Full Transcript for Ep2: Navigating the reset in Melbourne real estate - with Peter Harper, James Jorgensen and Annabel McFarlane

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Rebecca: It’s been a bit of a ride for Melbourne real estate over the past several years. As it comes out of the doldrums of one of the longest covid lockdowns in the world, there is a level of uncertainty that is keeping investors and other businesses sitting on their hands, waiting for signs of stability. But at the same time, there are many reasons to be enthusiastic. There is an undercurrent of optimism. All it takes is a bit of a deep dive to see where it is coming from, where it is showing already, and the reasons why. A JLL report, entitled The Real Melbourne, did just this and is worth a download if you haven’t already read it and you’re invested in the city. We’re going to do this deep dive in human form right now with my JLL colleagues Peter Harper, managing director and head of investment sales in hotels and hospitality, Annabel McFarlane, head of strategic research, and James Jorgensen, head of logistics and industrial in Victoria. I’m Rebecca Kent, host of this Perspectives podcast, of which we will be doing a few episodes that spotlight Melbourne. Thank you for joining us, Peter, James and Annabel. Rebecca: Peter, we'll start with you. Think back, I guess, to the start of 2024. What eventuated as you expected ﬁrst of all, and then tell me where would your bets have fallen short? Peter: I think 2024 played out almost entirely unlike what we were hoping or thinking it would, but then in many ways it also playing out like we thought it would. I think going into the beginning of this year, we'd gone through the 13 interest rate rises, or whatever it was over the course of 2022 and 2023. And there was a view that the veracity with which The RBA made those decisions and put the cash rate up to where it still sits, was going to have an immediate and sudden impact and then we were going to see the economy moderate and things improve over the ﬁrst half, and then in the second half we thought we’d see liquidity really kick oﬀ again. And we thought we'd, in many ways be back into the recovery. That didn't happen at all. I think things deﬁnitely stayed quite passive across the board. I think most investors took stock of where the world was at, where the markets were at, where debt was going to go. So we just saw very little transaction activity. The activity that we saw coming out of COVID was obviously fuelled by cheap money and people in the hotel world wanting to take advantage of the domestic tourism boom that was happening. But, I think in many ways 2024 has proven to be the year that we had to have and hopefully a bit of a reset. hopefully 2025 is much better than how we found the last 12 months. James: from an industrial perspective, I think we'd had a few boom years during the pandemic that it probably was inevitable that we'd have a correction or a normalisation of the market. But it was a pretty stark diﬀerence this year to what we've experienced in the last few years and deﬁnitely discretionary spend as a direct correlation to the need for industrial space … and as spending dried up so too did the demand for industrial space. From an occupancy perspective, the West market is the biggest market in Australia and it will probably do about 30 percent of its three-year average leasing volumes this year. Rebecca: That's pretty drastic, isn't it? James: Yeah, it was a bit of a shock to the system for most industrial brokers out there. Annabelle: It is a shock to the system, but I just want to say that we still had, for example, in the most recent quarter, 41% of all national gross take up. So it is across the board, still one of our strongest markets, even though it just got a little crazy there. It got very crazy through the pandemic. James: Yeah, it got crazy through the pandemic, it did. And I think it's deﬁnitely normalised. If we look at vacancy rates, they're at a normal level, but when you're coming oﬀ sub 1%, it feels like there's a massive oversupply. And I guess the demand, that's probably the big thing in the industrial market this year, is we're largely driven by third party logistics occupiers and they’re driven by consumer spend. Less inventory coming into the country means less warehousing and less need for 3PL space. During the pandemic, they were all taking on space speculatively, more and more, bigger and bigger buildings. And, as their businesses have come oﬀ, they're now sitting on vacancy within their existing sheds. So, it means even when a new contract comes up, it's not resulting in them taking new space. They've got enough white space in their existing portfolios. Rebecca: So it must feel daft to some people to still be talking about COVID, but Victoria is probably one of the markets that can justiﬁably still talk about the impact of lockdowns because it's still reverberating. Is that fair to say? Annabelle: Well, certainly in the oﬃce market, it's quite interesting. We've done some stats quite recently around return to oﬃce, and there are certain parts CBD market, for example, where the return to oﬃce story has stabilised, but other parts of Melbourne where it's still increasing. Peter: For the hotel market, as we came into COVID, the Melbourne hotel market was embarking on the largest new supply wave we'd ever experienced. And so when we went into that drastic lockdown the way we did, we had the biggest room night demand shock the market has ever experienced. Hotels essentially closed overnight unless they were doing quarantine business. And then as they started to open up, and bear in mind there were hotels that were closed for 6, 12, 18 months, we saw all of these new hotels start to ﬁnish because construction was one of the only industries that was allowed to operate through that period. And so when the market came back on, not only have we just gone through the biggest demand shock, so there was almost an entire reset of the market from that perspective, we had all this new supply to contend

