6 August 2014 — The latest WT Partnership Review of Australian Construction Market Conditions to June 2014 shows an increase in general construction projects progressing to tender and continuing falls in the activity of the mining and infrastructure sector.

The healthier market and improved confidence in the general construction sector is resulting in head contractors tendering with “healthier” margins than the cut-throat prices seen since the GFC, so an escalation in tender prices is expected to trend to the order of two per cent through to the end of 2014, rising to three per cent over the next three years.

Around the country, the multi-residential apartment sector is consistently strong and showing no sign of slowing in terms of development applications and approvals, with strong per-sales underpinned by Asian capital.

The tourism sector is also expected to improve in the medium to long term, in part due to increasing tourism from Asia and in particular China. WTP expects this will result in increasing numbers of new projects, including revitalisation projects designed to cater more particularly for this market.

There may be some impacts on construction cost escalation arising from this, with the report mentioning projects such as the $8 billion Aquis mega-resort and casino project at Yorkey’s Knob near Cairns as an example of the scale of activity and therefore price pressures that may occur. The $5.05 billion first stage of the 10-year project is expected to create 3750 construction jobs in the building of an artificial lake and island, five hotels totalling 4000 rooms, a casino and a range of facilities including retail, cultural centre, golf course, aquarium and a convention and exhibition centre.

In New South Wales, adaptive reuse projects are contributing to activity in addition to major infrastructure, mixed-use commercial precincts such as Parramatta and Barangaroo, and health and aged care sector projects.

WTP has identified that “adaptive re-use of existing C and D grade commercial space to both residential and hotel use is increasing as building owners see the need to reposition assets in the face of increased commercial vacancy rates as tenants look to relocate to Barangaroo, the CBD and North Sydney, leaving emptying lower grade stock behind”.

“As the strong demand for residential apartment stock continues, conversion of these assets is a logical option for building owners.”

Download the full report here.