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Construction Industry A $360bn House of Cards

construction industry

Australia’s construction industry is a $360-billion house of cards teetering in a profitless boom in which builders big and small are going bust—and warnings from its coalface indicate the worst is yet to come.

According to industry leaders, long-established cracks in the sector’s foundation are now so wide that it is “totally unsustainable” and in need of urgent major reform if it is to have the capacity to build projects that need to be built.

Up to 25 per cent of all insolvencies in Australia are companies within the construction industry.

“It’s a bit of a shocking statistic,” says Australian Constructors Association (ACA) chief executive Jon Davies. “Particularly when you look at it in terms of the industry’s contribution to the economy (8 to 10 per cent of GDP) it’s a disproportionately high level.

“At the moment you are hearing a lot of people talking about a ‘profitless boom’ and it has been a reality.”

“But the bigger issue is not so much the profit margins, it’s the willingness of our industry to accept risks that they really aren’t able to quantify, and they really shouldn’t be trying to, from clients that are more than happy to try to pass those risks onto them.

“So you have this race to the bottom where a lot of contractors, who are still trying to recover from years and years of under profitability, are saying ‘yeah, we’ll take on that risk, we’ll price that’.

“Then that risk comes to pass and suddenly they realise they’ve got a big problem and in a world of hurt.”

But according to Davies, the cracks in the industry run far deeper than boom-bust cycles and a lack of profitability.

“We have a real cultural problem within our industry,” Davies says. “We’re a very adversarial industry and that has created inherent issues in terms of productivity, mental health and diversity.

“And yet now you’ve got a situation where the government is relying on that industry with all these problems to lead the economy forward.

“However, there’s a real concern around capability and capacity to respond to and deliver on that record pipeline of work.”

One of the most recent casualties of Australia’s construction crisis is Perth-based Pindan Group—the head contractor for a number of WA government projects—which was placed in external administration in May owing creditors $80 million.

It joins a growing list of high-profile company collapses, including one of the country’s biggest construction firms, Melbourne-based building empire Grocon.

‘It’s a shambles’

“Much worse is to come. This is just the start … it’s a shambles,” says Scott Hutchinson, the chairman of one of Australia’s largest private construction companies, Brisbane-based Hutchinson Builders.

“It’s completely overheated. It’s getting ready to explode and for people to go down.

“In 12 or 18 months there’s likely to be a lot of builders going broke and most of them don’t know it yet. Then we’ll have a flight to balance sheets.

“But at the moment everybody’s just rushing to get trades and buy materials, costs are going through the roof … and that’s when it gets easy to win work because the builders who know what’s going on close their books or put up their prices, and the ones who are desperate for cash flow will bid low and then end up going down massively.”

Hutchinson Builders has a current workbook of 150 projects stretching across Queensland, New South Wales, Victoria, South Australia and Tasmania with a balance sheet of $350 million and an annual turnover of around $3 billion.

Hutchinson says unfortunately company collapses have become part of the “cut and thrust” of Australia’s high-risk, high-pressure construction industry.

“Everybody in the world knows it,” he says. “I was in Paris a few years ago and the big builders over there just said ‘We’re not touching Australia, it’s designed to fail’.

“It’s extremely competitive, there’s no barriers to entry and it’s not a scale game.

“It’s counterintuitive to most industries.

“When your turnover is falling it’s good and when it’s booming and your turnover is going up, it’s bad.”

Gold Coast-based Condev Construction has a workbook of 80-85 per cent multi-level residential developments. Managing director Steve Marais says profit margins are currently “down to 1 per cent and still heading south”.

“With the erosion of profits there’s going to be a bloodbath at some point,” he says.

Marais says Condev has a turnover of roughly $250 million a year but in a recent two-week period alone it had closed its books to a total of $400-million worth of work.

“The boom market is where builders go broke if they take on too much work. I call it the seduction of work and ultimately it will be where the losses are incurred,” he says.

“It’s all about how you manage the risks associated with an upward market swing.”

But he also strongly believes that changes need to be made to help stem the industry’s unenviable and ever-growing list of company collapses.

“At the moment you can keep procuring work unregulated,” Marais says. “I strongly believe that every time a project of over $10 million is procured by a builder, the financial audits should have to be submitted for review.”

