1. travel
2. tourist destinations
3. africa

INTERNATIONAL
REPORT
FIRST Quarter 2015
CONSTRUCTION
MARKET
INTELLIGENCE
Independent consultants, local knowledge
and expertise, global network
The strength of Rider Levett Bucknall, the largest independent and most geographically prevalent construction cost
consultancy of its kind in the world, is that it has the most foremost construction intelligence available to it. We collect
and collate current construction data and forecast trends on a global, regional, country, city and sector basis. Rider Levett
Bucknall publish key industry intelligence publications throughout each year. For more detailed sector and city/country
information than is published within the International Report please review our regional or country specific publications.
A listing of our publications and proposed publishing date are:
Regional
RELEASE
Sector Specific
RELEASE
Oceania Report
Apr, Oct
EMEA Hotels Monitor
Mar, Sep
European Report
Apr
Latin America & Caribbean Hotels Monitor
May, Oct
Americas – Caribbean
Nov
Gulf States
TBA
Hong Kong & China Report
Jan, Mar, Apr, Jul, Oct
Country Specific
Riders Digests
Riders Digest – USA
Feb
Riders Digest – Singapore
Jan
Riders Digests – Australian States
Jan
UK Index
Bimonthly
Riders Digest – UK
Jan
Singapore
Mar, Jun, Sep, Dec
Riders Digest – Philippines
Feb
China
Apr, Oct
USA
Feb, May, Aug & Nov
New Zealand
Apr, Jul, Oct, Dec
All publications are available from rlb.com or for a hard copy please contact your local office.
Sources of Information – International Report
Information contained within this report has been compiled from numerous global sources and RLB offices.
Certain text and data contained within the report has been compiled from information published by the following
organisations.
International Monetary Fund – Regional Economic Outlooks
imf.org
World Bank
worldbank.org
Asian Development Bank
adb.org
ANZ Bank research
anz.com
Global Construction Perspectives and Oxford Economics
globalconstruction2025.com
The Economist
economist.com
Reserve Bank of Australia
rba.gov.au
Colliers International
colliers.com
Further information can be found on their websites.
Cover: Nedbank MenlynMaine, Pretoria, Africa
Architect: Boogertman + Partners
Disclaimer: While the information in this publication is believed to be correct at the time of publishing, no responsibility is accepted for its accuracy.
Persons desiring to utilise any information appearing in the publication should verify its applicability to their specific circumstances. Cost information in this
publication is indicative and for general guidance only and is based on rates as at December 2014.
RLB promotes a sustainable environment.
Printed by Mercedes Waratah using the Ecoclean Chemical Recycling Process on Maine Recycled. This stock consists of 60% certified recycled (PCW)
and 40% certified virgin fibre sourced from responsibly managed forests. Certified carbon neutral by The Carbon Neutral Company, Maine Recycled is
manufactured process chlorine free and produced in a facility that operates under world's best practice ISO 14001 Environment Management System.
INTERNATIONAL
REPORT
The Rider Levett Bucknall International Report provides a half-yearly
snapshot of construction market conditions and price movements
around the world, via commentaries and analysis from Rider Levett
Bucknall directors in key locations.
The RLB International Construction Cost Relativity Index is shown on
page 5, with each location placed in its ranking spot in respect of all the
other locations in the study.
A broad overview of global construction economic issues is provided
on page 6 followed by a table of historical and forecasted movements in
RLB’s Tender Price Index for 53 key cities on page 13.
Key regional statistics are highlighted on pages 8 & 9. This data
describes the historical and projected economic conditions which the
construction industry functions within those regions or countries.
Pages 10 to 12 consider the wider issue of the construction activity
cycle for seven building market sectors, in each location, using the
RLB Construction Activity Cycle Model to provide an insight into each
cities construction sectors position in the market cycle.
Pages 14 and 15 feature Construction Rate Ranges for different key
building types in cities within each region, providing an easy cost
comparison between locations.
From pages 17 to 57, RLB directors provide market intelligence
commentary, highlighting the key issues that are impacting on the
construction industry in major global cities together with providing
information relating to current construction price movements.
Building Cost Ranges and International Construction Cost Relativities
are available in the RLB Intelligence Smartphone App and via the
RLB Desktop WebApp. Further information can be found at
rlbintelligence.com
To download our free App visit
rlb.com/app or scan the QR code.
Rider Levett Bucknall | International Report – First Quarter 2015
3
BUILDING ON A TRUSTED VISION
Rider Levett Bucknall offers independent cost management, project
management and advisory services. Committed to broad development
through a combination of organic, acquisitive and alliancing growth, the
firm recently opened new offices in Toronto (Canada), West Cumbria (UK),
St Lucia and Yangon (Myanmar).
The International Report First Quarter 2015 provides global and regional
construction market conditions and tender price movements via local
directors around the world. Additional locations have been included in this
edition, dovetailing recent growth in the firm’s global coverage.
RLB prides itself on exceptional
service delivery to its clients, offering
a combination of pre-eminent cost
experts, a history of proven success
and a global alliance with a broad
knowledge bank of experience.
Projects regularly demand a team
of distinguished professionals
from around the world, fostering a
collaborative approach.
In 2015 RLB proudly sponsors the
World Architecture Festival for a
fifth consecutive year. Over the
years, the firm has provided services
towards the awarded projects
listed on this page. Images of
some of these exceptional worldclass developments are featured
throughout this report.
RLB remains committed to its
research activities. A series of cost
reports, the firm’s renowned Riders
Digest and a world-first Smartphone
and Desktop application contain a
wide range of research advice to
assist industry colleagues and clients.
The firm recently expanded the RLB
Crane IndexTM to cover additional
regions across the world. The Crane
Index originated in Australia in 2012
as a unique gauge of construction
activity highlighting the construction
fluctuation for all sectors across
Australia. The Crane Index is now
published twice yearly in Australia,
New Zealand, North America, the
Middle East and Southern Africa.
In 2015, RLB will continue to capitalise
on its experience and strength in
defined areas of expertise to deliver
global best practice.
2014
Health
Chris O'Brien Lifehouse, Australia
Office
Liberty Place, Australia
Sport
Singapore Sports Hub, Singapore
2013
Infrastructure
Brisbane Ferry Terminals, Australia
Leisure Led Development
Singapore Sports Hub, Singapore
2012
Office
Darling Quarter, Australia
Masterplanning
Msheireb Downtown Doha, Qatar
2011
Transport
Kurilpa Bridge, Australia
4
Rider Levett Bucknall | International Report – First Quarter 2015
International Construction
Cost Relativities
City
Q1, 2015
New York
Americas
180
Honolulu
Americas
174
London
Europe
157
Hong Kong
Asia
157
Boston
Americas
152
San Francisco
Americas
151
Chicago
Americas
147
Washington
Americas
143
Los Angeles
Americas
136
Macau
Asia
133
Bristol
Europe
132
Darwin
Oceania
127
Manchester
Europe
122
Sydney
Oceania
120
Perth
Oceania
119
Birmingham
Europe
118
Seattle
Americas
117
Canberra
Oceania
116
Melbourne
Oceania
113
Doha
Middle East
111
Christchurch
Oceania
111
Adelaide
Oceania
110
Wellington
Oceania
107
Abu Dhabi
Middle East
106
Portland
Americas
106
Townsville
Oceania
106
Dubai
Middle East
105
Riyadh
Middle East
104
Phoenix
Americas
101
Denver
Americas
100
Auckland
Oceania
99
Las Vegas
Americas
98
Brisbane
Oceania
96
Beijing
Asia
91
Shanghai
Asia
90
Guangzhou
Asia
85
Shenzhen
Asia
80
Rider Levett Bucknall | International Report – First Quarter 2015
5
Global Construction Summary
Inflation is low and falling in almost all advanced economies. Currently all
advanced-economy central banks are failing to achieve their projections of
2% inflation, and some are struggling to avoid deflation.
The majority of large, developed economies are growing more slowly
than they did when their economic engines were roaring. But it is only the
Eurozone that has badly disappointed in recent years.
Most analysts are optimistic about the
fall in oil prices over the past year but
the fall in the price of both copper
and iron ore is more problematic on a
global stage. The price of oil is being
driven lower by oversupply. The price
of a barrel of Brent crude has fallen
below US$50 and global supply is
forecasted to exceed demand during
2015 and 2016. Falls in the price of
both copper and iron ore could signal
worrying signs for global growth.
Copper and iron ore are important
inputs into everything from cars,
construction, infrastructure to mobile
phones, and large price fluctuations
are interpreted as an indicator of
falling global demand.
The benefit of lower oil prices may
not be enough to counter slowing
investment and consumption globally
during 2015, the World Bank has
cautioned.
Unease about the strength of
the global economy is revealing
itself. Europe’s growth is relatively
stagnant: Japan is proceeding
through “Abenomics”, forecasting
GDP growth in 2015 of 0.9%. China’s
central government is implementing
a carefully managed slowdown. The
World Bank has commented "The
sharp decline in oil prices since mid2014 will support global activity and
help offset some of the headwinds to
growth in oil-importing developing
economies. However, it will dampen
growth prospects for oil-exporting
countries, with significant regional
repercussions".
6
Among major economies, growth in
the United States rebounded during
2014 ahead of expectations after the
contraction in the Q1 2014. Growth
is projected to exceed 3% percent in
2015. Canada’s positive growth will
be offset by lower oil prices which
will slow the recovery and reduce
inflation below target.
The United Kingdom is showing
positive signs. The UK will grow at
above average rates, higher than
that of the last decade – a period
that includes the peak of the financial
crisis. The Eurozone’s growth is still
weak, with the exception of the UK
which is stronger. Norway is quite
vulnerable to the significant drop in
oil prices. With the European Central
Bank commencing their Qualitative
Easing program, analysts are finding
it difficult to become more optimistic
on growth in 2015.
With deflation in both Hungary and
Poland, there is a concrete risk that
Central Banks may cut again or
extend the period of extraordinarily
low interest rates. Growth in Turkey
and South Africa is failing to pick up,
in spite of improving inflation and
current accounts. Russia is being
squeezed by recent sanctions and
low oil prices and is facing a sharp
4.5-6.0% contraction in growth
during 2015.
Australia is forecast to expand
at a 2.9% while New Zealand is
forecasting growth of 2.8% for 2015.
A shared theme in both countries
is predicted lower inflation. Recent
data in Australia has been favourable
with employment, building approvals
and exports for Q4 2014 beating
expectations. New Zealand’s
economic performance has been
impressive, especially record building
permits, exports and home sales
for the latter months of 2014. Net
migration inflows continue to post
fresh highs, keeping consumption and
housing-related activity buoyant.
China’s economy is being slowed in
a planned way. The general trend
is a reduction in the strong growth
seen in the previous decade to a sub
7% rate. China’s slowdown, coming
after years of significant investment
in real estate and infrastructure,
is fuelling further deflationary
pressures in global industrial
markets due to the excess capacity
in China’s manufacturing, steel and
cement sectors. With cheaper oil
available, India is positioned to reap
the rewards of lower input costs.
Indonesia is likely reaching the
bottom of its cycle, while Malaysia
may suffer from the oil slump as a net
exporter.
Rider Levett Bucknall | International Report – First Quarter 2015
All of this adds up to a recipe for
continued slow growth, secular
stagnation, disinflation, and even
deflation. That is why, in the absence
of appropriate fiscal policies to
address insufficient aggregate
demand, unconventional monetary
policies will remain a central feature
of the macroeconomic landscape.
Globally, there is still slack in realestate markets where booms went
bust (the United States, the United
Kingdom, Spain, Ireland, Iceland, and
Dubai). With bubbles in other markets
(for example, China, Hong Kong,
Singapore, Canada, Switzerland,
France, Sweden, Norway, Australia
and New Zealand) which pose a
potential new risk, as any collapse
would lower home prices in these
countries.
The International Monetary Fund
has published, that with too much
supply and too little demand there is
potential to invest in infrastructure,
which is lacking – or crumbling
– in most advanced economies
and emerging markets (with the
exception of China). With long-term
interest rates close to zero in most
advanced economies (and in some
cases even negative), the case for
infrastructure spending is indeed
compelling. But a variety of political
constraints – particularly the fact
that fiscally strapped economies
slash capital spending before cutting
public-sector wages, subsidies, and
other current spending – are holding
back the needed infrastructure boom.
Rider Levett Bucknall | International Report – First Quarter 2015
7
MARKET data
Key Statistics
YEAR
AUSTRALIA
2011
2012
2013
2014(f)
2015(f)
GDP
2.6 %
3.6 %
2.3 %
2.8 %
2.9 %
3.0 %
$64,665
$65,818
$66,205
$67,267
$68,395
$69,620
GDP per capita – AUD
Exchange Rate (As at 1 July per US$)
2016(f)
0.933
0.978
1.088
1.058
1.124
–
PPP Rate
1.511
1.482
1.477
1.462
1.463
1.473
Inflation
3.3 %
1.8 %
2.5 %
2.7 %
2.6 %
2.5 %
Unemployment
5.1 %
5.2 %
5.7 %
6.2 %
6.1 %
5.9 %
2016(f)
YEAR
CHINA
2011
2012
2013
2014(f)
2015(f)
GDP
9.3 %
7.7 %
7.7 %
7.4 %
7.1 %
6.8 %
¥11,467
¥12,284
¥13,164
¥14,067
¥14,989
¥15,936
GDP per capita – CNY
Exchange Rate (As at 1 July per US$)
6.469
6.315
6.181
6.152
6.010
–
PPP Rate
3.506
3.583
3.633
3.655
3.669
3.682
Inflation
5.4 %
2.6 %
2.6 %
2.3 %
2.5 %
3.0 %
Unemployment
4.1 %
4.1 %
4.1 %
4.1 %
4.1 %
4.1 %
YEAR
EURO AREA
2011
2012
2013
2014(f)
2015(f)
2016(f)
GDP
1.6 %
-0.7 %
-0.4 %
0.8 %
1.3 %
1.7 %
0
0
0
0
0
0
0.690
0.794
0.767
0.731
0.794
–
N/A
N/A
N/A
N/A
N/A
N/A
GDP per capita – InT $
Exchange Rate (As at 1 July per US$) - EURO
PPP Rate
Inflation
2.7 %
2.5 %
1.3 %
0.5 %
0.9 %
1.2 %
Unemployment
10.1 %
11.3 %
11.9 %
11.6 %
11.2 %
10.7 %
2016(f)
YEAR
NEW ZEALAND
2011
2012
2013
2014(f)
2015(f)
GDP
1.9 %
2.5 %
2.8 %
3.6 %
2.8 %
2.5 %
$32,520
$33,121
$33,743
$34,518
$35,218
$35,795
GDP per capita – NZD
Exchange Rate (As at 1 July per US$)
1.292
1.249
1.293
1.142
1.163
–
PPP Rate
1.486
1.456
1.468
1.475
1.459
1.468
Inflation
4.0 %
1.1 %
1.1 %
1.6 %
2.0 %
2.0 %
Unemployment
6.5 %
6.9 %
6.2 %
5.7 %
5.2 %
5.2 %
SINGAPORE
2011
2012
2013
2014(f)
2015(f)
2016(f)
YEAR
GDP
GDP per capita – SGD
6.1 %
2.5 %
3.9 %
3.0 %
3.0 %
3.0 %
$65,954
$65,968
$67,407
$68,471
$70,101
$71,817
Exchange Rate (As at 1 July per US$)
1.228
1.269
1.267
1.246
1.290
–
PPP Rate
0.891
0.889
0.877
0.866
0.863
0.861
Inflation
5.2 %
4.6 %
2.4 %
1.4 %
2.5 %
2.7 %
Unemployment
2.0 %
2.0 %
1.9 %
2.0 %
2.1 %
2.2 %
8
Rider Levett Bucknall | International Report – First Quarter 2015
MARKET data
Key Statistics
YEAR
UNITED KINGDOM
2011
2012
2013
2014(f)
2015(f)
GDP
1.1 %
0.3 %
1.7 %
3.2 %
2.7 %
2.4 %
£23,737
£23,646
£23,915
£24,520
£25,019
£25,454
GDP per capita – GBP
2016(f)
Exchange Rate (As at 1 JULY per US$)
0.624
0.638
0.657
0.584
0.613
–
PPP Rate
0.698
0.693
0.695
0.698
0.697
0.695
Inflation
4.5 %
2.8 %
2.6 %
1.6 %
1.8 %
2.0 %
Unemployment
8.1 %
8.0 %
7.6 %
6.3 %
5.8 %
5.5 %
2016(f)
YEAR
USA
2011
2012
2013
2014(f)
2015(f)
GDP
1.6 %
2.3 %
2.2 %
2.2 %
3.1 %
3.0 %
$48,152
$48,922
$49,658
$50,385
$51,613
$52,841
Exchange Rate (As at 1 JULY per US$)
1.000
1.000
1.000
1.000
1.000
1.000
PPP Rate
1.000
1.000
1.000
1.000
1.000
1.000
GDP per capita – USD
Inflation
3.1 %
2.1 %
1.5 %
2.0 %
2.1 %
2.1 %
Unemployment
8.9 %
8.1 %
7.4 %
6.3 %
5.9 %
5.8 %
YEAR
LATIN AMERICA and the CARRIBEAN
2011
2012
2013
2014(f)
2015(f)
2016(f)
GDP
4.5 %
2.9 %
2.7 %
1.3 %
2.2 %
2.8 %
GDP Per Capita (Int $)
13,982
14,467
14,904
15,175
15,618
16,181
Inflation
6.8 %
6.1 %
7.1 %
n/a
n/a
n/a
MIDDLE EAST & NORTH AFRICA
2011
2012
2013
2014(f)
2015(f)
2016(f)
GDP
4.5 %
4.8 %
2.3 %
2.6 %
3.8 %
4.5 %
GDP Per Capita (Int $)
16,329
16,841
17,085
17,434
18,064
18,835
Inflation
8.6 %
9.6 %
9.2 %
7.5 %
8.0 %
7.4 %
SOUTH AFRICA
2011
2012
2013
2014(f)
2015(f)
2016(f)
YEAR
YEAR
GDP
GDP per capita – ZAR
Exchange Rate (As at 1 July per US$)
PPP Rate
3.6 %
2.5 %
1.9 %
1.4 %
2.3 %
2.8 %
R 37,017
R 37,426
R 37,625
R 37,642
R 37,994
R 38,536
6.76
8.17
9.92
10.66
10.50
–
4.774
4.899
5.109
5.342
5.549
5.751
Inflation
5.0 %
5.7 %
5.8 %
6.3 %
5.8 %
5.5 %
Unemployment
24.8 %
24.9 %
24.7 %
25.2 %
25.0 %
24.8 %
Asean-5
2011
2012
2013
2014(f)
2015(f)
2016(f)
GDP
4.7 %
6.2 %
5.2 %
4.7 %
5.4 %
5.5 %
GDP Per Capita (Int $)
8,609
9,187
9,685
10,166
10,767
11,413
Inflation
5.8 %
3.8 %
4.6 %
4.6 %
5.0 %
4.6 %
YEAR
Rider Levett Bucknall | International Report – First Quarter 2015
9
MARKET data
Construction Sector Activity
PEAK GROWTH
ZONE
MID GROWTH
ZONE
TROUGH
GROWTH ZONE
PEAK DECLINE
ZONE
PEAK ZONE
MID DECLINE
ZONE
MID ZONE
The RLB Construction Market Activity
Cycle wave graph represents the
theoretical “boom / bust” business
cycle of the construction economy.
TROUGH DECLINE
ZONE
TROUGH ZONE
The market activity arrows highlight the current point in the construction activity cycle of the major sectors
within each RLB office.