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with. So a lot of hotel owners and operators are sort of working through that new normal. Pre COVID, we're running at 82%, 83% occupancy at an average daily rate of about 192. We've now got an occupancy rate in the early 70 percent range, but an average daily rate at the 240 mark. So it's just … Annabelle: diﬀerent metrics. Peter: Diﬀerent metrics completely. So, certainly from our perspective, people are getting their head around that new normal. Annabelle: I think the supply wave story is so interesting because in oﬃce, I don't think people realise but the CBD through the pandemic increased by 12.2% in oﬃce stock. If you include the fringe, we have added 1. 1 million square meters to Melbourne's oﬃce market through the middle of a pandemic. Really, the timing couldn't have been worse. Those buildings now, those ones are largely fully occupied or they've certainly got low vacancy and the ones that ﬁnished later, some of them have been more challenged. But fundamentally it's the better assets that have reset the market. Peter: I think too Bec, just another thing to add to your question. In hotels, we've been so heavily reliant on foreign investment into our market. It's sort of characterised activity for certainly the two decades of my career. But the way the Australian market is set up, it's very hard for people to get put into receivership. Banks don’t necessarily want to do that. It's a smaller market, so there's enormous pressure on valuers to hold valuations as best as they can because they're working with a limited client base and with limited transaction activity, and so on. So the market just hasn't been reset the way we have seen in other markets particularly in UK and Europe and parts of Asia and North America where it can just turn on a dime. Annabelle: Their economic volatility has been greater too. Peter: They're used to that. Annabelle: We haven't had economic volatility either. Peter: We almost just expect this linear growth in all our markets. A lot of investors – and I've been up in Singapore every two months for the last two years, just trying to take stock and meeting with all the owners up there and all the investors. And they're like, ‘listen, we still love Australia. But while ...’ – and yes, it is a Melbourne story to an extent, but we are seeing similar themes play out in Sydney and Brisbane and so on – they're like, ‘while you're going through that stabilsation, recovery, reset sort of thing we're going to go to markets where it's happened a lot quicker, where we see really compelling value and we're going to take advantage of those opportunities. And once we've done that, then we're going to come back to Australia.’ Rebecca: So have we been at somewhat of a disadvantage for being economically stable for such a long time? Annabelle: I just think the inﬂation ﬁgure has got much higher elsewhere. The cash rate got higher elsewhere and it's come down quicker. So there's more extremes, I think, perhaps in other markets. And that's a gross generalisation, but we've had no change to the cash rate in … Peter: Since November 22. Annabelle: Yeah. For 12 months. Just over 12 months. Peter: Longer. Annabelle: Longer. Much longer. Much longer. Peter: Two years. Annabelle: Two years. Exactly. So we have a lot of forecasts out there. The market's always forecasting that it's going to come in, it's going to come in, it's going to tighten again and it hasn't happened yet, so … Rebecca: So Peter, for the investors that have been sitting on their hands – you're talking about the Australian market being so heavily dominated by foreign investors – what about the ones that have been active. Where are they playing? Where are they ﬁnding value for themselves and who are they? Peter: They haven't played much this year. Annabelle: PAG invested in CBD oﬃce, 367 Collins Street. There are a couple of examples, but very few in Melbourne now, very few yet. Peter: Yeah, but I mean, office transaction volumes, what are they sitting at this year relative to historical averages? Annabelle: They're negligible. They're way, way down. I haven't got the ﬁgure, but they're way, way down. Yeah. Peter: And that's the same for hotels. Annabelle: So there are a couple of examples, but not many. Peter: We'll fall well short nationally of the historical long-term average in terms of transaction volumes. In Victoria, there have been four or ﬁve deals? Like, it's been pretty soft, pretty quiet this year. I think with some of the deals that have happened though there have been a couple of themes. We saw Sebel Ringwood transact earlier this year. Now that's a thematic that I think we're going to see play out a little bit more with developers that built all this new stock. A lot of it came about because the hotel