Commercial Construction
Outlook Remains Soft

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While Australia’s overall business expenditure has remained fairly strong, our Commercial construction and infrastructure outlays are expected to decline by at least 10% this financial year.

Construction OutlookBCI Australia is forecasting project construction of some $63 billion 2009-10, which is about $7.7 billion down on that for 2008-09.

In all but for Victoria and South Australia, there was general over construction during the past few years. And therefore, you are not likely to see new Commercial construction pick up, until mid-2010.And that’s good news as far as impending cost rises, for anyone planning a new project.

Obviously, some capital cities will restart their Commercial construction phases earlier than others.

For example: Melbourne will start to see rental growth during next year. But that probably won’t be sufficient to encourage major developers back into the market until around 2013-14.

During any financial downturn, Melbourne tends to suffer less than Sydney — because it houses a far wider range of business sectors. And unlike other states, Victoria’s Commercial property sector did not overbuild — keeping supply in check, as demand continued.

In contrast, the Queensland economy is dependent upon mining and tourism; and suffered heavily from the global financial crisis. As such, Brisbane’s office sector now has the highest vacancy rate of all capital cities — with office values having further to fall.

In fact, some valuers are forecasting its CBD office vacancy rate could reach 16% by 2012, with a general softening in rentals — mainly due to a further seven projects being completed over that period.

Perth may well be spared the same demise as Brisbane, once the full impact of the Gorgon project is felt. Firstly, in the already heated Residential market; and then, flowing into the currently soft Commercial market.

Right now, the selling yields seem to have stabilised in only Melbourne and Canberra.

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