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State of the Market: The Construction Industry in Melbourne

Author: Justin Bell

Published date: 2018/06

Blog Graphic The Construction Industry In Melbourne

It is a busy time for the construction industry in Melbourne. Our fair city has just overshadowed Sydney as the epicentre for housing construction in Australia, and a simple glance out of the window confirms that the boom is at its peak. Construction companies are flourishing, with cranes popping up everywhere. Looking out of my office window I can count 11, just in the Southbank precinct! Two of those giant cranes are dedicated to the impressive Melbourne 108 project, set to become one of the largest towers in Australia.

Statistics on the Melbourne construction industry

In November 2017, there were a record 165 cranes operating in Melbourne and surrounding suburbs – a testament to our obsession with new construction.

Over the past three decades, an average of 7,281 houses were completed each quarter, and 2,711 units. In the past five years however, that number has dramatically increased to 7,880 houses each quarter (an 9.27% increase) and 6,323 units (a whopping 133.2% increase).

The demand cannot be questioned, but the question everyone is asking is: is the growth required to meet this demand, actually sustainable?

Melbourne has been welcoming 100,000 new residents each year with our population set to reach 5 million in 2018.

There has been a lot of speculation on the subject of new construction, and whether we are building the right residences for our growing population to live in. While apartments might be a good way for new buyers to get into the property market, the question remains how long they will want to live in a city apartment before they outgrow it.

So is the rapid growth in this area sustainable? Time will tell. But one thing is for certain – apartments are getting built. Lots of them!

The challenges

As a specialist recruiter in the construction industry, one thing I am seeing is a real shortage of quality candidates that can deliver apartment builds at a high standard. From smaller Tier 3 builders to some of the largest builders in Australia, there is a severe drought of good candidates that have that capability.

A persistent issue is the extremely low margins that some companies are required to bid at in order to combat market competition, and win jobs. With minimal financial meat on projects, builders are not able to attract the top candidates in the market with the competitive salaries they deserve.

It also prevents them from securing the top sub-contractors that can deliver a high-quality project. So what can they do? Pay the higher salaries but not the sub-contractors on time, or in fact at all? That is both unacceptable, and prevents quality trades from wanting to work with them in the future. But sadly, we continue to see it happen.

It’s not all bad news!

There are great companies that I work with that are paying their staff and trades well, and delivering some of Melbourne’s highest quality and most liveable apartments. These are the builders that will thrive in the Melbourne construction market long into the future.

I do believe that the apartment sector will slow down eventually, that’s inevitable. However, there will continue to be a demand for quality apartments throughout Melbourne as our population grows, and convenience and amenities remain at the top of people’s lifestyle requirements.

The financial burden being borne by builders in the apartment market will likely stabilise as residents and investors become more discerning. The demand for high quality design and fittings will hopefully force builders to invest well in their talent and sub-contractors.

In the meantime, everyone in construction here in Melbourne can enjoy the boom!

Justin Bell is a Senior Consultant at Fetch Recruitment, specialising in the Commercial Construction space. With a background on the tools and strong relationships with top tiers companies, Justin knows how to match the right person with the right career opportunity. You can connect with Justin on LinkedIn here.