06/05/2020 - 12:34

Commercial construction concerns

06/05/2020 - 12:34

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Major commercial construction jobs have been derailed by the novel coronavirus crisis, with neither the public nor the private sector stepping up to provide certainty for contractors.

Multiplex is constructing the $800 million Karrinyup Shopping Centre redevelopment. Photo: Gabriel Oliveira

Major commercial construction jobs have been derailed by the novel coronavirus crisis, with neither the public nor the private sector stepping up to provide certainty for contractors.

With no new big-ticket items like the $430 million WA Museum on the state government’s development agenda, calls are mounting for projects to be fast-tracked to boost the health of the commercial construction sector.

Premier Mark McGowan recently acknowledged the COVID-19 crisis had affected many construction companies across the state, saying he expected public sector work to be crucial in keeping firms afloat.

“A lot of the private sector work is drying up, has dried up or has been suspended, so we’ve got to keep our public sector work going to keep those people employed and those businesses alive both in the city and across the regions,” Mr McGowan told reporters last week.

But while the premier and Transport Minister Rita Saffioti recently announced a fast-tracked tender process for about $2.5 billion in road and public transport projects, the state government is yet to provide significant levels of support to commercial contractors.

The lone new commercial construction project announced in 2020 is a $218 million plan to redevelop the historic East Perth Power Station, with two of WA’s heavy hitters given the task of revitalising one of the city’s most neglected prime riverfront sites.

But while Andrew Forrest’s Minderoo Group and Kerry Stokes’ Australian Capital Equity promised the precinct would create 1,900 construction jobs and 1,300 permanent roles, no certainty has been provided around the project’s timeline.

Meanwhile, progress has been made in recent months on the $200 million Fini Group-DevelopmentWA joint venture in the Murdoch Health and Knowledge Precinct, with a development application lodged and a tender process launched to find a builder earlier this year.

Outside of those developments, however, there is no real movement from the state government on commercial construction jobs.

Master Builders Association of WA executive director John Gelavis said while the fast-tracking of tenders for civil construction projects such as the $880 million Bunbury Outer Ring Road was certainly positive, he called on the state government to find more stimulus for commercial contractors.

“A lot of these road projects are very good, but when you build an asset-creating project like a hospital or a high school, that will create significantly more jobs,” Mr Gelavis told Business News.

“When you are doing a high school or a hospital, a medical centre or day care centres, you are building assets for the state and those construction projects create a significant amount of jobs.

“So as much as we welcome these civil projects being fast tracked, we would prefer them to fast-track the major asset-creating commercial construction projects, which will then provide great stimulus and support for the building and construction sector.”

In a move that perhaps provided an insight into developers’ views in the current economic climate, Ms Saffioti in April announced a blanket two-year extension to development approvals after sustained campaigning from the sector.

While that extension was widely welcomed, the state government’s support for construction companies in WA pales in comparison to a recent initiative announced by NSW Premier Gladys Berejiklian.

In late April, Ms Berejiklian unveiled a suite of 24 projects that will undergo fast-tracked planning assessments to boost the NSW economy.

Those projects, which include affordable housing initiatives, new schools and student accommodation, are slated to create around 9,500 jobs, inject $7.54 billion into the NSW economy, and result in 4,400 new dwellings being built.

In WA, the 2019-20 state budget’s forward estimates included a suite of significant commercial projects, including the $161 million Joondalup Health Campus, a $452 million package to build new schools and improve existing educational facilities, and a $186 million expansion of Casuarina Prison.

Another significant project is the $365 million redevelopment of Department of Defence facilities at Garden Island, which national contractor Lendlease was appointed to undertake in early April.

However, Lendlease said its crews will not be on the ground at HMAS Stirling until September at the earliest.

“Those are the sort of projects we would like to see the governments bring forward,” Mr Gelavis said.

“But you would think that there must be other projects that are planned.”

In the private sector, while the pipeline of proposed projects is impressive, economic uncertainty due to COVID-19 means there are no clear indications of when the projects might commence.

Major projects proposed in Perth include Brookfield’s $1.1 billion Perth Plus at Elizabeth Quay, Finbar Group’s $365 million Civic Heart, and a $290 million redevelopment of the Four Points by Sheraton hotel and its surrounding precinct by Singaporean developer Bonvests Holdings.

A big list of shopping centre redevelopments has also been in the planning process for several years, but developments such as the $700 million expansion of Westfield Booragoon, a $500 million redevelopment of Galleria Shopping Centre, and a $450 million revamp of Westfield Stirling have been placed on ice.

“The challenge is there is just too much uncertainty for either the government or the private sector to commence long-term major projects, until there is more certainty on the duration or the severity of the outbreak in WA,” Y Research principal Damian Stone told Business News.

“For the private sector, the significant pipeline of shopping centre redevelopments is going to be delayed, you’d think for at least a year or two in most cases.

“In office construction, we’ve come off a decade of record supply additions, and given the uncertainty over the number of people that are going to be back working in an office full time, you would have to question the viability of any major office development.”

Mr Stone said he believed it was likely that any new commercial construction projects would emerge in industrial and medical sectors.

“There will be a push for local manufacturing in core, well-located areas predominantly in the eastern suburbs, so the question then becomes about land availability,” he said.

“And for medical, I think there will be a greater focus on healthcare either as part of mixed-use developments or standalone precincts.”

Of projects under construction, Multiplex is the market leader in terms of value, with the state’s biggest commercial job on its books in the $800 million Karrinyup Shopping Centre Redevelopment. 

Other major jobs being undertaken by Multiplex include the finishing touches on the New Museum of WA and the NextDC P2 data centre in Northbridge.

Malaysian developer Victor Goh is understood to have created his own construction company to undertake two major jobs in Perth: an office tower at 98 Mounts Bay Road, and the $385 million apartments, hotel and art gallery complex EQ West on the river’s edge.

Pindan also has a significant suite of work in its order book, including Iris Residential’s One Mabel Park in Jolimont, a Hilton Garden Inn in Albany, and Koodaideri Village in the Pilbara.

Probuild’s $400 million-plus contract to build the first stage of Curtin University’s Greater Curtin has placed the national builder as the third-ranked construction company in WA, according to BNiQ.

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