16/06/2009 - 12:27

Building contractors cut costs by 3.7%

16/06/2009 - 12:27

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The next 12 months will be a critical time for building contractors in Perth as latest research shows commercial sub-contractors cut costs by 3.7 per cent in the March quarter

The next 12 months will be a critical time for building contractors in Perth as latest research shows commercial sub-contractors cut costs by 3.7 per cent in the March quarter

The latest Davis Langdon Commercial Index showed construction costs in Perth fell due to declining forward workloads which have forced contractors to be more competitive on pricing.

Davis Langdon said the sector was feeling the fallout of the current economic climate which has led to a reduction in demand for office space.

It added that in Perth, the next 12 months will be crucial for commercial contractors as existing workload dries up from peak levels experienced in previous years.

However, Davis Langdon Perth director Neil Dickson said the commercial construction sector could pick up quickly when finance becomes more readily available.

"We are still experiencing demand at the feasibility stages as clients that have sites wish to be ready to go to market when conditions improve with the financial institutions," he said.

"We are also finding that clients are being creative with the raising on debt for their projects which will hopefully alleviate some of the demands being made by the main financial institutions.

"Naturally this is not without risk but come a year or two down the line we may have an imbalance between demand and supply again and risk taking clients may reap the rewards.

While contractors have cut construction costs in the March quarter, Davis Langdon has forecast a 1 to 2 per cent increase in costs in the next 12 months.

The forecast is in stark contrast to a year ago when the Index was recording an average of a 10 to 12 per cent lift.

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