Engineers in Australia are largely shifting focus as resource construction work dries up and opportunities emerge in sectors like apartment building and transport.
By all means, the impact of the resource sector slowdown cannot be understated. Around 400 people are being ‘demobilised’ at the $34 billion Ichthys LNG Gas plant in Darwin. Engineering outfit WorleyParsons lost $54.9 million in 2014/14 on the back of a $198.6 million write-down and a sustained decline in market activity, and profits have also been slashed at rival Monadelphous. Despite having stabilised in the past 12 months, job vacancy numbers in professions such as mine engineering, civil engineering and electrical engineering have fallen by around three quarters since their peak in early 2012.
Worse is yet to come. Following what is expected to have been a 7.7 per cent drop in civil construction work in 2014/15 from $123,700 billion to $101,858 billion, Australian Construction Industry Forum expects activity in this sector to continue to fall before bottoming out at $88.480 billion in 2017/18. Over the four-year period spanning 2013/14 to 2017/18, ACIF expects work on resource and electricity related projects to drop by 44.8 per cent and almost 50 per cent respectively, with resource states such as Queensland, NT and Western Australia being the hardest hit.
Signs are not much better when it comes to non-residential building, where approvals in the first seven months of this year were down by almost a fifth compared to the same period two years earlier, and where ACIF expects the dollar value of work done to drop by 7.1 per cent over the period spanning 2013/14 to 2016/17. Outside of hotels and accommodation, subdued conditions are expected across most sectors of this segment of the market.
Where then, are the opportunities? With the Housing Industry Association expecting ground to break on construction of a record 100,630 units and apartments this year – almost three times the level seen in 2009 – the booming multi-residential sector is an obvious answer. While commencement numbers are expected to peak this year, output levels within this sector are set to remain elevated by historic standards over at least the medium term.
Elsewhere, growth is expected in sectors such as transport, telecommunications and hotels amid a good range of road and rail projects, continued work on the National Broadband Network and growing developer interest in tourism and accommodation projects. In terms of states, momentum is shifting back toward New South Wales and some parts of Queensland, and remains reasonably robust in Victoria.
While not exactly a growth sector at the moment, meanwhile, the water infrastructure construction sector will benefit over the longer term from initiatives like the Federal Government’s recently announced National Water Infrastructure Fund.
Not surprisingly, these are the areas where critical employment opportunities are emerging. In New South Wales, for example, recruitment specialist Hays says highway and bridge engineers, civil drafters and transport planners will all be needed for major infrastructure work, while building structural engineers and land development specialists are in demand for major commercial and residential projects. Structural engineers are also needed for work on large high-rise residential developments in Victoria, meanwhile, and those with Revit experience and modelling skills are sought after across the majority of markets around the nation.
Even here, however, there are challenges. Tighter lending requirements are expected to deliver a pull-back in speculative development on new high rise residential complexes – a phenomenon which will no doubt be exacerbated as uncertainty in China causes some Chinese investment activity to pull back. New temporary height restrictions in Melbourne could well put an end to the current roll of skyscrapers going up in that market.
Meanwhile, developments are happening on other fronts. Following last summer’s fire at LaCross, the sector is dealing with concerns relating to building control, fire safety and the use of non-compliant products on building sites. To maintain quality amid an anticipated wave of foreign workers coming into the market, meanwhile, Engineers Australia is setting up a scheme to register those who meet certain tests and criteria in order to provide verification of the qualifications and experience of foreign engineers who seek to work within Australia.
Critical areas of opportunity are as follows:
With ground expected to break on more than 100,000 new units and apartments in 2015, the pace at which new work is coming in in multi-residential construction is up by almost two-thirds compared with three years ago and almost three times compared with calendar 2009.
Although starts will drop back after peaking this year, they are expected to remain at historically elevated levels over the foreseeable future, with historically elevated commencement numbers anticipated across almost all states except for the Australian Capital Territory.
Not surprisingly, the roads sector in Australia offers significant levels of opportunity as a massive infrastructure program sees the dollar value of work done bottom out at $14.975 billion in 2014/15 before increasing to almost $19 billion by 2017/18.
New South Wales and Queensland appear to be the big winners, as work on projects such as WestConnex, the Pacific Highway – Woolgoolga to Ballina project, the F3 to M2 Corridor and road upgrades associated with the second airport drive activity in the former state and a decent range of projects drives work in the latter.
This is another area of opportunity which is set to build up to a $7 billion peak by 2017/18 as work on the National Broadband Network continues, with elevated levels of work generally anticipated across the board.
Hotels and Accommodation
Although not large by dollar value, accommodation is the only segment of the commercial building market which is expected to experience a long-term trajectory of growth as the sector benefits from a resurgence in tourism and an undersupply of quality facilities.
Thanks to developments like the $4.2 billion Acquis Great Barrier Reef Resort in Cairns as well as the $900 million Jewel Mixed Use Development at Surfers Paradise, the $600 million Capricorn Integrated Resort development in Yeppon near Rockhampton, the $600 billion Linderman Island resort redevelopment on Linderman Island in the Whitsundays and the revitalisation of the Great Keppel Island resort off the coast near Rockhampton, the Gold Coast and Tropical North Queensland are the hot areas for development.
High occupancy levels should create conditions which are conducive to investment in Sydney and Melbourne, meanwhile, while activity is also expected to be reasonably buoyant in Brisbane.