Houses
Apartments
Offices
Industrial
Retail
AMERICAS
Anguilla
Antigua and Barbuda
Bahamas
Barbados
Bermuda
Boston
British Virgin Islands
Cayman Islands
Chicago
Cuba
Denver
Dominica
Dominican Republic
Grenada
Guadaloupe
Haiti
Honolulu
Jamaica
Las Vegas
Los Angeles
Martinique
Montserrat
Netherlands Antilles
New York
Phoenix
Portland
Puerto Rico
San Francisco
Seattle
St Kitts and Nevis
St Lucia
St Vincent and
the Grenadines
Trinidad and Tobago
Turks and Caicos Islands
US Virgin Islands
Washington
NP: Not published
10
Rider Levett Bucknall | International Report – First Quarter 2015
Hotel
Civil
RLB Construction Market Activity Model
Growth Sectors vs Decline Sectors
NUMBER OF CITIES
70
60
50
40
30
20
10
0
GROWTH
HOUSES
DECLINE
APARTMENTS
OFFICES
INDUSTRIAL
RETAIL
HOTEL
CIVIL
RLB Construction Market Activity Model
No of Cities within Zones
NUMBER OF CITIES
50
45
40
35
30
25
20
15
10
5
0
PEAK ZONE
HOUSES
RLB Global Market Activity
Peak Zone Sector
MID ZONE
APARTMENTS
OFFICES
APARTMENTS 23%
HOTEL 16%
INDUSTRIAL
RETAIL
RLB Global Market Activity
Mid Zone Sector
HOUSES 12%
CIVIL 16%
TROUGH ZONE
CIVIC 16%
HOTEL
RLB Global Market Activity
Trough Zone Sector
CIVIL 12%
HOUSES 19%
HOTEL 11%
CIVIL
APARTMENTS 13%
HOUSES 10%
APARTMENTS 12%
HOTEL 17%
RETAIL 13%
RETAIL 13%
OFFICES 12%
INDUSTRIAL 8%
INDUSTRIAL 15%
OFFICES 13%
OFFICES 17%
RETAIL 16%
Rider Levett Bucknall | International Report – First Quarter 2015
INDUSTRIAL 16%
11
MARKET data
Construction Sector Activity
Houses
Apartments
Offices
Industrial
Retail
Hotel
Asia
Beijing
Chengdu
Guangzhou
Ho Chi Minh City
Hong Kong
Jakarta
Kuala Lumpur
Macau
Seoul
Shanghai
Shenzhen
Singapore
EUROPE
Amsterdam
Berlin
Birmingham
Bristol
Dublin
NP
London
Manchester
Moscow
Rome
Sheffield
Vienna
Welwyn
Wokingham
Africa
Cape Town
Johannesburg
Maputo (Mozambique)
Port Louis (Mauritius)
Pretoria
Middle East
Abu Dhabi
Doha
Dubai
Oceania
Adelaide
Auckland
Brisbane
Canberra
Christchurch
Darwin
Melbourne
Perth
Sydney
Townsville
NP
Wellington
NP: Not published
12
Rider Levett Bucknall | International Report – First Quarter 2015
Civil
MARKET DATA
RLB TENDER PRICE ANNUAL % CHANGE
2009
2010
2011
2012
2013
2014(F)
2015(F)
2016(F)
2017(F)
2018(F)
Africa
Cape Town
np
np
np
np
np
7.2
6.8
5.4
4.8
4.8
Johannesburg
np
np
np
np
np
7.2
6.8
5.4
4.8
4.8
4.0
Maputo
np
np
np
np
np
4.0
4.0
4.0
4.0
Port Loius
np
np
np
np
np
5.0
5.5
6.0
6.0
6.5
Pretoria
np
np
np
np
np
7.2
6.8
5.4
4.8
4.8
Americas
Boston
(5.0)
0.1
1.7
3.7
5.2
5.6
6.1
5.1
4.1
4.1
Chicago
np
np
np
np
4.7
5.2
6.1
5.1
4.1
4.1
Denver
(8.1)
0.2
1.8
1.8
2.2
3.9
5.1
5.1
4.1
4.1
Honolulu
(8.4)
(0.5)
5.3
3.1
7.7
12.7
10.4
7.2
6.1
4.1
Las Vegas
(9.0)
(1.0)
1.7
2.0
0.9
3.5
4.6
5.1
4.1
4.1
Los Angeles
(6.9)
3.2
1.9
1.0
1.8
5.9
6.1
6.1
4.1
4.1
New York
(4.0)
0.8
2.5
4.3
5.9
5.3
6.1
5.1
4.1
4.1
Phoenix
(11.3)
(0.1)
2.1
2.4
2.5
3.9
4.8
5.6
4.1
4.1
Portland
(5.7)
0.3
2.1
0.9
1.7
6.5
6.1
5.1
4.1
4.1
San Francisco
(7.6)
2.6
1.7
0.9
1.8
7.1
6.1
5.4
4.1
4.1
Seattle
(11.6)
(0.5)
1.1
2.1
3.5
4.6
5.1
4.8
4.1
4.1
Washington
(6.2)
0.6
1.0
3.9
5.4
6.2
6.1
5.1
4.1
4.1
Beijing
1.5
4.5
5.1
0.5
1.0
2.0
1.5
2.0
2.0
2.0
Chengdu
np
np
np
np
np
1.1
0.5
0.4
0.4
0.4
Asia
Guangzhou
4.4
4.1
5.6
4.1
4.1
3.0
(0.0)
2.0
2.0
2.0
Hong Kong
(5.4)
7.9
9.5
7.4
9.0
8.2
7.2
6.1
3.0
3.0
3.0
Macau
(12.3)
3.8
7.2
7.2
9.3
10.4
7.2
6.1
3.0
Seoul
np
np
np
np
2.4
1.7
1.5
1.6
1.7
1.8
Shanghai
2.9
4.7
7.7
3.5
2.0
(1.0)
(3.0)
1.0
2.0
2.0
Shenzhen
3.4
6.0
3.5
(1.0)
3.0
1.5
(0.5)
2.0
2.0
2.0
Europe
np
np
np
np
np
2.0
2.0
1.6
2.0
2.0
Birmingham
Berlin
(9.3)
(1.0)
(1.0)
(0.8)
5.9
3.7
4.1
4.6
4.6
4.6
Bristol
5.4
(7.9)
(4.0)
3.2
(2.1)
6.8
6.9
6.7
4.9
5.2
Budapest
np
np
np
np
np
np
2.5
3.0
3.3
2.5
Dublin
np
np
np
np
4.0
5.0
8.0
9.0
9.0
9.0
London
(8.6)
(1.6)
3.2
1.3
3.4
5.1
5.6
4.8
4.6
4.1
Sheffield
np
np
np
np
6.3
7.1
4.7
4.9
5.3
5.5
Welwyn Garden City
np
np
np
np
5.9
4.6
4.9
4.8
4.4
4.3
Wokingham
np
np
np
np
5.9
6.4
5.1
4.1
3.8
3.0
Madrid
np
np
np
np
np
0.1
1.2
1.3
1.4
1.4
(12.1)
(1.5)
3.2
(0.8)
5.9
3.7
4.1
5.5
8.3
7.9
Moscow
np
np
np
np
np
1.7
0.5
3.6
3.6
3.6
Warsaw
np
np
np
np
np
(0.8)
0.7
3.2
3.2
1.2
Abu Dhabi
2.0
1.0
2.0
0.7
3.2
3.3
4.7
5.7
6.1
7.3
Doha
4.5
1.0
3.0
4.0
3.2
4.5
5.0
5.5
6.0
7.0
Dubai
2.0
1.0
2.0
1.4
3.2
3.7
4.7
5.7
6.1
6.5
Riyadh
2.5
2.0
2.5
3.0
4.4
5.0
4.8
4.8
4.5
4.5
Manchester
Middle East
Oceania
Adelaide
(2.8)
2.9
(3.2)
0.1
0.9
0.6
2.5
3.0
3.5
3.5
Auckland
1.0
0.0
0.0
0.0
0.8
4.1
5.6
4.8
3.5
3.0
Brisbane
(5.8)
(0.7)
0.3
(0.0)
(0.9)
3.5
5.1
6.1
4.1
4.1
Canberra
1.1
3.4
1.4
(0.6)
2.2
1.6
2.1
2.5
3.2
3.5
Christchurch
1.5
4.6
3.0
4.7
5.1
6.1
7.0
7.0
6.6
5.3
Darwin
3.5
2.0
(11.4)
2.0
3.0
3.0
4.0
3.5
3.5
3.0
3.5
Melbourne
1.7
4.2
3.0
0.0
0.2
1.5
2.5
3.0
3.5
(6.2)
(1.6)
1.3
(2.3)
1.1
2.0
2.5
3.0
3.0
4.1
0.0
1.0
2.2
1.2
2.0
3.0
4.5
4.5
4.5
4.0
Townsville
(4.7)
0.4
0.5
1.0
1.3
2.0
2.0
3.0
4.1
4.1
Wellington
1.0
1.5
1.0
1.5
2.0
3.4
3.0
3.0
3.0
3.0
Perth
Sydney
NP: Not published
Rider Levett Bucknall | International Report – First Quarter 2015
13
MARKET data
International Construction Rates
The following data represents estimates of current building costs in the respective market. Costs may vary as a
consequence of factors such as site conditions, climatic conditions, standards of specification, market conditions etc.
Range of cost per m2 of gross floor area
Office Building
Local
Currency
AMERICAS
Bahamas
Barbados
Bermuda
Boston
British Virgin Islands
Cayman Islands
Chicago
Cuba
Denver
Honolulu
Las Vegas
Los Angeles
New York
Phoenix
Portland
Puerto Rico
San Francisco
Seattle
St Lucia
US Virgin Islands
Washington D.C.
Premium Offices
Retail
Grade A
Mall
Strip Shopping
Low
High
Low
High
Low
High
Low
High
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
2,495
2,270
3,540
2,155
2,915
2,810
2,475
3,110
1,505
2,745
1,505
2,155
2,205
1,400
1,775
2,650
2,370
1,775
2,230
2,850
1,885
4,455
3,790
4,715
3,015
3,025
4,110
3,875
4,340
2,420
5,060
3,070
3,230
3,765
2,585
2,370
3,540
3,550
2,205
3,400
4,155
2,585
2,335
2,055
3,305
1,885
2,540
2,595
1,290
2,790
1,075
2,315
1,130
1,505
1,940
1,075
1,240
2,065
1,720
1,240
1,635
2,615
1,400
3,270
3,250
4,480
2,635
3,735
3,790
1,940
4,025
1,615
3,820
2,045
2,260
2,905
1,720
1,830
2,950
2,585
1,720
2,345
3,790
1,990
1,635
1,745
2,950
1,290
2,110
2,700
1,240
3,110
860
1,990
1,240
1,345
1,505
1,130
1,185
2,065
1,615
1,240
1,410
2,250
1,025
2,830
2,700
3,765
2,260
3,510
3,680
2,260
4,350
1,400
4,735
5,165
3,015
2,690
1,775
2,370
2,660
3,015
2,155
2,110
3,315
2,045
1,520
1,520
2,605
970
1,755
2,380
860
2,230
700
1,670
700
1,075
1,240
755
970
1,185
1,400
1,025
1,645
1,660
805
2,390
2,380
3,425
1,560
2,335
3,250
1,400
2,970
1,345
4,145
1,560
1,720
1,720
1,345
1,400
1,765
1,990
1,455
2,110
2,370
1,455
Rmb
Rmb
Rmb
VND ('000)
HKD
Rp ('000)
RINGGIT
MOP
PHP
KRW ('000)
Rmb
Rmb
Sgd
7,600
6,900
7,300
23,341
21,400
9,648
2,400
17,500
32,468
2,320
7,350
6,900
2,800
12,550
11,200
11,670
33,572
31,900
13,200
4,000
25,200
44,303
2,960
11,900
11,300
4,050
7,100
6,350
6,750
19,906
18,600
6,670
1,300
15,400
26,197
1,740
6,750
6,500
2,150
10,750
9,400
10,200
24,916
25,200
10,620
2,800
21,600
35,705
2,130
10,300
9,850
3,050
8,400
7,300
8,350
18,836
21,900
6,520
2,100
19,100
27,512
1,550
8,150
7,500
2,250
12,850
11,050
11,900
25,076
27,900
8,515
3,500
23,600
31,659
2,250
12,550
11,450
3,500
7,350
6,600
7,200
N/P
18,700
N/P
N/P
16,200
20,836
1,310
7,050
6,600
N/P
11,500
10,500
10,800
N/P
24,300
N/P
N/P
20,800
23,365
1,980
11,300
10,100
N/P
EUR
EUR
GBP
GBP
EUR
EUR
GBP
EUR
GBP
EUR
EUR
EUR
EUR
GBP
EUR
1,300
1,340
1,725
1,920
1,200
1,800
2,228
825
1,815
1,700
2,840
1,295
1,800
1,770
1,850
1,650
1,754
2,430
2,530
1,500
2,000
2,937
1,250
2,390
2,000
3,690
1,306
1,800
2,330
2,325
950
980
1,500
1,690
920
1,600
1,874
640
1,590
1,100
2,190
2,434
1,200
1,500
1,374
1,400
1,135
2,435
2,530
1,300
1,800
2,937
1,150
2,390
1,500
2,850
2,745
1,200
2,380
1,691
750
1,135
2,645
2,750
1,300
1,900
3,038
1,800
2,590
2,000
1,800
1,538
1,400
2,580
1,797
950
1,445
3,700
3,850
1,800
2,100
4,253
2,500
3,640
2,800
2,340
2,314
1,400
3,620
2,220
600
826
840
875
600
1,000
972
1,800
830
900
1,440
1,198
N/P
830
1,004
800
1,030
1,580
1,655
1,200
1,200
1,823
2,500
1,550
1,400
1,870
1,538
N/P
1,550
1,163
AED
AED
SAR
QAR
5,800
5,800
4,890
6,500
7,000
7,000
7,597
8,500
4,700
4,700
4,991
6,100
6,600
6,600
6,825
8,200
4,100
4,100
4,728
5,300
6,500
6,500
6,198
6,500
N/P
N/P
3,361
N/P
N/P
N/P
4,728
N/P
AUD
NZD
AUD
AUD
NZD
AUD
AUD
AUD
AUD
NZD
2,600
2,800
2,450
3,070
3,600
3,000
3,000
3,150
3,100
2,940
3,850
4,000
3,800
3,980
4,700
4,050
3,750
4,770
4,350
3,360
2,100
2,400
1,900
2,490
3,100
2,300
2,325
2,575
2,300
2,310
3,250
3,600
2,900
3,140
4,100
3,700
2,900
3,740
3,250
2,625
1,550
1,800
2,150
2,110
1,600
1,650
2,025
2,300
1,700
1,300
2,850
2,300
2,950
2,960
2,100
2,500
3,000
2,800
3,550
1,800
1,300
1,200
1,050
1,130
N/P
1,100
1,060
1,025
1,350
N/P
1,825
1,800
1,550
1,860
N/P
1,950
1,550
2,565
1,700
N/P
ASIA
Beijing
Chengdu
Guangzhou
Ho Chi Minh City
Hong Kong
Jakarta
Kuala Lumpur
Macau
Manila
Seoul
Shanghai
Shenzhen
Singapore
EUROPE
Amsterdam (Netherlands)
Berlin (Germany)
Birmingham (UK)
Bristol (UK)
Budapest (Hungary)
Dublin (Ireland)
London (UK)
Madrid (Spain)
Manchester (UK)
Moscow (Russia)
Oslo (Norway)
Paris (France)
Podgorica (Montenegro)
Sheffield (UK)
Vienna (Austria)
MIDDLE EAST & AFRICA
Abu Dhabi
Dubai
Riyadh
Doha
OCEANIA
Adelaide
Auckland
Brisbane
Canberra
Christchurch
Darwin
Melbourne
Perth
Sydney
Wellington
N/P: Not published
14
Rider Levett Bucknall | International Report – First Quarter 2015
MARKET data
International Construction Rates
Rates are in national currency per square metre of Gross Floor Area except as follows:
Chinese cities, Hong Kong and Macau: Rates are per square metre of Construction Floor Area, measured to outer face of external walls.
Singapore, Ho Chi Minh City, Jakarta and Kuala Lumpur: Rates are per square metre of Construction Floor Area, measured to outer face of
external walls and inclusive of covered basement and above ground parking areas.
Chinese cities, Hong Kong, Kuala Lumpur, Macau and Singapore: All hotel rates are inclusive of Furniture Fittings and Equipment (FF&E).
