Keeping your Eye on Building Costs

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Every six months, you’ll find Rider Levett Bucknall publish their “Oceania Construction Cost Commentary”. In this posting, you’ll find an extract from their July 2007 publication — which covers both the Australian and New Zealand markets.

The Adelaide market continues to show investment in the commercial and retail sectors. The recent completion of major office and retail developments is corresponding with the first stages of significant Government infrastructure spending … maintaining pressure on resources with ongoing labour shortages in selected trades.

In Brisbane the residential apartment market has been characterised by a lack of investors, resulting in fewer new starts. Commercial office projects have also been slow to start, but are now coming on-line, whilst demand in the industrial sector remains strong, accompanied by a steady retail market.

Canberra continues at a high, but stable, level of activity, with skills shortages an ongoing problem. The commercial office market is particularly busy … The new-build commercial office work will give rise to increasing demand in the fit-out sector.

Continuing optimism in the (Darwin) market and increased Government spending are maintaining building activity at a high level. The office market is strong, with demand outstripping supply for high quality office accommodation and a number of Government agencies consolidating and relocating to newer premises.

p=. Building Costs

The first half of the year has shown above-trend tender price increases in the larger (Melbourne) projects, as an increased volume of work has been released onto the market. Particularly affected have been structural trades, where the number of large projects commencing has given rise to premiums being included.

The high levels of growth experienced in the Western Australian market over the last three years look set to continue, with a wave of major projects either recently commenced or about to commence construction … Inevitably, the ‘supply and demand’ pressures have continued to drive further price increases over the first six months of 2007 and we expect this trend to continue for the remainder of the year.

Sydney continues to experience a slower rate of development activity than the capital cities in other States … However, Contractors’ market views are mixed, some actively seeking tendering opportunities and others stating that their order books are full.

The first half of the year (for Auckland) has seen an easing of market activity levels. The residential apartment is experiencing a slowdown, and generally contractor pricing has become more competitive to maintain workload, with materials price increases also being absorbed within the subcontract market.

Construction activity in Christchurch remains stable, although the tendering market has been more competitive in recent months. The strength of the New Zealand dollar is beneficial with regard to the cost of imported items and materials and is offsetting some relatively minor labour and materials price increases.

Spending on Government department relocation into 5 Green star rated buildings continues to drive Wellington commercial construction, with historically low vacancy rates and increasing rental returns drawing major investors to the marketplace.

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