"There's still projects on everyone’s books that they're completing at a loss"
Productivity will likely be a major challenge for the construction industry in 2024, according to Jack Hutchinson, heir apparent at Hutchinson Builders and a director of the family-owned company.
Speaking with The Australian, Hutchinson said that subcontractors are facing difficulties due to a lack of productivity, with build times being extended post-pandemic. This is mainly attributed to cost and supply-chain pressures, labour shortages, and adverse weather conditions in recent years.
“There’s still projects on everyone’s books that they’re completing at a loss, basically,” Hutchinson told The Australian. “So, there’s all these historical losses and then productivity is still not where it needs to be either. “The only other thing that could overheat the whole thing again is we have a lot to get through as far as social infrastructure, like schools, and hospitals. That will suck up a lot of the labour, and it may be hard to get productivity on some of those smaller jobs.”
Recent data from BCI Central revealed a positive upswing in the national construction pipeline after a sluggish year, primarily due to rising rates. Notable large-scale infrastructure projects currently in the early stages of construction include the $3 billion Central One development in Sydney, the $1.7 billion Melbourne Arts Precinct, and the $530 million stage two expansion of Logan Hospital by the Queensland government, The Australian reported.
Ashleigh Porter, BCI's chief operating officer for Australia and New Zealand, told the publication that the construction pipeline for the coming year is expected to be robust, with several large-scale projects and deferred projects resuming.
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“Nationally, we’re expecting a significant jump in commencements,” she said. “Total construction value, we do see this to peak in quarter one next year. And, if we look at projects by volume, the number of projects coming on stream, we do see that really up ticking this quarter that we’re in now and peaking in the fourth quarter 2024.
“If you compare this year both on value and number of projects nationally across all sectors, it is really positive to see significant higher rates coming into 2024, which is making it look like a much more fruitful year,” she said.
According to the data, New South Wales will account for 36% of the new construction pipeline in the coming year, while the number of deferred and abandoned projects is slowing down on a national level, The Australian reported.
Hutchinson Builders, the second-largest private building firm in the country, has managed to maintain profitability in recent years by operating on slim margins, according to The Australian. Hutchinson said that the company is writing fewer contracts but working on larger projects, projecting higher revenue for the upcoming year. Additionally, the completion of existing projects locked into cheaper building contracts signed in 2021 is expected to alleviate some pressure in the first half of 2024.
However, busy builders are facing challenges in forecasting construction due to the inconsistent nature of costs. Fluctuating costs make it difficult for builders to plan ahead, resulting in spikes and troughs in their pipelines and project timelines.
The construction sector has faced a wave of insolvencies this year, with labour and material issues driving many firms to collapse.
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