beneﬁted from mixed use development. They put a hotel in there because of the halo impact it had over the residential component or the commercial or the retail. Some just got into hotels because at the point when that development was conceived, the market was strong and there was an opportunity. But they've sort of got to the point where it's, ‘I've taken this as far as I want to go and I'm not a hotelier, I'm a developer, I'm out’. And so we saw that transact quite a strong price ultimately, but it had to be a real structured deal to get there. That was bought by a local fund that had Malaysian money. We've seen the Adelphi hotel transaction. That was probably the only real receivership deal that's taken place. We sold that to a group about this time in 2022 for $25 million and then we resold it again only a couple of months ago for $21m with a bit of a discount there. So we are seeing some of those increases. Standalone privates feel the heat of the cost of debt and so on. And then we've started to see a couple of transactions acquired for redevelopment into the living sector, whether it be co-living or

BTR and so on. But for the most part, all of that capital is domestic-based or certainly domestic led, even if they do have an oﬀshore partner. Annabelle: If you look at our oﬃce market yields, for example, the interesting thing is the diﬀerence between all the markets now. Typically, in Melbourne and Sydney the prime CBD oﬃce market yield spread would be 44 basis points over the last 20 years. That's the sort of standard. It's currently 82 basis points. So at some point it's going to look like good value in Melbourne. James: From an industrial perspective, it’s been a similar theme. There has been an incredible appetite from oﬀshore capital for the last ﬁve years where they've basically bought everything. However, the introduction of an additional surcharge to the land tax has basically led to all oﬀshore capital sitting out from now. So the only transactions of note this year have been to local super funds. Annabelle: Yeah, super funds have gone in. James: Yeah. Super funds have gone in and it's also probably allowed some owner occupiers to get back into the market. For the last ﬁve years they haven't been nimble enough or been willing to pay enough to compete with these oﬀshore institutional groups. But, with them all sitting on the sidelines for the time being, there's been an opportunity for owner occupiers. Peter: Are they're sitting on the sidelines or is it that they can't compete? James: They can't compete. I reckon it's probably a 75 basis point penalty when you load in the additional surcharge. Which is just … Rebecca: Can someone just elaborate on the land tax because that's had quite a massive impact across sectors, hasn't it? James: It probably has the biggest impact on industrial because it's the highest land component compared to the building. So it makes a big diﬀerence. You're buying a parcel of land that has 50 percent building ratio on it, compared to an oﬃce block where the component of land is tiny. Annabelle: There are three things to it, actually. What's happened over the past three years is we've had land values skyrocket, escalate enormously, triple and double in some precincts. That's one driver of increased land tax bills. The next thing is they've changed the rates of land tax. And then on the top for the oﬀshore groups, they've got this 4%surcharge and that's gone up from 2%. So now you've got three big drivers of big changes to your land tax bill. And where it would be quite sort of manageable, I think we'll see a lot … I'm sure you'll see a lot of discussion with tenants about who pays it because traditionally it would have been the tenant just takes it on the chin. James: Well, I think most leases would be written in a way where the tenant does have to take it on the chin. However, it's become quite a competitive market again. It's ﬂipped to a tenant's market. So to remain competitive, a lot of the landlords are choosing not to pass it on for the time being. Annabelle: For the time

being. Rebecca: What sort of policy shifts or levers would you be pulling if you were in the seat of power to get things moving again if you could next year, Pete? Peter: we had Nick Rees speak at a private client event we did a couple of weeks ago, and he made a really good point. And I think this is the ﬁrst thing I'd do if I was sitting in a position of power in government. It’s bring the public sector back into the oﬃce. The impact that would have on the leasing market, the oﬃce market, even the retail market in terms of demand for cafes and shops and everything else, absolutely I think that's a no brainer. Annabelle: I think the other one that Nick actually came up with is an economic zone around the CBD, which is not a bad idea. So that’s for special dispensation to get the CBD moving again because we've got to get the CBD moving. It’s the engine room of Victoria. Peter: A hundred percent. And look, Melbourne became the largest oﬃce market in the country and the largest hotel market in the country. Annabelle: It's also the largest industrial market by a country mile. It's 29.1m sqm. 41 percent of all take up in Australia. It is the largest by a mile. Peter: And that all came about because we welcomed investment, we welcome development. A lot of people and developers would favour Melbourne over Sydney because you can get a building approved and construction