Range of cost per m2 of gross floor area
Hotels
Car Parking
5 Star
Low
AMERICAS
2,725
2,595
3,540
2,690
4,670
2,915
2,690
2,790
1,990
4,950
3,500
3,230
3,445
2,475
1,885
3,830
3,230
1,990
3,285
5,340
2,475
3 Star
Multi Storey
Basement
Industrial
Warehouse
Residential
Multi Storey
High
Low
High
Low
High
Low
High
Low
High
Low
High
7,070
4,325
4,715
4,305
6,425
3,790
4,845
4,350
3,015
7,160
5,005
4,845
5,115
4,305
2,850
4,715
5,060
2,960
4,110
6,525
4,035
1,530
1,735
2,950
1,720
2,915
2,485
1,290
2,230
1,130
3,120
1,290
2,155
1,990
1,185
1,400
2,355
2,370
1,505
2,230
3,565
1,615
4,885
2,700
3,540
2,690
4,090
3,465
2,260
3,110
1,775
5,220
2,420
2,960
2,850
1,720
1,830
2,950
3,120
1,940
2,830
4,445
2,475
N/P
N/P
N/P
645
N/P
N/P
700
N/P
430
915
540
1,025
700
430
755
N/P
1,075
700
N/P
N/P
590
N/P
N/P
N/P
970
N/P
N/P
1,185
N/P
755
1,345
915
1,240
1,130
700
970
N/P
1,400
915
N/P
N/P
860
N/P
N/P
N/P
860
N/P
N/P
970
N/P
645
1,290
645
1,185
915
645
1,075
N/P
1,290
915
N/P
N/P
805
N/P
N/P
N/P
1,185
N/P
N/P
1,400
N/P
1,025
2,530
1,615
1,670
1,345
1,075
1,505
N/P
1,775
1,345
N/P
N/P
1,075
1,410
700
2,355
755
1,130
1,840
755
1,615
700
1,345
540
1,025
970
590
805
935
1,025
805
830
1,660
755
2,280
2,000
2,990
1,075
2,215
2,915
1,400
2,230
1,185
2,155
1,075
1,720
1,400
1,075
1,400
1,420
1,720
1,185
1,765
2,370
1,075
1,410
3,025
3,055
1,455
2,100
2,215
1,290
N/P
645
1,830
755
1,615
1,505
860
1,185
1,775
1,720
1,075
2,110
2,130
1,075
4,565
4,325
4,715
3,500
3,270
3,565
3,500
N/P
3,765
7,320
4,305
3,335
3,765
4,305
2,800
2,950
3,765
2,530
2,940
3,315
2,690
17,200
14,800
16,750
37,170
41,600
17,420
6,500
35,300
61,599
4,600
16,500
15,900
5,800
9,700
8,700
9,700
22,817
28,100
10,410
2,500
23,700
43,190
2,000
9,300
9,120
3,400
12,450
11,000
11,900
29,518
32,400
11,875
3,800
27,300
48,854
2,550
11,900
11,500
3,850
2,250
2,050
2,150
8,509
8,300
3,460
800
N/P
14,666
650
2,100
2,050
700
3,050
2,800
3,050
12,714
9,750
4,450
1,200
N/P
16,892
800
3,050
2,900
1,400
3,750
3,650
3,750
17,499
15,600
4,450
1,400
8,650
16,083
840
4,000
3,750
1,500
6,500
5,950
6,500
23,910
22,100
6,190
3,200
11,550
18,510
1,060
6,600
6,350
2,250
4,350
3,490
4,200
5,832
14,400
4,650
1,000
N/P
17,397
1,150
4,100
3,900
1,150
5,450
4,300
5,250
8,830
18,200
5,680
1,700
N/P
20,533
1,460
5,300
4,900
1,650
4,050
3,500
3,850
14,952
20,500
6,430
1,700
13,200
27,209
1,500
3,750
3,650
2,050
6,100
5,450
5,750
22,669
35,400
9,986
4,100
21,000
48,450
2,170
5,800
5,550
3,250
1,900
2,720
2,750
3,045
1,950
2,200
3,240
2,600
2,700
3,500
5,090
4,436
2,100
2,690
3,382
1,200
1,340
1,270
1,325
800
1,340
1,620
1,300
1,250
1,500
2,960
N/P
1,300
1,215
1,691
1,500
1,750
1,870
1,765
1,150
1,440
2,076
1,590
1,690
2,000
3,850
N/P
1,300
1,620
2,167
400
465
320
385
350
400
390
1,600
315
400
690
N/P
900
305
529
600
670
635
770
500
500
780
1,900
630
550
880
N/P
900
610
581
650
774
800
875
450
600
1,013
500
830
800
890
880
1,400
810
1,163
1,000
1,030
1,375
1,465
650
1,000
1,671
700
1,350
1,100
1,160
N/P
1,400
1,315
1,321
375
362
350
365
400
400
421
400
350
450
1,570
N/P
500
330
581
525
723
635
665
520
560
760
500
630
650
2,030
2,105
500
610
740
850
980
1,590
1,655
650
1,400
1,874
500
1,570
1,200
2,420
2,338
N/P
1,520
1,480
1,350
1,390
2,230
2,320
950
1,600
2,684
790
2,200
1,700
3,150
2,466
N/P
2,170
1,744
12,000
13,000
10,110
14,500
6,000
6,000
5,989
7,500
8,500
8,500
7,465
8,500
1,800
2,300
920
N/P
3,600
3,600
1,220
N/P
2,850
3,100
2,265
2,750
4,500
4,500
2,845
4,500
1,500
1,800
3,312
N/P
2,700
3,400
4,046
N/P
4,500
4,500
4,576
6,500
6,500
6,500
9,647
7,800
4,400
4,000
4,800
4,660
4,200
4,400
4,500
4,430
5,050
4,100
2,500
2,900
2,500
2,750
2,900
2,800
3,050
2,645
2,750
2,310
3,400
3,350
3,600
3,840
3,300
3,500
3,500
3,635
3,450
2,730
580
600
700
700
850
750
655
750
650
500
900
850
1,000
970
1,300
1,250
1,060
1,000
1,000
900
1,300
1,300
1,500
940
1,700
1,150
1,110
1,850
950
1,890
1,900
1,800
2,000
1,340
2,100
1,500
1,365
3,100
1,520
2,730
625
500
600
650
720
750
555
625
640
900
1,100
750
1,000
1,010
1,100
1,375
1,100
1,020
990
1,400
2,350
2,800
1,900
2,550
N/P
2,010
2,200
2,230
2,250
2,625
3,550
3,600
3,050
3,700
N/P
2,600
3,500
3,830
4,100
3,360
ASIA
13,000
11,550
13,000
30,351
34,100
13,670
4,800
28,400
53,507
3,110
12,550
12,200
4,400
EUROPE
1,500
1,960
2,015
2,285
1,350
2,000
2,405
1,950
2,000
2,800
3,920
4,008
2,100
1,960
3,012
MIDDLE EAST & AFRICA
9,000
9,500
8,304
11,500
OCEANIA
3,500
3,600
3,200
3,780
3,600
3,550
3,450
3,600
3,850
3,400
Rider Levett Bucknall | International Report – First Quarter 2015
15
Menlyn Maine Mixed Use Green Precinct, Pretoria, Africa
Architect: Boogertman + Partners
Market Intelligence
Sub- Saharan Africa
Sub-Saharan Africa’s positive
outlook reported in Q3 2014 has
seen 2014 GDP growth at 4.5% up
slightly from the 4.2% reported
in 2013. Public infrastructure
developments have been a large
factor in growth across the region
with significant investment in
transport, electricity and ports.
Notwithstanding the recent decline
in copper prices and the ongoing
decline in oil prices, the forecast
growth for 2015 is expected to be
steady at 4.6%. Whilst the decline
in commodity prices will impact
on exports, it is unlikely to reduce
growth in the short term due to the
strength of ongoing infrastructure
investment and agricultural
expansion.
Despite particular regions facing
socio-political risks associated with
poverty remaining high, conflict
(South Sudan, Central African
Republic) and the continuing Ebola
outbreak (West Africa), the region
remains one of the fastest growing
globally.
During 2014, growth in excess of
6% has been seen in Mozambique,
Rwanda, Nigeria, Ethiopia, Cote
d’lvoire, Democratic Republic of
Congo and Burkina Faso. Other
countries such as Cabo Verde,
Guinea-Bissau and Guinea recorded
the lowest with 2.1%, 2.1% and 0.5%
respectively.
Construction within the region is
increasing due to increased public
investment in infrastructure as a
result of increasing mineral exports,
renewal of aging infrastructure
and an ever increasing services
sector. The capacity to maintain
and operate this infrastructure
expansion is highlighting the need
for long term financial management
reforms in a number of countries.
These reforms are focussed on the
strengthening of transparency and
accountability in the use of public
resources.
2015 Forecasted GDP Growth
Country
2014%
2015%
Angola
3.94
5.92
2016%
6.16
Benin
5.48
5.20
4.80
Botswana
4.35
4.18
4.05
Burkina Faso
6.66
6.81
7.02
Burundi
4.74
4.80
5.01
Cabo Verde
1.02
3.02
4.04
Cameroon
5.08
5.19
5.27
Central African Rep.
1.01
5.29
5.70
Chad
9.64
6.72
9.72
Comoros
3.92
3.93
3.94
Congo, Dem. Rep. of
8.63
8.49
7.90
Congo, Rep. of
6.00
7.47
7.29
Côte d'Ivoire
8.50
7.90
7.75
(2.54)
(7.87)
1.31
Eritrea
2.02
2.14
2.01
Ethiopia
8.20
8.46
8.47
Gabon
5.12
5.39
6.01
Gambia, The
7.37
7.00
5.53
Ghana
4.47
4.69
7.18
Guinea
2.45
4.08
4.99
3.70
Equatorial Guinea
Guinea-Bissau
2.63
4.00
Kenya
5.34
6.16
6.38
Lesotho
4.30
4.68
4.97
10.88
Liberia
2.49
4.47
Madagascar
3.05
3.98
4.53
Malawi
5.70
5.97
5.50
Mali
5.92
4.79
5.09
Mauritius
3.32
3.95
4.14
Mozambique
8.34
8.16
8.23
Namibia
4.31
4.49
4.57
Niger
6.33
4.91
5.69
Nigeria
6.97
7.28
7.18
RLB Construction Market Activity Model
Africa - Growth Sectors vs Decline Sectors
Rwanda
5.96
6.67
7.50
São Tomé & Príncipe
5.00
5.50
5.50
Senegal
4.55
4.65
5.07
NUMBER OF CITIES
Seychelles
3.67
3.77
3.65
Sierra Leone
8.00
9.91
7.81
South Africa
1.40
2.30
2.80
South Sudan
6
5
4
3
(12.25)
18.96
10.28
Swaziland
2.11
2.03
2.07
Tanzania
7.21
7.02
7.13
Togo
5.65
5.66
5.84
Uganda
5.91
6.28
6.50
Zambia
6.47
7.17
7.72
2
1
0
GROWTH
HOUSES
APARTMENTS
DECLINE
OFFICES
INDUSTRIAL
RETAIL
HOTEL
CIVIL
Rider Levett Bucknall | International Report – First Quarter 2015
17
Location Intelligence
AFRICA
Cape Town
Johannesburg
The Cape Town property and
construction industry is in the midst
of a significant recovery. The sector
is however showing signs of a lack
of capacity ranging from property
consultants, principal building
contractors and subcontractors. This
is being attributed to the learnings
of the past decade where the
market has over promised and under
delivered. This has resulted in the
contractors and subcontractors, with
the required capabilities, being more
circumspect in their pricing and risk
acceptance, thereby driving up the
cost of building.
While building costs are increasing,
end user demand is still lagging,
resulting in low yields for developers
and investors together with the
potential of higher vacancies for
prospective developments. Despite
this, the overall trend is a positive one
of recovery.
Current projects include:
• V&A Waterfront - ongoing
development - various projects and
sectors
• Cape Town International
Convention Centre (CTICC) Phase II
• Netcare Hospital (Cape Town
Foreshore)
• Century City ongoing development
- various projects and sectors
• Cape Town CBD various tall
building site
Steel reinforcement and structural
steel remains a highly volatile trade
in the Western Cape. This is more
pronounced with structural steel and
continues to inhibit the growth of
fast tracked steel construction with
current pricing trends continuing
to favour in situ concrete framed
structures.
HVAC is characterised by a shortage
of large subcontractors capable of
high specification HVAC installations.
Aluminium doors, windows and
shopfronts has seen a number of
established subcontractors close their
doors in the midst of the recession
leaving a capability shortage. This has
affected the standard of commercial
and residential projects. There has
been an increase in capability of flush
glazed facade contractors.
Given the waning capacity and
the general increase in margins,
opportunities to negotiate contracts
rather than tender are being pursued
throughout the industry.
Despite high office vacancies, rental
growth in office nodes around
Johannesburg are still growing at
levels higher than current inflation
levels. The areas around the new
Gautrain stations, Sandton &
Rosebank, are showing strong signs
of growth, being very popular among
developers. The manufacturing sector
remains challenged and the demand
for industrial space is still low.
Positive growth is continuing in the
retail sector, with new centres being
built in previously disadvantaged
towns and the refurbishment of
existing centres in established areas
like Menlyn and Sandton.
Current significant projects underway
include Discovery’s Head Office
within the Sandton’s commercial
node. The landmark building consists
of 9 basement levels with 6,000
parking bays and a 9 level office
building with a gross building area of
100,000m2. The total gross building
area is 300,000m2. The development
is expected to house 5,000 people.
The total development cost is
forecast to cost R 3billion and to be
completed in October 2017.
A new Head Office for Sasol
Petrochemicals Company is being
constructed also in Sandton. With an
office area of 67,000m2, the 10 level
building and seven level basement,
will house up to 4,000 employees.
The 5 star Greenstar development
commenced in 2013 and is due for
completion in late 2016.
The current weakness in the Rand
could potentially make South
African goods more competitive
internationally, and could give the
industrial sector more impetus. Lower
fuel costs and stable food prices will
give households more disposable
income which bodes well for all
sectors.
18
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
AFRICA
Maputo (Mozambique)
Port Louis (Mauritius)
Pretoria
Mozambique is currently experiencing
major economic uplift and positive
prospects for the foreseeable future.
The district of Moka, situated in the
centre of the island, has witnessed
significant growth in terms of
infrastructure works and property
development during the past 5
years. The St Pierre region and
Bagatelle areas have witnessed the
most development activity. Strong
investment has been seen in road
infrastructure within the district. Due
the increased access, strong growth
in development has been seen with
new retail outlets, real estate projects
and business centres being built.
The construction economy for the
region (Gauteng) is showing positive
signs. The majority of current
construction projects within the
region are private sector owned
while the Government is investing in
the majority of the civil engineering
works.
Offshore gas was recently discovered
in northern Mozambique, which
amounts to the second largest found
in the world (with Qatar the largest)
with reserves estimated to be 170
trillion cubic feet CF. With this find,
major infrastructure requirements
have come to the forefront of the
country's construction activity.
Residential villages, offices, medical
facilities, schools, retail and
engineering facilities will be required
in large quantities once the physical
extraction of the gas starts in the
near future.
Current key projects include The
Horizon in Maputo. This project is
currently the largest commercial
development in the city. The
development consists of four car
parking decks of 24,000m2, a 14 level
office tower of 15 000m2, and a 193
key, 18 level residential tower. The
project totals an estimated GCA of
74,000m2.
The Pemba Mixed use Development
in Pemba (Northern Mozambique) is
a mixed use project, comprising of
two construction phases. Phase one
comprises a 10,000m2 multi tenanted
retail centre (strip mall) and 2,500m2
multi-tenanted office block (ground
+ 1). The first phase is expected to
be completed by March 2016. Phase
two will comprise a further 10 000m2
multi tenanted retail centre (strip
mall) and 2 multi tenanted office
blocks of 2,500m2 each (ground +1).
The bulk of projects in Mozambique
are US dollar based projects.
The price of steel reinforcing
fluctuates regularly due to the
metals union strikes that have led to
shortages and has put pressure on
the prices of steel. Structural steel
prices have also increased regularly
by 2%-5%.
Major developments include the
Mall of Mauritius – Bagatelle,
Mauritius’s leading shopping and
retail destination. During the course
of 2014, two major shops in the mall,
namely Woolworths and Cash & Carry
have undergone further extension
due to an increase in business
activity.
Phase 1 of the Bagatelle Motorcity
was completed in October 2014.
This new development aims to be
the destination for car and new
technology enthusiasts. When
completed the development will
accommodate showrooms for car
dealers, bikes and motorcycles and
workshops for car sound fitments,
tyres and windscreens. Phase 1 of
the project consisted of two retail
blocks and the majority of the site’s
infrastructure works.
Mauritius’s impact from the GFC
was delayed by more than three
years. The local construction market
started to feel the effects of the crisis
towards the end of the year 2012,
with the impact escalating in 2013
and 2014. However, in the second
half of 2014, the industry has started
to recover. Activity in the sector has
strengthened and it is expected to
improve during 2015 and 2016. The
local authorities are hopeful more
investment will follow and new
developments will help the industry
grow in the next coming years.
The construction industry’s focus
has shifted slightly, over the past few
years, to be more aligned with the
global perspective. In order to attract
foreign investment, the standards
have been raised to satisfy the needs
of potential investors while staying
true to the country’s environmental
responsibilities.
Currently the biggest construction
activity in Pretoria is around the
Menlyn area where Menlyn Maine
is the focus point constructing the
first "green city" in Africa. This Mega
development will comprise a total
of 315,000m2 of Gross Lettable Area
including:
• 140,000m2 of Commercial Office
space,
• 35,000m2 of Retail, Dining and
Shopping space,
• 4,000m2 Virgin Active Classic Gym,
• 85,000m2 of Up-market Residential
Apartments
• 18,000m2 of Luxury Hotel space,
• 60,000m2 Time Square Urban
Entertainment Complex.
• 5,700m2 of Scenic parklands.
Existing buildings are being upgraded
and others demolished to make way
for new developments in the Hatfield
area. Commercial developments
under construction include new
government office accommodation
for Stats SA, Agrivaal and Munitoria.
Rider Levett Bucknall | International Report – First Quarter 2015
19
Arizona State University Polytechnic Campus Sun Devil Fitness Complex, Mesa, United States of America
Architect: Architekton and 360 Architecture
Photographs provided by Dror Baldinger, AIA Architecture Photography
Market Intelligence
Americas
The effect of falling oil prices and
the strengthening dollar in the US is
not yet showing in published figures.
GDP growth continues to rise with
growth forecasted to be 2.4% for
2014 and 3.1% for 2015. The overall
impact on economic growth of the
fall on oil prices is probably positive,
although it may slow growth in the
mining sector.
The U.S. economy is growing at
an above trend pace, in part with
strong jobs growth. The construction
industry is showing stronger
indicators with job gains during 2014.
July construction spending was at
its highest that it had been since
December 2008. The US Department
of Commerce reported a total of
US$981 Billion for July 2014 up
8.2% on the previous July. Despite
a decline in highway spending in in
both August and September other
sectors within construction were
on the rise, however November
saw increases in residential, but
slight declines across other sectors
reducing total construction spending
for the quarter.
With lower unemployment, wages
growth and positive sentiments
across most sections of the
economy, there has been an increase
in new home sales as well, with
a spike in August 2014 up 18%
on July. Showing all sections of
the construction industry have
performed well for 2014, this may
continue if current requests for
increased infrastructure spending
are answered with funds.
While there are signs wages
growth is starting to strengthen,
with oil prices falling and the dollar
strengthening, low inflation remains
the main risk that may delay rate
hikes. Business and consumer
surveys are generally positive.
Within South America, regional
economic growth is forecasted
to accelerate in 2015-16 following
a relatively weak year. The
Brazilian economy will remain
fragile. Mexico remains at the
centre of development potential.
Manufacturing (primarily autos),
energy, telecommunication, and
utilities are key sectors for further
integration within the North
American landscape through
the North American Free Trade
Agreement (NAFTA) .The Pacific
Alliance countries (Mexico,
Colombia, Chile and Peru) are
forecasted to grow by 4% in 201516. Both Peru and Colombia will
likely recover fastest. An expanded
Panama Canal will boost regional
trade flows and deepen economic
ties from 2016 onwards.
RLB Construction Market Activity Model
The Americas - Growth Sectors vs Decline Sectors
USA Construction Cost Relativities
Q1, 2015
New York
180
Honolulu
174
Boston
152
San Francisco
151
Chicago
147
Washington
143
Los Angeles
136
Seattle
117
Portland
106
Phoenix
101
Denver
100
Las Vegas
98
2015 Forecasted GDP Growth
Country
2014%
2015%
2016%
2.36
North America
Canada
2.27
2.45
Mexico
2.39
3.53
3.77
United States
2.15
3.09
3.03
South America
Argentina
(1.70)
(1.50)
--
Bolivia
5.20
5.00
5.00
Brazil
0.30
1.39
2.23
Chile
2.00
3.34
4.00
Colombia
4.81
4.53
4.52
Ecuador
4.00
4.00
4.00
Guyana
3.32
3.83
4.85
Paraguay
4.00
4.50
4.50
Peru
3.60
5.12
5.47
Suriname
3.26
3.78
4.23
2.80
2.80
3.00
(3.00)
(1.00)
0.01
Uruguay
Venezuela
Central America
Belize
2.00
2.50
2.50
Costa Rica
3.60
3.60
4.20
El Salvador
1.70
1.80
1.80
Guatemala
3.40
3.70
3.60
Honduras
3.00
3.10
3.20
Nicaragua
4.00
4.00
4.00
NUMBER OF CITIES
Panama
6.61
6.44
6.69
30
The Caribbean
25
Antigua and
Barbuda
1.86
1.73
2.00
The Bahamas
1.20
2.10
2.00
(0.55)
0.55
1.51
Dominica
1.43
1.24
1.23
Dominican Republic
5.30
4.20
4.00
1.11
1.20
1.70
3.75
3.70
3.99
Barbados
20
15
Grenada
Haiti
10
5
0
GROWTH
HOUSES
APARTMENTS
DECLINE
OFFICES
INDUSTRIAL
RETAIL
HOTEL
CIVIL
Jamaica
1.05
1.78
2.23
St. Kitts and Nevis
3.54
3.16
3.24
St. Lucia
(1.11)
1.39
1.44
St. Vincent and
the Grenadines
1.66
2.57
3.05
Trinidad and
Tobago
2.34
2.09
1.86
Rider Levett Bucknall | International Report – First Quarter 2015
21
Location Intelligence
AMERICAS
Americas
Caribbean
Denver
Bahamas
The strengthening Denver economy
continues to provide new jobs
through most industry sectors.
From an unemployment rate of 9%
during the Global Financial Crisis, it is
expected to be as low as 5% in 2014
and perhaps lower in 2015.
