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Commercial property construction set to grow

On Aug 13 2013
Tagged as:
  • Commercial


A new report from BIS Shrapnel has predicted that the non-residential building industry in the ...

A new report from BIS Shrapnel has predicted that the non-residential building industry in the country will see some growth over the next two years; however this activity will be slow.

According to Dr Kim Hawtrey, associate director of BIS Shrapnel, the transition from economic growth in the building sector from the mining sector is going to be at a slow pace.

This predicted growth will be evident in different forms - residential, industrial property, and commercial real estate - and in varying states across the country.

"We're in for a real nail biter," said Dr Hawtrey.

"We see an upswing in building but it will be uneven and slower to get going than usual. The next 12 months will be a critical test of how quickly the construction sector can take on more of the heavy lifting, and the Australian economy will remain balanced on a knife edge."

The Building in Australia 2013 report showed that non-residential building in the country is expected to move in two different ways - up and down - with declines in one area slightly offsetting the growth in another.

Social and institutional building projects are expected to be weaker over the 2013-14 period, which BIS Shrapnel attributes to the level of available public funding being exhausted by all governments. The recent releases of state budgets will also mean that many governments have had to tighten purse strings.

This may mean a reduction in building commencements for health and education, which BIS Shrapnel predicts will be a decline in the "immediate term".

At the same time, the level of commercial and industrial building projects will rise over this period by 16 per cent through commercial office property, retail and warehouse spaces, and the added construction of hotels in the tourism industry.

However, this growth is expected to "turn into three years of retracement" after 2015 once the commercial projects have been completed.

Then during 2017-18, non-residential building commencements are expected to pick up again at a rate of three per cent.

While this predicted growth is at a slow pace, it is trending upwards nonetheless.

In further encouraging news, there has been recent evidence from another BIS Shrapnel report that shows investor activity in commercial retail property has been strong - an encouraging sign for both developers and sellers.

According to BIS Shrapnel, the level of transactions for retail property in 2012 set a new record for the year, with interest maintaining a strong performance into 2013.