'Construction sector gains momentum with Brisbane leading the charge' Turner & Townsend
In the last quarter of 2020, there was a distinct improvement in sentiment across construction markets in Australia, according to market intelligence surveys conducted by global professional services consultancy Turner & Townsend.
The company’s Australia and New Zealand Market Insight Report Q4 2020 (ANZMIR Q4 2020), highlights that the outlook for Australia’s construction markets is positive across all capital cities. While construction activity is expected to be subdued over 2021, an improvement is anticipated from 2022 onwards. Between 2022 and 2024 all construction markets are forecast to see an increase in non-residential construction activity, driven by a strong pipeline of major public sector projects and the recovery of private sector investment. Brisbane is forecast to lead the recovery, supported by its pre-existing pipeline of major projects underway and to commence.
Public infrastructure projects dominated much of the activity in the market in Q4 2020, with increased funding and fast-tracking of social infrastructure projects such as schools and hospitals as well as major transport infrastructure projects in roads and rail.
Over 2020, the public sector did most of the heavy lifting in terms of construction expenditure and investment into new projects, according to Simon Kearney, Director at Turner & Townsend.
“Many private sector projects were placed on hold or cancelled altogether due to the uncertainty brought on by the pandemic. In H2 2021, a recovery in private sector investment is forecast to begin, in line with improving economic conditions. Fiscal and monetary policy is expected to continue to support construction activity, while private investment remains subdued.
“Tendering conditions are extremely competitive right now and the focus is on public sector projects such as schools, hospitals and defence, while there are limited private sector projects out for tender. We expect this competitive market to continue over the first half of 2021, or until private sector construction activity starts to pick up in each market.”
According to the ANZMIR Q4 2020, confidence appears to be returning to the market in New South Wales with contractors and consultants reporting an uptick in enquiries. This is expected to continue to strengthen over 2021, in line with private investment increasing.
“From 2022 onwards, private sector construction activity investment should start to gain momentum, as more projects get underway, which will subsequently push up construction costs as the market tightens,” Mr Kearney said.
“Queensland has a robust pre-existing pipeline of major projects committed, which should help to uphold construction activity in the interim. This includes Queen’s Wharf, the Cross River Rail station developments, 360 Queens Street Office Tower, and Logan and Caboolture Hospital redevelopments.”
“The South Australian market continues to be supported by the state government with their ongoing investment into the school building program and major defence projects. However, we anticipate softer construction activity over 2021” Mr Kearney said.
Following the second wave of COVID-19 in Melbourne, construction expenditure has been subdued however there are a number of major social infrastructure projects in the pipeline across the health and education sectors.
“Overall tendering conditions remain competitive in Melbourne. The lack of private sector projects out for tender is resulting in many contractors turning their focus to public sector projects. Private sector investment is expected to start recovering from the end of 2021 and into 2022,” added Mr Kearney.
The Western Australian economy and construction market appears to have now stabilised after the recent period of uncertainty and volatility. Government stimulus in education and infrastructure sectors, together with a steady progression of works in food retail are expected to uphold construction activity over 2021.
“Government stimulus is driving a surge in housing demand in Western Australia, and we are likely to see the impact of this flow over into other market sectors. Already we are starting to see labour shortages and supply chain constraints materialise and this could start to impact construction costs across other sectors,” Mr Kearney concluded.
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