Non-residential construction is leading the charge

By Greg Bell

Residential construction may have stolen many of the headlines over recent months, but it seems this may no longer be the standout performer of the national economy. Releasing the spring 2015 edition of its Construction Monitor, Australian Construction Insights (ACI) noted there has been an upswing in non-residential building activity.

As a result, there could be an increase in the amount of industrial property for sale on the Gold Coast, with developers going in search of key locations to begin their next project.

Where is the construction work concentrated?

ACI Economist Geordan Murray explained the work is generally spread across a range of different sectors. He identified agriculture, health and recreation as just some of the areas that have already started to benefit from this recent upswing in activity.

State economies are now living up to the reality of the fact the mining boom is over, which consequently means other sectors will need to come to the fore. Western Australia and Queensland are two regions where this trend is particularly prominent, which is why activity may be slightly slower than it is in other parts of the country.

"Construction work associated with the mining sector continues to ease back from the peak," noted Mr Murray. A stronger pipeline of work is therefore necessary if previously resource-rich nations are to keep pace with the rest of the nation.

Although this trend has been identified in Queensland, there are nevertheless likely to be pockets of activity where quite a different situation has emerged. The Gold Coast, for example, has been a hub for construction work over the past few years and there are high hopes this will continue for some time yet. 

What does the future hold?

There has been no shortage of predictions about what the future has in store for construction, both in residential and non-residential terms. BIS Shrapnel recently forecast that there could be three more years of softening in the national economy before growth is restored.

The group's Long Term Forecasts 2015-2030 report shows there is likely to have been a decline in economic activity during the final quarter of last year, but once again, non-residential building has proven its value.

"Offsetting these declines will be expected modest increases in private non-residential building and public engineering construction activity, with solid growth in dwelling investment (including alterations and additions activity) and consumer demand the main growth drivers at present," said Richard Robinson, associate director of economics at BIS Shrapnel.

Mr Robinson forecasts construction activity will remain above its long-term average over the next three years, so there is still potential for more commercial property for sale on the Gold Coast. Investment is also predicted to remain buoyant, showing that despite economic conditions, people are still on the lookout for their next venture.

It is private infrastructure construction that is most at risk of a downturn, BIS Shrapnel believes, while building work in the public sector may also be limited. The next three years could see a situation where the construction industry needs to find its feet again, especially in areas where the legacy of the resources boom is still so strongly felt.

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