Australia & New Zealand - Linesight · AIQS BCI 290 270 250 230 210 CPI Note: AIQS BCI and CPI comparison, March 2016, Australian weighted average ... 12 | Australia & New Zealand

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2017

Australia & New ZealandRegional Analysis

2 | Australia & New Zealand


Contents

Contributors: John Carleton, Rémi Chalon

©Linesight 2017

Australia

Australia Market Review 3

Macro indicators 4

Australia key statistics 4

Value of construction output public/private 4

Currency exchange rates 5

Linesight average Australian construction costs 2017 6

Indices 7

Building cost index by capital city 7

Building cost index and consumer price comparison 7

Main Contractors 8

List of tier 1, 2 & 3 contractors 8

Housing 9

Dwelling unit approvals 9

New Zealand

New Zealand market review 10

Macro indicators 11

Value of construction output 11

Employment in construction 11

New Zealand key statistics 12

Currency exchange rates 12

Linesight average New Zealand construction costs 2017 13

Housing 14

Residential work by area 14

Dwelling unit commencements 14



Australia Market Review

Overall construction activity has decreased by approximately 10 percent for the year to September 2016. Gains made in terms of the value of work done in residential (up 8.3 percent) and general building (up 3.7 percent) have been negated by declines in non-residential (down 4.5 percent) and a significant decrease in engineering (down 23 percent). The reduction in engineering activity has been well documented and although the decrease is significant, it does not come as a surprise because of the sharp decline in resource sector investment. In essence, the Australian market can be split in two – the states and territories that are affected by resource activity; Queensland, Western Australia, South Australia and Northern Territory, and those who are to a lesser extent; New South Wales, Victoria, Australian Capital Territory and Tasmania.

The construction industry in Sydney and Melbourne is currently going through a strong phase, with the residential sector, in particular, predicted to remain buoyant throughout 2017. This is fuelled predominantly by continued population growth and historically low mortgage rates. Concerns in relation to oversupply (especially of apartments and units) are beginning to surface; however, the effect of this will not come to fruition until early 2018 or, maybe not at all if the Reserve Bank of Australia (RBA) decides to raise interests rates in the short term. A number of major urban transport infrastructure projects (rail and road) have commenced in 2016, and activity in the commercial office sector remains buoyant. The data center market is thriving at present, with existing suppliers continuing to build to meet demand from their clients, as well as new players entering the Australian market. All of this activity is putting upward pressure on tender prices, with subcontractors, especially in the services trades, having the ability to choose which projects they submit tenders on.

Construction activity is set to remain relatively stagnant in Adelaide, Perth and Brisbane throughout 2017. This is likely to be the case in the medium term, or until there is either a revival in commodity prices, leading to resource projects which are currently postponed becoming feasible, or a significant drop in the Australian dollar, which would lead to a revival in the tourism and hospitality sectors.

It is expected that tender prices will increase by between 4 and 5 percent in 2017 for Melbourne and Sydney, with the remaining capital cities between 2 and 3 percent.

Tender prices will increase by between 4 and 5 percent in Melbourne and Sydney, with the remaining capital cities between 2 and 3 percent



Australia key statistics

Units 2010 2011 2012 2013 2014 2015 2016

GDP, current prices* AUD$ billions 1327.74 1435.79 1499.20 1542.01 1599.70 1625.13 1667.73

GDP per capita, current prices* AUD$ units 60.38 64.38 66.12 66.85 68.31 68.43 69.26

Inflation, average consumer prices Annual % change 2.8 3 2.2 2.7 1.7 1.7 1.5

Population Persons, millions 22.17 22.52 22.92 23.29 23.62 23.94 24.13

Current account balance* AUD$ billions -57.36 -43.50 -55.63 -55.6 -46.75 -66.27 -64.46

Macro indicators

Value of construction output public/private

Sector 2010 2011 2012 2013 2014 2015 2016

AUD $m AUD $m AUD $m AUD $m AUD $m AUD $m AUD $m

Building Work

Residential

Private Sector 46,586 47,070 46,652 50,253 57,012 66,101 73,880

Public Sector 3,460 2,127 1,120 971 963 1,086 991

50,046 49,197 47,772 51,225 57,975 67,187 74,871

Non-Residential Building

Private Sector 22,326 22,555 23,967 25,164 26,937 29,650 28,523

Public Sector 17,007 12,320 10,062 10,262 9,532 7,447 8,460

39,333 34,875 34,029 35,427 36,469 37,097 36,983

Total Building 89,379 84,071 81,802 86,651 94,444 104,284 111,854

Engineering Work

Engineering

Private Sector 48,791 70,911 100,954 102,383 95,002 78,676 55,707

Public Sector 29,325 31,626 32,455 31,428 26,775 26,459 29,342

78,116 102,538 133,409 133,811 121,778 105,135 85,049

Total Construction 167,495 186,609 215,211 220,463 216,221 209,418 196,903

Notes:* Calculated from Sept. to Sept.Source: Australian Bureau of Statistics

Note: * Average figures based on Q1, Q2 & Q3 to predict Q4Source: Australian Bureau of Statistics



Currency exchange rates

20172012 2013 2014 2015 2016

0.6

0.7

0.8

0.9

1.0

1.1

OctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJan

Source: European Central Bank

AUD$/USD$ AUD$/EUR€



cost range AUD$

from to unit

Commercial Offices

City Centre Air Conditioned

Shell and Core (Low - Medium Rise) 1,500 2,500 per sq.m.

