Commercial construction forecast to suffer steep decline says Master Builders
The commercial construction sector is facing a devastating downturn due to the impact of the COVID-19 pandemic unless governments act to provide stimulus.
Master Builders Australia chief executive Denita Wawn says that commercial construction activity is forecast to severely decline. Compared to Master Builders’ previous forecasts, it now expects commercial building activity to be 15.7% lower in 2020/21 and 11.5% 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 says.
“The impact on the commercial construction sector, as well as residential construction, is severe because the majority of projects are not publicly funded.”
There currently are 459 projects in Master Builders’ reports on the current pipeline of potential commercial projects in Australia Denita explains. Out of that number, 68% are private sector-funded, 23% public sector and 8% private partnerships.
“43% of all projects cost more than $50 million, 24% are under $50 million and the cost of 33% of the projects is unknown,” she says.
“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.
“Logical areas where government stimulus can help build the bridge to recovery are where the public sector dominates, such as in education, health and defence.
“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 concludes.
Other measures that Master Builders is calling for are:
- 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; and
- 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.