Architects Look to Commercial Opportunities for Growth

Monday, May 30th, 2016
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Commercial sectors such as retail, healthcare and accommodation look set to offer the best areas of opportunity for architects in Australia going forward amid expectations that the current boom in new home construction will come off the boil over coming years.

Thanks largely to boom in the residential sector, which has seen the number of housing and apartment commencements jump from just over 160,000 in the same period three years earlier to a whopping 232,180 over the 12 months to March this year, current market conditions facing architects around Australia are extremely strong.

Whilst specific data with regard to the architecture sector itself is scarce, a look at the employment market indicates that current levels of work are extremely high. Department of Employment information, for instance, suggests that compared with the same month two years earlier, vacancies for architects and landscape architects, interior designers and urban and regional planners are up by 42 per cent, 122 per cent and 83 per cent respectively.

In its latest quarterly report, meanwhile, recruitment outfit Hays suggested that demand for CAD drafters, design managers, design architects, senior design architects, senior project architects, architectural draftspeople commercial/workplace interior designers and senior designers as well as Revit drafters and documenters was exceptionally strong.

With conditions in the residential sector set to drop back, however, attention turns to commercial building for opportunities going forward. The latest forecasts from Australian Construction Industry Forum (ACIF) indicate that the overall level of work done in non-residential building will remain largely flat, but opportunities are emerging in a number of sectors.

Already at elevated levels, spending on healthcare is expected to bottom out in 2016/17 and grow by almost 15 per cent over the four years thereon after due to an aging population, a national shortage of beds and the need to maintain and refurbish a stronger asset base following high levels of building activity in recent years.

The weaker Australian dollar and an upsurge in tourism numbers is driving strong levels of building within the hotel and accommodation sector, whilst the lower dollar and higher levels of consumer spending are also largely behind an improved outlook in retail. Encouragingly, property industry sentiment remains buoyant, with the most recent survey results from the Property Council of Australia indicating positive expectations with regard to both forward work schedules and overall conditions.

One factor which will not help much revolves around relatively subdued expectations for the broader economy, which would suggest that critical demand drivers behind demand for new space in some areas of commercial building could be lacking. According to the IMF, the Australian economy is expected to grow by modest levels of 2.5 per cent, three per cent and 2.8 per cent throughout 2016, 2017 and 2018 respectively. Whilst this will help to underpin an accommodative monetary stance, tighter financing conditions and the erosion of what was previously considered to be a significant level of housing undersupply mean low interest rates may not have the kind of stimulus impact upon the residential sector as has been the case in recent times.

In other areas, developments affecting the profession are happening on a number of fronts. At a federal level, an ambitious plan to create ’30 minute cities’ was unveiled by Malcolm Turnbull last month and has placed cities firmly on the agenda of the federal government.

In Victoria, the Andrews government is planning tougher building height laws which will restrict floor area to height ratios to 18 to one in the Melbourne CBD. The commencement of operation of the new Building Code of Australia on May 1 will see a number of changes including the allowance of timber buildings of up to 25 metres in height.


Areas of opportunity

According to forecasts from Australian Construction Industry Forum:

  • With the average annual dollar value of work done over the next five years set to exceed that expected to have been done over the five years to June this year by more than 50 per cent, hotels and accommodation represent arguably the best area of growth and the biggest area of opportunity, with momentum set to be driven by rising tourism numbers and falling vacancies. Particularly strong conditions are expected on east coast markets, including Queensland, New South Wales and Victoria.
  • Amid an aging population and a growing shortage of beds, healthcare represents another area of opportunity as activity bottoms out in 2016/17 but grows by more than 15 per cent in the three years thereon after, with New South Wales and Victoria leading the way.
  • With average annual levels of activity over the next five years forecast to exceed that of the five years to June 2016 by 10.3 per cent, retail looks set to offer another area of promise.
  • Entertainment facilities, too, represent another area which will undergo a modest uplift in activity especially in areas such as New South Wales, Queensland and Western Australia.
  • Finally, whilst new home building is set to slow, some areas of opportunity could be seen in the renovations of existing housing as a combination of lower interest rates, increasing levels of household equity and a profile of stock which is seeing larger numbers of homes move into the 10-to-20 year age bracket during which kitchen and bathroom renovations typically take place is expected to drive a surge of 13 per cent in the dollar value of work done on large alterations, with pretty much all states set to share in the spoils.
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