Projects in Focus - A new decade for the Construction sector.

In our Projects in Focus series, over the past six months we have been focusing largely on significant construction and infrastructure developments and projects in our home markets of NSW and Queensland. We now take a wider view of the marketplace in the first of a four-part Market Wrap series looking at the current financial year and ahead to the coming year. 

We canvassed our Construction specialists for their input on the 2019/20 year and on CGC’s market predictions for the coming financial year. David Hope, Queensland director for  building, Billy Versey, director, building and Infrastructure, and Carmel Jones, associate director building, contribute to our overview of strong growth areas, key take-outs for clients and candidates; and the trends and initiatives impacting Australia’s construction industry.

The State of the Construction Market 

Our expert team is in agreement in early 2020 that continued government spending is a key driver of the health of the construction market across a number of strong-performing sectors, with education, health and aged care at the forefront.  

At present, the ‘hero’ in terms of economic demand is government consumption which bolstered the growth rate over the past year, registering an increase of some 5.1% over the past 12 months… Government-led projects mean that transport infrastructure will be one of the strongest performers, but prospects for new home building are more mixed and some areas of commercial building will be doing it fairly tough. Master Builders Australia Building & Construction Forecasts to 2023/24

From the perspective of construction companies, we see commercial construction, industrial, and data centres are strong and logistics as a growing space. Our view is that data centres and defence are both going to be massive going forward. 

‘Must have experience’ is the CGC message for candidates at senior level, with companies competing for available talent as they search for leadership and Senior Project Manager / Project Director and contract management expertise at the top. In the junior ranks, the talent pool is strong, with not all candidates able to be placed in the current market.

Queensland Activity

In the Queensland market, CGC expects government spending to continue positively influencing the closing months of this financial year.  On top of this government funding, data centers have been big and will continue to see massive spending from the private sector, while the logistics space is expected to grow later in this financial year. 

Housing has been strong with a lot of big projects, but has been very competitive, with builders already not having huge margins to work with.

New home building is currently undergoing a cyclical downturn and we forecast that a trough will be reached during 2020/21 when work on about 168,000 new homes is expected to begin. This would still represent a strong volume of new home building activity by historic standards.

The prospects for residential building in Australia will be determined by the combined interplay between macroeconomic conditions, microeconomic considerations as well as local issues in each of the different geographic markets around the country. Master Builders Australia Building & Construction Forecasts to 2023/24.

CGC’s Queensland director for building, David Hope, sees clients looking for top professionals all encountering the same issue in the state’s construction market. “When you’ve got high demand, candidate supply shrinks, because everyone is jumping on the recruiting bandwagon, whether that is government or private sector spend, or other investment.” 

What we’re seeing across the board is building companies trying to diversify into new sectors and projects. Those senior strategic appointments are key to opening doors in new areas.

NSW Activity

Similarly, strong on the back of government spending in NSW, the Aged Care sector is continuing to exceed growth expectations. This area’s growth is fueled by an aging and healthier population, baby boomers downsizing, improvements in the style of aged care developments, and the availability of cheap funding. 

The biggest demand from NSW companies is to fill senior construction roles. Other thriving recruitment areas include contractors in the workplace space and builders across the industrial data centre, commercial, residential apartment, health and education sectors. 

CGC’s Associate Director, Building, Carmel Jones comments that in early 2020, there is already a shortage of candidates with solid experience across these strong sectors. “As more projects are released it will be a booming market and this shortage will only increase. But as CGC has good networks in these sectors we will be well placed to recruit experienced candidates.” 

Late last year, businesses have also experienced an impact on project flow due to clients pushing projects back, not pushing the ‘go’ button because of new development application issues, or clients not giving them the sign-off. These early months of 2020 didn’t really get going as quickly as we anticipated, so from a relatively low base there is some pent-up demand.

Positive signs for the next six months and beyond

If we see some of these projects come along reasonably quickly on the back of government spending and strategic investment, there are positive signs for the next six months and beyond. Combined with all the associated activity around infrastructure projects, there's a lot of reason for optimism. 

However, there are senior candidate shortages and potentially not that level of people available. “You’ve either got that leadership experience as a senior project manager or commercial manager, or you haven't. It’s that classic thing, how to actually get the experience that’s needed,” said Jones.

Senior requirements are primarily around the compliance space for defence, health and education. Project directors and project managers really need to know the contracts and understand the client’s expectations from both the commercial and contract point of view, plus be aware of potential risk factors.

Once you do pick up that work and have an experienced leader in place, you can recruit and train at more junior levels. Right now, there is almost too much junior talent, with CGC probably having more candidates that we can place.

Underperforming sectors

In both our QLD and NSW markets, residential oversupply, commercial vacancy rates, available commercial fit out space, stricter international investment requirements and tighter bank lending are contributing to the underperforming areas of residential and commercial fit out.  

