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Master Builders Chief Economist forecasts weaker commercial construction

Master Builders outlook on commercial construction 

Master Builders Australia are forecasting that construction activity in the commercial building sector will soften in the next few years, but not all aspects of commercial construction projects are facing tough headwinds in a challenging economic environment.

Master Builders’ Chief Economist, Shane Garrett said “Commercial building has been a bit of a dark horse over recent years, growing steadily to reach its highest level on record.”

The Chief Economist raised the warning in a recent press release to the building sector suggesting the low interest rate environment is to blame for slowing demand for commercial building projects.

.“Demand for commercial building projects has been whetted by the environment of exceptionally low interest rates. A significantly larger population means that we need more schools, more hospitals, more shops and more restaurants. In addition, the strong gains in employment have boosted the amount of office building work making it over the line,” he said.

“We expect that the volume of commercial building across Australia totalled $45.75 billion during 2018/19, an increase of 8.0% on the previous year,” Shane Garrett said.

“The favourable economic backdrop is forecast to propel commercial building forward by another 6.5% during 2019/20. However, market activity is then expected to revert to lower levels. By the end of our forecast horizon in 2023/24, the size of Australia’s commercial building market is projected to be 8.9% smaller than in 2018/19,” he said.

Master Builder segments impacted

“The segments to see the toughest conditions over the next few years include building for accommodation, offices and education. These are the parts of the market which generally performed best over recent years,” Shane Garrett said.

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“It is not all bad news however and several segments of commercial building are set for healthy growth over the period to 2023/24, including retail/wholesale, transport buildings and health facilities,” he said.

“If the rollout of newly committed government infrastructure work were to be speeded up, this would enhance the viability of more projects in the commercial building space and get recovery underway more quickly,” Shane Garrett said.

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Aaron M, Editior
Aaron is the founder and editor of TREN eMagazine with 15 years experience in the real estate industry investing and helping investors seek value, leverage value and capitalise on value, developing professional and technical skills and capabilities that have enabled his success in business from startups, adoption, asset growth, management and community leadership projects. Aaron also loves travelling, sports, his partner Jodie and helping people discover their "why" and find their few "what's" in life that realise the "wows. The " www" in is one of his why, what and wow's that strive to add valuable content and analysis for readers to participate and win.

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