that land over time, as the population grew.
- Australia’s housing future will likely follow the same path.
- The next phase of property wealth will come from better use of land.
- Westfield may once again be showing the way forward.