Developer Standard (Low - Medium Rise) 2,350 2,750 per sq.m.

Shell and Core (Medium - High Rise) 2,550 3,050 per sq.m.

Developer Standard (Medium - High Rise) 3,100 4,050 per sq.m.

Residential

Developer Standard Apartments (medium standard) 1,850 2,350 per sq.m.

Developer Standard Apartments (high standard) 2,400 2,950 per sq.m.

Leisure

Hotel Building (Budget / 3 Star) 2,850 3,500 per sq.m.

Hotel Building (4 / 5 Star) 4,100 4,600 per sq.m.

Education

Primary Level (up to 3 stories, no air conditioning) 1,500 1,900 per sq.m.

Car Park

Surface 2,600 3,100 per space

Multi Storey 20,000 25,500 per space

Double Level Basement 27,500 49,000 per space

Notes:i All subject to site specifics, design and specificationii All exclude land acquisition costs, external works costs and professional feesiii The above costs are for projects based in Sydney. Regional cost variances occur for projects in Adelaide,

Brisbane, Canberra, Melbourne, Hobart & Perthiv Regional variances across the states can vary from -5% to +22%

Source: Linesight

Linesight average Australian construction costs 2017



Indices

Building cost index by capital city

Building cost index and consumer price comparison

20172011 201220102009 2013 2014 2015 2016

235

245

255

265

275

285

295

305

315

325

335

345

Canberra AdelaidePerthMelbourneBrisbaneSydney

JanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJan

Source: Australian Institute of Quantity Surveyors

Oct 05

Feb 06

Jun 06

Oct 06

Oct 07

Feb 07

Jun 07

Oct 08

Feb 08

Jun 08

Oct 09

Feb 09

Jun 09

Oct 10

Feb 10

Jun 10

Oct 11

Feb 11

Jun 11

Oct 12

Feb 12

Jun 12

Oct 13

Feb 13

Jun 13

Oct 14

Feb 14

Jun 14

Oct 15

Feb 15

Jun 15

AIQS BCI

290

270

250

230

210

CPI

Note: AIQS BCI and CPI comparison, March 2016, Australian weighted averageSource: AIQS



List of tier 1, 2 & 3 contractors

Tier 2 & 3 contractors

Laing O’Rourke Constructions Pty Ltd.

Brookfield Multiplex Pty Ltd.

Brookfield Global Integrated Solutions

Watpac Pty Ltd.

Hansen Yuncken Pty Ltd.

Built Pty Ltd.

ADCO Constructions Pty Ltd.

Grocon Pty Ltd.

Downer EDI Works Pty Ltd.

J Hutchinson Pty Ltd.

ICON Construction Australia

Patterson Building Group

FDC Construction & Fit Out Pty Ltd.

Cockram Pty Ltd.

Probuild Pty Ltd.

Taylor Construction Group Pty Ltd.

Shape Australia

Schiavello Pty Ltd.

Richard Crooks Constructions Pty Ltd.

Buildcorp Australia Pty Ltd.

Source: Linesight

Tier 1 contractors

Lend Lease

Baulderstone Pty Ltd.

Abigroup

CPB Contractors Pty Ltd. (formerly Leighton Contractors Pty Ltd.)

Thiess Pty Ltd.

John Holland Pty Ltd.

Main contractors



Dwelling unit approvals

Year New HousesNew Other

Residential BuildingsTotal Dwelling

Units

2007-2008 107,269 49,592 158,536

2008-2009 101,677 48,325 131,681

2009-2010 108,515 41,480 165,605

2010-2011 111,961 69,998 181,959

2011-2012 95,636 58,119 153,755

2012-2013 92,035 65,641 157,676

2013-2014 102,967 80,308 183,275

2014-2015 118,152 91,855 210,007

2015-2016 119,605 119,883 239,488

2016-2017 117,914 115,969 233,883

Source: Australian Bureau of Statistics

Housing



New Zealand Market Review

New Zealand’s construction industry recorded another remarkable year during 2016, with a 17 percent increase in building activity up to September. The actual value of all building work for the September 2016 quarter was NZ$5.2 billion, up 22 percent from the same quarter in 2015. Auckland and Canterbury continue to be the strongest performers in relation to construction activity, comprising 60 percent of the total value of building work in the September quarter. Activity is driven by demand for residential housing, ongoing earthquake repairs, and investment in infrastructure, healthcare and education facilities.