going in 12, 18 months, where it’s multiple years in a market like Sydney. People came to Melbourne because they could put their money to work and it was a happening place. And so many things are still happening, particularly from a hotel sense. We still have a thriving major events calendar and we're continually selling out concerts, population growth is strong. Corporate demand is still there. It's still a really good place to come and visit if you're a domestic or international traveller, but we're just not doing enough to promote development and investment the way we used to. Annabelle: I think the structural fundamentals that we know, that population growth story, people talk about it a lot for Victoria, but it's really material. In the next 10 years, we'll have, give or take 900, 000 more people over the next 10 years. Only Delhi, out of the top cities in the global 15 economies around the world, outperforms Melbourne over 10 years. New York is expected to outperform Melbourne over ﬁve years, but in 10 years, Melbourne will have absorbed more people than New York, London, Berlin, and there's a whole bunch of other cities in the global top 15 economies around that are actually going to be losing people. And given that we all shop, need goods delivered to our homes, we have visitors, we need hotel rooms, we need places to work, albeit that that's changing slightly. It's an incredible driver for all real estate. James: It's an incredible stat. Just out of interest, how does that compare to Sydney's population growth numbers? Annabelle: Sydney gets, over the same time frame of 10 years, around 500, 000, Brisbane gets around 500, 000, and Perth is a little less, 460, 000. And all the Australian cities are at the top of this leaderboard, apart from New York and, well, Delhi is just ﬁring. But anyway, so that's, I think we forget that. It's like, when you were talking about cold storage previously, we're all doing more take home meals, we're doing more, eating. James: You just walk through the supermarket and you see the amount of frozen space in a supermarket. I remember you used to get half an aisle and now it feels like there are three aisles dedicated to pre-done meals and frozen space. We're seeing in demand for frozen and chilled logistics space. [00:30:00] That's one of the big drivers of the market at the moment of the big third-party logistic groups specialising in frozen and chilled. Annabelle: If you compare us to the U. S., I think on cold storage, we're underdone per capita. And if we've still got a population growth story as strong as we have across Australian markets, then that's a good news story for cold storage. James: Yeah. Well, the population growth story for the industrial market is terriﬁc. And that's what we're telling occupiers and landlords. The fundamentals in Melbourne are terriﬁc. You've got double the population growth to Sydney and Brisbane over the next decade. And we know that there's a direct link to warehouse space with somewhere between 4 sqm and 6 sqm per person. So I think in 10 years’ time, we're going to need 2 million more sqm of warehouse space just to cover population growth. And when you couple that with the penetration of e-commerce, which we think has got a decent amount of headway, you add to that again. Rebecca: And James, for industrial, you're saying it's a tenant's market at the moment. When do we start to see things balance out? And then on that population growth point, do we then start seeing more of a speculative development wave come through or pre-commitments? How do you see that panning out? James: Good question. So in the COVID years there was so much demand. And we're in a tenant's market now because there has been a big wave of spec supply delivered this year in response to the COVID demand. And it's arrived at the time that demand's really softened. So this year was soft. I think deﬁnitely the ﬁrst half of next year will be soft as well. But now that the supply has been delivered developers are reluctant to bring on more. So we'll slowly see this current wave absorbed then we'll start to see some sort of normalised rental growth again, and then I think more spec supply will be drip fed rather than blasted out like it's been in the last 12 months. Rebecca: And this change has only happened fairly recently. Rents have been on a bit of a ride. James: Yeah, so, I reckon rents have probably doubled in the space of a ﬁve year period. So there are plenty of tenants who are coming oﬀ long legacy leases who are

getting a really rude shock when they come back to the market or go and renew leases. So that's stimulating a little bit of activity. However, this year it's ﬂipped back quite quickly and landlords are now favouring renewals to avoid their buildings going into the over supplied market and competing with new spec stock. So we had 300, 000 sqm of speculative development that's been completed in the last few months in the western (Melbourne) market. So that's meant that landlords of existing buildings are having to do pretty good renewal deals to avoid competing with the spec supply. So rents moved really, really quickly and then it's ﬂipped back quickly as well. Rebecca: Peter, you were talking previously about hotel conversions into build-to-rent and other types. Can we just go into that a little bit and maybe Annabelle as well, it'd be interesting to hear a little bit about, a little bit about how that might be