Push for change

Leading the charge for major industry reform by example is Alison Mirams, the maverick chief executive of Sydney-based construction firm Roberts Co.

“The risk profile from when I started in the industry 20 years ago is exponentially worse on contractors for no good reason,” she says.

“Contractors generally operate on margins of anywhere between 2 and 5 per cent, but if you fund a $100-million project you have the potential to lose $50 million to $100 million.

“And, unfortunately, they do take on risk that they can’t manage and if one or two of those come home to roost it can be pretty ugly.

“But tell me another industry where when it all goes wrong we essentially hand you the keys to liquidate the company? There isn’t one.

“So how has the construction industry got to the point where that is the accepted norm?

“The whole industry is unsustainable for so many reasons that it needs to recalibrate.

“It’s not just companies going down, you’re losing people out of the industry, you’re losing people to suicides, and we don’t have migration at the moment so we do need people to come into the industry from within Australia—but to get them in, things have got to change.”

Mirams is pushing for a five-day working week in an industry where six-day working weeks and sometimes seven-day working weeks are the norm; a greater focus on bringing women into the industry (only 12 per cent of its workforce are women) to increase diversity; and “fair and appropriate” risk ownership on projects.

Among the $640-million worth of projects on the workbook of Roberts Co is the first stage of the Concord Hospital Redevelopment in Sydney, which it is delivering with a strict five-day working week as a pilot for the Construction Industry Culture Taskforce.

“In the interim report we have just received, 81.4 per cent of the survey respondents said it’s a better way to work,” she says.

“We have not only achieved better health and wellbeing outcomes but we have also achieved increased productivity on site by giving people back their weekends and the project will finish slightly ahead of time.

“This is a very hard industry. It takes a toll on people and I think the pandemic has provided an incredible opportunity to recalibrate and substantially reform how we work.”

Joe Barr, chief executive of Chinese-owned Australian contractor John Holland, last year warned about the dire impact of the massive risks being passed to contractors.

He declared that despite being in the midst of an infrastructure boom the industry was “teetering on the brink of collapse”.

Since then, he says, all key stakeholders have banded together and faced the Covid-19 pandemic, paving the way for change with a focus on developing fairer risk-sharing on major projects.

“We are having constructive discussions with our government customers, peers, and industry associations to reform the industry for the better,” Barr says.

“There is some way to go but I’m confident the industry is holding up well against the challenges of the past year.”

 

Article Source: www.theurbandeveloper.com

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Developments

Paradiso Place set to redefine living – Surfers Paradise, Gold Coast

Paradiso Place set to redefine living, Surfers Paradise GC

Locals are dominating the apartment sales at Paradiso Place, the new premium residential precinct planned for an entire city block in northern Surfers Paradise on the Gold Coast, with Tower 1 of the three-tower mixed-use development instantly appealing to a couple who purchased two apartments.

Locals Martyn Shedd and Amy Degenhart purchased two apartments; one to occupy and a second apartment as an investment to accommodate visiting family and friends.

It’s a huge vote of confidence in Paradiso Place from the couple, who are directors of an award-winning architectural firm specialising in the urban design space.

After many months of due diligence, it was Paradiso Place that ticked off their long list of criteria for the ultimate oceanside apartments.

The $800million Paradiso Place is a landmark development of distinction being developed by SPG Land on an 11,483 sqm whole city block site between Surfers Paradise Boulevard and Ferny Avenue at the northern end of Surfers Paradise on the Gold Coast, consisting of three residential towers sharing a ground-level retail and dining plaza and a level one podium with extensive five-star, resort-style amenities.

“As an urban designer and architect, we have a full understanding of placemaking, so we are highly sensitive to the visual environment and what sets Paradiso Place apart for us is the way SPG Land is creating a village, not just apartment buildings,” Martyn and Amy said.

“We respond to the way spaces work and how people relate to them. This notion of living close to amenity you can walk to is important to us and the facilities provided at Paradiso Place are one of the main reasons why we chose to live there.

“The whole development has been really well designed to support lifestyles of the future. To have access to five-star resort amenities, a retail and dining precinct on the ground level, plus a whole floor within our own building dedicated to co-working spaces have been some of the driving factors behind our decision to purchase two apartments.

