Western Australia’s economic prosperity is generating unprecedented levels of building activity across public and private sector projects, with no shortage of developments in the planning phase.
Western Australia’s economic prosperity is generating unprecedented levels of building activity across public and private sector projects, with no shortage of developments in the planning phase.
The only limiting factor, according to many property pundits, is finding enough people to build them all.
Taking a fair share of the construction activity already is the state government, which after adjusting for its deferred projects last month announced a record capital works budget of $5.8 billion for next financial year.
As part of its 10-year health blueprint, the government has committed itself to a $1.1 billion development of the Fiona Stanley Hospital at Murdoch (pictured right), which will replace the ageing Royal Perth Hospital as the state’s premier emergency care facility from 2011.
Other major projects under way include the $100 million extension of St John of God Hospital in Subiaco, and the $300 million Joondalup Health Campus expansion with Ramsay Health Care.
Back in the CBD, the government is still under pressure to deliver the long-awaited 14,000-seat multi-purpose indoor stadium next to the Entertainment Centre, despite putting its $255 million Northbridge Link project and a $24 million upgrade of Members Equity stadium on ice this month.
The $42 million Performing Arts Centre in Northbridge and $180 million District Court complex in the CBD are already under construction, and likely to open in early 2009.
On the private sector front, rising construction costs and skilled labour shortages have dissuaded few from launching ambitious, large-scale projects.
Confident of its chances, the Western Australian Cricket Association unveiled a $250 million redevelopment plan for the WACA ground to transform it into a 30,000-seat venue alongside a substantial residential, commercial and entertainment precinct by 2012.
Also in East Perth, Frasers Property Australia is planning to start construction shortly on a $180 million Queens Riverside mixed-use development including a hotel.
Saracen Properties director Luke Saraceni said developers were having a hard time at present finding Perth-based building contractors prepared to take on major CBD construction projects.
Mr Saraceni recently signed Melbourne-based Salta Properties to construct his company’s 42,500 square metre Raine Square office tower for BankWest.
“We had to go east to get a fair price after what was a hard and long process to get a builder from WA. Prices are much higher than they used to be because contractors are flat out and are pretty much writing their own tickets. It’s getting ridiculous,” Mr Saraceni told WA Business News.
He said if builders did not perform by missing key deadlines, it was usually the developers who had to “wear it”.
KPMG audit partner property and construction, Grant Robinson, said with construction costs going up rapidly and more skilled workers heading north to chase big salaries, it was dangerous for builders to lock themselves into contracts.
“These are buoyant times in which people expect great results but costs are going up rapidly… it’s not uncommon for construction companies to fall over in boom times because they’ve stretched themselves across too many projects,” he said.
Although relatively new, Mr Robinson said its migration services division was getting a lot of inquiry from large WA building companies with approved projects to find workers from Asia as well as overseas entities looking to get into the market.
One of Perth’s busiest building contractors, Pindan, is searching overseas to fill professional positions.
The company is building a $30 million secondary school at Atwell, an $18 million traffic operations support centre in Midland and a $13 million office building in Parliament Place, West Perth, among other projects.
Pindan’s director of construction, Andy Peppercorn, said the skilled labour shortage had become so acute that the company had not pursued projects in certain areas knowing there was little chance of delivery on schedule.
Although some financial risk had transferred to procurers as a result of the boom, he believed the bulk of the risk still rested with contractors.
“Many procurers feel that contractors are doing extremely well out of the boom, where in fact, they still carry the lion’s share of the risk with penalties,” Mr Peppercorn said.
“Sub-contractors are the big winners and understandably are making hay while the sun shines.”
