With Gordon Bateup, Director ACORPP

The WA construction market continues to be slow-moving, with Perth yet to experience the full brunt of the effect of the mining industry tapering off. The slower market has the advantage that prices remain competitive, particularly at the 2nd and 3rd tier (contractors still well established but not as big as the top tier), where they are experiencing a limited number of jobs, thereby making competition for contracts fierce. With the continual pipeline of investment, which had previously supported the resource sector construction work now receding, the bursting of the resource bubble has meant that completion has increased due to the number of sub-contractors available to do the work. Signs of oversupply and a general reduction in new housing construction are everywhere.

At its peak last year, WA construction sector employed more than 150,000 workers which will drop by roughly 10,000 over the next year, according to the Australian Construction Industry Forum. Other parts of the economy will also feel the impact of this, as slowing tenant demand from the resource sector will affect requirements for commercial office space. The slow rate of population growth will have an effect on the demand for new housing as well. 

With the slowdown in the industry continuing to be felt in the office-space market, we are also seeing a slowdown in government work overall. This being the consequence of less money coming through from the government and other projects being done in-house. In our last Perth construction voice we talked about builders tiering down, we are also now hearing of builders looking to new strategies to ensure their survival through the development and investment area of property.

It’s worth noting that it’s not all doom and gloom, the silver linings include:

• Retail seeing the redevelopment of shopping centres, a recent one being the $600 million expansion at Karrinyup and several others in the pipeline.
• Aged care going exceptionally well with huge spending nationwide and 2 primary drivers; the privatisation of aged care and the existing aged care providers looking to get their product revamped and ready.
• Infrastructure which has not really hit the market yet but being talked about a lot i.e. the tunnel from Perth to Fremantle, more roads and train station extensions with predictions of another train link.
• Different opportunities in regional areas, with government spending on health projects such as new hospitals or hospital refurbishments, particularly in areas such as the Wheatbelt.

The mining industry flow-on effects have resulted in less enrolments happening in education. A large resource element meant a growing population with greater education needs, therefore more schools and affiliated projects, however the current market means parents are losing jobs and consequently pulling children from private schools. The education model has changed, with an emphasis on bringing in more international students, adapting to changes in technology and doing extended learning at home. To keep relevant in both the local and international space, money has to be spent on different types of projects, in an effort to ensure continued growth.

There’s been a significant divide in the consultancy market with big, multi-nationals and large engineering companies laying people off at an alarming rate, however smaller consultancy firms are seeing the opposite and are actively looking for people. Whilst not being super busy, the smaller firms are comfortably situated as they are now afforded the opportunity to compete, engage and provide quality service. The most important aspect of any business relationship is the service element and in the construction industry, timely completion and making things happen is the hallmark of good service.

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