The current flat commercial construction sector in Western Australia will soon be heading back to boom times as the resource industries continue to gain momentum, according to International property and construction consultants Davis Langdon.

The latest national commercial construction sector measure looks patchy nationally and subdued in W.A., but Davis Langdon’s resident National Director in Western Australia, Ian Silver said increasing commodity prices, expanding export volumes and significant major projects have set the foundation for a new phase of construction growth.

“There is plenty of evidence to support the on surge of another resource boom,” he said.

“There are currently more than $140 billion worth of projects which are either committed or under consideration including the $43 billion Gorgon LNG project"

“We are seeing continuing growth in both Chinese and Australian economies, and that – coupled with Australia’s skimming over the GFC and coming out of it relatively unscathed – seems to have started the cycle off all over again.”

Mr Silver said current commercial construction activity in W.A. is low and prices had fallen by as much as 30% over the last two years.

“We expect that it will take up to 18 months to two years from now before the flow on effects from the resources industry creates a revitalised demand in construction and the property market,” he said.

“When that occurs we can once again expect to see a return to high rates of cost escalation, possibly in the range of 8-12% per annum. It is more than likely that the next construction boom will be bigger and last longer than previous one.

“There seems no doubt that it will happen. The question is when and for how long?”

Mr Silver said the last commercial construction boom went on for around five years from early 2003 to mid 2008, driven by the resource boom fuelled by China’s insatiable appetite for Australian iron ore and natural gas.

“It took two years before the full effect flowed on to secondary industries including commercial construction, particularly in Perth,” he said.

“Activity levels skyrocketed and Perth’s commercial office space vacancies fell to an all time low of less than 1%.

“Over that period Davis Langdon’s commercial Tender Price Index for Perth soared by 70% resulting in Australia’s highest cost of  commercial construction.

“Then came the global financial crisis and it all stopped".

“But just barely two years on, China’s appetite for our commodity exports is returning with a vengeance.

“Large commercial projects have long lead times from start up and can take between 3 to 4 years in many cases before coming on stream.

“Therefore the challenge is when to start planning new projects so that completion is timed to meet the anticipated market demand and avoid the higher construction prices which will inevitably return."

For further information, contact Meaghan Jones on +61 3 9933 8800 or email mjones2@davislangdon.com.au