24/04/2017 - 13:41

Builders target niche opportunities

24/04/2017 - 13:41


Save articles for future reference.

SPECIAL REPORT: Competition is ramping up among the state’s commercial builders, as different strategies emerge to fill order books.

Builders target niche opportunities
Julian Timmis says niche markets are an important part of Badge’s strategy to win work. Photo: Attila Csaszar

The most frequently expressed sentiment among many in Western Australia’s property circles during the past year would be something akin to: ‘If we’re not at the bottom, we’re close to it.’

While it is a common refrain among the state’s residential real estate agents, it also certainly applies to WA’s commercial construction sector.

The total value of construction work done in WA fell by 21 per cent in the year to September 2016, according to the Building and Construction Industry Training Fund.

At the same time, the number of people employed in construction fell by 6.8 per cent, to 139,930 workers, providing a stark reminder that the sector has contracted sharply from recent record highs of activity.

Industry executives spoken to by Business News painted a very different picture to media reports out this week, which forecast a new construction boom, largely in Perth's CBD.

While there are a lot of high-profile and large-scale projects approved, the reality in the construction game is that not all projects come to fruition - especially in the under-pressure apartments and commercial office sectors.

Perth's slowdown, which claimed a high-profile scalp earlier this year with the collapse of commercial builder Diploma Group, is being felt most sharply in office development.

(click image to see commercial projects currently under construction)

At the time of writing, there were just three major office projects being built in Perth: the $350 million new headquarters for Woodside Petroleum at Capital Square; a 10,400 square metre office building at 500 Hay Street, part of the $100 million Subi XO; and the $31 million Primewest Joondalup.

Exacerbating that pain, according to EMCO Building general manager Ron Keogh, was the fact that apartment developers across the city were putting projects on hold, stretching what has already been a lengthy downturn since activity peaked in the construction sector in 2012.

“Office construction and apartments were very significant sectors, and there hasn’t been another sector come through,” Mr Keogh told Business News.

“But hopefully in the next 12 months we will see a bit of a turnaround – I think there is a bit of pent-up demand out there in the marketplace for projects where clients have an appetite to move them forwards.”

Mr Keogh said the sector with the most activity occurring was retail, pointing to a pipeline of work worth about $3 billion at Perth’s major shopping centres.

However, Westfield shopping centres owner Scentre Group is planning $1.3 billion of that pipeline, which will be built by its own construction arm.

Of the other jobs, Multiplex has its name on two of the biggest – the $350 million upgrade at Mandurah Forum, which is under construction, and the $700 million redevelopment of Karrinyup Shopping Centre for AMP Capital.

“There’s a bit going on, but not enough to compensate for the markets that have downturned,” Mr Keogh said.

“From a trades point of view, they do reap some of the benefits, because even with Scentre Group they will still need sub-trades.

“But from a builder’s point of view, from our side, there isn’t necessarily as much retail work coming to the market as the market would have us believe.”

New Badge Constructions WA state manager, Julian Timmis, who was promoted to his role last month, said it was certainly a challenge for the industry that one of the largest pipelines of work was already spoken for.

However, Mr Timmis said Scentre Group’s commitment to redeveloping its centres also provided flow-on opportunities.

“From our perspective, it creates opportunity through the smaller shopping centres who need to compete with those large-scale projects,” he said.

“That’s where we think there is some opportunity in our space.”

Mr Timmis said focusing on neighbourhood centres was an indication of Badge’s overall strategy – finding niche markets where it could provide value for clients.

One of those niches, he said, was aged care.

“We have identified aged care, as probably a lot of others have as well, as a real growth area,” Mr Timmis said.

“We are approaching that with a national view, with repeat clients and new partners as well. From our perspective, we look to have a collaborative approach with clients; it is difficult out there and we want to deliver a good project and get an opportunity on the next one that that client may have.

“If we can offer early contractor involvement, we see significant benefits to the project in offering that service up front and ironing out issues before they become real problems.”

At one of Perth’s longest-running building companies, Belmont-based Pindan, a diversified approach means new markets and new capabilities.

Pindan managing director George Allingame said a shifting focus to eastern states markets through a partnership with Singaporean development giant Oxley Holdings had insulated the builder somewhat from the challenging conditions in WA.

“With Oxley Holdings, they want to diversify a bit out of Singapore and Asia so they are keen to do more developments in Australia,” Mr Allingame told Business News.

“It was always our plan to try and get investors from overseas, because there is a lot of capital in places like Singapore that wants to be involved in Australia.”

For Georgiou Group managing director John Georgiou, riding out WA’s construction downturn was a challenge of patience.

“Give us another six months, allow the state government to settle in, they will get some clearer direction in terms of what they want to do and the timing of that, and that will help businesses like us to understand the timing of some of their projects and their capital expenditure,” Mr Georgiou said.

“I think we’re definitely on the bottom, but we are seeing more confidence and at least people are thinking about investing again.

“In terms of competitiveness, it will last a bit longer, as long as there is that low level of activity, but over time, you will see that improve.”


Subscription Options