happening in the oﬃce sector also, where and why and how that shifts the landscape a little bit. Peter: Yeah, well where that's come about is the Australian hotel market has been characterised largely by a couple of fairly signiﬁcant development booms over a period. Japanese investment in the 80s, that delivered us a lot of product. We had a lot around the Sydney Olympics in 2000, and then again, just what we've gone through. So many of the original hotels in Melbourne in particular, have been in existence now for the best part of 40 years-plus, they occupy really strong locations and really signiﬁcant land parcels. The challenge that a number of these hotels have faced over the last couple of years is because the Melbourne market was running at such high occupancies for so long, there was no incentive to shut down your hotel to renovate or refurbish. And so, once we went through COVID and again, that huge demand shock coupled with that enormous supply shock. I mean, there are six hotels remaining under construction in and around the Melbourne CBD and once they've come online by the end of next year, perhaps early 2026, we're looking at a total increase in room night supply of around 33%. So it's signiﬁcant. But a lot of those hotels as they came out of COVID went, ‘you know what, we just can't compete. There’s much better product in better spots.’ And you know what? Particularly with the activity and the value growth in the living sector in particular, I think that (living sector), it’s fair to say, was certainly one of the buzzwords of the commercial real estate sector for last year and this year. They got to a point where they were faced with ‘I either spend a ton of capex on my asset that's purely defensive just to ensure that I can continue to compete in this market, or I take my chips oﬀ the table because I recognise that the fundamentals of not only the plot of real estate that my asset is situated on, but in a lot of cases, the built form characteristics of the asset lend themselves really well to conversion to co-living or BTR in particular.’ And so we've seen a number of assets transact in Melbourne over the last 24 months that have been bought for either conversion or redevelopment. So it's not just isolated to Melbourne but in a lot of ways it has presented a real opportunity for some of these owners that otherwise if there wasn't that strength in that living sector would have found themselves to be in a little bit of a pickle but they've got out at really strong prices. It's helped us meet the needs again of that requirement for residential accommodation or student accommodation even as we've seen at times. And then it's taken out some of that supply in the market to help the market recover as well it has. I referenced that low 70% occupancy rate for the Melbourne market. That's enormous for a market that's had to endure that level of supply. And so that speaks volumes to the fundamentals of the market. It's only a good thing if we see more of this sort of stock, hotel stock, come out of the market and help us as a city and as a market meet the needs of particularly BTR, but but also co-living and student accommodation. Annabelle: With the oﬃce market it’s not quite as easy. We haven't seen that shift to other asset classes. It just isn't as easy. But what we are seeing is that those groups that are refurbishing their buildings, upgrading – whether it for the sustainability metrics or end-of-trips, they are doing better than others. We've been looking at the vacancy across the CBD of Melbourne, for example. It hit 20% in Q4, which is high. Not quite as high as 1993 but it's high and it's a real challenge for the market. But even in the context of that, we are seeing some assets record positive eﬀective rental growth. Not many, but that's a really encouraging thing. And what do they have in common? They have great location, they have great building amenity, great precinct amenity, high sustainability metrics, and a proactive owner or landlord. On the ﬂip side, we've got 60% of Melbourne's CBD vacancy sitting in just 38 assets or 10 percent of the market. And it's a lot of vacancy. If you look at those assets, you can put them four categories in terms of their challenge. Sometimes it’s because they're in a weaker location. That's diﬃcult to ﬁx if it's a weaker location because you have to then start thinking, ‘well, is it oﬃce, is it something else? The next thing is that some have been exposed to very large corporates, who happen to have been the corporates that have shrunk. Oﬃce assets work really well when you've got lots and lots of tenants. If you've got one huge tenant which decides to vacate or shut, you can get really caught out. That's a couple of situations of having the big corporates, that's one bucket. And then you've got the ones with the building condition that is tired, old and it needs to be upgraded. And then the fourth bucket are the ones that have the same issue, the building's tired,

