The current upturn in the non-residential building industry marks the beginning of a boom to be sustained over the next four years, with building activity increasing by 40 percent to its peak, according to a report released by BIS Shrapnel .

The latest edition of ‘Building industry prospects’ says the growth will be driven by office, hotel and factory building with commencements expected to increase by 11 percent to $14.5b in 2002/03. All States will share in the growth.

Robert Mellor, the principal author, says the office sector is at the beginning of a long upturn, retail building will boom in all sates except South Australia, the hotel sector will recover strongly in the current year but from a low base, and factories and other business premises will continue to grow.

According to Mellor: “this potential boom will be concentrated in the commercial and industrial building sector, with activity in the office and factory sectors forecast to double, while hotels are likely to experience a trebling in building commencements by 2005/06.

“A strong economy through the middle of this decade will drive demand for office and industrial space and this, in turn, will lead to strong growth in rents, which will encourage developers to proceed with major projects in a way not seen since the boom of the late 1980s.”

The report finds office office commencements, having already risen by 60 percent over the past two years, ar at the beginning of a long upturn, moving into a boom mid-decade in response to falling vacancy rates and strong rental growth in all the major capital cities. Despite weak demand for office space over the past 18 months, commencements are forecast to increase a further 17 percent in 2002/03 with activity strongest in Melbourne and Sydney.

Retail construction has been buoyant over the past 10 years, driven mainly by continual refurbishment and large extensions to major regional shopping centres. Following a modest four percent decline in 2001/02, retail building commencements are forecast to grow by 23 percent in 2002/03, with strong growth in all sates except South Australia.

Hotel commencements began a modest recovery following a 63 percent drop in activity over the preceding three years as developers responded to falling hotel occupancy rates in most States. While the demand for hotel rooms has been growing modestly, we expect that stronger growth in demand will occur by 2003/04, driving up room rates and leading to a strong hotel construction phase mid-decade. In 2002/03, commencements are forecast to rise by 57 percent from a low base, due to a number of major hotel refurbishments in Sydney.

Both factories and other business premises commencements experienced a solid recovery in 2001/02, driven by a 45 percent boost to activity in NSW. A five percent decline is forecast for this sub-sector in 2002/03 as a result of declines in the three eastern sates.

Source: Building Products News.