Commercial construction set for decade high surge

| February 17, 2018

Activity in the commercial construction sector is set to have the best year in more than a decade. The latest Building & Construction Industry Forecasts produced by Master Builders Australia show that total commercial construction activity is expected to contribute $42 billion to the economy in 2017-18.

“With forecast growth of more than 14.5%, equating to $5.3 billion, commercial building activity will be strong enough on its own to drag the whole industry back into positive territory for the first time in four years,” Matthew Pollock, Master Builders Australia’s National Manager Economics said.

“With a small moderation expected in the value of residential construction work and another year of consolidation in the engineering sector, the timing of this surge in commercial construction couldn’t be better,” Matthew Pollock said.

“Better yet, new commercial construction projects will provide job opportunities for workers who may be finishing up on major high density residential projects over the next 12 months or so,” he said.

“Looking a little further down the track, the Government’s investment in major transport infrastructure is ramping up and will support a boom in transport related construction over the next 5 years. There are currently more than $170 billion in transports projects in the pipeline, with activity expected to peak in 2019-20.

“This work will provide jobs for years and also provide much need productivity enhancing infrastructure. Master Builders has called for a greater focus on infrastructure investment to support businesses, but also to boost new housing supply and help with housing affordability,” Matthew Pollock said.

“On the residential building front, the last three years saw unprecedented growth in new housing construction. We have built more than 200,000 new dwellings per year – a feat unmatched in our history,” he said.

“Despite the forecast showing a moderation in new dwelling construction, we expect new commencements in 2017-18 to top 195,000 and average around 185,000 thereafter. To keep pace with population growth we will need to build at least 185,000 new dwellings each year for the next five years,” Matthew Pollock said.

International Retailers
New retail related construction is expected to rise to $6.9 billion in 2017-18, led by the recent introduction of some big international retailers, including Amazon which recently built a large distribution centre in Melbourne’s Dandenong South and plans by Aldi to open another 30 stores across the country in the next 12 months.

Office Space
Office space is set to make the biggest single contribution with a strong pipeline of projects supporting an expectation of related construction work to top $6.8 billion in 2017-18.

Resorts and Hotels
“Asia continues to be a strong source of tourist visitor numbers, particularly from Japan, South Korea, Malaysia and China. Asian investment is following the tourists with $4 billion committed to the construction of new pipeline of resorts and hotels with Queensland’s resort sectors forecast to do particularly well,” he said. $9 billion of the $11.7 billion in projects waiting in the pipeline is allocated to major resort projects in Queensland.

Health and Education
Health and education related construction will also boost the construction industry in some states.
The $247 million Health Innovations Building at the University of South Australia is a case in point, as is the reallocation of the University of Tasmania’s STEM facilities.

Residential Renovations
A forecast boom in renovations is also ramping up and is expected to average $8.8 billion per year and top $44 billion over the next five years.

A surge in the pipeline of alterations and additions work for residential builders kicked off in 2017,” Matthew Pollock noted, “Last year renovation building work reached a decade high with activity topping $8.3 billion.”

“Importantly it has provided a much needed lifeline for small building businesses outside of Melbourne and Sydney who have seen the new housing construction side of their businesses struggle in the last few years.

“In fact, while the boom in new dwelling construction has been centred on the Sydney and Melbourne markets this is forecast to be reversed with the boom in renovation work. We expect growth to be strongest in South Australia, Western Australia and Queensland which is great news for our members in those states who have been doing it tough.”