MELBOURNE MARKET UPDATE - MAY 2010

Firstly, a quick thanks to all of those who commented following our last Market Update in February  - we greatly appreciate the continued feedback that we receive from these articles.

Looking ahead into 2010 sees elections at both State and Federal levels in the latter part of the year, mixed messages at a federal level over further “stimulus” spending and continued financial uncertainty in Europe. Against this backdrop, expectations for the market to resume buoyancy across all sectors are far from certain. Further, interest rates appear on an upward trajectory based on the heat of the residential market, at a time where many business sectors are still feeling some negativity.

State Budget is being delivered at the time of writing, so a number of educational and health related projects that have been stretching out in terms of commitment may be soon to kick off, which would create a renewed consistency in workflow in those sectors of the Architectural market. The European situation creates further uncertainty in terms of credit availability, with potential negative impacts on large scale developments $100M and above.

Having raised the above issues, we can report however that there is optimism across many sectors of the market here in Melbourne.

In particular, the medium density residential and apartment sectors are strong, with forward projections indicating continued activity. Institutional projects in the health and research sectors are also enjoying the benefits of previously committed stimulus funding, with further activity to come pending Government announcements. Outside of this, project specific activity is occurring, however these are individual projects based on specific circumstances rather than clearly defined trends. These projects include retail circa $50M, industrial developments up to $120M and hospitality interiors of a large scale.

Interiors have seen an increase in activity, again however this is not spread across all sectors. Some specialised groups in both the retail and corporate sectors are very buoyant, while others are experiencing limited activity.

From a recruitment perspective, there has been consistency in the positions being created at all levels, however a degree of conservatism prevails, particularly in construction detailing and delivery roles, meaning there is immediate availability of key personnel in these areas.  This suggests the market is still experiencing weaknesses in real terms for detailed design and delivery areas.

Looking to the next 6 months, we realistically foresee that there are still difficulties to come.  Since October 2008 we have been discussing a two-tiered marketplace and this will prevail, indeed with more pronounced extremes.

As the flow from Education and other stimulus work slows, practices that held strongly last year are now looking for the next area of workflow.

Health is the big recipient from the State Budget, however the joint venture orientation of these projects will mean limited opportunities, given the scale of projects coming on stream.

If the 6-month lag from recruitment trends as against the ‘actual economy’ (that we read about in the papers), we feel that 2010 will be an up and down year. With positive forces fighting negative, it is forcing the positive news that we read about presently will be tinged by a slight downturn in the September / October area with a resurgence in to the last quarter.

The next 6-months could potentially see a new round of redundancies across the market almost surprisingly, serving as a reminder that we are not past the worst. Nevertheless from a recruitment perspective we still believe Melbourne to be the strongest, not only Australia wide but internationally.

There will be pockets of work (and they will be strong ones) so try not to read negativity in the papers later in the year and think things will get worse – all those in Architecture see things 6 months in advance. Things will be okay!

Given the ups and downs in the market, strong demand still exists for those with Revit skills, and this underpins both design and more technical roles.

As we move into the June reviews, salaries will move with CPI, around 2.9%, and the areas that move above this will be the ‘in demand’ Architects at 4-8 years experience with BIM skills. As the market suffers from limited training in BIM sectors, at a time when the majority of practices have made a ‘level of commitment’ to new projects, as mentioned, this will result in high demand for those with Revit skills in particular.

Reminiscent of the late 1980s, when firms were reticent to train all of their teams in CAD, there will be an extended period of limited training – waiting for everyone else to train up their staff.  The reality is that those who take the initiative and see the new BIM revolution as another way of progressing rather than harassment will reap the rewards as the market continues to grow. With strong management and a desire to change, (in terms of the way projects are documented and delivered), will see new practices take the lead in an uncertain market into 2011-12, a time when our new growth will create opportunities for all.

While times are still somewhat tenuous, it is with the utmost positivity that we look towards the future.