Building and Construction Forecast for 2012-2013, South Australia

The last year has been incredibly volatile for the construction industry domestically and abroad. The next 12 months are critical for the long-term future of South Australia's building and construction industry.  Demand seems to be weakening in the the residential and commercial sectors. The most dominant sector of growth in South Australia is still engineering construction.

What about residential? It seems that the residential construction industry is going down hill in a hurry. The number of unit starts last financial year was down over 30% from the previous financial year. It was the lowest number recorded in almost a decade! The industry is hoping that cuts in interest rates and stimulus for multi-residential developments in Adelaide by the Government will boost the sector but optimism is low. The best we can hope for over the next couple of years is a stable market as opposed to a downward spiral.

On the commercial side of things, delays and concerns about the Olympic Dam expansion project have hit an already faltering sector with a bludgeoning blow. Negative capital growth is expected for at least 12 months if not 2 years. On the plus side, office vacancy rates in Adelaide CBD are holding up nicely at 7.7%. It is likely though that this has a lot to do with a lack of new supply as opposed to strong demand.

So what can we gather from all this? Well if you are a business moving into a new office in Adelaide, it might be a good idea to sign as short of a lease as possible. With such a volatile market, you could find yourself paying a lot more to lease your office space and furniture assets 12 months from now than the going market rate.