Office building on a roll
By Eli Greenblat | theage.com.au | 02 May
The resources boom and a frothy domestic economy have combined to boost building in the commercial sector, with office towers and shops set to flood the market at the same time as residential construction is contracting.
Australian Bureau of Statistics figures released yesterday show commercial building is holding up the construction sector nationally.
The value of new commercial approvals rose 8.9% in March. In the year to February, commercial building softened to $31.3 billion from record highs.
This was against an unexpected slump in residential dwelling approvals, which slid by 5.7% in March. Overall, building activity recorded its biggest decline in 3½ years.
Master Builders Australia chief executive Wilhelm Harnisch said commercial builders were reaping the rewards of the robust economy.
"They are enjoying the (benefit) of the resources boom and the strong investment environment over the last 12 months and that has now manifest itself in construction, and that's likely to continue," he said.
This optimism was underlined by the Performance of Manufacturing Index, which rose by 0.5 of a point to 52.7 in April. A reading over 50 indicates expansion.
"Unlike the residential building sector, the commercial building sector and engineering — which is essentially infrastructure — has bucked the trend that residential is finding itself in," Mr Harnisch said.
He said he expected the commercial sector to come into equilibrium soon as office towers and other buildings met demand.
Tony Crabb, director of Property services group Savills, said there were 6 million square metres of commercial floor space in the Melbourne CBD and nearby districts. Since 2000, 500,000 sq m had been added.
"That's a healthy amount (500,000) but we will need at least that again in the next 10 years," he said.
"On top of that, you have public infrastructure expenditure as well, the new exhibition centre, soccer stadium … non-residential construction going on, so there is good healthy activity."
First published by TheAge.com.au on May 02 2008
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