Colorado boasts the sixth fastest
growth in GDP nationally and
remains as one of the nation’s
most desirable places to reside and
establish a business. This economic
growth, while overall being a
positive characteristic, is increasingly
stretching the resources within the
construction industry and sending
worrying signals regarding the
inevitable increase in the price of
construction due to the availability of
skilled labour to satisfy the volume of
work in the industry
The completion of Denver’s Union
Station development project,
reinstating it as the regional
transportation hub, has made the
LoDo (Lower Downtown) area one of
the most sought after office locations
in the nation. Two new office towers
are set to break ground in 2015 which
is certain to encourage development
of other speculative ventures.
The boom in marijuana grow houses
appears to have settled down for
now although it will most likely
continue to be a significant part
of the construction industry as the
fledgling industry finds its feet.
During the latter part of 2014
Colorado experienced increases in
construction costs at rates far greater
than the previous years. Our cost
index suggests cost escalation will
be recorded at between 4 and 5%
for the year. Statutory wage rate
increases have been rather modest
as has material supply process
but the increase in the volume of
construction in the marketplace has
led to labour shortages in several key
sub-trades. It is very likely volume of
construction will continue to grow
and is expected that the cost of inplace construction will rise further in
2015 as subcontractor resources fail
to meet demand resulting in reduced
competition.
The economy is expected to have
grown by 1.2% in 2014, according to
the IMF, against an earlier forecast of
2.3%, but up on the 0.7% achieved in
2013 and 1% in 2012. Tourism activity
has softened and the momentum
remains weak.
Led by the ongoing Baha Mar project,
government figures show that the
non-residential construction sector
has been booming in the Bahamas,
growing by 21% in 2013, and there
are expectations that tourism-related
construction will continue to support
economic output. This will be helped
by the completion of the $400
million renovation and expansion of
Lynden Pindling International Airport,
although the Bahamian Contractors
Association (BCA) is seeking
legislation to revive the stagnant local
construction sector.
Scheduled to open in December 2014,
the US$3.5 billion Baha Mar project
will include four hotels as well as a
200,000 sq. ft. convention centre,
an 18-hole Jack Nicklaus Signature
Golf Course and a casino. Located
at Cable Beach, it has been heavily
backed by the Chinese in terms of
financing and providing the general
contractor. Nearby, the US$35 million
Towers Shopping Centre will provide
64,000 sq. ft. of retail space, while
another potential project is the
development of the Abaco Club at
Winding Bay into a major residential
scheme.
Single-family construction has been
fairly flat in 2014 to match a decrease
in demand. The forecast for 2015 is
that this market sector will pick up a
little but only with a 2 to 3% increase.
22
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
AMERICAS
Barbados
Cayman Islands
St Lucia
Barbados’s economy is still failing to
show signs of growth in the face of
rising government debt (up to 80%
of GDP in March 2014), with the 1%
decline in 2013 likely to be repeated
in 2014 before a small recovery in
2015.
The growth in the Cayman Islands’
economy is expected to remain in
the 1-2% range for the third year in
succession in 2014, with 1.9% forecast.
The planned Ironwood community
is a US$360 million mixed-use
development, located on the East
End of the island of Grand Cayman.
Saint Lucia is a high-income country
with a very small-sized economy.
According to the World Bank, GDP
fell by 0.9% in 2013 but is forecast to
grow by 0.9% in 2014, followed by
2-2.5% growth in both 2015 and 2016.
Following the lead taken by a number
of other islands in the Caribbean,
the government is considering
the establishment of an economic
citizenship programme as a new area
of investment.
The tourism sector has a litany
of woes ranging from effects of
a recessionary economy, visitor
security, to declining arrivals and
low spending, but sees current
investments as the bright spot.
The real estate market has shown
signs of picking up in 2014 after six
years of sluggish activity, particularly
for luxury homes, with the premium
west coast from Bridgetown to
Speightstown being especially
popular. This has not yet translated
into rising prices.
There are several planned
developments. These include the
decision by international brand,
Sandals, to purchase and renovate
the landmark tourism property,
Almond Beach Resort, at a cost of
US$125 million. Sandals already has
another property – the Casuarinaunder renovation, while a takeover
of Amaryllis is set for the renovation
and the purchase of Four Seasons.
Sandy Beach is being converted into
a condo hotel and there is planned
development for Settler’s Beach.
It will include an Arnold Palmer
signature golf course, a Town Centre
with shops and a vacation resort.
Having opened a US$40 million,
112-bed care hospital in Grand
Cayman in 2014 within a 12 month
construction schedule, DeAngelis
Diamond Healthcare Group has plans
to expand to a 2,000 bed facility over
the next decade at Health City.
Developer Dart Realty is developing
Camana Bay as a major hotel/
tourism destination. The plans are
for a resort village connecting Seven
Mile Beach to the current mixed-use
town centre. Additional office space
is under construction. Another of
their developments is the 263-room
Kimpton-branded Seven Mile Beach
Hotel with 56 residences, a US$200
million project in Grand Cayman.
The government is also providing a
boost to the construction sector with
new and on-going projects in 201415. The industry is heavily reliant on
infrastructure developments within
both the public and private sectors
and is a major employer. Projects
include the reconstruction and
expansion of the Castries-Gros Islet
highway and repairs to a number of
areas which suffered infrastructural
damage from the 2010 hurricane and
floods. These include repairing the
island’s south-western roads, bridges,
the Babonneau Fire Station and the
Hewannora International Airport.
Following the completion of the
infrastructure, the first 12 beachfront
resort villas at Six Senses Freedom
Bay are scheduled for completion
by the end of 2014. The 60-acre
ecofriendly development will
include hotel villas, luxury homes
and apartments. The island will also
benefit from additional cruise ships.
After an eight-year hiatus, Port
Castries is back on the Disney Cruise
Lines itinerary with a total of five
calls to Saint Lucia for the 2014/2015
cruise season. As a result, Port
Castries is scheduled to welcome
over 685,000 cruise passengers
and over 375 cruise ships over the
2014/2015 cruise season.
Rider Levett Bucknall | International Report – First Quarter 2015
23
Singapore Sports Hub, Singapore
Architect: DP Architects Pte Ltd
Market Intelligence
Asia
In China, GDP growth has been
revised down slightly to 7.38% from
the initial estimate of 7.50% as has
Hong Kong down from 3.70% to
3.00%. Construction growth within
real estate remains strong and
showed year on year an increase of
12.4%, with a similar year on year
growth of 12.3% for total floor area
under construction. There was a
drop of 5.5% year on year for total
floor area of new projects. China
are still implementing their carefully
managed slowdown and while
they have slowed some sectors,
there are stimulus measures to
support housing projects, public
infrastructure and tax relief to small
and medium enterprises in order for
China to reach its growth target.
Japan’s GDP growth is lower than
first expected dropping from 1.40%
to 0.89%. The drop is partly due
to increases in sales tax and the
rising costs of energy imports since
the shutdown of nuclear reactors.
Wage growth remains subdued and
unemployment remains high. The
central bank has announced further
monetary stimulus aimed to bolster
growth and prevent inflation.
ASEAN 5 countries Indonesia,
Malaysia, the Philippines, Singapore
and Thailand have all seen a
marginal reduction in forecast
growth for 2014 with the exception
of Malaysia who have had an
increase from 5.20% to 5.90%.
With the October 2014
announcement that China and
20 other Asian countries have
agreed to create an international
infrastructure bank, Beijing is hoping
the fund will rival American-led
agencies like the World Bank, giving
them regional autonomy in creating
funding for strategic regional
infrastructure projects. Continuing
infrastructure investment across
Asia is hoped to be fast tracked with
access to these funds which augers
well for the construction industry as
a whole.
ASIA Construction Cost Relativities
Q1, 2015
Hong Kong
157
Macau
133
Beijing
91
Shanghai
90
Guangzhou
85
Shenzhen
80
2015 Forecasted GDP Growth
Country
2014%
2015%
2016%
Bangladesh
6.21
6.40
6.76
Brunei Darussalam
5.30
2.99
3.38
Cambodia
7.18
7.31
7.34
China
7.38
7.09
6.84
Hong Kong SAR
3.00
3.25
3.50
India
5.63
6.35
6.46
Indonesia
5.16
5.49
5.80
Japan
0.89
0.83
0.84
Korea
3.73
3.97
3.99
Lao P.D.R.
7.37
7.23
7.66
Malaysia
5.90
5.20
5.00
Myanmar
8.50
8.50
8.25
Philippines
6.24
6.27
5.98
Singapore
2.96
3.04
2.95
Sri Lanka
7.00
6.50
6.50
Taiwan Province
of China
3.49
3.84
4.18
Thailand
0.96
4.62
4.40
Vietnam
5.50
5.60
5.70
RLB Construction Market Activity Model
Asia - Growth Sectors vs Decline Sectors
NUMBER OF CITIES
10
9
8
7
6
5
4
3
2
1
0
GROWTH
HOUSES
APARTMENTS
DECLINE
OFFICES
INDUSTRIAL
RETAIL
HOTEL
CIVIL
Rider Levett Bucknall | International Report – First Quarter 2015
25
Location Intelligence
ASIA
Beijing
Chengdu
Beijing’s economic growth has
remained steady with GDP in the
3Q 2014 growing by 7.3% year-onyear which was slightly higher by
0.1% than in 2Q 2014. Fixed assets
investment grew 6.9% year-on-year
while the Consumer Price Index in the
3Q 2014 registered a slight increase
of 1.9% year-on-year. Beijing’s
economy is indeed cooling down
which is in line with Chinese leaders'
plans for a controlled slowdown.
The office market still has the lowest
vacancy level across China due to
under-supply. Rents appreciated for
the second consecutive quarter in
3Q 2014. However, as supply is
expected to surge significantly next
year, the rising trend will reverse in
1Q 2015. On the other hand, in the
retail sector rental growth has slowed
down due to relatively weak demand
for luxurious consumer goods.
The residential market remains weak
in terms of transaction volumes and
prices, as many buyers take on a
wait-and-see approach due to the
uncertainty over the future direction
of the market. Beijing’s government
will continue to control the capital’s
residential market with taxation,
credit tightening and purchaserestriction policies, hence property
prices are expected to drop further.
In addition, leasing demand from
expatriates has weakened. Rents
are set to decrease as a result of the
tightening leasing budget of foreign
companies.
The Chinese government finally
approved the US$3.25 billion
Universal Studios movie theme
park, Universal Beijing. To be built
in Tongzhou, an eastern suburb of
Beijing, after 13 years of negotiation
and planning it will be the biggest
park Universal has ever built. It is
expected to open in 2019. The Initial
stage is planned to be built with an
area of 300 acres and it is expected
to expand to 1,000 acres when all
stages are complete. The park will be
jointly owned by a consortium of four
Chinese state-owned companies and
Universal Parks & Resorts.
26
The new tallest building in Beijing
“Zhongguo Zun”, designed by TFP
Farrells, KPF and BIAD and located
in eastern Beijing at the heart of the
new CBD extension, will be over 120
storeys and more than 500 metres in
height. Being part of the 30-hectare
master plan at the core of the
district, the building accommodates
2 million m2 of office space, six-star
hotels, luxury service apartments and
high-end retail that connects to the
existing metro station and adjacent
shopping malls. The “Zhongguo Zun”
is expected to be complete in 2018.
Tender prices in Beijing have
remained stable but with the
workload stalling, contractors are
more willing to offer discounts under
mounting competition. In addition to
this, the costs of reinforcement bars
are still at a low level, while prices of
other building materials and labour
costs have remained relative stable.
Tender prices are expected to face
downward pressure in the next few
months, before starting to pick up in
late 2015.
Although China’s GDP growth
has slowed down, the economy
of Chengdu has remained stable.
According to Chengdu Statistics
Bureau, Chengdu’s GDP in the 3Q
of 2014 increased 9.03% when
compared with last year, which was
0.55% higher than the nationwide
GDP growth. Chengdu’s Consumer
Price Index (CPI) increased 1.30% in
the 3Q of 2014 and the increment
was lower than the national CPI by
0.67%.
In October 2014, the 15th Western
China International Fair (WCIF) was
held in Chengdu. The WCIF serves as
an important platform for investment
promotion, trade cooperation and
diplomatic service in western China.
In 2014, a number of prominent
international guests such as U. S.
first lady Michelle Obama and the
Chancellor of Germany, Angela
Merkel visited Chengdu. These visits
have enhanced the global image
of Chengdu and strengthened its
position as an important city in
Western China.
In 2014, the Chengdu government
supplied about 240.7 hectares of
land for residential development
and 216 hectares for commercial
use, representing an annual increase
of 10% and 33% respectively. Land
prices and turnovers have declined
compared with the same period last
year. According to the China Index
Academy, in the first three quarters
of 2014, land transaction value has
declined approximately 20% on a
year-on-year basis.
In October 2014, Tianfu Xinqu
district, with an area of 1,578 km2,
was approved as a new national
development district. The largest city
park in Chengdu will be constructed
in the core of Tianfu Xinqu, which will
be a new town with IT, commercial,
business, cultural and administration
centres. It will serve as the link
between Western China and the
world.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
ASIA
Lotte Group is developing
their first project in Chengdu, a
540,000 m2 complex comprising
residential, office, hotel, cultural and
entertainment facilities. Chengdu
Joy City is being developed by
COFCO Property (Group) with a total
construction floor area of 330,000
m2, comprising shopping, dining,
entertainment and office facilities.
According to Chengdu Urban and
Rural Construction Commission the
total floor area of projects under
construction in Chengdu from
January to July 2014 was 42 million
m2, including 26.7 million m2 for
residential and 15.3 million m2 for
others. The total construction floor
area has decreased 10.09% compared
to the same period last year.
Chengdu’s labour cost increased by
6.8% on an annual basis in 2014. The
market prices of ready mix concrete
and steel in September 2014 declined
by 1.42% and 25% respectively
comparing with the prices in January
2014.
Due to the slowdown in GDP growth,
development activities in Chengdu
are forecast to decline in 2015.
Although current tender prices
remains stable, it is expected that
prices will face downward pressure in
the coming few quarters.
Guangzhou
Hong Kong
Guangzhou’s economy has grown
steadily from the 1Q 2014. GDP for
Q3 2014 was about RMB 1.2 trillion
and grew by 8.5% year-on-year. Fixed
asset investment, retail sales and
exports posted annualised growth of
14.2%, 12.5% and 19.5% respectively
in 3Q 2014 – all higher than figures
recorded in the first half of the year.
CPI in the 3Q 2014 rose by 2.4%. The
economic outlook is still optimistic
though not as strong as previous
years.
Hong Kong’s economy grew
moderately by 2.7% year-on-year in
real terms in the 3Q 2014, compared
with the 1.8% increase in the 2Q 2014.
On a seasonally adjusted quarter-toquarter comparison basis, real GDP
increased in the 3Q 2014 by 1.7%
over the 2Q 2014. According to the
Composite Consumer Price Index,
overall consumer prices rose by
5.2% in October 2014 over the same
month a year earlier, higher than
the corresponding increase of 6.6%
in September 2014. The seasonally
adjusted unemployment rate stood at
3.3% in September to November 2014,
same as that in August to October
2014. The under employment rate
increased from 1.5% in August to
October 2014 to 1.6% in September to
November 2014.
The municipal government has
identified 136 projects currently
undertaken in Guangzhou for close
monitoring. Significant projects
include eleven underground railway
lines, four incinerators, Phase 2 of
China Mobile’s southern operation
base, Alibaba’s South China logistic
centre, Tencent’s South China
e-commerce operation headquarters,
three newly built or extensions to
hospitals, the infrastructure and
advance works for the “Guangzhou
Financial Centre”, a new 7.5 km2 CBD.
The government’s curb on home
prices has been impacting upon the
property market and it has taken its
toll. Real estate and land transactions
have dwindled significantly and
the related tax income which used
to be a major contribution to the
government has tapered off. The
government has been stalling earlier
plans for fixed asset investment amid
a shortage of capital. The contraction
in property and land sales, together
with downsized government
investment, will drag down the level
of construction activities in the near
term. The government however has
made announcements to launch
extensive land auctions by the end of
2014 – an effort to boost its income
- yielding better prospects from the
construction sector around mid2015. Concrete and reinforcement
supply costs have fallen by 5% and
10% respectively while labour costs
have remained stable since 1Q 2014.
Tender price movement is forecast to
dip to 2% by the first half of 2015.
Hong Kong’s economic activities
have been showing some signs of
mild slowdown in recent months
especially in the retail sector which
may have some dampening effect
on investment sentiment. With the
government’s determination in
maintaining a steady supply of land for
private developments, the impact of a
weaker economy on the construction
industry will not be very significant.
On the other hand, the delay in
funding approval for a large number
of public projects by the Legislative
Council since early this year will have
a substantial impact on the workload
of the construction industry in the
medium term if the situation does not
improve quickly. Nevertheless, the
construction industry is currently at
the peak of output thanks to increased
public expenditure in infrastructure
works as well as public buildings.
The shortage of skilled workers and
professionals is still a major concern,
but the pressure on tender prices has
been mitigated by stable material
prices to a certain extent.
RLB’s Tender Price Index, which
measures tender price movements of
builder’s works in the private sector in
Hong Kong, increased by 1.5% in tender
prices in the 3Q 2014. On a year-onyear basis, the increase was 8.7%.
On the whole, it is forecast that the
increase in tender prices will gradually
become more moderate towards the
later part of 2015.
Rider Levett Bucknall | International Report – First Quarter 2015
27
Jockey Club Innovation Tower, The Hong Kong Polytechnic University, Hong Kong
Architect: Zaha Hadid Architects
Location Intelligence
ASIA
Ho Chi Minh City
Vietnam’s economic growth in Q3
2014 expanded 6.2% compared with
the same quarter of the previous
year. It is a gradual increase from
5.42% in 2Q 2014 and 5.09% in
1Q 2014. Support from a robust
manufacturing sector and export
demand is assisting a slowly
recovering economy as the domestic
economic markets deal with slowing
inflation and investment growth.
For 2015, the government is targeting
Vietnam's GDP to rise to 6.2%, up
from a projected 5.8% for 2014.
In 2014, the annual inflation rate
decreased from 3.6% in September to
3.2% in October, which remains well
below the government's initial target
of 5.0%. In the January-September
period, the Consumer Price Index
(CPI) rate stood at 2.3%, the lowest
nine-month inflation rate in the past
decade. The government is expecting
the inflation rate to end below 3.0%
for 2014 while in 2015, the average
inflation rate is forecast to accelerate
to 6.8%.
While Vietnam's central bank had cut
its policy interest rates twice in 2014
to encourage lending, credit growth
was at 7.85% at the start of the 4Q
2014 from the end of 2013, compared
with a goal of 12.0%-14.0% for 2014.
The Official Development Assistance
(ODA) is the World Bank’s assistance
program of foreign aid to Vietnam
since 1993. The construction market
continues to see growth that is
driven by ODA in infrastructure.
The majority of the funds to date
have come from loans from foreign
governments or international
agencies such as the Japan Bank of
International Cooperation and the
Asian Development Bank. Vietnam
expects to disburse about $US 3
billion in untied ODA funding annually
from 2011 to 2015. Sectors prioritized
for ODA funding are primarily in
infrastructure construction. It is
expected that more Foreign Direct
Investment (FDI) will start driving
growth within the commercial
building markets at the end of 2015.
Domestic funded development is
predicted to remain flat until 2016.
While South Korea is Vietnam’s
biggest foreign investor, Singapore
and Japan are the top two
investors into the real estate sector.
Singapore's Keppel Land Vietnam
had increased its ownership to 98.0%
in The Estella apartment project in
Ho Chi Minh City. Notable property
projects in 2014 include the US$300
million Alma Resort in Central Khanh
Hoa Province by Israel’s Alma Group.
