MELBOURNE MARKET UPDATE - APRIL 2009

Activity levels in the January to March period have at last shown some signs of life, and indeed our normal  “litmus test” period of mid February to mid March has been more positive when compared to the uncertainty that prevailed late last year. We are currently anticipating that there will be a “two tiered” marketplace showing clear divisions between groups with institutional project exposure, and those without. This will have a direct impact on the number of newly created roles in the market from a job seekers perspective.

Essentially there is a shifting of the project types and scales (downwards but more of them) that were existent up until October 2008. The major negative factor impacting the market being the ‘risk averse stance” currently being held by lending institutions towards medium to large-scale property. In broader terms this means that mixed use or commercial buildings of $100M scale and above are unlikely to move within the foreseeable future. Whilst there are several exceptions to this, they are exceptions rather than a market trend.

Project flow from the Federal Government’s Stimulus Package now seems to be on everyone’s radar. Whilst this is welcomed, given the limitations in the commercial marketplace, it will not be a magic fix across the entire industry. Specific sectors within the Institutional project areas will continue to improve, meaning practices and personnel with existing track records in these areas will primarily benefit with some additional overflow into more broadly based groups.

Otherwise, new project flow, whilst sporadic, is still occurring in various sectors, without one specific area being noticeably strong. This has been evidenced with projects as varied as mid-rise apartments, small-scale commercial, residential, retail and hotel interiors all creating job placements in the course of the past month. Interior Design opportunities are still relatively limited. The Corporate Interiors market appears in a holding pattern, being linked most closely to broader uncertainty in the business community.

Whilst redundancies have continued over the past 3 months, we have seen a number of those affected finding alternative roles in the industry, and we anticipate a slight increase in the number of opportunities in the next few months, albeit in specific project areas.

Roles in highly focused areas are still coming available. Areas such as health planning, Architects and Draftspeople with extensive and specific CAD (rarer types of and very new systems) exposure through to recent graduates with high quality design and presentation skills that can offer greater flexibility to a practice in early project stages. We anticipate an increase in demand for documentation roles in institutional project sectors, although in keeping with the “two tiered” marketplace described above, there is the potential for shortages of those with very specific project experience.

This is a situation that is creating genuine frustrations for those not able to find a role currently; with well-experienced people in some cases being overlooked for positions due to very specific requirements / expectations by practices when recruiting personnel. This is consistent with our previous experience in tight markets were there is often a trend seen in that companies tend to be overly cautious and very conservative when recruiting.

Outside of the Institutional sectors, we anticipate a trend towards contract based, project specific positions over permanent roles in the next 6 months, with a greater need for flexibility in practices with project specific, short term needs.

We have seen Salary and contract rates levelling off from the highs achieved in July to October last year, and with smaller to mid sized practices more likely to recruit than very large groups, a softening has occurred.  This reduction in contract rates (mainly) and salaries has been between –3 and –10 % from the levels seen in the first half of last year. We feel this negative adjustment is more related to the size of practice employing rather than a large demand vs supply movement. Additionally there has been greater flexibility from applicants in regards to remuneration given the climate.

There has been a weakening in many offshore markets over the past 3 months, most notably Dubai, and the continued difficulty within UK and American markets, with many well experienced Australian Architects, technicians and Interior Designers returning to Australia as a result.

In summary, we anticipate mixed fortunes for practices dependent on their specialised project sectors over the next 6 months. However there will be opportunities with projects still coming on line. Government fiscal stimulus will be important to underpin this, and private sector development will be dictated by available finance, (specifically the “risk” stance of lenders) with only average expectations in the medium term anticipated.

We are yet to find ourselves in a “depression”. Thus far the impact of current market conditions have come on more quickly than originally expected but does not seem as deep as originally thought based on initial indicators. The rhetoric from economic leaders suggests there is more pain to come. We believe the reality at present is that Melbourne, as a marketplace, is still a good place to be when compared to London, USA and Europe.