A commercial construction boom is underway in Australia – driven by increased funding for infrastructure and tourism. The big winners will be those working in the rail, road and hotel industries, as thousands of building opportunities become available. Although this is good news, the vocational training sector is failing to produce enough workers to meet the skills shortage created by an influx of projects.
Commercial construction companies ended last year on a high note, but this achievement pales in comparison to predictions for coming months.
It looks as though 2018 is turning into the best year the sector has seen in a decade, and we’re not even at the half-way mark yet.
Data from the ABS shows the building and construction industry pumped more than $28 billion into the national economy last year, which is no small feat.
This is largely due to non-residential projects picking up the slack left by the lagging residential sector in the final quarter of last year.
Master Builders Australia CEO Denita Wawn says the nation’s second largest industry strengthened the economy in every city, town and region around the country.
“That’s $28 billion that is creating employment, providing young people with the skills they need to be job ready and build rewarding careers and it’s supporting more than 360,000 small building businesses that build prosperity in every community,” she said.
Could 2018 bring stronger results?
It appears this is already happening. The construction sector is expected to grow by 14.6 per cent and add $42 billion to the economy this financial year.
This is particularly good news for commercial builders, who can look forward to their best year in a long time.
“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,” Ms Wawn said.
“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. 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.”
National sentiment lags behind projected outlook for commercial construction boom:
Master Builders Australia conducts a national survey of its members on a quarterly basis, canvassing views on the economy and work conditions.
Overall confidence in the building and construction sector appears to be generally positive in the recent March edition, at an index score of 58.0.
Expectations for business conditions in the industry improved slightly, at a score of 58.2. This measures a range of indicators, including profits, turnover levels and workplace conditions. Responses were more positive in Queensland, Victoria and NSW for this particular category.
The index for conditions in the non-residential sector remains neutral, at a score of 49.6. Although 2018 is set to be a strong year for commercial construction, many in the industry are yet to feel this optimism. But this is expected to change as big projects enter the pipeline. It’s still early days, after all.
Interestingly, residential builders feel more positive about future building activity than non-residential workers.
“We can expect the Survey’s non-residential index to record substantial improvement as commercial builders feel the effects of the surge in commercial construction work that is recorded in the latest ABS building activity data.”
Hotel industry drives building opportunities in commercial construction boom:
A thriving hotel market is doing wonders for Australia’s commercial construction industry.
It was a different story four years ago. There was little reason to invest in new developments, because the surging Australian dollar kept tourists way.
But this has changed in recent years, as the weaker dollar attracts international visitors and Australians look to their own backyard for their next getaway.
Data from Tourism Research Australia shows that 914 500 overseas tourists arrived in Australia in February 2017. This is a 16 percent spike from February 2016. International visitors also spent a record $41.3 billion in December 2017, up 6 per cent from the previous year.
At a glance, why are more tourists coming to Australia?
- The value of the Australian dollar remains lower than the US dollar. This makes Australia a cheaper destination for overseas visitors, compared to many other countries. The same applies for Australians considering a local holiday. As far as currency conversions go, it’s cheaper to fly interstate than to visit the US or Europe, for example.
- There’s greater international trade and higher demand for corporate travel, thanks to several Free Trade Agreements with major export destinations, such as China, Japan and South Korea.
- Chinese airlines now have unrestricted access into Australia, following an aviation agreement between China and Australia in 2016.
- The federal government has introduced online visas, multiple entry visas and other programs to make visiting Australia more appealing.
TRA predicts that international visitor numbers will continue to rise by 6 per cent every year until 2022. Domestic overnight trips should show continue to grow by 2.2 per cent each year.
Hotels can now charge more because they’re filling up faster, so development activity must increase to keep up with demand.
What does this mean for hotel building opportunities in Queensland?
Sourceable reports that Queensland’s pipeline for new projects increased threefold over two years and there’s more work on the horizon. Brisbane alone is expected to add 24 per cent to its portfolio in coming years.
As far as building opportunities go, this will open many doors for architects, engineers, designers, builders, project managers and construction workers across the region.
Queensland’s tourism hotspots are set to reap the greatest benefits:
- Brisbane is expected to increase their accommodation capacity by more than 3000 rooms, as the city attracts more corporate travellers (who tend to have higher spending habits).
- There haven’t been any new hotels in Cairns for nearly two decades, but this is changing to cater to strong tourism growth in the remote area.
New road and rail projects create building opportunities in commercial construction boom:
If you’re working in the infrastructure sector, you can expect to be kept on your toes as more projects roll in.
Australia is currently in the midst of a road and rail construction swell that doesn’t appear to be easing any time soon.
Sourceable reports the value of construction work on road projects will increase more than threefold from 2014 levels to $6.7 billion this year. They also flag that rail activity will nearly triple to $3.5 billion. Road construction should drop off after this year, but rail activity is expected to remain heightened until 2024.
Both state and federal governments have spent big on road infrastructure over the past two years. Road activity in Queensland surged by 24 per cent in the previous financial year, in light of recent projects:
- Toowoomba Range Second Crossing
- Ipswich Motorway
- Gateway Upgrade North
- Kingston Smith Drive
- Bruce Highway Update Program (the largest road infrastructure project that Queensland has ever seen)
- Improvements to the Warrego Highway
- Widening of the Pacific Motorway
Across Australia, the federal government is switching its focus from roads to rail. Although there are massive road projects underway, a $10 billion national rail program has become priority.
State governments are also starting to invest heavily in rail. The Queensland government will oversee the Cross River Rail project, which will benefit all of South East Queensland. This is the biggest infrastructure project in the area for more than a decade. If everything goes according to plan, construction will begin in 2019 and finish in 2024.
During this time 7700 new jobs will be created and there will be countless building opportunities for people working in the commercial construction sector. In particular, civil contractors and suppliers of materials, heavy machinery and equipment will be in high demand.
Construction skills shortage Australia – can vocational training keep up with commercial construction boom?
Although the surge of building opportunities is good news, there’s a shortage of skilled workers who can fill job gaps.
Commercial construction companies are struggling to find engineers, architects, project managers and contract administrators. Unfortunately, many candidates are lacking the specialised skills that employers seek.
This raises questions about incentives for young people looking to work in construction. Master Builders Australia welcomes federal Labor’s promise to review the tertiary education system, if elected. Labor’s plan is to make sure that prospective students find TAFE as attractive as university, when considering their options.
Denita Wawn says Labor’s proposed inquiry is important because it puts the VET sector on equal footing with university education. Vocational training, she maintains, has long been considered the “poor cousin” of getting a university degree.
“Master Builders has consistently called for a review of the system to ensure it can provide young people with the skills they need and that employers want,” Denita Wawn, CEO of Master Builders Australia said.
“Recent jobs vacancy data shows the number of good, secure jobs continues to increase in the building and construction industry and we need more young people, their parents and teachers to give vocational education greater consideration.”