The anticipated US$4 billion South
Hoi An integrated casino resort
in central Quang Nam province is
slated to commence construction
in mid-2015. The project is a joint
development between Vietnam's Vina
Capital and another foreign project
investor, and will comprise of a 500room five star hotel, villas and gaming
facilities on a 1,000 hectare site.
Notwithstanding geo-political
tensions between Vietnam and China
over the parking of a Chinese oil rig
in contested South China Sea waters
near Vietnam in May 2014, foreign
investors continue to have an interest
in the Vietnam construction market.
Foreign Direct Investment (FDI)
increased nearly 6.0% to US$10.2
billion in the first three quarters of
2014 with Ho Chi Minh City being
the largest beneficiary. The building
and construction industry increased
6.4% with the real-estate business
and construction gaining over
US$1.22 billion and US$1.03 billion
respectively. More Foreign Invested
Enterprises (FIEs) are encouraged
with the support of Vietnam's new
Land Law and Construction Law
which take effect from 2014 and 2015
respectively.
Barring any unforeseen market
conditions, building tender prices in
Ho Chi Minh City are anticipated to
increase by 3.0% to 6.0% for 2015.
Rider Levett Bucknall | International Report – First Quarter 2015
29
Location Intelligence
ASIA
Jakarta
Indonesia’s GDP growth slowed
further to 5.01% year-on-year (y-o-y)
in 3Q 2014, the slowest rate since
2009. It is predicted to drop slightly
below 5.0% in 4Q 2014. Growth has
been constrained in 2014 after the
central bank raised interest rates in
2013 to restrain domestic demand,
rein in both inflation and the current
account deficit together with a ban
on exporting unprocessed mineral
ores. Inflation is expected to be
between 3.5%-5.5% for full year 2014.
Accelerating building infrastructure
development for electricity
generation and transmission, ports,
airports and roads are the new
government's priority to create
more fiscal room for economic and
social development. Indonesia’s
dependence on imported fuel must
be addressed by building local oil
refineries. President Widodo pledged
the construction and expansion of
24 integrated seaports across the
archipelago, the development of toll
roads along the shore of Java and
the construction of 35,000 megawatt
power plants during his 5-year
presidential term.
In 4Q 2014, Indonesia's new
government under President Widodo
raised fuel prices by nearly 31.0%.
This freed up state budget by more
than 100 trillion rupiah (US$ 8.2
billion) and 16 trillion rupiah (US$1.3
billion) to invest in the growth of
infrastructure facilities and other
productive sectors respectively. The
nation is projected to have a faster
economic growth of 5.8% for 2015
from an initial forecast of between
5.2-5.3%, as well as a full-year 2014
inflation of 7.3% after taking into
account the fuel price hike. The fuel
price hike is expected to further
boost confidence among foreign
investors in the new government
to pursue an over 7.0% economic
growth within 2 years.
Indonesia's construction sector
grew 6.28% y-o-y in 3Q 2014, down
slightly from 6.59% y-o-y in Q2
2014. Several state-funded projects
which commenced in 4Q 2014
30
include the IDR2 trillion (US$165
million) airport railway project that
will connect Greater Jakarta to
Soekarno-Hatta airport. It is expected
to be completed by the end of 2015.
State-run construction firm Waskita
Karya allocated nearly IDR600 billion
(US$49.27 million) in the form of
cash and assets including machinery
and building for the Bekasi-CawangKampung Melayu toll road project.
The 100% precast concrete toll road,
which costs an estimated IDR5 trillion
(US$418 million) is scheduled to be
completed in 2016.
Property prices in Indonesia are
expected to rise in early 2015 as
higher subsidized fuel prices and
higher bank interest rates imply
greater construction (local labour,
local materials and transportation)
costs and increased borrowing costs,
leading property developers to raise
sales prices to offset losses. There
is caution of a multiplier effect on
inflation that trickles down to the
lower income households who will
have declining purchasing power by
up to 30.0%.
Indonesia tightened up restrictions
on foreign investments in local
businesses. Foreign ownership is
limited to 55.0% in sectors involving
construction consulting, design and
architectural services and engineering
services. While it is believed that
Indonesian construction workers will
now have a higher competitive value
in the ASEAN region, it also makes
it difficult for individual ASEAN job
seekers to find job opportunities
in Indonesia. The country further
announced it would terminate its
Bilateral Investment Treaty (BIT) with
the Netherlands from 1 July 2015.
Within Indonesia, Jakarta introduced
new procedures for securing a
Construction Services License (Ijin
Usaha Jasa Konstruksi or IUJK) to
provide construction services as
planners, contractors or supervisors.
The IUJK has a three year validity and
can be extended.
Barring any unforeseen market
conditions, building costs are
anticipated to increase by 1.0%-3.0%
in 2015.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
ASIA
Kuala Lumpur
Malaysia's economy grew at its
slowest pace during the 3Q 2014, as
annual growth slipped to 5.6% from
a revised estimate of 6.5% growth
in 2Q 2014, with exports struggling
against a fragile global economy.
Along with the ongoing 10th Malaysia
Plan, Economic Transformation
Programme (ETP) and Government
Transformation Programme (GTP),
the Malaysian economy is expected
to sustain its growth momentum
in 2015. The Ministry of Finance
(MOF) kept its forecast for full year
growth between 5.5-6.0% in 2014 and
between 5.0-6.0% in 2015. Inflation
is expected to remain within 3.04.0% for 2014. It is projected to rise
between 4.0-5.0% in 2015 before
stabilizing toward an average of 3.0%
in 2016, due to subdued external
price pressures and moderate
domestic demand.
In conjunction with the 2015 Budget,
Malaysia’s revised 6.0% goods and
services tax (GST) will take effect
in April 2015 which is expected to
raise RM21.7 billion in revenue. In 4Q
2014, the government abolished fuel
subsidies where prices of petrol and
diesel will be fixed on a managed
float mechanism that will move
in tandem with global oil prices.
Malaysia is estimated to save RM20
billion annually from the fuel subsidy
removal alone. The government
will continue to shrink its subsidy
program where total subsidies are
expected to be cut around 7.0%,
from RM40.6 billion in 2014 to RM37.7
billion in 2015. The nation aims to
reduce the fiscal deficit from an
expected 3.5% of GDP for 2014 to
3.0% of GDP in 2015, while ensuring
that its public debt does not surpass
a limit of 55.0% of GDP.
The Malaysian government is
planning to implement infrastructure
investment worth RM75 billion
(US$23 billion) in a bid to boost
growth amid concerns of a curb
in private spending arising from
subsidy cuts and impending Goods
and Services Tax. Such infrastructure
investments include highways and
a rail system. The most notable of
this investment is the construction of
the Pan Borneo Highway spanning
the two East Malaysian states of
Sabah and Sarawak with a total
length of 1,663km. The other notable
investments are seven new highways
worth RM21 billion (US$6.19 billion)
surrounding the capital Kuala
Lumpur.
The construction sector recorded
a strong growth of 9.6% in the 3Q
2014. It is anticipated to expand
with a growth rate of 10.7% in 2015.
This is supported by oil and gas
(O&G) related projects such as
the Refinery and Petrochemical
Integrated Development (RAPID)
and ongoing transportation-related
infrastructure projects. Demand
for affordable housing will also
support the construction industry.
Construction costs are projected to
continue trending upwards due to the
increased volume of work, the rise of
transportation costs from the removal
of fuel subsidy, the implementation of
GST and the projected rise in inflation
due to domestic cost factors.
Barring any unforeseen market
conditions, building tender prices
in Kuala Lumpur are anticipated to
increase by 3.5% - 4.0% in 2015.
Rider Levett Bucknall | International Report – First Quarter 2015
31
Location Intelligence
ASIA
Macau
Shanghai
According to the Statistics and
Census Service of the Macau
government, GDP for the 3Q 2014
decreased by 2.1% year-on-year in
real terms. The unemployment rate
for August to October 2014 stood
at 1.7%, same as that in July to
September 2014. The average daily
wage of construction workers was
MOP672 in the 3Q 2014, increased by
2.3% on a quarter-to-quarter basis.
The average daily wages of skilled
and semi-skilled workers increased by
2.4% to MOP677 and that of unskilled
workers rose by 0.8% to MOP390.
Since January 2014, Shanghai’s
economy has been in a stable
condition. Both the industry output
and consumer spending have shown
signs of improvement at a slow but
steady pace.
Major projects under construction
include the expansion of the six
major gaming resorts and the Light
Rapid Transit (LRT) System which
commenced construction in 2012. On
completion of Phase 1 in 2016, the
LRT will connect the border entryexit points at the Macau Peninsula
and Taipa with major residential and
tourist areas.
In the past few months, there has
been a slump in gaming revenue,
with the Gaming Inspection and
Coordination Bureau recording a fall
of 23.2% year-on-year in November
2014. Home prices have also started
to decline, and the fall is expected
to continue in the coming months.
Whilst the construction industry is
still heavily involved in the six major
gaming resorts which are on target to
be completed in late 2015 and 2016,
the weakening economy will result in
a reduced workload after completion
of these projects and a milder rise in
construction costs.
32
In the first three quarters of 2014,
the GDP for the Shanghai area
was RMB 1,661 billion which was
7.0% greater than that in the same
period last year. It is predicted that
the overall increase of GDP in 2014
will not exceed 7%. The increase
of CPI for the period of January to
September 2014 was 2.7% comparing
to the same period last year, and it
is estimated that the annual increase
will not be more than 3%.
During the period of January to
September 2014, a total amount of
RMB 217.55 billion was invested in
local property developments which
was an 8.2% increase compared
to the same period last year, and
represented about 55.6% of the
overall investment to fixed assets.
Based on the types of property,
a total of RMB122.691 billion was
invested in residential developments,
which was an increase of 9.6%
comparing to the same period
last year. Total amounts of RMB
33.07billion and RMB 30.823 billion
were invested in office buildings and
commercial buildings respectively,
which represented increases of 14.8%
and 10.8% for the respective property
type compared with the same period
last year.
There were 85 major projects under
construction in Shanghai in 2014,
including the development of an
engine factory for commercial
aircraft, a shipbuilding facility on
Changxing Island, the Shanghai
Disney Resort and the Shanghai
Tower skyscraper, the construction
of the fourth runway at Pudong
International Airport, the expansion
of Shanghai No. 1 People's Hospital,
the second phase of SAIC automobile
research and development centre,
the second phase of the Chinese
Academy of Science Pudong Branch,
and the construction of the National
Convention and Exhibition Centre in
Hongqiao Business District.
Traffic projects include the
renovation of Terminal 1 building
of Pudong airport, the expansion
of China Eastern Airlines' base at
Hongqiao airport, the extension of
Highway S6 and Jiading-Minhang
Expressway, and the third phase of
Metro lines 9, 13 and 17. The city is
also building Huangpu River tunnels
for Zhoujiazui Road, Hongmei Road,
Jinhai Road and Changjiang Road.
Tender prices have not changed
significantly in 2014. It is expected
that the tender prices will remain
relatively stable in the next 12 months
with mild decreases in the range of
2 - 3%.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
ASIA
Shenzhen
Singapore
Shenzhen’s GDP growth in 1H 2014
was 8% compared with the same
period last year. This percentage
was slightly higher than that of the
1Q 2014, and was also slightly better
than the total GDP growth of 7.5%
nationwide. The city remains as one
of the top ten fastest growing cities
in China.
Singapore’s economy grew by 2.8%
y-o-y in 3Q 2014, the same pace of
growth in the preceding quarter. The
construction sector grew by 1.7%
on a y-o-y basis, a sharp slowdown
from the 3.7% growth in the previous
quarter. This is due to a fall in private
construction output, reflecting a
weaker market across the residential,
commercial and industrial sectors.
The Ministry of Trade and Industry
(MTI) expects the economy to grow
by around 3.0% for the whole of 2014,
and between 2-4% in 2015.
The structure of the 600-metre Ping
An Finance Centre will be toppedout in early 2015. The excavation of
the 300-metre adjoining hotel tower
has already commenced. The entire
development is scheduled to be
completed in 2017 which will certainly
add some synergy to the current well
planned CBD in Futian district. China
Resources Da Chong’s 3,000,000m2
redevelopment is ongoing in full
steam. There are also several major
developments in the new CBD in Qian
Hai area of Shenzhen. The number of
land parcels available for auction is
being controlled, enabling a steady
supply of office and commercial floor
areas in a smooth manner.
The construction market is stable
at the moment. It is not overheated
and contractors are eager to take on
more projects as the Government's
controlling measures on cooling
down the property market persist.
Material prices have generally been
declining, in particular the price
of steel bar reinforcement while
labour costs have been rising mildly,
resulting in a rather flat tender price
movement.
The CPI-All Items inflation eased
to 0.6% in September from 0.9%
in August and 1.2% in July, mainly
reflecting a sharper decline in
private road transport costs along
with a more moderate increase
in services fees and a further
decline in accommodation costs.
The government's introduction of
enhanced medical subsidies, including
the Pioneer Generation Package
(PGP) also contributed to the
slowdown of inflation.
The Monetary Authority of Singapore
(MAS) Core Inflation measure, which
excludes the costs of accommodation
and private road transport, edged
down to 1.9% in September from
2.1% in August. MAS Core Inflation is
projected to stay elevated at 2-2.5%
in 2014, down from its earlier forecast
of 2-3%. CPI-All Items inflation is
projected to come in at 1-1.5% in 2014.
For 2015, it is projected at 0.5-1.5%,
reflecting also the impact of muted
housing rentals.
Amidst the weak global market,
Singapore Tourism Board data
shows that the tourism industry
has witnessed a strong and rapid
annual growth rate of 10% in tourism
receipts and 6.6% annual growth in
visitor arrivals in the past decade.
Construction works for the notable
S$1.57 billion Changi Airport’s Project
Jewel and expansion works for
Terminal 1 are slated to start at the
end of 2014 and be completed by the
end of 2018. With the continuity of a
resilient domestic demand and strong
growth in the number of international
tourists, additional infrastructure is
being planned and built to support
the gross domestic product and job
market.
Labour productivity for construction
fell 1.3% in the first half of 2014,
despite efforts by the Ministry of
Manpower (MOM) to incentivise firms
to invest in more skilled workers and
better equipment, through training
programmes and grants. This is in
line with overall efforts to achieve
quality growth driven by productivity
improvements. The construction
sector which has contracted for two
consecutive quarters, continues to
struggle with higher foreign worker
levies, amidst a slowing property
market and delays in public projects.
Tender prices remain competitive
into 2015 despite construction costs
continuing to rise following the
Government’s introduction of further
regulations to improve construction
productivity.
Based on current trends and in
the absence of any extraneous
circumstances, RLB is presently
forecasting building costs to increase
by 1-3% on average for 2015.
Rider Levett Bucknall | International Report – First Quarter 2015
33
Debenhams, United Kingdom
Architect: Ingenium Archial / Archial NORR
Market Intelligence
Europe
The UK is gaining momentum but
parts of the Euro Area are lagging
behind. The UK’s forecast GDP
growth for 2014 being revised from
2.90% to 3.21% while countries like
Cyprus at -3.22%, Italy at -0.17% and
Finland at -0.19% have had negative
growth. Low growth has been seen
in France at 0.37%, the Netherlands
at 0.60%, Portugal at 0.99%,
Belgium at 0.98 % and Austria at 1.01
%. While others in the Euro Area are
showing more positive signs such
as Ireland at 3.62%, Luxemburg at
2.69% and Latvia at 2.66%.
The Commonwealth of Independent
States has seen a 0.75% decline in
GDP for 2014 while the Euro Area
is forecasted to grow by 0.83%,
an increase on the previous two
negative growth years. The Euro
Area remains in a slowly recovering
state, forecasting GDP growth
at 1.3 and 1.7% for 2015 and 2016
respectively.
For countries in the European
Union there are varying figures
across countries. Croatia and Serbia
have both had negative growth at
(0.82%) and (0.54%) respectively
while Poland at 3.25%, Turkey at
3.03%, Lithuania at 2.98% and
Iceland 2.91% are helping to bolster
the figures for the European Union.
While most of European economies
look to changing fiscal policies to
strengthen their economies, the
economic outlook is improving.
The bourgeoning anti austerity
movement is gaining momentum,
as recently witnessed in Greece,
and may force renegotiation of
debt repayment timings with the
European Central Bank, causing
implications for the troika of debtor
countries.
The German construction sector is
still growing but at a slower pace
than in recent years. There are
positive signs in the Netherlands
and Spain where the hardest times
appear to be over, as these two
countries showed improvement
throughout the whole of 2014.
France and Italy are not recovering
as fast as expected during 2014. The
British market keeps on improving,
due in part to the growth in building
permits for non-residential buildings,
indicating a potential strong pipeline
of future work.
RLB Construction Market Activity Model
Europe - Growth Sectors vs Decline Sectors
NUMBER OF CITIES
12
10
Europe Construction Cost Relativities
Q1, 2015
London
157
Bristol
132
Manchester
122
Birmingham
118
2015 Forecasted GDP Growth
Country
2014%
2015%
Austria
1.01
1.86
1.66
Belgium
0.98
1.40
1.50
Bulgaria
2016%
1.40
2.00
2.50
Croatia
(0.82)
0.50
1.40
Cyprus
(3.22)
0.43
1.56
Czech Republic
2.49
2.53
2.44
Denmark
1.54
1.80
1.86
Estonia
1.23
2.48
3.45
Finland
(0.19)
0.92
1.59
France
0.37
0.95
1.55
Germany
1.39
1.45
1.81
Greece
0.60
2.87
3.71
Hungary
2.80
2.30
1.80
Iceland
2.91
3.03
2.70
2.54
Ireland
3.62
3.05
(0.17)
0.85
1.30
2.66
3.18
3.39
Lithuania
2.98
3.35
3.66
Luxembourg
2.69
1.90
2.14
Malta
2.20
2.23
2.02
Netherlands
0.60
1.43
1.56
Norway
1.80
1.86
1.99
Poland
3.25
3.31
3.50
Portugal
0.99
1.55
1.74
Romania
2.40
2.52
2.80
Italy
Latvia
San Marino
(0.01)
2.18
2.41
Serbia
(0.54)
1.04
1.50
Slovakia
2.35
2.65
2.90
Slovenia
1.44
1.39
1.53
Spain
1.31
1.69
1.79
2.72
Sweden
2.11
2.74
Switzerland
1.25
1.60
2.01
Turkey
3.03
3.01
3.74
United Kingdom
3.21
2.71
2.44
Russia
0.24
0.51
1.50
Kazakhstan
4.61
4.71
4.84
6.00
Commonwealth of
Independent States
8
6
4
2
0
GROWTH
HOUSES
APARTMENTS
DECLINE
OFFICES
INDUSTRIAL
RETAIL
HOTEL
CIVIL
Uzbekistan
7.00
6.50
Azerbaijan
4.47
4.32
3.47
Turkmenistan
10.12
11.46
9.89
4.00
Ukraine
(6.50)
1.00
Belarus
0.94
1.48
2.05
Georgia
5.03
5.00
5.04
3.70
Armenia
3.18
3.50
Tajikistan
6.00
6.00
5.75
Kyrgyz Republic
4.10
4.93
5.02
Moldova
1.80
3.50
3.80
Rider Levett Bucknall | International Report – First Quarter 2015
35
Location Intelligence
Europe
Amsterdam
Birmingham
Due to new sustainability regulations,
developers are requesting permits
before the end of 2014. For housing,
the "energy norm" will be 33%
tougher than before. Sustainability
regulations will change extensively in
2015 for many commercial building
types. The next step will be the 2020
"energy norm" that provides that new
buildings cannot use more energy
than they produce themselves.
With more transformations of existing
buildings due to real estate market
having changing needs from 20 years
ago, we are seeing office buildings
being redeveloped into housing or
hotels.
