Don O’Rorke says the construction industry faces one of its most challenging periods

Developer Don O’Rorke from Consolidated Properties Group said developers are taking on more risk from builder troubles. Picture: David Clark

Developers are taking on greater risk as the construction industry faces one of its most challenging periods, said veteran property player Don O’Rorke.

The chairman and chief executive of Brisbane development firm Consolidated Properties says it is not just builders in the hot seat anymore as the industry moves through the most precarious position he has witnessed in his more than four decades in the industry.

“The risk pendulum has definitely swung towards the developer away from the builder,” Mr O’Rorke said.

The comment follows the Queensland Building and Construction Commission’s warning to home and property owners not to pay any additional money to home builders before seeking legal advice.

It was responding to housing company Oracle asking clients to cover some of the variation of build costs, totalling up to $52,000 for some.

Mr O’Rorke said this period would be the wake-up call to move away from fixed-price contracts and implement a more sustainable model.

“I can’t see builders completing projects on cost (at the moment),” he added.

“Property is always equated with risk and that’s why I think there will be a structural change in contracting around risk taking and margins in the future.”

This year has already seen a string of builders fall under the pressure of the pandemic and associated stimulus, construction costs soaring by at least 20 per cent, and supply shortages for key materials such as timber and drywall. Rising inflation and the war in Ukraine have only further exacerbated issues of the past two years.

Last month, Condev on the Gold Coast had attempted to negotiate terms with it’s developer clients to help cover costs but was unsuccessful, entering liquidation carrying debts of $33m.

“No one is going to be better off in that situation,” Mr O’Rorke said. “It is in everyone’s interest to keep subbies and builders.”

ProBuild toppled just a few weeks earlier with projects totalling $5bn. Australia’s largest home builder, Metricon, also had to fend off rumours what it was in dire financial straits.

Consolidated Properties has had a long-term relationship with Hutchinson Builders who, while not being listed, has revealed it is currently operating on a profit margin of 1 per cent.

Even the famed building company’s chairman, Scott Hutchinson, has admitted that would not be viable for the long term, a sign that the industry needed to change.