Brief recovery expected for builders

The non-residential building industry should expect a brief and shallow recovery in the current financial year, according to industry forecaster, BIS Shrapnel. BIS has released its latest Building Industry Prospects, which predicts a 4 per cent recovery for non-residential building commencements in 2001, following a two-year decline.

The recovery for the industry is expected to be short lived and the market will turn down again in 2001/02. This downturn will be quite severe with commencements falling by 16 per cent.

The decline will result from a weakening economy which will impact particularly on retail building and warehouse construction. Hotel construction continues to suffer from the large increase in new supply that has come on stream over the past two years.

BIS Shrapnel's Director of Building Services, Robert Mellor, forecasts that the Northern Territory and South Australia will experience strong growth this year, while commencements will decline in NSW, Tasmania and the ACT.

The brief resurgence in the current financial year will be driven by new offices. This sector will increase by 15 per cent. However, most of this improvement will be due to major projects in Brisbane and Perth, and this could exacerbate an oversupply that exists in all states except NSW.

Retail building declined by 19 per cent in 1999/2000 from its record level in 1998/99. With large projects beginning in Sydney and Melbourne, commencements will improve by 8 per cent in 2000/01. But this sector is also oversupplied and the increased activity in the current financial year will exacerbate the next major decline in 2001/02/

Hotel commencements fell significantly in 1999-2000 (-37 per cent) with declines in all states except Tasmania. The downturn is expected to continue into its third year (-2 per cent) in 2000/01. The sector will continue to perform sluggishly until developers recognize increasing room occupancy rates and improvements in room rates, a scenario that is unlikely before 2002/03.

Factory construction increased by 8 per cent in 1999/2000 with very strong growth in Victoria. A decline of 12 per cent is forecast for the current year. Only South Australia will demonstrate any significant improvement with commencements increasing by 47 per cent, but from a low base. Social and institutional building commencements improved by 7 per cent in 1999/2000 and will increase again (+5 per cent) in the current financial year, with growth driven by entertainment and recreational building and schools and colleges.

Other building premises (warehouses, airport terminals) are expected to turn down by 2 per cent in 2000/01.

     

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