MELBOURNE MARKET UPDATE - FEBRUARY 2010

Generally speaking initial indications are optimistic although we anticipate the first half of 2010 will still offer some challenges ahead in certain sectors. The underlying strength of the market will need to experience increasing private sector finance in the commercial and retail / mixed use sectors for the market to be seen as heading to a full recovery.  These areas are still the ones with least potential activity at the present time.

The last quarter of 2009 saw the positive increase in private sector finance into the medium density residential and apartment markets; driven by strong owner occupier and investor activity and this will continue solidly over the next 6 months. Projects were initially seen in the $15M range and by late in 2009 increasing to $50M and in some cases $80-$90 M.

These privately financed projects were welcomed as a positive sign, and also started to readdress the balance of Government financed projects vs private sector projects across the industry. We felt this was at a ratio of 80:20 in July / August 2009, and whilst very welcome, showed signs of being an artificial market largely reliant on Government spending.

One of the positive factors to come out of the increase in social and community projects is that there is greater opportunities for those who have had a long term desire to be involved in this type of work and many involved are enjoying being a part of this area from a personal perspective.

The industry will still be heavily reliant on Government sector projects throughout 2010/11, with several large health, infrastructure and research projects poised to move in the first quarter, and as the personnel demands from BER (education) starts to wind down, many groups are looking toward other projects streams to address this. The social housing program in Victoria has remained an enigma to many groups, and seems certainly to have a lesser impact on the industry broadly in comparison to the BER program.

What does this mean from a recruitment perspective?

We anticipate there to be some “musical chairs” over the next few months, particularly for those who were engaged on a project specific basis around the education work in 2009.  Early indications are that employment levels should remain consistent across the industry as other sectors strengthen, creating new employment opportunities.

Over the past 12 months we have been describing a “two-tiered” marketplace, meaning some groups are very active and others very quiet.  To a certain extent, this will continue, although the extremes in this area seen in mid 2009 will not be as wide.

Many firm who are continuing to gain confidence in their workload into 2010 are still preferring  to engage personnel on a contract or time specific basis initially with the intent of looking at longer-term engagement as projects strengthen with time.

There has been an increase in demand for mid level Architects with a broad range of project experience and software skills.  The range of requests from our client companies spans design, coordination, documentation and delivery aspects quite evenly, again indicating a balanced market. (We are always nervous when everyone wants contract administrators only!!!)

Senior Architects with broad project delivery and management skills are increasingly being sought, however definite demand for positions at this level will need confirmation in line with projects as we go into the March period.

The outlook for the Interior Design market is more optimistic than 2009, however still lags in confidence compared to the Architecture market. There has been very little in the way of activity from Government spending. As commercial confidence increases, so will this market but further positive signs are needed here. Some indications of retail interiors seeing a resurgence are there. The question of will this be tempered by the limited new large scale retail development under construction still remains.

As we reported late last year demand for BIM software skills remain strong reflecting the increasing move by practices toward this area.  Whilst training of staff in-house is occurring, the demand for highly experienced Revit and ArchiCAD professionals still outweighs supply.

The much discussed area of rates and salaries has seen opposing forces at work over the past 6 months. These forces include high demand roles being able to achieve “above market” results in specific sectors; when at the same time some practices have returned salaries to pre existing levels after percentage decreases occurred in late 2008/early 2009. Some job hunters are able to increase their earning capacity more readily by changing jobs therefore creating internal pressure for practices to retain staff at a time when fees are hotly contested in the industry.

In broad terms we anticipate small market increases occurring over the next 6 months and we are anticipating that this will become more apparent as projects firm up in the mid February/ March period.

So, here we go into 2010 – there is optimism in the papers again about the economy, politicians are already starting their “election spiels”, the real estate market are starting to use the “boom” word again – how different things are to January of 2009. The reality is that whist things appear to be increasingly good, we are in the middle phase of a government lead fiscal stimulus program of large proportions and for a market to be “normal” (whatever that might be), there needs to be broadly based activity across various project sectors, both Government and Private sector. The latter is still recovering from a worldwide financial shock, albeit improving.

Therefore, those who are saying that things are now back to 2008 boom levels may be ambitious - the reality is that the market is still an improving one with some sectors stronger than others and general activity levels will be sound, however, not all sectors will enjoy the benefits of a strong recovery in the immediate future.

Having said all this we still believe Melbourne is the place to be in the major western cities in terms of optimistic outlook and real activity.

Good luck to all in 2010.