What’s in Store for QLD’s Construction Industry in 2016?

Monday, January 4th, 2016
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The Queensland construction market has been buoyed by the residential market for around two years, but it is predicted that the majority of the key projects will finish in around 12 to 18 months.

This leads to a couple of questions, namely what is the next key area for the sector and what is in store for the market in 2016?

The past year saw the construction market in Queensland pick up, so much so that I believe it was one of the busiest years since 2007, and I think 2016 is only going to be better.

By all reports and forecasts, 2016 looks set to be a positive year for the construction market in Queensland.

Having spoken with several of my clients over the past few months, the general consensus is that the residential apartment sector has about 12 to 18 months before it starts to slow down and what companies will need to do is diversify their project pipeline. Furthermore, this needs to happen now.

To determine what is in store for 2016, I spoke with Constructions Skills Queensland CSQ CEO Brett Schimming; Badge Brisbane manager Toby Rice, who has been working within the industry for around 20 years; and well-known Brisbane developer Tom Dooley, who runs Tom Dooley Development, which concentrates on high-end residential apartments.

Schimming said overall the Queensland construction market is looking fairly steady for the next couple of years, while Dooley believes 2016 will be very busy at the start of the year.

“I don’t think there will be the same wave of projects all commencing within a short amount of time like we had this year,” Dooley said. “I think it’s going to be busy for the first half and we will see it slow down towards the end of the year as some of the projects that have been going will all wind up around the same time.”

It’s generally agreed that 2016 will see the focus spread from Brisbane to regional and northern locations.

Schimming said CSQ’s research predicts the Northern, North West, Far North and Fitzroy regions will have quite a healthy outlook, thanks particularly to some good forecasts for non-residential and residential construction.

Both Dooley and Rice are in agreement that Gold Coast will be a key focus area.

“We are seeing Gold Coast projects beginning to escalate, particularly within subcontract pricing – tiling, block work, painting,” Rice said. “The high rise residential projects will start jumping ship to Enterprise Bargaining Agreement (EBA) projects.”

New sectors

There has been a lot of talk about the residential unit/apartment market and how much longer can we sustain it. Badge currently has a strong focus on age care and education projects leading into 2016.

“We are really glad we aren’t in the residential market,” Rice said. “We believe age care is the next residential boom.

“We feel you really need to be on the path now or you are going to struggle. You need to be thinking long-term for project pipeline and long-term for relationships with clients.”

Rice said builders who only focus on residential towers will struggle.

“There is always going to be a need for residential, but nothing like we have seen over the past couple of years,” he said.

Dooley predicts retail will also become a stronger market in the upcoming year. He further posits that the residential market is still on track, but with a stronger focus on owner-occupiers.

“Within the residential side, there are still big numbers of units being completed,” he said. “I think there will always be a market for it. You do see a lot of developers not really catering to the owner-occupier market.

“There are a lot of projects being built at the moment that are only focusing on the investor market.

“We will always have an owner-occupier focus, as we like to focus on the local market. In fact, 90 per cent of our latest projects were sold to people within a 4000 postcode.

“Builders doing the investor-only apartments will see it slow up, but those that continue to do a mix of product for owner-occupiers and investors will still continue.”

Finding the right workforce

Many of my discussions show that attracting and retaining quality staff is going to be a challenge for the sector in the coming year.

This has been a concern for many of my clients for this year and will become even more of a focus in 2016.

This key concern has grown tenfold in the past six months, particularly in the area of high-rise residential experience.

While the job description and the salary packages are key to potential candidates, what continues to come out through discussions with candidates I work with is: “why should I work there over another company? How do they look after their staff?”

Our candidates within this sector are spoilt for choice, given that there is presently a small pool of talented professionals to fulfil key roles.

The answer is simple really, our sector is candidate-scarce, which requires us more than ever to put time and energy in ensuring we not only retain our current workforce, but be seen as an ideal place to work.

“This has always been a problem in our area,” Dooley said. “Finding good staff is difficult, but once you do you need to do all you can to hold on to them.

“We work hard, but they know I value them I’ve had guys here for almost 15 years. I would do anything I can to keep staff that show potential.”

Rice said the success of a company in the new year will rely heavily on the people and attracting the right people to carry out the work.

Pricing and profit

“2016 will be positive in terms of the volume of work, but profitability will still be difficult for many builders,” Rice said. “It will be very, very busy and the margins are still tight and the industry is very competitive.  I don’t think 2016 is going to be any easier to make profit.

“We also need to be prepared for projects coming on board and not being converted as fast as we hoped. Trend forecasting shows this to be continuing.

“We will also see one extreme or the other, projects will either get shelved or they will be go, go, go! There will be no middle ground, as it’s either one way or another.

“We will also see the price of materials and sub-contractors rising. Managing the costs of delivering projects and ensuring that they can be delivered at agreed prices, will be key to ensuring we can turn a profit.”

Dooley agreed and said one of the biggest challenges in 2016 will be controlling pricing.

“Subcontractor pricing is quite high right now and I think it will stay like that until the latter half of next year,” he said.

2016 looks set to be another positive year for the construction market in Queensland, however also a year in which we will see significant change.

The shift from a residential dominated market will begin to take shape, and with this we will see areas outside of Brisbane seeing relatively significant activity.

Price and cost control will continue to be key challenges and those who can manage this process effectively while diversifying their portfolio will be the ones to prosper financially.

And finally, while diversification, cost control and regional capability will all be important, it will be those organisations that can attract and retain the best talent in the industry who will find success easiest to come by.

Even as we look back at the successes of the past year, preparing for 2016 should be a major priority.

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