Australia’s commercial building sector is set to emerge as an area of opportunity over coming years as the boom in residential work subsides, a new forecast suggests.

In its latest forecast, Australian Construction Industry Forum says it expects the overall value of work done throughout the building and civil construction sector in Australia to contract by 4.4 per cent in 2016/17 to go from $217.606 billion in 2016/17 to $209.727 in 2017/18. That value is then expected to continue to contract thereon after until bottoming out at $203.859 billion in 2020/21 as the peak of the boom in new home building passes and resource related activity continues to contract.

But ACIF says a modest recovery is set to take hold in nor-residential building, which contracted by 1.5 per cent last year but is showing signs of life as the pace at which new work is coming in has grown.

From a modest base of $36.363 billion in 2016/17, ACIF believes the dollar value of work done on non-residential buildings will increase by around four per cent in the financial year and will reach more than $40 billion in 2020/21.

The forecasts come amid growing evidence within this segment that the pace at which new work is coming in is picking up.

Overall, the dollar value of non-residential buildings approved for construction has increased by 16 per cent in each of the past two years to reach $43 billion – the highest level on record in more than a decade.

Moreover, a total of 290 new non-residential projects have been registered on a database of significant dollar value projects maintained by real-estate information services firm Cordell over the past six months.

This compares to only 240 projects in the six months to May, and represents a reversal of a previous trend of declining project numbers.

In its report, ACIF says growth will be evident across the office, retail and industrial sectors, whilst elevated levels of activity will continue in the accommodation sector.

In offices, it says activity will recover over the next three years after a dreadful 2016/17 in which the value of work tumbled by 21 per cent on developer fears of oversupply following completion of projects such as Barangaroo South in Sydney and sky-high vacancy rates in Brisbane and Perth.

Currently, it said there has been an upturn in approvals amid robust levels of tenant demand in Melbourne and Sydney and the constraining of supply by the withdrawal of stock into apartments.

Also expected to recover is the retail sector, where activity was hit last year by a lacklustre sales environment but where approvals and project flow are recovering as retailers respond to the competitive threat from online retail by refreshing and reorientating their outlets to allow more space for food and leisure services.

In industrial, further growth is expected especially in eastern states after a strong year in 2016/17 amid an expansion of transport and logistics services located in growing capital cities in and around transport routes and intermodal terminals.

Finally, robust conditions will remain in hotels and accommodation amid continued strength in international arrival numbers and rising domestic business travel.

Whilst things are looking better in non-residential building, however, a decline in activity is expected in the residential sector as the peak of the new home building boom passes.

Particularly hard hit will be the multi-residential sector, where the dollar value of work done is expected to drop by 35 per cent over the next few years following a multi-year surge in the number of cranes in the sky.

In engineering construction, meanwhile, the decline in activity will level out as the pull-back in resource work is partially offset by more projects coming online in roads.

In terms of employment within the sector, ACIF expects substantial reductions in headcount following several years of jobs boom amid the contraction of the labour-intensive side of the business.

All up, a net of 87,000 positions throughout the sector will be shed over the next three years, it said.