Schiphol airport is in the planning
phase for the redevelopment of
the existing airport to position it
as a significant hub. After a large
security renovation project that split
the ingoing and outgoing travellers,
Schiphol is now working on extending
the airport to increase the capacity
with a complete new area (more than
100,000 m2). This project is in its
master plan phase and will be worked
on for the next few years to come.
Amsterdam Metro is undertaking
significant projects. The new North
South line being constructed under
the existing city is expected to be
completed in 2017. Concurrently the
city is working on the renovation of
the existing East line. It requires an
upgrade after 40 years to meet the
new standard of the new North South
line. This project is expected to be
ready in 2016-2017.
After a few poor years in the Dutch
building industry the forecast is
looking brighter for 2015 and 2016.
Most recent indications (October
2014) show a growth of 4.0% for
2015 and 3.5% for 2016 for the whole
sector. The residential sector is
forecasted for the largest increase
of 7.0% for 2015 and 6.5% for
2016 which will mostly come from
new built residential projects. The
commercial sector forecasts also
36
shows an increase of 2.5% for 2015
and 2.0% for 2016. There is still
significant vacant space in office and
education buildings around the city,
but some of the growth will come
from new development in the health
sector.
Infrastructure has had two years
of decline with a total decrease of
10.0%. The Government is planning to
have more projects underway during
the next two years which results in
a forecast growth of 1.0% for 2015
and 2.0% for 2016. Most of the work
will be concentrated around the
Randstad region.
During the period 2009 to 2013,
employment has decreased
extensively. The forecast growth in
the market will have a positive effect
on the employment in the building
industry for the coming years.
Berlin
Current global political and economic
upheavals and associated risks
have also dampened the up to now
high levels of economic growth and
exports within Germany. The Berlin
Chamber of Commerce Economic
Index has fallen to the level of last
autumn, but this is not seen as a
stagnation or recession.
Currently the area around Berlin main
station (Hauptbahnhof) is surrounded
by construction work: several hotel
and office buildings are being
constructed or planned, among which
is John F Kennedy House, a ¤70m
office block. The new ¤250m tower
building "Upper West" near Zoo
Station has commenced construction.
The overall rate of inflation in
Germany is still very low, and
stagnating at present at around 1%.
Construction costs however have
been rising more strongly at around
1.7%, with fit out trades at around 2.4
– 2.7%, while shell and core trades at
much lower levels of around 0.8 %.
The midlands area continues to show
signs of recovery, albeit that many
proposals need to be underpinned
with pre-lets. The retail market is
also showing signs of a growing
confidence with many schemes
being resurrected. However with
the pressure within the retail sector
to maximise cashflows, greater
emphasis is being placed on mixed
use developments to spread retailing
revenue exposure.
Small churn and micro developments
are being created to maximise
and improve existing assets. The
university and education sectors
continue to develop student housing,
teaching and research facilities.
Fee earning levels continue to be
competitive with the demands on
delivery more intense and the scope
detail being carefully challenged.
The shortage of new Grade A office
space is feeding the development
and refurbishment pipeline such as
the developments at Paradise Circus,
Arena Central and 55 Colmore Row.
With the increase in tendering
activities, contractors are carefully
reviewing the risk profile of each
project including contract conditions,
the tender process, construction risk
profile and programme, before they
commit to return a tender or enter
the tender process.
Feedback through the supply
chain continues to indicate that
the previously perceived skills
shortage is developing, together
with materials, plant and equipment
shortages which may drive up costs
and hinder programme delivery. This
is specifically evident with the early
trades of brick/concrete works and
ground works.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
Europe
Bristol
The Universities in and around
Birmingham have, or are in the
process of, delivering major projects.
Warwick University with JLR &
TMETC are developing a 33,000m2
research facility, Aston University has
recently resurrected a redevelopment
and tower scheme as well as student
accommodation blocks are also under
consideration.
The retail sector is showing continued
signs of investment as several retail
schemes are on the drawing board
as either new ventures or previously
shelved schemes being resurrected.
Lichfield has various scheme options
being investigated. There are also
signs that residential schemes
are being dusted off and new
opportunities developed, primarily in
the city centre apartment schemes.
With the squeeze on skilled resources
following the skills loss fallout from
the recession and the more selective
guard of the contractors, which
combined with a shortage of skilled
suitable sub-contractors there is a
general expectation that tender price
inflation will continue to climb into
2015 and 2016.
The skills shortage in each faculty
of the construction process will also
affect the ability to deliver successful
schemes both professionally and
during construction and delivery.
There is a likely increase in the
number of failures of principle supply
chain members and contractors as
market conditions improve.
The South West market is showing
signs of increasing activity although
it appears to be lagging behind the
rest of the country. There are several
developers moving into the Bristol
market, citing the fact that London is
becoming saturated, improving the
economy locally.
Contractors are becoming
increasingly selective over what
they are prepared to price. With
negotiated tenders they are still
being very cautious and any hint
of significant risk, they are walking
away.
There are several projects converting
offices into residential apartments,
the longer term effect resulting in an
office space shortage.
Shortages of bricks / blocks, in
particular, and other materials
are causing project lead in times
and programmes to be extended.
Construction resources are becoming
short with brickwork labour only
costs, exceeding budgets available
for contractors, on a regular basis.
Labour has been reported as moving
from project to project to secure
better rates and not even turning
up on projects as more lucrative
deals have been secured elsewhere.
This creates tension on projects
both commercially and with overall
delivery programmes.
The £24 billion Hinkley Point power
station is now moving forward
causing resourcing issues around
Somerset. Other significant projects
coming to the market will be the
£500 million redevelopment of both
the University of Bristol and the
University of the West of England.
Network Rail is planning a major
investment at Temple Meads where
the surrounding areas are ear marked
for major redevelopments including
the Bristol Arena, new housing and
office / retail projects.
The market will continue to rise
into 2015 but thereafter may well
level off. The political effect of
the 2015 election will potentially
affect construction activity. All
construction sectors are showing
signs of shortages and due to the
magnitude of Hinkley Point , clients
are becoming concerned of the drain
on resources to Somerset.
The consultants market is also
moving with salaries rising, and for
some positions quite dramatically.
Constructions costs are rising and
skill shortages are occurring for
contractors. With professional fees,
however, the market is still fiercely
competitive and well below realistic
levels.
Rider Levett Bucknall | International Report – First Quarter 2015
37
Location Intelligence
Europe
Budapest
Dublin
Budapest and its surrounds, as
the financial and administrational
centre of Hungary, represents the
majority of real estate and property
investment within the country. After
the long recession and stagnation,
signs of growth are beginning to be
seen, although they are weak and
volatile. Annual growth is forecasted
to be between 1-2 % for the next
couple of years.
The volume of output in building
and construction increased by 7.7%
in 1Q 2014. The volume of output in
the residential sector y-o-y up to 2Q
2014 has increased by approximately
30%. This increase was mainly seen
in both the Dublin and the greater
Dublin area followed by the areas
surrounding the other major cities
(Cork & Galway). August 2014
marked one year of continuous
growth across every sector of the
construction industry. Sub-contractor
availability is declining to levels
similar to 2000. A significant rise in
new orders has led to companies
increasing their purchasing
activities and actively seeking
professional positons. Consultants are
experiencing severe staff shortages
across all sectors. There has been
an increase in employment growth
in the construction sector of over
30% compared to levels experienced
in early 2009. Ongoing forecasts
lead to significant improvements
in the construction sector leading
to increased activities. However,
a significant volume of increased
activities are still centred on the
Dublin Commercial and the Greater
Dublin areas. Activity in the other
major cities (Galway and Cork) are
slower in comparison.
The construction sector is dominated
by larger state run investments,
backed by European Union finance
such as state or government
buildings, football stadiums,
railway refurbishments and other
infrastructure developments. The
private sector is still relatively quiet
although a few office buildings are
under construction again. Currently,
no major retail developments are
under way however, two larger (a
few hundred thousand m2) mixed
use developments are in the permit
stage. The commencement of their
construction depends on the stability
of growth within the economy and
the increase of the public buyingpower which is currently lower than
in 2007/08.
TPI decreased from 2008 until 2011
and was stable in 2012 and 2013. A
large number of medium and smaller
size companies ceased or terminated
their operations together with a
few larger companies. Due to the
commencement of state-financed
projects this trend has stopped. The
forecasted growth in tender pricing is
between 2–3% for the next two years.
38
As tender prices have shown
evidence of rising there are
now significant shortages of
tradespersons. With enhanced
programme activities for
multinationals such as Intel, resources
in the services industry are thin
on the ground. All trades are at
full capacity having been severely
depleted in previous years. Currently,
a small return of tradespersons to
Ireland, who were previously abroad,
is being observed. Whilst there is
still caution in terms of the longevity
of the current rise in activities,
tradespersons are experiencing
significant capacity shortfalls.
Professional consultancy firms are
experiencing difficulties in hiring
staff with clear evidence of salary
increases across every professional
consultancy sector.
Significant developments underway
include the re development of the
¤60 million former Bank of Ireland
premises in Dublin City, the new
¤30 million Legal premises in Dublin’s
Commercial District, the new ¤25
million headquarters for Lidl in South
Dublin and the ¤200 million joint
venture between NAMA and various
property developers which consists
of the development of 1,000 houses.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
Europe
Istanbul
London
The key economic data for Turkey in
2014 is GDP is estimated at 3.0% and
inflation (CPI) at 8.9%. A combination
of high inflation and a large current
account deficit has resulted in the
Turkish lira falling in value, and
with the continued rise of the US
dollar this has been problematic for
businesses.
The inflation rate is of concern not
only to businesses, but consumers
and the government as well.
Emerging markets such as Turkey are
highly dependent on foreign capital
inflows and it remains to be seen
how the end of quantitative easing in
the US will impact emerging market
countries such as Turkey. While
the Turkish economy has remained
resilient in the face of ongoing global
economic worries, there remains
significant difficulties for the Turkish
economy to overcome.
However, despite all this, the property
and construction sector continues
to boom in Istanbul with significant
investment in hotels, residential
and commercial developments and
infrastructure projects under way and
many more planned in the pipeline.
The construction of the third
international airport on the European
side of Istanbul and the third bridge
crossing the Bosporus Sea are the
major projects under construction at
the moment. Both projects are key
factors in the country's continuing
expansion of their transport network
capabilities. The third airport is
also significant part of the tourism
strategy to accommodate a greater
number of flights. The construction
of the third airport is a signal that
the government is attempting to
challenge the Gulf States monopoly
of the Middle East passenger
'connecting' flight traffic to the Indian
sub-continent and the Far East. The
continuing expansion of the Metro
system in Istanbul is another example
of the government’s intention to
develop the creaking transport
infrastructure of Istanbul.
The construction market remains
buoyant and certain sections are
faring better than others. The huge
demand from investors to develop
residential and commercial schemes
shows no signs of abating. The
government is fuelling this growth
with the provision of cheap land. This
strategy is driven by the needs of an
ever expanding city population of 16
million people and their continuing
housing needs. The luxury hotel
sector is experiencing significant
investment with three new five star
hotels opening during 2014. Planned
refurbishments of other five star
hotels means that this sector will
continue to grow as Hotel owners
have to refurbish their properties to
keep pace with the newer properties
introduced into the market.
The Turkish lira has depreciated
against the US dollar this year and
this remains a challenge for the local
currency. The currency weakness
coupled with high levels of inflation
add considerable risk to construction
pricing. This risk can be offset by
agreeing to use Euros or US Dollars
as the project currency, however
only large international clients are
willing or able to accept this, and
opportunities are rare.
Construction costs have continued to rise
over this past quarter. This is largely as
a result of the booming housing market,
stronger commercial sector and limited
contractor capacity. The residential
market continues to experience growth
with demand out-stripping supply and
house prices are continuing to rise in
London, largely driven by overseas
investors.
Increased activity in the commercial
sector has continued with an upsurge
in the amount of pre-lets in speculative
developments. Two of the most recent
additions to the London skyline, 122
Leaden Hall Street (the cheese grater)
and 20 Fenchurch Street (The Walkie
Talkie) are 80% and 90% let respectively.
The increase in construction costs is
having an impact upon the viability of
some commercial sector projects and
could affect growth.
Contractors are continuing to be
selective about which projects they
tender for and we continue to see
a trend towards two-stage and
negotiated tendering. Individual trades
are experiencing higher than average
inflation. Material price increases for
curtain walling and cladding have been
encountered. There are labour shortages
within the bricklaying trade and the rise
in demolition and strip out works are all
playing a part.
The second phase of the Battersea
Power Station redevelopment has
been awarded to Skanska. Kings Cross
rents surge by 15% as technology
businesses are being attracted by the
imminent arrival of Google and their £1bn
development in the area. Pharmaceutical
and science businesses are also fighting
for space due to the fast links to
Cambridge, a key research hub and new
medical research centre, the Francis
Crick Institute. The £1bn Northern line
extension has gained final approval and
has been designed to pave the way for
regeneration of the Vauxhall, Nine elms
and Battersea area. This is to include two
new tube stations.
As construction activity continues to
rise in London, it is not a surprise that
construction costs are following suit.
With the order books of the supply chain
following an upward trend, coupled
with a lack in increased labour force or
material production, some elements are
reaching premium levels. Tender prices
are forecast to increase by 5.5% in 2015,
4.75% in 2016, 4.5% in 2017 and 4.0% in
2018.
Rider Levett Bucknall | International Report – First Quarter 2015
39
FC Barcelona, Spain
Architect: ICON Venue Group – Barcelona
Ingenium Archial / Archial NORR – Debenhams
Location Intelligence
Europe
Madrid
Manchester
The construction sector has
slowed down during 2014 and
follows the trend of the previous
years. Rehabilitation construction
work remains at 90-95% of the
levels achieved in 2009, pre GFC.
Residential activity continues to be in
the region of 80-90% of 2009 levels
and infrastructure, industrial and
office sectors are only achieving 80%
of the pre GFC activity. The trend
is positive for all sectors and are
anticipated to rise, but slowly.
The North West continues to
show sustained recovery with the
residential sector the key growth
factor for the region. This has
continued to perform strongly as
private developers continue to bring
schemes to the market. Commercial
sector growth continues to be London
centric however we are seeing a
number of previously shelved retail
developments coming back on
stream in the region along with large
key developments still ongoing. The
North West continues to be the best
performing region for medical and
health projects with strong growth
expected to continue with significant
public health sector spending in the
region and its established position as
a leading research and development
hub.
Except for both the rehabilitation
and residential sectors, in aggregate
terms, construction activity is
anticipated to fall by 10 - 15% during
2014, but forecasted to grow 1-2%
in 2015. The growth in 2015 is
predicted to be seen in the residential
& rehabilitation sectors with a
stabilization in the contraction of
other sectors.
Some of the current projects under
construction include:
• BBVA Bank headquarters tower,
over 90 m high and area of
114,000m2 .
• Banco Popular Data Centre, over
50,000m2.
• Canalejas Centre Complex,
16,000m2 operated by Four
Seasons.
• ¤660 million Wanda Edificio,
España, mixed use development
consisting of hotel, offices,
commercial and residential
Housing prices continue to fall due
to high levels of housing stock and
the difficulties in obtaining finance .
Banks are currently selling their real
estate portfolios, adding to the levels
of residential stock.
The construction market remains in
a similar condition as to our previous
report, with the potential of a slight
recovery. Prices remain constant with
forecasted uplifts of 1.2% to 1.4% over
the next few years.
42
The North West continues to show
tender return costs increasing
with contractors and supply chain
struggling to keep pace with
demand, there is an appreciable skills
shortage across the region and many
companies are now actively recruiting
as they gear up to meet increased
demand. Fees remain tight and with
increasing costs, project delivery
across all sectors remains challenging.
Contractors are now being far
more selective on both the types of
projects and procurement routes they
are willing to bid against meaning
that careful risk management and
procurement selection are ever more
key in successful project outcomes.
Research & Development remains
a key for the region with significant
projects such as the £65 million
University of Liverpool Material
Innovation Factory project announced
and recent completion of the £25
million City labs Development just two
of many noteworthy projects. Works
continue on the £800 million, 20 acre
mixed-use NOMA redevelopment
scheme in Manchester, this is a key
development for the city that involves
the creation of 4,000,000 ft2 of office,
residential, retail, leisure and hotel
space.
Retail development is coming back on
stream with a number of significant
schemes including the £50 million
Barons Quay Development due to
commence on site before the end
of the year. The £100 million Bolton
Wanderers backed Middlebrook
Master Plan has gained approval and
will see a new free sports academy
for up to 500 pupils built next to the
stadium, as well as 200 apartments, a
60-bed hotel and a wealth of offices
and restaurants.
Airport City Manchester remains a key
development for the region with an
£800 million cost to create a globally
connected business destination
located at Manchester Airport
with 5 million ft2. of offices, hotels,
advanced manufacturing, logistics and
warehousing.
Recovery has remained the
watchword in recent quarters whilst
there has been wider fears and
market blips on the back of poor
Eurozone growth and slowing in
global emerging economies. There is
still an entrenched belief that whilst
there may be bumps to contend with,
the construction industry is firmly
engaged in a growth phase and will
continue its recovery at least in the
near term much in line with the wider
UK economy. The IMF predicts the
UK looks set to replace France as the
second largest Eurozone Economy
and round out the year as the fastest
growing G8 economy.
Whilst the previous upward trend
in construction output looks likely
to settle to a more moderate level,
optimism in the industry remains
strong and there is still an appreciable
skills shortage across the sectors.
Many companies are now aggressively
looking to recruit and there is still
a need for the wider economy to
address key areas such as wage
growth however the UK as a whole
appears strongly placed globally and
the construction outlook remains
buoyant.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
Europe
Milan
Moscow
The property sector outlook in
Milan is, at best, bleak. The country,
in general, has had a difficult time
restarting after the 2008 crisis. The
construction industry has had the
opportunity to follow through, but
2014 has proven to be strenuous for
all involved parties, with company
downsizing and bankruptcies
becoming the norm for both
consultants and contractors.
General observations are leading to
the conclusion that prices are quite
unstable at the moment. The overall
conditions in the sector are leading
some to desperate measures, willing
to undercut market prices in order to
move forward until times are better,
hopefully sooner rather than later.
This results in very unstable and
erratic pricing, for which it is difficult
to predict a specific impact.
There are, however, some
isolated discussions of interesting
developments in the Milan area and,
indeed, throughout the peninsula.
Opportunities include mainly retail
and hospitality projects funded by
foreign investors, as well as office
refurbishments for some international
corporations. It is doubtful, though,
that these developments will provide
enough stimulus to restart the local
construction sector as well.
In the past, sentiment was that times
will soon improve, now it appears
that people are resigning themselves
to the fact that this downturn is more
dramatic and longer-lasting than
imagined.
The 2015 Milan EXPO is providing
some slight relief, but the bulk of the
work appears to be in the hands of
specialised international corporations,
with less trickle-down effect than
expected. Timing is tight, with initial
delays and poor initial organisation
taking its toll on the project. Pavilion
construction is being handled
mostly by international corporations
specialised in temporary facilities.
Westfield is planning a large
development in Milan, in a joint
venture with an Italian retail
developer. Westfield is vetting
various types of companies and
has started tendering the design
phase with some local professional
consultants.
The political situation within Russia
is having a significant impact on the
construction industry. Projects are
being put on hold and there is no
doubt that potential foreign investors
are now not considering Russia, at
least in the short term, as a viable
location.
Currently, the only two market
sectors that seem to be stable are
the infrastructure and apartment
sectors. This is due to the
continuing population growth of
Moscow requiring new residential
accommodation either inside the
newly defined city boundaries (the
Western boundary of Moscow has
recently been extended), or in some
cases in areas outside the city.
