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Commercial Construction Set to Have the Best Year in Decades


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Multi-residential construction might be slowing. However, according to Master Builders Australia’s latest Building & Construction Industry Forecasts, other sectors are already taking up the slack.

MBA is tipping commercial construction to have its best year in decades. Retail, tourism, and commercial office space developments are the major drivers of a forecast $42 billion contribution by the industry to the national economy over the 2017-2018 financial year.

Matthew Pollock, Master Builders Australia’s National Manager Economics, says the predicted growth of more than 14.5 percent in commercial building activity, equivalent to an added $5.3 billion, is “strong enough on its own to drag the whole industry back into positive territory for the first time in four years.

The predicted growth is “strong enough on its own to drag the whole industry back into positive territory for the first time in four years". 

“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.”

New commercial projects will also ensure a pipeline of new job opportunities just as many major high-density projects reach completion during 2018 and early 2019.

Amazon, Aldi and Costco are the big players contributing to a rise in the value of retail construction to $6.9 billion in the current financial year. Aldi plans to open 30 more stores around Australia in the next 12 months, Costco is also in expansion mode, and Amazon has recently developed a large distribution centre in Dandenong South on the outskirts of Melbourne.

Major Resort Construction Up

Construction in the tourism sector is getting a boost from the high number of tourists coming from Asian nations, particularly 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,” Pollock says.

Queensland’s resort sector is expected to fare particularly well, with $9 billion of $11.7 billion in projects in the pipeline earmarked for major resort projects in the Sunshine State.

Commercial office space also has a healthy pipeline of projects. The MBA expects the resulting construction work to reach a value of $6.8 billion or more this financial year.

Pollock says a boom in transport-related construction is also expected over the medium term of the next five years, due to Government investment in transport infrastructure ramping up.

“There are currently more than $170 billion in transports projects in the pipeline, with activity expected to peak in 2019-20." 

“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 as well as the much needed productivity enhancing infrastructure.”

Social infrastructure is also making a strong contribution to the industry’s bottom-line, with health- and education-related construction expected to boost the industry in a number of states.

“In South Australia, 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,” Pollock says.

Unprecedented Growth

The MBA is urging a greater focus on infrastructure investment, to support businesses, boost new housing supply, and assist with housing affordability.

According to Pollock, the past three years have seen an “unprecedented growth” in new residential construction, with an average of more than 200,000 dwellings built. He says it’s a feat unmatched in the industry’s history.

While the forecast shows a moderation in the construction of new homes, it is not a major slow-down. The MBA expects new commencements in 2017-18 to top 195,000 and average around 185,000 in subsequent years.

That is also the minimum number of new homes that will be required annually over the next five years if housing supply is to keep pace with population growth.

Comments

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    This is a great read! Can you tell us how this differs from strategies used by other companies in the area like J2 Commercial Development? They seem to offer construction services which align with these trends.
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