Commercial Construction to Bolster Residential Downturn

Australia's economy is predicted to receive a $42 billion injection this year thanks to activity in the commercial construction industry, according to Master Builders Australia.

The organisation's latest Industry Forecasts report revealed that the sector should expect growth of more than 14.5 per cent - equal to $5.3 billion - in commercial building activity, resulting in the best year in more than a decade.

Master Builders Australia economist Matthew Pollock said that with a small moderation expected in the value of residential construction work and another year of consolidation in the engineering sector, the timing of commercial surge in construction couldn't be better.

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"With forecast growth of more than 14.5 per cent (equal to $5.3 billion) commercial building activity will be strong enough on its own to drag the whole industry back into positive territory for the first time in four years.

"Better yet, new commercial construction projects will provide job opportunities for workers who may be finishing up on major high density residential projects over the next 12 months or so," he said.

Data collated by the Australian Constructors Association revealed last year that commercial construction is expected to contribute to a 7.1 per cent boost in 2017-18, followed by a further jump of 6.8 per cent in 2018-19 .

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Across the other sectors, residential construction saw a healthy growth rate after recording 200,000 new dwellings per year across the country in the past three years.

"Despite the forecast showing a moderation in new dwelling construction, we expect new commencements in 2017-18 to top 195,000 and average around 185,000 thereafter," Pollock said.

"To keep pace with population growth we will need to build at least 185,000 new dwellings each year for the next five years."

Tourism-related and hospital projects valued at $11.7 billion was in the pipeline, including the $550 million Dusit Thani Brookwater Golf Resort, and Jewel on the Gold Coast.

Fresh hotel construction pipelines were also in place in response to strong and continuously growing visitor numbers from Japan, South Korea, Malaysia and China.

"New retail related construction is expected to rise to $6.9 billion in 2017-18, led by the recent introduction of some big international retailers.

Pollock said that included companies like Amazon, which recently built a large distribution centre in Melbourne's Dandenong South, and plans by Aldi to open another 30 stores across the country in the next 12 months was creating construction work.

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Infrastructure will also be a strong player in Australia's construction industry - more than $170 billion in transport projects is in the pipeline - and activity is expected to peak in 2019-20 due to the Government's increasing investment in major transport infrastructure.

"Master Builders has called for a greater focus on infrastructure investment to support businesses, but also to boost new housing supply and help with housing affordability," Pollock said.