The single biggest construction
project is the Skolkovo Innovation
Park (Russia's answer to Silicon
Valley). The development comprises
a university, a technology innovation
centre, a transportation hub, housing
on a grand scale and associated
infrastructure works.
As the Ruble continues its downward
slide, the effect on Ruble funded
projects is enormous. Most materials
are increasing more or less at the
same rate as the Ruble is devaluing.
Whereas the projects funded in Euros
or US Dollars are largely unaffected
by the situation. As far as the tender
prices are concerned it is anticipated
that there will be a short term
reduction (again in terms of Euros) as
the result of both, a reduction in the
volume of work and the reduction in
the contractor's local wages costs,
as wages have significantly reduced
when measured in Euros and of
course upward adjustments will take
much longer to filter through than
with materials. The current climate
remains highly unpredictable and
is dependent on both the political
situation and sanctions levied upon
Russia together with the terms of
trade within Russia which has been
significantly impacted by the fall in
the price of oil.
Rider Levett Bucknall | International Report – First Quarter 2015
43
Location Intelligence
Europe
Sheffield
Thames Valley
Activity and optimism is increasing
throughout Yorkshire however
Sheffield is slightly behind other
larger regional hubs. Construction
costs are rising, driven by an increase
in client activity as confidence is
returning; this is in turn leading to
greater contractor demand. This
combined with a perceived skills
and materials shortage means that
contractors are becoming selective
with the tenders they are bidding,
with some only willing to negotiate or
tender via a two stage approach.
The Thames Valley area is starting
to show signs of recovery. There
has been increased speculative
commercial development over the
last 12 months and schemes that
were shelved during the recession
are starting to move forward again.
This is particularly the case with
residential schemes and premium
town centre office developments. The
development of two significant rail
infrastructure projects in Reading and
Maidenhead has driven the creation
of regional ‘hot spots’ with much of
the commercial development centred
on these two towns.
An increase in client confidence
is leading to an increase in tender
activity. Contractors are looking
more stringently at the risk profile
of schemes, becoming more
selective on the types of projects
and procurement routes they are
prepared to bid for works under.
Feedback through the supply
chain indicates that there may be
a materials, plant and equipment
shortage which could drive costs up
and lengthen programme delivery.
Sheffield Hallam University and the
University of Sheffield remain key
players in the Sheffield market. The
University of Sheffield is in the midst
of an ongoing capital development
programme that has seen significant
investment within the city. Current
key projects include Sheffield Hallam
University’s £30 million “Charles
Street building” and University of
Sheffield’s “The Diamond” project.
The Diamond, for the faculty of
Engineering, will provide in excess of
10,000m2 of teaching space with a
project value in excess of £80 million.
The retail sector within Sheffield is
showing signs of activity. The Seven
Stones city centre development
lead by Sheffield City Council is
beginning to gain momentum with
the announcement of the councils
preferred delivery partner.
As construction activity continues to
rise in the region construction costs
will follow suit. The current pressure
is anticipated to ease in the medium
to long term as skilled labour reenters the industry after a prolonged
period of decline.
44
The education sector has also
started to generate increased
workload after a period of
stagnation with investment in
student accommodation, research
and teaching facilities being moved
forward. The region still lags behind
London in terms of its economic
recovery and there is still significant
caution in the market. Decisions
to proceed are being made over
extended timescales, with as much
risk removed or passed on as
possible.
In terms of tender price levels, the
region is feeling the full effects of the
increased construction workload in
London. The London workload, more
than work in the region, is driving
price levels. In some cases, tender
price inflation is starting to affect
the viability of some schemes with
the increase in construction costs
outstripping the increase in asset
values in the Thames Valley region.
Fee levels continue to be overly
competitive with all-encompassing
scopes of service and intensive
demands on delivery.
The increase in workload has lead
contractors to be far more selective
about the work they tender for.
Contractors are carefully reviewing
the risk profile of each project, the
contract conditions, tender process
and programme, before they commit
to participate in the tender process.
It is becoming difficult to engage
contractors in a single stage tender
and they are favouring projects
based on two stage or negotiated
processes.
The £500 million Station Hill
development in Reading town centre
is scheduled to commence in 2015
but continues to be delayed and is
now on its third planning application.
Plans for the redevelopment of
Maidenhead town centre are also
under development but timescales
remain undetermined. The University
of Reading has kicked off the
development of its Thames Valley
Science Park with the new road
infrastructure and bridge over the M4
starting on site in January 2015 and
the first phase of the 800,000 ft2.
science park scheduled to be on site
in summer 2015.
Work on residential housing
developments in the South of M4
Strategic Development zone are
set to commence in early 2015 with
Bellway Homes, David Wilson Homes
and Taylor Wimpey planning to build
in excess of 2,500 homes together
with associated infrastructure and
community facilities.
Asset prices in the Thames Valley
may not be able to sustain the
increase in construction costs as they
do in London and this may threaten
the viability of schemes outside of
the capital and see a reduction in
workload. We are already seeing
signs of this in the region. Some
domestic investors are withdrawing
from the London market in favour of
‘better value’ assets in the regions
and this may see some equilibrium
returning and a ripple of activity
outwards from London that will
support a more even distribution in
growth.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
Europe
Vienna
Welwyn Garden City
Due to the opening of the Eurasian
Economic Commission (EEC), Vienna
is one of the fastest growing capitals
in Europe. The economic situation
is better in Vienna than in the rest
of Austria and this also applies to
the construction market. The overall
mood in the economy is positive
even though unemployment ratio
is around 5%. This is an "all-timehigh" for Austria, though statistical
measurement rules have been
changed within the last years.
The region is now feeling the full
effects of the increased construction
market activity from London and is
starting to see increased construction
activity in a wide range of sectors.
In particular, housing projects have
seen significant growth, particularly
in areas of the popular London
commuter belt as local councils are
opening up land for development to
meet their new housing obligations.
"Seestadt Aspern" is the most
significant project currently in
Vienna; the old airport of Aspern in
the northeast of Vienna is becoming
a new residential district and will
contain about 10.500 apartments
when the development is finished.
The new Central Station has opened
and a new hospital "Krankenhaus
Nord" is under construction.
The general recession still effects
Austria except for the Viennese
construction market. Some regions
in Austria are still providing loan
programs for the refurbishment of
residential buildings. This economic
stimulus package for residential
buildings, as well as the thermal
retrofit of dwelling units are very
important for Austrian general
contracting KMU´s (small and middle
sized construction companies).
The growth of superstructure
industries is about 3.3%, however
the infrastructure sector suffers
from a decreasing number of big
infrastructure projects. Brenner
Basis Tunnel is under construction
and full project speed will probably
be reached in two or three years
however it is currently “on track”.
Economic hubs, such as Cambridge,
have seen a significant increase in
the amount of speculative buildings
being constructed, in particular office
accommodation as the green light to
begin speculative investment again.
Generally, it has been witnessed that
growth in the food retail sector is
showing signs of slowing down from
previous periods of growth, but nonfood retail continues to grow with
evidence of major developers and
retailers in the retail sector looking to
spend significantly over the next few
years.
The heightened market activity,
primarily spilling outwards from
the London growth, has seen
procurement options available being
reduced to clients, with a significant
number of contractors unwilling to
competitively tender under single
stage procurement routes. The
primary reason for this is estimating
resources and increased general
workload of contractors. Works on
site have been impacted by increased
lead in periods on key materials, in
particular bricks and façade materials
generally and shortages of skilled and
unskilled labour.
There appears to be an increasing
pipeline of key projects in the local
education sectors, with a local
education college indicating that a
significant amount of land will be
sold for housing. The proceeds of the
sale going towards significant master
planning of the existing campus. In
addition to this, local universities
Essex and Hertfordshire continue to
expand and refurbish their existing
facilities.
Significant interest has been sparked
with the proposals for the Welwyn
Garden City Master plan which will
see 750 new homes created over a
20 acre town centre site, alongside
retail and community assets.
Whilst still going through public
consultation, should the project be
approved, it will represent a large
boost to the local economy generally,
as well as stimulate further growth in
the construction market.
Given the general increase in
construction activity in the region,
coupled with the shortages in
materials and labour, the local market
has seen significant price increases in
the period. It is expected to continue
to do so in line with the continued
growth in the London market, albeit
with a slight lag effect.
Rider Levett Bucknall | International Report – First Quarter 2015
45
Institute of Diplomatic Studies and Consular Affairs, KSA
Architect: Henning Larsen
Market Intelligence
Middle East
& North Africa
Oil prices have fallen by more than
50% since June 2014. In November
2014, the Organization of the
Petroleum Exporting Countries
(OPEC) declared that member
countries would not cut production
in the short term. Markets have
forecasted oil prices to be around
US$60 -70 per barrel on average in
2015 (a decline of about 40 percent
from June 2014 levels) before rising
gradually to US$72 per barrel by
2019. Oil prices are expected to
partially recover over the medium
term because of the likely decline
in investment and future capacity
growth in the oil sector in response
to lower oil prices.
Forecasted GDP within the region
remained strong during 2014 at
3.0% up from 2.3% in 2013. GDP
growth for 2015 & 2016 is predicted
to fall slightly due to the fall in oil
export prices. The Gulf States GDP
is forecasted to be 3.4% in 2015, a
reduction of 100 basis points (bps)
from that forecasted by the IMF in
September. For other oil exporters
in the region, a fall of 70 bps is
predicted.
Growth of 0.3% during 2014 was
seen for the developing oil exporting
countries including Algeria, Iran,
Iraq, Libya, Syria and Yemen, with
GDP rising to 2.4% in 2016.
Oil production and continuing
conflicts in the area will determine
the stability of the forecasts in
the short term. Regional OPEC
oil producers are not expected to
cut oil production under baseline
projections, but as production levels
are maintained it may suggest
that any sizeable lift in oil pricing
may not be seen in the short term.
Countries that are presently in
conflict (Iraq, Libya and Yemen)
or facing difficult external trading
environments (Iran) could also suffer
from declining oil production and/
or face downside risks from conflictinduced disruptions in non-oil
economic activity impacting on the
Region’s GDP forecasts.
Across both the developed
and developing parts of the
region increased spending on
infrastructure is helping to offset
the recent volatility of oil prices.
Construction either underway or
planned is inclusive of some large
infrastructure projects across the
region. In Algeria, Egypt, Jordan,
Kuwait further investment in power
and water assets are being seen,
while others in the region are in
the midst of seeking to upgrade
outdated infrastructure in the
developing economies.
Approximately US$180 billion of
contracts for new construction
projects are forecast to be awarded
in the Gulf States during 2014,
the highest amount for six years,
despite falling oil prices, according
to MEED Projects. The concern for
the construction industry is that oil
prices could drop for an extended
period below the "break-even" levels
which may cause governments to
balance their budgets and reduce
infrastructure and new development
spending.
Middle East Construction
Cost Relativities
Q1, 2015
Doha
111
Abu Dhabi
Dubai
105
Riyadh
104
2015 Forecasted GDP Growth
Country
RLB Construction Market Activity Model
Middle East - Growth Sectors vs Decline Sectors
NUMBER OF CITIES
4
2014%
2015%
2016%
Afghanistan, Rep. of
3.24
4.49
5.03
Algeria
3.84
3.99
3.83
Bahrain
3.88
2.95
3.11
Djibouti
5.50
5.55
6.00
Egypt
2.20
3.50
3.85
Iran, I.R. of
1.46
2.20
2.23
(2.66)
1.46
7.62
Jordan
3.50
4.00
4.50
Kuwait
1.39
1.79
1.83
Lebanon
1.75
2.50
4.00
Iraq
3
Libya
2
1
0
GROWTH
HOUSES
APARTMENTS
DECLINE
OFFICES
INDUSTRIAL
RETAIL
HOTEL
CIVIL
106
(19.78)
15.00
18.28
Mauritania
6.80
6.75
6.69
Morocco
3.51
4.72
5.05
Oman
3.40
3.41
3.60
Pakistan
4.14
4.30
4.40
Qatar
6.53
7.70
7.82
Saudi Arabia
4.60
4.46
4.39
4.57
Sudan
3.03
3.71
Syrian Arab Republic
n/a
n/a
n/a
Tunisia
2.80
3.70
4.50
United Arab Emirates
4.28
4.50
4.44
West Bank and Gaza
NOT
LINKED
NOT
LINKED
NOT
LINKED
1.91
4.58
4.68
Yemen
Rider Levett Bucknall | International Report – First Quarter 2015
47
The Address Residence Fountain Views, Dubai, UAE
Architect: Dewan for FV1 and FV2
(Left and Right Residential Towers)
and Atkins are for FV3 (Middle Tower – Hotel)
Location Intelligence
Middle East & North Africa
Abu Dhabi
Abu Dhabi has recorded overall
steady growth in the second half
of 2014 as all market sectors are
going through a recovery phase
and showing positive signs since
the economic crisis. The Abu Dhabi
Airport recorded an increase of 15%
in visitors compared to 2013 which is
encouraging.
A number of significant projects are
keeping the construction market
buoyant such as the Abu Dhabi
International Airport a part of the
governments “Plan Abu Dhabi 2030”.
The building will be constructed using
approximately 69,000 tons of steel,
more than 680,000m3 of concrete,
and nearly 500,000m2 of steel and
glass cladding, 135,000 tons of rebar,
360,000m2 of suspended ceilings and
325,000m2 of natural stone flooring.
Also adjacent to Abu Dhabi city is
the Yas Island Development. Already
home to significant development it
continues to provide construction
activity to complete or add to some
world-class leisure an entertainment
attractions including a world-class
motor sports racetrack, the Ferrari
World Abu Dhabi theme park, and
a water park. In addition to these
attractions, the island is home to
300,000 square meters of retail
space, parkland golf courses, lagoon
hotels, marinas, apartments and villas.
Many more projects in Abu Dhabi
support the current and forecast
growth figures for Abu Dhabi such
as Capital District City, Khalifa Port &
Industrial Zone, Al Falah Community
Development, Le Louvre Museum,
Masdar City, Saadiyat Island Museums
and other infrastructure projects.
The second half of 2014 has shown
strong market confidence which
will instigate a sustained period of
developments with multiple new
projects to be awarded. The TPI’s
are forecast to increase in 2015 and
2016 in line with current and planned
construction activity for Abu Dhabi.
The second half of 2014 is seeing
steady economic growth driven
by the continued expansion of the
non-hydrocarbon economy and
infrastructure investment. Economic
diversification is growing and, along
with the continued plans associated
with the National Vision of 2030.
Government investment is beginning
to materialize and set off new
projects on the infrastructure level
as well as education and healthcare.
With the new Hamad International
Airport opening, the increased
number of visitors to Qatar, along
with the continued rising population
growth, has resulted in noticeable
economic growth in the second half
of this year. This however has also
seen an increase in the cost of living.
Projects for Doha can be seen at
Doha Metro, Doha Education City
and Doha Festival City. In preparation
for the 2022 World Cup stadium
construction is moving ahead at Fifa
2022 World Cup Stadium, Lusail
Iconic Solar Stadium, Al Wakrah
Stadium and Al Gharafa Stadium.
The Qatar National Museum in also
underway.
With the 2022 World Cup and the
National 2030 Vision, the Qatari
Government is investing heavily in
infrastructure such as roads, Doha
Metro, rail, drainage and sanitation
projects. Other sectors currently
seeing significant activity include
health, education, hospitality and
retail sectors. Although there remains
steady activity across all sectors, the
rate of growth in new opportunities
outside of infrastructure appears to
have stabilised. This is potentially
due to the ongoing rationalisation
of policy driven projects as the
local authorities begin to undertake
the necessary prioritisation of key
investments prior to 2022. Prices
currently remain reasonably stable
due to ongoing high competition but
an increase is forecasted for the year
to come as pressure on resources
begins to make a more noticeable
impact.
Dubai
A positive increase in sentiment with
the award of the 2020 Expo to Dubai
as well as the perception of Dubai
as an investor friendly safe haven
has seen property prices and rentals
increase markedly. This has also seen
an increase in the cost of living. The
resultant development boom has
seen a swath of new projects and
mega projects being announced with
all major developers trying to get to
market as soon as possible in order to
secure competitive tenders and lock
in contractors.
Significant projects include
Bluewater’s Island, centred on the
Dubai Island, the development
includes retail, residential, hospitality
and infrastructure together with
a 260m high ferris wheel. Dubai
Airport’s Maktoum International
project is said to become the largest
airport in the world and capable of
accommodating up to 200 million
passengers a year.
Other significant projects include:
• City Walk, a large mixed use and
retail development,
• La Mer, a leisure, housing and
hospitality development,
• Downtown, centred on the Burj
Khalifa, a number of mega projects
are ongoing including Fountain
Views
• Dubai Opera House, and
• AKOYA Oxygen, housing project
and golf courses, including
approximately 13,000 units.
With the increased sentiment and
the number of projects and mega
projects noted above, prices are
expected to continue to ramp
up as the competition for staff,
management personnel and materials
increases. Current market forecasts
as reflect an annual increase of 4.7%
in 2015, 5.7% in 2016 and up to 6.1%
by 2017.
Doha
Rider Levett Bucknall | International Report – First Quarter 2015
49
ASB North Wharf, Auckland, New Zealand
Architect: Bligh Voller Nield and Jasmax
Market Intelligence
Oceania
In 2014, the Australian economy
grew at 2.9%, a small amount
below trend and the New Zealand
economy grew at 3.6%. Despite
large falls in Australian mining
investment in the year, rising
resource exports meant that growth
of mining activity overall, remained
high. Growth of non-mining
activity remained below its longrun average, but picked up owing
to stronger growth in dwelling
investment and public demand and
a small rise in consumption growth.
Non-mining business investment
remained subdued. Falling export
commodity prices in Australia
are having a detrimental effect
on revenues but the fall in the
Australian Dollar and oil pricing is
assisting this shortfall.
Within New Zealand, the economy
is still strong. Investment is likely
to remain a strong driver of growth
during 2015, with consumption solid
in support. The pace of growth in
New Zealand’s economy will remain
firm through 2015. The ecomomy
is seeing falling unemployment,
a slight lift in wages growth, but
continuing low inflation as falling
dairy incomes and potential El Nino
affect are being offset by strong
construction growth, rising housing
prices and strong net immigration.
GDP forecasts are predicting
domestic economic growth will ease
during 2015 but still remain robust
culminating in a forecasted GDP of
just under 3%.
In Australia, construction work yet
to be done in the non-residential
building sector remains elevated
and should support investment in
the near term. Forward-looking
indicators, such as non-residential
building approvals, have weakened
over the course of this year,
implying that there is less growth
in prospect in this sector than
previously expected. Residential
construction is still very strong all
around the country
Forecasts for Australian GDP growth
are expected to be below trend over
2015 and 2016, remaining at the 3%
mark.
Oceania Construction Cost Relativities
Q1, 2015
Darwin
127
Sydney
120
Perth
119
Canberra
116
Melbourne
113
Christchurch
111
Adelaide
110
Wellington
107
Townsville
106
Auckland
99
Brisbane
96
2015 Forecasted GDP Growth
Country
2014%
2015%
Australia
2.82
2.90
3.01
New Zealand
3.60
2.84
2.45
NOT
LINKED
NOT
LINKED
NOT
LINKED
Pacific Island
countries and
other small states
2016%
Pacific Island countries and other small states include
Bhutan, Fiji, Kiribati, Maldives, Marshall Islands,
Micronesia, Palau, Papua New Guinea, Samoa,
Solomon Islands, Timor-Leste, Tonga, Tuvalu, and
Vanuatu.
