Escalating Costs, Construction Skills Shortage Lead Global Developer Concerns

An international pulse check of the property industry has revealed the top concerns for developers coming to terms with a rapidly changing global landscape.

The latest Real Estate Development Trends Report, released by real estate software provider Altus Group, has revealed the emerging challenges and strategies being emplaced in the face of disruptive market forces.

According to the report, which is based on a global survey of more than 400 property development leaders, market forces including trade policy, labour shortages and complex approval processes are among developer's top concerns over the next five years.

The report indicated that 68 per cent of global respondents underlined cost escalation as the biggest business challenge they are facing.

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In Australia, the large number of infrastructure projects currently occurring along the east coast is creating a shortage of skilled labour and trade contractors.

The shortage has caused contractors to decline large tenders due to the risk versus reward balance which in turn has affected tender prices.

A staggering 62 per cent of developers said that they considered joint ventures due to the rise of private capital, land scarcity in urban markets and shifting consumer demands.

“This is why developers are increasingly opting for joint venture arrangements,” Altus Group’s senior director of Asia Pacific Niall McSweeney.

“With mixed-use opportunities as the number one driver and with over activity in the residential market on the east coast, mixed-use development allows developers to limit overexposure.”

Developers across the globe also named the development approval process as a shared challenge, with 60 per cent of respondents saying that gaining development approval is often a complex and protracted process.

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When asked about the impact of emerging technologies on the property development industry, many respondents expressed a significant degree of uncertainty due to proven application and adoption within other industries.

A mere 32 per cent believe that drones have the potential to cause major disruption within the industry while 40 per cent recognised a place for robotics within construction.

Only 22 per cent of those surveyed by Altus expect major disruptive change from process automation, heralded by many specialists as a potentially significant cost-saving technology.

“It’s clear from the report that the global development sector is facing an increasingly complex set of challenges and rapid change, from escalating construction costs through to a sea-change in the development financing environment,” Altus Group chief executive Bob Courteau said.

“However, development leaders clearly see significant opportunities to manage risk and take advantage of changing conditions through a number of future-ready strategies including investments in technology and performance management along with consideration of new ways of managing and financing projects.”