The architecture profession in Australia is expecting better times ahead as commercial building activity picks up, though firms within the profession face a number of challenges as a result of growing competition and structural changes within the sector.
In a recent forecast, industry research firm IBIS said the average annualised rates of growth for the architectural services industry would increase from a paltry 0.5 per cent in the past five years to 2.2 per cent over the five years to 2019.
The research firm also predicted employment levels within the sector would stabilise and return to modest levels of growth.
Driving that growth will be a pick-up in commercial and institutional building, which together account for around 56 per cent of industry revenue. Work on detached houses and apartments will not experience that same growth, but it is expected by most commentators to remain at elevated levels.
“While investment into the non-residential building market is expected to be weak over 2014-15, growth is expected to increase from 2015-16, as commercial and industrial building construction heats up,” the report says.
“Large retail, office and entertainment developments are expected to contribute to demand over the period. The institutional building market is also expected to rebound over the period, with growth in the healthcare sector expected to drive most of the gains.”
While the report did not break down its forecasts on a state-by-state basis, growth is likely to be strongest in states such as New South Wales, Queensland, the ACT, South Australia and Tasmania, which are generally expecting higher levels of residential and commercial building activity in coming years.
The report said growth in 2015/16 (1.3 per cent) would be slower with conditions picking up more toward 2016/17.
By work type, IBIS said that demand for design development would grow as the level of building code regulation increases and more complicated mechanical and electrical requirements are implemented. Demand for contract documentation and schematic design would remain relatively constant and levels of work on pre-design services would level off after a significant growth spurt.
Demand for drafting services, however, was falling amid competition from low-cost international drafting services. The need for work on project management and contract administration and supervision may also decrease over time as technologies like BIM allow for better testing and modelling of construction processes, thus helping to reduce the number of faults which can occur during construction.
IBIS warns that the sector faces structural challenges associated with growing competition as building service and engineering consulting firms become more vertically integrated in their service offerings. According to the report, many firms are responding to this challenge by specialising in particular segments of the market as well as by either aligning themselves with these diversified players or increasing links to companies offering building services.
Challenges are also emerging through a growing volume of class actions against some players of the industry by owners of allegedly defective high-rise buildings – a trend IBIS says has led to higher premiums for professional indemnity insurance notwithstanding the fact that architects can only be held responsible for defective design work.
“A growing trend of broadening service offerings is occurring across the professional services sector, and the architecture industry is no exception,” the report says.
“Building services firms and engineering consulting firms are increasingly offering vertically integrated services, and are expected to capture an increasing share of the architectural market from industry participants.
“[In response,] the more traditional architecture firms will have to broaden the range of services they provide to clients. Other players in the industry are expected to continue to segment into areas of specialisation. They can then market themselves as providing a point of difference from other firms by specialising in areas such as a particular style, low-cost housing, or particular markets such as the holiday house market.”
Despite expectations that recent free trade agreements with China, Korea and Japan could lead to more import competition, IBIS says state-based regulation and industry accreditation processes have so far deterred all but the largest of the US and UK players from entering the Australian market.
It says some larger Australian firms are pushing into foreign markets, with the specialist design of schools, hospitals and aged care facilities being a particular area of opportunity.