The country’s biggest architecture firms are expecting a stronger construction economy in 2015 than last year, as offshore investment and housing demand – particularly in Sydney – drives activity and building project pipelines.
Investment from China would keep fuelling domestic construction despite concerns of a slowdown in that country’s economy, Woods Bagot’s outgoing managing director, Ross Donaldson, said.
Capital would also keep coming from lower-profile sources such as Canadian pension funds, he said.
“The deregulation in China and the slowing of the Chinese market itself creates a double whammy incentive for the investment capital outflow. It’s going to all the safe-haven countries with premier cities. They’re going to New York, London, San Francisco, Los Angeles and Sydney and Melbourne and Brisbane and others.”
The pace of residential construction is picking up even as engineering construction declines as mining-related investment slows.
The Australian Construction Industry Forum in December raised its forecast for 2015-16 to $83.1 billion from the $79.5 billion predicted in May, despite a slightly lower 2015 estimate.
Master Builders Australia says housing starts will pass the 200,000 mark for the first time.
BVN principal Abbie Galvin said the Sydney-based firm’s order book had “almost doubled” from a year ago.
Ms Galvin said the pick-up, which included commercial work, was putting firms that had just come out of a downturn under pressure.
In Sydney, BVN has added 40 staff to its 80 employees over the past 12 months.
“The pace at which we are working is a pace at which we haven’t worked at in the previous year. Our projects are almost halving their program time,” Ms Galvin said. “What might take us a year to design and produce delivery documentation for is now requiring us to put together in six months.”
Sydney remains the strongest market, not just for residential work but for commercial work like office fitouts.
“The pipeline’s healthy, the conversion rates are great,” Hassell managing director Rob Backhouse said.
However, sectors such as the commodity price-hit Perth office market were weaker.
Mr Backhouse said one challenge was to avoid the growth-at-all-costs mentality pervasive until the 2008 global economic crisis. “If you think pre-2008, when things were booming, firms like ours kept responding to the opportunities and growing. We are much more focused on not growing and maintaining a focus on quality and quality of people we’re holding.”
A strong market is also drawing competition as overseas firms such as Gensler enter the Australian market. Partly in response, many firms are diversifying and expanding overseas.
BVN is designing the Australian embassy in Bangkok with local firm The Beaumont Partnership.
There are other risks to the buoyant residential outlook, such as whether Victoria’s new Labor government, which has suspended the previous Liberal government’s $6.8 billion East West Link road project, will allow the same level of residential construction that resulted in 6300 apartments being completed in Melbourne in the first 10 months of 2014; more than triple the long-term annual average of 2100.
“The change of government in Victoria has changed the planning landscape a little bit but we’re optimistic about how that will go,” Bates Smart chairman Roger Poole said.
“Our main concern is consistency in planning policy. It’s important that there’s enough continuity from the last government to this one; that people who find themselves with some very extensive sites and projects which they’re eager to move forward with and can have an opportunity to do that.”