Commercial construction forecast to suffer steep decline

The commercial construction sector is facing a devastating downturn due to the impact of COVID-19 unless governments act to provide stimulus.

Denita Wawn, CEO of Master Builders Australia said, “Commercial construction activity is forecast to severely decline.  Compared to our previous forecasts Master Builders now expects commercial building activity to be 15.7 per cent lower in 2020/21 and 11.5 per cent lower in 2021/22.”

“The lockdown has obliterated private sector demand in the economy and a gradual easing of restrictions is not going to replace that demand, so governments need to act,” she said.

“The impact on the commercial construction sector (as well as residential construction) is severe because the majority of projects are not publicly funded,” Denita Wawn said.

“There are 459 projects in Master Builders’ reports on the current pipeline of potential commercial building projects in Australia. Most of these projects, 314 (68 per cent) are private sector funded projects, 108 (23 per cent) are public sector projects and 37 (8 per cent) are public private partnerships. 43 per cent of all projects cost more than $50 million, 24 per cent are under $50 million and the cost of 33 per cent of the projects is unknown,” she said.

“Master Builders is calling on National Cabinet to urgently develop a COVID-19 Action plan for the building and construction industry including measures to address the looming devastation to the forward pipeline in commercial construction,” Denita Wawn said.

“Logical areas where government stimulus can help build the bridge to recoveryare are where the public sector dominates, such as in education, health and defence,” she said.

“Bringing forward maintenance on government buildings is a stimulus measure Master Builders has been calling for and we commend the Department of Defence which has just announced $870 million in estate works which will bolster the confidence of construction contractors and subcontractors,” Denita Wawn said.

Other measures that Master Builders is calling for include:

• An expansion of government construction of education, health and aged care facilities.
• Extending the government guarantee for working capital loans to projects above $50 million could reduce the impact of financial risk from COVID-19 thereby softening the impact on commercial activity.
• Governments taking the lead in funding cladding rectification and asbestos remediation. Buildings requiring rectification were identified in the state and territory cladding audits and projects on government asbestos remediation lists could be fast tracked with government stimulus to prop up commercial activity and provide employment opportunities.