RLB Construction Market Activity Model
Oceania - Growth Sectors vs Decline Sectors
NUMBER OF CITIES
12
10
8
6
4
2
0
GROWTH
HOUSES
APARTMENTS
DECLINE
OFFICES
INDUSTRIAL
RETAIL
HOTEL
CIVIL
Rider Levett Bucknall | International Report – First Quarter 2015
51
Location Intelligence
Oceania
Adelaide
Auckland
The tender market still continues to
be very flat. There is a limited number
of new projects being generated from
both the private and public sectors to
feed the trade and head contractor
market within Adelaide. We have
seen some signs of larger contractors
pricing smaller projects to ensure that
they maintain some work into the
new year – with some limited success.
Tertiary Institutions remain active
with large projects being tendered
to Tier 1 Contractors. There are signs
of the retail sector improving which
will provide new projects during 2015
including the ALDI Stores roll out.
The New Zealand economic recovery
continues to strengthen and
broaden across the regions after
being concentrated in Canterbury
and Auckland in the last couple of
years. The Reserve Bank of New
Zealand raised interest rates earlier
in the year in an attempt to cool
the Auckland housing market whilst
the New Zealand dollar appears to
have peaked from historical highs.
Generally business confidence is high
with optimism in hiring, investment
and increasing margins and profits.
Despite interest rate rises the
Auckland housing market remains
strong. The central government has
set a target of 39,000 new homes in
Auckland over the next three years
and residential building activity is
increasing including apartments and
retirement homes. This increased
level of activity is affecting resource
and supply chain capacity and is
ultimately increasing labour and
material costs.
Major projects that are expected to
help lift the market include:
• Adelaide University Clinical School
($230 million)
• University SA Health Innovation
Building ($200 million)
• Sky City Casino ($300 million)
• University SA Great Hall
($50 million)
• Courts Precinct ($550 million)
All trade contractors continue to
remain very competitive and activity
seeking work.
Many trade contractors continue
to fall into administration - recent
casualties include a mid-sized
electrical contractor and a medium to
large sized concreter during Q4 2014.
For the short and medium term, the
market continues to be difficult for
trade contractors.
52
The strong residential market
and demand has provided strong
work flows through the civil and
infrastructure sectors with new land
zoning opening up areas of new
residential development. Particularly
in the North West and South of
Auckland where new Town Centres
such as Westgate and Ormiston are
being developed.
Non-residential construction activity
has increased over the year and has
highlighted capacity issues within
the industry with long lead times for
off-site prefabricated products and
labour shortages on structural trades.
This is of concern given that whilst
construction activity has increased,
the current volume of work is not
yet significant. There is promise of a
number of large scale construction
projects in Auckland and the amount
of projects in for building consents
has grown strongly. With this
potential volume of work along with
other significant construction projects
in Christchurch, then there will likely
be industry capacity issues requiring
significant industry investment. Key
projects in the planning for Auckland
in the short to medium term include
the proposed new International
Convention Centre, the Precinct
Downtown redevelopment and the
City Rail Loop.
The increased construction
activity has seen an increase in
main contractor margins and
subcontractor pricing including
increased labour costs. Particularly
in the structural trades which are
experiencing high demand. Should
construction activity continue to
grow as expected then we will see
a volatile market and tender prices.
Going forward construction cost
escalation will need to be considered
as a key risk element of project
feasibility models.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
Oceania
Brisbane
Canberra
The sharp decline in commodity
prices is likely to have a significant
effect on the State budget for
2014/15 and future budgets. In
2013/14 Gross State Product was 2.3%
compared to the budget forecast of
3%. In addition the upcoming State
budget is likely to result in a reduced
level of Government activity during
the caretaker period and during the
post-election period. The major issue
for the election is the Governments
Strong Choices proposal to lease
State assets to the private sector.
Positive indicators are an increase
in the ANZ Job Ads survey that
has risen for 6 consecutive months
indicting sustained strength in the
jobs market. The international trade
balance has also increased by 5%
in October 2014 but is still negative
$1.55 billion. This can be expected
to improve dramatically as the LNG
exports increase in 2015.
Housing finance continued to
increase in 3Q 2013 however
construction work on buildings fell by
7.4% in the same period. Retail trade
increased 1.4% in the period ending
October 2014.
Market sentiment remains positive
particularly in the residential, retail
and industrial sectors. The key
indicator is population growth
that continues increase with 1.5%
(70,500) growth in the year ending
June 2014. Significant house price
differential between Brisbane, Sydney
and Melbourne and an increase in
overseas migrants are major factors
in this trend. There remains strong
interest from overseas developers
and investors in the South-East
Queensland market.
The retail sector continues to
perform strongly with four major
projects in South-East Queensland
under construction and further
projects planned for commencement
in 2015. The commercial market
remains subdued but the longer
term prospects remain strong. The
residential market continues to grow
with a number of major projects
underway or about to commence
including the Flat Iron project in
Fortitude Valley, 300 George Street,
the Commonwealth Games Village
and Jewel on the Gold Coast.
The Government has released
details for the two bids for the
redevelopment of the Queens Wharf
precinct which will re-vitalise this area
of the CBD with both bids offering
an integrated resort incorporating
hotels, casino, apartments and a
retail precinct. A final decision on the
preferred bidder is likely in early 2015.
The market remains competitive
however increased costs have been
experienced in particular trades
in particular, mechanical Services,
formwork and tiling. This is the result
of limited resources and limited subcontractors in these trades to meet
the increasing workload.
Construction costs in 2015 will
be dependent on the timing of
the commencement of major
projects currently being planned
and marketed however we expect
construction volumes to increase
through 2015 putting upward
pressure on construction costs.
A recent OECD report has ranked
Canberra as the world's most liveable
city. The continued development
of award winning projects like New
Acton, visionary infrastructure
such as the Capital Metro and
significant investments in federal
office accommodation, health and
education over the years have laid the
foundations for a vibrant city ready for
new opportunities and growth as the
region approaches its coming of age
with the ACT celebrating 21 years of
self-government in 2015.
The long term outlook for Canberra
is promising, however, in the short
to medium term, market sentiment
is still subdued with the impact of
consecutive federal budgets cuts
continuing to affect confidence.
Projections for employment growth
and final demand remains below long
term trends.
The ACT Government has announced
a mass buy back scheme for homes
affected by loose asbestos insulation
fill. A previous clean up in the 1980s
failed to remove all traces of asbestos
leaving no other option than full
demolition of the 1,021 affected
properties. The buyback scheme,
underpinned by a $1 billion federal
government loan, is expected to leave
a shortfall of $300 million in the ACT
Government accounts. One major
effect of this is that many ambitious
capital works programs such as the
City to Lake are unlikely to be realised
within previously reported time
frames.
Major projects recently announced
are the Department of Social Services
new offices in Tuggeranong providing
a net lettable area of 38,000m2 and
the recent tender for leased office
accommodation for the Department
of Immigration and Border Protection
to provide 80,000m2 NLA of office
accommodation. There has also been
a strong response to the new ACT
Government Offices project with 11
developers registering their interest to
develop 42,000m2 of office space
As the construction industry welcomes
a New Year we expect confidence
to slowly recover and forecast a rise
in the tender price index line with
inflation for 2015 of 2.5%.
Rider Levett Bucknall | International Report – First Quarter 2015
53
Location Intelligence
Oceania
Christchurch
Darwin
The post-earthquake Canterbury
rebuild has continued to gain
momentum with the CBD skyline
noticeably busier over the last period
with the number of cranes engaged
in new commercial construction.
July 2014 non-residential consents
were $154 million, once again the
highest in New Zealand. Residential
construction, while moving slower
than expected is continuing strongly
(July residential consents were 20%
ahead of the same period in 2013).
Developing the North is the key
theme of the NT Government
in conjunction with the Federal
Government with a number of
initiatives through all sectors of
the NT economy being explored.
The infrastructure sector including
oil, gas, mining, roads and services
infrastructure including ports, is being
examined with a view to ensuring
these are adequate or require major
investment to enable the theme to be
implemented.
There is some month on month
volatility but the overall trend is still
one of strong growth across both
sectors.
Land is being released for housing
in a bid to lower the cost of housing
in Darwin and surrounding areas, a
key driver in getting the cost of living
down and improving NT business
competitiveness in the face of
growing interstate and international
competition.
Unemployment in Canterbury remains
the lowest in New Zealand at 3.8%.
The total number of people employed
in Christchurch has grown by nearly
6% since 2013. Most of the current
cost increases in Canterbury are from
labour cost inflation although some
subcontract and supplier margins
are also increasing and affecting
tender prices on major and complex
projects.
54
The current positive economic
environment is still heavily influenced
by the INPEX gas project which is
under full construction and providing
a number of positive outcomes and
spin-offs for those local businesses
that can benefit from such a project.
The Burwood Hospital redevelopment
is around 30% through construction
while the Christchurch Hospital
redevelopment is beginning early
earthworks and enabling works ahead
of main contract commencement
by the middle of 2015. The Justice
Precinct project is now rising in the
CBD and a number of commercial
office and retail projects are also
underway in the city centre. The Bus
Interchange project has commenced
and both Canterbury and Lincoln
Universities have extensive building
programmes planned.
The INPEX gas project was the
primary focus of construction and
engineering activity in the Top End in
2014 and likely to remain so in 2015. A
number of construction projects were
in the feasibility phase in 2014 after
the increased onsite construction
activity experienced in 2013. A
number of projects are earmarked for
start in 2015 mainly in the apartments
and hospitality sectors. Industrial
activity will continue in earnest as
will other sectors such as health and
education with slower activity in retail
and commercial office markets.
Escalation forecasts are complex
and uncertain at present and have
a number of variables depending
on project size and type and
as such should be taken as an
average. Overseas contractors and
subcontractors have begun to see
some success in securing contracts in
recent months.
The construction market is still very
competitive with a number of bidders
vying for the few projects on offer. A
number of owner developer builders
are seeking to lock in prices for
projects due to start in 2015 given
the current competitive nature of
the market. As more projects come
on line we predict a rise in the order
of 4% for the calendar year in 2015,
potentially easing thereafter once
work on the INPEX project tapers off.
Rider Levett Bucknall | International Report – First Quarter 2015
Location Intelligence
Oceania
Melbourne
Perth
Victoria’s economic growth has
performed strongly over the past
twelve months, despite not being
heavily reliant on the resources
sector. Since 2009, Victoria’s Gross
State Product (GSP) has grown at an
average of 3%. Driven by growth in
the services, warehousing and freight
sectors, Victoria have repositioned
its employment base away from
manufacturing towards health,
education, finance and business
consulting services.
Although the Western Australian
economy, with the engineering
sector in particular, is experiencing
some "post resources boom blues",
it is nevertheless showing resilience
across many other sectors of the
construction market. The leadership
shown by the State Government in
initiating a number of projects to
release and 'create' land immediately
adjacent to the CBD has provided
development opportunities and
enticed major players to invest in
Perth.
Increased investment in infrastructure
has been a significant driver of
industrial capacity growth for
the Victorian economy. Victoria’s
transport infrastructure program
of up to $24 billion of new projects
has generated jobs, from officebased engineering and design roles
to onsite road works and building
and construction jobs, plus the small
businesses that support them.
Victoria’s population is growing at
near record rates, driving higher
levels of economic growth. This will
help to support demand for housing.
A high level of new dwelling supply
in the pipeline (mainly in the form of
apartment completions) is likely to
tip the market into oversupply from
2015/16, causing vacancy rates to rise.
Commercial real estate ownership
is changing within Melbourne. The
displacement is occurring as private
investors, typically one of the
largest group of investors in prime
grade assets in Melbourne, were
net sellers of assets, during 2014,
which were taken up by institutions.
Since 2004, Melbourne has added
more than 900,000m2 of new office
supply. Despite the strong pipeline
of development during this period,
vacancies averaged only 6.9%.
The Melbourne construction
market is still in positive territory.
Pricing is starting to increase in
the structure, finishes and façade
trades. Competition is holding prices
relatively steady but escalation of
2.5% is forecasted for 2015.
Reclaiming the area over the railway
approaches to the main Perth rail
station has resulted in Perth City Link
development zone.
The Elizabeth Quays development
has unlocked a number of major sites
and will in future become home to
the new Chevron office tower and
Ritz Carlton hotel.
The reclamation of land alongside
the causeway at East Perth has
created further opportunities at
'Water bank' and will provide Lend
Lease, the incumbent developer, with
extensive opportunities for mixed
used development over the next 5 to
10 years.
From a counter perspective, the
office vacancy rate has continued
to climb and is now at levels not
seen for at least a decade and
will effectively dampen interest in
speculative office development
although a number of pre-committed
office projects will proceed.
The Perth construction market
continues to be demand driven with
keen pricing at virtually every level
and particularly fierce competition
in the low to mid-range commercial
projects. However, increased activity
in the housing sector has led to some
shortage of supply, particularly in
the brickwork trade and it is possible
there may be some emerging price
pressures in this and other selected
trades.
Rider Levett Bucknall | International Report – First Quarter 2015
55
Liberty Place, Sydney, Australia
Architect: Francis-Jones Morehen Thorp
Location Intelligence
Oceania
Sydney
Wellington
Recent National Accounts statistics
reported New South Wales had the
second highest growth in GDP for the
Q3 2014 recording a 3% increase from
the Q3 2013 statistics. A factor in the
improvement of GDP has been the
strong performance of the building
sector.
An analysis of Australia Bureau of
Statistics construction work done
reports an 18% increase in building
works for Q3 2014 compared to Q3
2013. Overall construction activity has
increased 6% for the similar period.
Whilst activity over twelve months
has recorded increases, activity on
a quarter by quarter basis reported
a fall of 1% from Q2 2014 to Q3
2014. This fall is attributed to a 13%
reduction of engineering activity.
The strength of building activity in
New South Wales follows from the
higher levels of building approvals
that had been recorded in the past
two years. Residential building
approvals continue to be the sector
that indicates continuing activity and
increased opportunities. However
it is difficult to confirm anticipated
trends as values and the number of
approvals for the residential sector
varies on a month to month basis.
Developers report demand for multiunit development continues to be
strong for pre sales. In particular,
areas of high demand are sold out
within hours of entering the market.
A recent analysis of the RLB Crane
Index confirms the strength of
residential activity by the majority of
tower cranes erected in Sydney are
operating on residential sites. The use
of tower cranes across the Sydney
metropolitan area confirms the
changes in methods of construction
requiring the use of tower cranes
to take advantage of pre-fabricated
components and maximise materials
handling methods in order to achieve
reduced construction durations.
Whilst approvals and activity in the
non-residential sector is increasing,
the rate of increase is much lower
than the residential sector at about
a 1% increase over a twelve month
period. Current forecasts predict this
trend to continue.
Despite increased activity materials
price rises have been very stable
over the last half of the year. The
most significant price increase in this
period has been plasterboard supply
recording a 6% price increase.
Contractors are reporting that subcontract pricing continues to record
large spreads between highest and
lowest prices. It is believed that such
differences are attributed to subcontractor workload. Contractors,
operating on major residential multiunit projects, have reported price
rises for selected structural and
services trades that are well above
expectations. Subcontractors and
contractors continue to be risk averse
on projects where perceived risk
will impact upon possible margins.
Such projects are attracting a price
premium and a reduced number of
interested contractors.
During 2014 the Sydney building
industry has experienced levels of
confidence resulting in an increased
investment in staffing levels, plant
and equipment and in some cases
selective tendering in order to
achieve an increased return on
investment. However, whilst there
is increased confidence and greater
opportunities for continued workload,
competition to secure projects has
not diminished. Contractors report
that to secure work significant
discounting of prices is required.
Such competition is likely to see price
rises limited to 3% for 2014. However,
the outlook for 2015 remains positive
as the continued strength in the
residential sector could see prices
increase up to 4.5% for 2015 which is
the highest level for price rises since
2008.
Local construction trends
remain weak in terms of new
developments, in both the
commercial and residential markets.
Civil infrastructure projects
are progressing well north of
Wellington and will continue to
provide employment for some time.
Strengthening of existing buildings
still remains high on the priority list
locally but is not adding value to
the cityscape or local economy. This
needs to change if we are to move
forward like other centres within New
Zealand, but there are no real signs of
this on the horizon.
There are a few larger projects due to
start in the New Year. These include
the Gateway project and Rutherford
House extensions for Victoria
University, Transmission Gully and the
major civil road works on the Kapiti
Coast as well as the potential Hilton
Hotel and Convention Centre. These
projects will soak up a large portion
of the contracting resources and
provide much needed impetus to the
local industry, and hopefully kick-start
a number of other developments in
our region.
We are beginning to see some cost
escalation come through from the
market, being led by material supply
price increases on the back of the
burgeoning markets in Auckland and
Christchurch. Whilst this escalation is
having an impact on certain trades,
it is not reflecting in large increases
on a project level as not all material
groups are affected. Labour costs
remain in a holding pattern and we
are still seeing resources moving to
pick up work in other centres. It is
likely that we will see further upward
pressure on prices in 2015/16 on the
back of new projects due to start,
but the market here remains well
behind the other major centres in the
country.
Rider Levett Bucknall | International Report – First Quarter 2015
57
Instant
cost data
on the spot
Rider Levett Bucknall Desktop app
The fastest way to get the latest construction
cost information right at your fingertips
…and on the go
RLB Intelligence Smartphone app
Available on iPhone, Android, Windows Phone7
and Blackberry Operating Systems
rlbintelligence.com
Global Construction and Property Advisors
OFFICES AROUND
THE WORLD
AUSTRALIA
Adelaide
Brisbane
Cairns
Canberra
Darwin
Gold Coast
Melbourne
Newcastle
Northern NSW
Perth
Sunshine Coast
Sydney
Townsville
NEW ZEALAND
Auckland
Christchurch
Hamilton
Palmerston North
Queenstown
Tauranga
Wellington
MIDDLE EAST
Abu Dhabi
Doha
Dubai
Muscat
Riyadh
Africa
RLB|Africa Alliance
Gaborone (Botswana)
Johannesburg (South Africa)
Port Louis (Mauritius)
Maputo (Mozambique)
Pretoria (South Africa)
Cape Town (South Africa)
UK
Birchwood/Warrington
Birmingham
Bristol
London
Manchester
Newcastle
Sheffield
Welwyn Garden City
West Cumbria
Wokingham
EUROPE
RLB|EuroAlliance
Austria
Belgium
Bulgaria
Czech Republic
Estonia
France
Germany
Greece
Hungary
Ireland
Italy
Kazakhstan
Latvia
Luxembourg
Malta
Netherlands
Norway
Poland
Portugal
Romania
Russia
Slovakia
Slovenia
Spain
Sweden
Switzerland
Turkey
Ukraine
CHINA
Beijing
Chengdu
Chongqing
Dalian
Guangzhou
Guiyang
Haikou
Hangzhou
Hong Kong
Macau
Nanjing
Nanning
Qingdao
Shanghai
Shenyang
Shenzhen
Tianjin
Wuhan
Wuxi
Xiamen
Xian
Zhuhai
INDONESIA
Jakarta
MALAYSIA
Kuala Lumpur
Myanmar
Yangon
CANADA
Calgary
Toronto
CARIBBEAN
Barbados
Cayman Islands
St. Lucia
USA
Austin, TX
Boston, MA
Chicago, IL
Denver, CO
Guam, GU
Hilo, HI
Honolulu, HI
Kennewick, WA
Las Vegas, NV
Los Angeles, CA
Maui, HI
New York, NY
Orlando, FL
Phoenix, AZ
Portland, OR
San Francisco, CA
Seattle, WA
Tucson, AZ
Waikoloa, HI
Washington, DC
PHILIPPINES
Cebu
Davao
Manila
SINGAPORE
Singapore
SOUTH KOREA
Jeju
Seoul
VIETNAM
Ho Chi Minh City
Rider Levett Bucknall | International Report – First Quarter 2015
59
rlb.com