“The 2.95m ceiling height was another drawcard. We know how important the vertical space is and the floor-to-ceiling windows really capitalise on that. Not only does it feel more spacious, but there are practical aspects too, like extra cupboard space.

“Paradiso Place will also have a porte cochère and a separate surf entry, which were items on our wish list that we didn’t expect to find.

“We have no doubt that our apartment at Paradiso Place will be the right fit for us.”

Paradiso Place set to redefine living Surfers Paradise

Paradiso Place set to redefine living GC

Tower 1 of Paradiso Place offers 258 well-appointed one, two and three-bedroom apartments across 38 levels, with ocean views. One-bedroom apartments start at $525,000, two-bedroom apartments begin at $777,000, two-bedroom plus multi-purpose room apartments are priced from $1,248,000, and three-bedroom apartments from $1,549,000. Details on the two penthouses are yet to be released.

Luxury apartment marketing agency TOTAL Property Group is managing the apartment sales of Paradiso Place and has reported strong interest from a wide range of local buyers, along with interstate and overseas purchasers either relocating to, or investing in the Gold Coast.

“We are predicting continued growth for the Gold Coast this year with higher buyer and rental demand driving the market,” TOTAL Property Group Managing Director and Paradiso Place Marketing Manager Adrian Parsons said.

“The Gold Coast lifestyle is attracting a large migrating population as well as investors with their eye on hot property destinations now that international travel has returned.

“The apartments at Paradiso offer incredible value and are an affordable option for a premium apartment close to the beach with ocean views.

“SPG Land is setting new standards for lifestyle residential developments and has given a great deal of consideration to creating highly desirable living spaces with apartments in Tower 1 having ocean views and market-leading 2.95m ceiling heights in the living areas and 2.65m in the kitchen and bathrooms.

“The extensive amenity provided at Paradiso Place and in each of the three towers is indicative of SPG Land’s commitment to world-class innovation and revolutionary design of smart, efficient residential homes that offer high quality lifestyles.

“Paradiso Place presents an exceptional residential opportunity for apartment buyers looking to own a luxury apartment close to the beach, all with ocean views and the highest levels of amenity and walkability.”

More information on apartments at Tower 1 can be discovered at the expansive $4m Paradiso Place Sales Gallery that includes two full-scale apartments, a spacious grand foyer showcasing design features of Tower 1’s lobby and an impressive 2.5-metre scale model of the three-tower development.

A 60sqm immersion room and virtual tours of the Paradiso Place development enable purchasers to experience the views, location and SPG Land’s vision for Paradiso Place, while free onsite parking offers purchasers the opportunity to spend time exploring the full-sized apartments, quality of luxuriously-styled finishes and extensive amenities throughout Paradiso Place.

 

 

Article source: www.yourneighbourhood.com.au

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Developments

Local Developer Files Latest Plans for Gold Coast Hotspot

Local Developer Files Latest Plans for Gold Coast Hotspot , QNY Group

Plans have been lodged for a 24-storey apartment high-rise with petal-shaped floor plates at Broadbeach, as tower proposals tally up at the epicentre of the Gold Coast’s development boom.

QNY Group, headed by local businessman Anthony Quinn, and Melbourne developer Glenvill Developments are behind the $85-million proposal earmarked for a 511sq m site at 21 Broadbeach Boulevard.

The Gold Coast-based company put its foot on the parcel—located at the end of a cul-de-sac fronting the beach—earlier this year in a $10.1-million deal, equating to almost $20,000 per sq m.

“This site is like no other on the Gold Coast and we wanted the design to reflect its uniqueness,” Quinn said in a statement.

“We’ve worked closely with the architects to come up with a design that will coexist with the natural environment while delivering an iconic landmark that enhances the aesthetic of this leafy Broadbeach Boulevard corner.”

The joint venture is the first foray into the Gold Coast apartment market for Glenvill Developments.

“This will be our first multi-residential project on the Gold Coast, but this not about riding the wave,” Glenvill’s chief executive Len Warson said.

“Queensland had plenty of growth potential prior to the pandemic. We study the market and use those insights to make our next moves, and this was a deliberate move.”

