Residential wane is commercial property’s gain

Sydney’s Barangaroo is lifting construction activity.
Sydney’s Barangaroo is lifting construction activity.

Master Builders Australia has forecast that commercial construction will carry the industry through a residential building downturn this year. 

For the first time in four years, new dwelling commencements are set to fall below 200,000 as a result of perceived oversupply ­issues, particularly in the apartment market.

But at the same time, the value of new commercial construction is expected to soar 14.6% to $42 billion.

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Among the projects under construction include the $6 billion Lendlease Barangaroo development, Lang Walker’s $4 billion Collins Square Village at Docklands and Crown’s $2 billion Barangaroo casino and hotel.

The Industry Forecasts report identified the “influx of international retailers into Australia” as behind the $6.9 billion in spending on retail construction, led by expansions by Costco and Aldi.

Master Builders Australia economist Matthew Pollock says Aldi had plans to open 30 new stores over 12 months and even the arrival of online giant Amazon is creating construction work.

“They’ve got a new distribution centre in Dandenong and will perhaps have some other centres that will pop up around the country,” Pollock says. “It remains to be seen what the long-term impact of Amazon will be for bricks and mortar, but at this stage we’re certainly seeing these big retailers providing a source of activity.”

Jewel Gold Coast

The Jewel development on the Gold Coast.

Tourism and hospitality projects valued at $11.7 billion are also in the pipeline, including the $750 million Dusit Thani Brookwater Golf and Spa Resort in Brisbane, and the $970 million Jewel Development at Broadbeach on the Gold Coast.

Education and health-related construction is similarly strong, with the value of work completed exceeding $6.2 billion. Key projects included the $1.87 billion Sunshine Coast University Hospital in Queensland and $247 million Health Innovations Building at the University of South Australia.

Pollock says transport infrastructure is also powering.

“We’re seeing some really big road and rail projects, most of which are publicly funded,” he says. “The federal government’s $75 billion Transport Investment Program is supporting a lot of new projects around the country and we expect that will last at least five years.”

Looking further ahead, declines in residential projects are expected to continue next year before a small rebound in 2019-20.

In contrast, non-residential construction is likely to come off the boil next year and slowly decline over the following years.

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