old and needs to be upgraded, but a landlord that doesn't want to do anything. So we think that those middle two categories they have plans. They will refurbish, they will get going, and the vacancy in those will be absorbed ﬁrst. It's the ones where you've got landlords not doing anything. There's no price at which some of these tenants will think they’re a good idea. When you're a 5, 000 sqm tenant in the CBD at the moment, you get 52 prime grade options thrown at you. Yet, if you are a prime grade tenant looking for 5, 000 sqm, you might ﬁnd that there are actually only three options that you would even consider and you'd rather stay where you are than move to some of these other cheaper options. Peter: And is location a big driver in that too? Annabelle: Massive. The eastern core of Melbourne seems to be where this positivity is starting. It's rippling out to Civic, down Collins Street, across to Parliament. It's centring around that location. But if you wanted to get into 101 Collins Street and you’re 5, 000 sqm … Peter: Get in line. Take a ticket. Annabelle: Exactly. So some of the better assets are very quickly ﬁlling up with the tenants that managed to make their decisions quickly. And I think a lot of tenants don't realise that. There is a lot of choice, but a lot of choice over stuff you potentially don't want. So we think there's going to be a structural vacancy basket in the CBD for some time. Vacancy will remain high. But some assets will start to beneﬁt. Peter: It's the exact same thing with the hotel market. the basket data or trading metrics are not horrendous. But it's not great either. And if you dig a little deeper, there's a real bifurcation of the market. You've got the best stock – be it location or quality – they're ﬂying, they're trading really well. I was up in Singapore last week and there are so many owners that are just enormously happy with their asset in Melbourne. But then there's that other stock that's in secondary locations or is really poor quality and they're struggling. Rebecca: Are you seeing any similar patterns in terms of location in the industrial market? James: It's a good question. Historically, the industrial market has operated by way of tenants moving further out to sites with cheaper underlying land values for cheaper rent. However, I think particularly the larger occupiers are becoming more sophisticated. They’re not necessarily doing that anymore. Now they’re doing much more analysis on transport costs and other and costs other than rent and will commonly take a view that cheap rent in a bad location is probably a bad deal, not a good deal. Rebecca: Great. I think we've canvassed a lot of the market really well. Thank you so much. Just one last question before we go. I'd be interested to hear from each of you a last word on what the biggest trend you think will unfold in your respective sectors? So Annabelle, let's say oﬃces, James, industrial and Peter, hotels. And at what point in time that will have the biggest impact, and what will the impact be? So one trend in each of your sectors, when will it have the impact and what will that impact be? As a last word. Peter: Going into 2025 for the hotel sector, I think it'll be the value of the Australian dollar. I think where it's sitting with Trump coming in, and everything that he is going to do, I think we'll see the growth of the USD. So what that means is outbound travel is probably going to moderate. People will be likely to stay home and travel within Australia because it's just so expensive to go to the States or to go to Europe and likewise if you're sitting in the States. But in the States, Europe, Asia, a lot of our key inbound source markets, there will probably never be a better time to travel to Australia. So I think that's really going to have a big impact, a real positive impact on hotel trading over the course of 2025. And there's the obvious ﬂow-on eﬀects in what that means for investment as well. Annabelle: I think in terms of oﬃce, the trend we will be keeping an eye on is, Sydney's had a very positive net absorption ﬁgure for 2024, which is great. The national vacancy numbers for CBD oﬃce is coming down. It's not in Melbourne yet. So we think Melbourne's positive story will start at some point in 2025. I think the other story we have to be very aware of, particularly for oﬃce, is the sustainability reporting standards. They're coming in in 2025. We've got the international valuation standards. That code is coming in in 2025. We've had NABERS start to come out with their embodied carbon tool, so that's going to shift thinking around refurbished assets. And while we've got high vacancy, that's going to really make a lot of groups think, ‘right, what am I doing? What does it look like? I'm going to have to do something.’ So I think that will stimulate extra discussion in the market going forward. Rebecca: Gosh, that's quite a list. Thanks Annabelle. James: Talking to the Victorian industrial leasing market, I said before that I think we've got really strong fundamentals and we're in pretty good shape. There's been a lull. One of the other advantages we have is the relative aﬀordability when compared to Sydney. So we're hearing a lot of talk that groups will move their national distribution centre from Sydney to Melbourne once leases come to an end there. We haven't seen much transactional evidence, but there’s a lot of discussion. But I think the biggest thing that we need is discretionary spend, the economy stimulated. So we need to see some rate cuts to get people spending money, to get inventory coming in in containers, and a requirement for warehousing again. That's probably the biggest need for us. Rebecca: Yeah, great. All right. Well, thank you so much, Peter Harper, Annabel McFarlane and James Jorgensen. Appreciate your insights and all that data and intelligence.

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