In the North Island area, Auckland is benefiting from the sustained demand for residential properties, which is mainly fuelled by population growth. It is estimated that Auckland requires 10,000 houses per year for the next three decades to resolve the current housing shortages. House prices continued to climb in 2016, which will further fuel inward investment in this sector. The government has also established the Social Housing Reform Program, which aims to build 1,000 houses in Auckland by 2018. In the South Island, the Christchurch and Canterbury region rebuild is still the focus of construction work.

Overall, construction is one of the largest sectors in the New Zealand economy, generating approximately NZ$16 billion of gross revenues annually. The industry accounts for 9 percent of the workforce, employing an average of 225,000 people annually.

The current outlook looks remains very positive for the construction industry in New Zealand, particularly in Auckland and the surrounding suburbs, where demand for residential space is at an all-time high.

New Zealand’s construction industry recorded another remarkable year during 2016, with a 17 percent increase in building activity



Macro indicators

Value of construction output

Employment in construction

Source: Statistics New Zealand

Residential buildings Non Residential buildings

0

2,000

4,000

6,000

8,000

10,000

12,000

14000

2016201520142013201220112010

NZ$m


150,000

160,000

170,000

180,000

190,000

200,000

210,000

220,000

230,000

201620152014201320122011201020092008



New Zealand key statistics 2011–2016

Currency exchange rates

Units 2011 2012 2013 2014 2015 2016

GDP, current prices NZ$ billions 283.73 297.40 303.30 324.02 337.41 363.56

GDP per capita, current prices NZ$ units 70,630 72,304 73,446 76,089 78,542 80,740

Inflation, average consumer prices Annual % change 1.8 0.9 1.6 0.8 0.1 1.3

Population Persons, millions 4.39 4.41 4.45 4.51 4.60 4.70

Current account balance NZ$ billions -8.23 -11.85 -10.11 -10.8 -11.1 -9.14

Note: Average exchange rate for 2016 used to convert from NZ$ to US$Source: www.stats.govt.nz

20172011 2012 2013 2014 2015 2016

0.4

0.5

0.6

0.7

0.8

0.9

1.0

OctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJanOctJulAprJan

Source: European Central Bank

NZD$/AUD$ NZD$/USD$ NZD$/EUR€



Linesight average New Zealand construction costs 2017

cost range NZ$

from to unit

Commercial Offices

City Centre Air Conditioned

Shell and Core (Low - Medium Rise) 1,850 2,100 per sq.m.

Developer Standard (Low - Medium Rise) 2,400 3,400 per sq.m.

Shell and Core (Medium - High Rise) 2,600 3,100 per sq.m.

Developer Standard (Medium - High Rise) 3,000 3,900 per sq.m.

Residential

Developer Standard Apartments (medium standard) 2,150 2,850 per sq.m.

Developer Standard Apartments (high standard) 2,700 3,400 per sq.m.

Leisure

Hotel Building (Budget / 3 Star) 3,300 3,950 per sq.m.

Hotel Building (4 / 5 Star) 4,250 5,300 per sq.m.

Education

Primary Level (up to 3 stories, no Air conditioning) 1,900 2,300 per sq.m.

Car Park

Surface 3,100 4,200 per space

Multi Storey 22,000 26,500 per space

Double Level Basement 31,500 33,500 per space

Notes:i All subject to site specifics, design and specificationii All exclude land acquisition costs, external works costs and professional feesiii The above costs are for projects based in Auckland. Regional cost variances occur for projects in

Waikato / Bay of Plenty, Wellington, Remainder of North Island, Canterbury & Remainder of South Island

Source: Linesight



Residential work by area

Dwelling unit commencements

Housing

YearApartments, townhouses,

flats and units Houses Total

2008 2,298 16,158 18,456

2009 1,449 12,976 14,425

2010 1,701 13,066 14,767

2011 1,483 11,112 12,595

2012 1,816 13,733 15,549

2013 3,262 16,721 19,983

2014 4,441 18,359 22,800

2015 6,195 19,038 25,233

2016 6,804 21,310 28,114


2012 2013 2014 2015 2016

Note: September quarter actual valuesSource: Statistics New Zealand

Auckland0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

$bn

Waikato Wellington Rest of NorthIsland

Rest of SouthIsland

Canterbury

AustraliaLevel 2210 George StreetSydney NSW 2000AustraliaT: +61 2 8278 9500

John [email protected]

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Australia & New Zealand - Linesight · AIQS BCI 290 270 250 230 210 CPI Note: AIQS BCI and CPI comparison, March 2016, Australian weighted average ... 12 | Australia & New Zealand