Commercial Building Set For Modest Recovery: Survey

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Wednesday, May 21st, 2014
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Even as the mining boom fades, the latest survey suggests that the commercial building industry in Australia is set for a modest comeback, albeit with overall levels of non-residential construction set to drop back over the next two years.

Published by Australian Industry Group (AI Group) in conjunction with Australian Constructors Association (ACA), the May 2014 Construction Outlook survey of 100 companies in the commercial and engineering sector showed that following growth of 7.1 percent in 2013, the overall level of non-residential construction activity was expected to drop by 3.6 percent and 1.8 percent in 2014 and 2015 respectively as higher levels of work in transport and telecommunications was offset by lower levels of resource activity (see chart).

But respondents were increasingly confident about prospects in commercial building, tipping combined average growth rates of 4.1 percent and 3.5 percent (private and public combined) respectively in this sector over the next two years.

The report follows a Property Council survey last month showing increasing levels of confidence regarding forward work schedules in non-residential building, with sentiment being highest in New South Wales, Victoria, Queensland and Western Australia.

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Cautioning that signs of any upturn remained patchy and modest, Ai Group Economist David Richardson said the improvement in commercial building sentiment was consistent with an increase in non-residential building approvals and noted that demand was reasonably strong in some areas, such as warehouse and logistics space needed to support online retail nearby major metropolitan areas.

“What we are seeing is that more projects are starting to get the go-ahead,” Richardson told Sourceable.

“That will translate through to improvement in commencements.”

ACA Executive Director Lindsay Le Compte agrees, saying improving commercial building sentiment was being underpinned by a number of factors including stability in terms of both interest rates and the economy and noting that the sector had greater visibility with regard to policy direction following the federal budget notwithstanding that not all of the announced measures are guaranteed to pass the senate.

“I think perhaps they (commercial builders) are saying ‘well, we are not expecting any major hiccups at this point in time,’” he said.

Le Compte also stresses the need to lift training efforts to help the sector cope with a longer term uptick in activity as well as an aging workforce, and says he supports a new program to give apprentices access to low interest loans.

Consistent with the lower levels of activity overall, meanwhile, respondents to the latest survey expect to reduce their employment numbers by 2.3 percent this year, with onsite workers expected to be worst affected.

Such falls, however, may well be offset by reasonably strong labour market conditions in the residential sector, where commentators are becoming increasingly confident that a recent upturn in starts will be sustained in coming years.

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