The low base rate has a knock-on effect, while CGC anticipates that across residential, first home-owners grants will help the sector bounce back, with commercial improving as new office towers are built, and as Sydney government departments relocate west to Parramatta. We should see a big increase in commercial over the next 6-12 months and from there, it will just keep going.

“Essentially, Sydney has had the Metro come through and taken out something like 20 city buildings.  I think once the overland development projects are built, there will be a big shift of major tenants moving to a great new office space. Tenants and property owners will have a blank canvas to work with and consider who to use to go ahead with their fit out” states Billy Versey, Director, Building and Infrastructure.

Underperforming Sydney areas this year include the Residential and Project Homes sectors, with oversupply fueling this decline. More prestigious unit developments are starting to bounce back, however the boom is probably over.  

Because of the different skill sets, we have experienced challenges trying to place residential sector candidates into commercial roles. We have also seen salary increases while the boom was happening, so it has been challenging to realign people’s expectations in these areas. 

Looking Ahead to Financial Year 2020/21

Key take-outs for Clients

What should companies be focusing on in the current market? Our experts give their opinion:

1.Reputation – companies are encouraged to improve staff retention through paying attention to the employee experience and to the training and career development they can offer.

2. Proven Track Record – candidates want to know an employer has a good record of delivery and experience.

“Reputation together with a proven track record is still number one. From both the client and candidate perspective, reputation keeps coming up in our conversations. It’s a really big thing in terms of recruitment and staff retention.  How people feel about a company and its culture while they’re working there or as viewed from the outside, and what emphasis companies put on the employee experience.” Carmel Jones.

3. Diversification - this is an important selling point for many candidates, who are looking for employers that have a well-diversified pipeline. So, companies should be looking at diversification and one way to do that is by hiring senior level people with that capability who can assist with business development / strategic development.

4. Gender Diversification – this is a hot topic and a real drive for employers who have set targets for equality. 

Key take-outs for Candidates

What should candidates be focusing on?

  1. Reputation - for candidates, it’s important how they feel about a company and its culture, and what emphasis that company puts on the employee experience.
  2. Challenge yourself – is it time to take the next step up in your career development? Does your current employer know about your aspirations? 
  3. Be realistic about salary expectations – money always talks, even if a candidate says it isn’t a factor. But the market has changed, and your expectations may have to as well.
  4. Work-life balance is an increasingly big factor for many construction professionals. “I think, if it gets adopted, the five-day working week will be a game- changer for work-life balance. It will decrease employees’ stress and the flow-on impact on relationship break-ups and the industry’s high suicide rates,” says Versey.

Queensland 

Looking ahead to the next financial year, David is excited about the future for the overall Queensland market, citing the flow-on effects of large projects coming through such as Queens Wharf and the Cross River Rail project. 

Areas of concern for 2020/21 include increased competition, as companies seek to attract top industry talent from other Australian and international locations to fill senior and other positions.

Both Western Australia and Queensland are expected to be the strongest performers in growth terms over the next three years. This reflects both the high levels of activity already occurring in NSW and Victoria (which is not expected to ease), but also a recovery in private (i.e. mining-related) and public investment in the ‘resource’ states. Infrastructure Magazine.

NSW

In NSW, the long-awaited second Sydney Airport at Badgerys Creek, major transport projects, an increasing spend from the Defence sector and a booming commercial sector will see a strong market over the next 12-24 months, and even up to 36 months.

Construction and infrastructure will continue to thrive due to a number of factors, with major infrastructure projects coming online such as the Metro and all the overland stations still in design, Metro West, South Connex and Badgerys Creek.  Sydney also has major towers including Circular Quay Tower, Parramatta Square and Central Station Tech Hub all starting this year, going through to build and fit out in FY21. 

Carmel Jones also points to specific projects in the pipeline. “We have some iconic projects being delivered this year, such as the Opera House, Sydney Modern and Sydney stadium, which attracts keen interest from top talent. But with ACT, Melbourne and Brisbane being busy, we’ll see the NSW talent pool reduce.” 

Conclusion

With government investment in health and education budgets at an all-time high, those areas will be busy for at least 2-3 years, which will also put more pressure on the talent pool.  Continuing public sector investment across infrastructure including road and rail will continue to underpin growth for the construction sector.

Master Builders Chief Economist Shane Garrett said its latest forecasts predict a substantial upswing in the volume of engineering construction work particularly on transport infrastructure in the next 12 months, with this forecast “contingent on state and territory governments working with the Federal Government to push shovel ready projects out the door.” InsideConstruction.com.au.

We're going to be busy. Next year and the future are looking bright. 

With these market trends and many construction opportunities on the horizon, speak to a consultant at CGC Recruitment. 

 

Sources

Australia-Forecast_August-2019, Master Builders Australia Building & Construction Forecasts to 2023/24, Masterbuilders.com.au [PDF]

Infrastructure outlook: 2020 and beyond, Infrastructuremagazine.com.au

Construction activity plummeted during 2019 to 2007 levels, InsideConstruction.com.au