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Commercial Construction Expected to Have Best Year in a Decade

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ABS building and activity data for 2017, released in early April has revealed an overall healthy year for the construction sector, with the value of work growing by 8 percent in the final quarter of 2017, and the industry contributing more than $28 billion to Australia’s economy.

The outlook was not quite so rosy for the residential construction sector, which fell by 5.4 percent in the same quarter, leading to speculation that 2018 will be moderate for that sector. The commercial sector conversely grew by 15.8 percent in the December quarter leading to an optimistic outlook for 2018.

Master Builders Australia CEO Denita Wawn said of the ABS results: “This very positive result for  non-residential construction supports master Builders’ outlook for a boom in non-residential building activity over the next 12 months.”

“This very positive result for  non-residential construction supports master Builders’ outlook for a boom in non-residential building activity over the next 12 months.” 

She continued: “2018 is shaping up to be the best year for commercial builders for more than a decade. Total Commercial Construction activity is expected to contribute $42 billion to the economy in 2017-18, with the sector expected to grow by 14.6 percent.”

More than $535 million worth of approvals were granted in February for industrial developments, according to the ABS data, which was 100 percent increase from the previous month. Total industrial property including warehouses and factories recorded and an increase of more than 15 percent in approval values in the 12 months to February 2018.

There has been speculation that the increase in warehouse approvals stems from the growing trend for online retail and the need for more extensive distribution centres around locations close to motorways and transport hubs. AMP Capital chief economist Shane Oliver said: “Rents are rising very strongly, so that has encouraged a pick-up for approvals for industrial complexes or warehouses.”

Australian Industry Group (AIG) released its latest Performance Management  Index (PMI) figures which shows a record high of 63.1 (Any number above 50 indicates overall growth in the manufacturing sector.) Amazon launched in Australia in December 2017.

“The timing couldn’t be better with the expected moderation in the value of residential construction work ." 

The growth in industrial building has been welcomed by Master Builders Australia: “The timing couldn’t be better with the expected moderation in the value of residential construction work and another year of consolidation in the engineering sector,” said Denita Wawn.

“Better yet, the new commercial construction projects driving the upswing create new jobs and opportunities for workers whose work on major high-density residential projects may be finishing over the next 12 months or so,” she said.

According to the ABS Building Activity report:

  • -The trend estimate for new private sector house commencements rose by a modest 1.5 percent in the December Quarter

  • The trend estimate for the value of work done in the private sector rose 1.9 percent in the December Quarter, but the seasonally adjusted estimate for the value of work done fell by 46.6 percent to $13,533.1m

  • The trend estimate for the value of work done in public sector rose 1.7 percent in the December Quarter, but the seasonally adjusted estimate for the value of work done fell 2.6% to $8,739.4m

  • The trend estimate for the value of total engineering work done in December quarter rose 1.9 percent, but the seasonally adjusted estimate for the value of work done fell 35.1 percent to $22,272.5m

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