The DA documents filed with the Gold Coast City Council indicate the proposed development would comprise 19 three-bedroom whole-floor apartments across levels 2 to 20, a three-bedroom lower penthouse over levels 21 and part of level 22, and a three-bedroom upper penthouse spanning level 23 and part of level 22.

A rooftop communal open space with deck and glass-edge pool is planned for level 24, with a small portion reserved as a private area for the upper penthouse.

Below the residential levels, a lobby entrance and visitor parking is proposed for the ground floor and a gym and sauna on level 1.

Parking in the four-level basement is to be accessed via two car lifts.

The proposed tower has been designed by Contreras Earl Architecture, whose co-founder Rafael Contreras Morales spent seven years working for world-renowned Zaha Hadid Architects.

If approved, the development on a corner lot near the Broadbeach Bowls Club will replace Karoola, a two-storey walk-up block of units.

The submitted architectural design statement said the building’s form was inspired by the surrounding vegetation and parks.

QNY Group, Local Developer- Files Latest Plans for Gold Coast Hotspot

▲ Arist’s impressions of the planned Broadbeach tower designed by Contreras Earl Architecture, which has a growing portfolio of Gold Coast projects including Sunland’s 272 Hedges Avenue.

“The tower uses its vertical structure to articulate the elegant design, which emulates a tree trunk that is seamlessly connected to each floor slab, which at the same time expresses an elegant organic petal shape,” it said.

A filed planning assessment report concedes the proposal is not compliant with the site’s specified residential density performance outcome, which required one bed per 13sq m.

The proposed development has a density of one bed per 8.17sq m but, the report said, the performance outcome of the zone code had been “overtaken by events, as council regularly approves development at densities much greater”.

Broadbeach is now among the Gold Coast’s biggest development hot spots, led by the $2-billion masterplan for The Star Gold Coast casino site.

Iris Capital has been given the green light to build a $800-million project comprising 400 apartments over two towers of 40 and 56 storeys on the site of the Niecon Plaza.

Also, Brisbane-based developer Turrisi Properties has plans for a $100-million, 22-storey residential development at 9-11 Armrick Avenue.

Broadbeach Luxe Development, headed by director John Kubatov, has launched its six-star, $160-million residential project at 2 Charles Avenue, comprising 28 apartments.

More recently, south-east Queensland developer Horan Group has lodged plans for a 28-storey DBI-designed apartment tower.

The 120-apartment tower planned for the 1214sq m site at 11-13 Rosewood Avenue would comprise 96 two- and 24 three-bedroom apartments atop a podium.

 

 

Article source: www.theurbandeveloper.com

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Developments

Developer Tests Depth of Albion Apartment Market

Albion Apartment Market

Arden Property Group has lodged plans for an eight-storey apartment tower next door to its Jade apartments development on Burdett Street at Albion.

Euroa is a 76-apartment development on a 2676sq m site, which the developer bought in 2017 for $3 million.

The Altis Architecture-designed tower is on the corner of Burdett Street and Crosby Road, with views over Crosby Park, a proposed Olympic sporting precinct for the 2032 Games.

According to planning documents the development pays homage to the industrial history of the site and the Albion precinct.

“The proposed design has taken a sensitive approach in respecting the industrial heritage significance of the existing site,” the report said.

“The distinct angular roof form and brick palette of the existing industrial building have been reflected in the proposal by incorporating brick feature walls and overclad elements along the street frontage within the planting areas.”

The tower would comprise 19 one-bedroom apartments, 22 two-bedroom apartments, and 35 three-bedroom apartments with a communal rooftop area for residents with a rooftop pool, daybed area, and lounge and views over Brisbane’s evolving skyline.

The architectural design statement said the design outcome would improve street activation, as well as complement and enhance the medium density typology of Albion and leave a “compelling and long-lasting legacy of architectural expression”.

Hoarding has been up on the site for some time, and it comes off the back of Arden Property Group’s four-building 369-apartment Jade development next door.

Arden Property Group’s Jade development won approval in 2014, and was the first major residential development in Albion’s industrial precinct.

Meanwhile former FKP executive director Philip Parker owns a significant stake in the Albion precinct, with storage sheds on Burdett Street and industrial sheds fronting Crosby Road in his portfolio.

 

Article source: www.theurbandeveloper.com

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