Sometimes, less is actually more.
Particularly in the Sunshine State, where residential builders are becoming harder to find and the cost of projects is challenging the feasibility of the industry.
“If you don’t have a builder, you don’t have a business.”
That is the stark reality for Queensland developers such as Joe Adsett, who is looking to add building into the fold of his architecture, design and development business.
“We don’t really have a choice at the moment,” Adsett says.
“There’s only potentially one tier 2 or tier 1 builder left that wants to work with us. Everyone else is either too expensive or we can’t afford them.
“So we’re investigating it at the minute, we’d love the opportunity to do it.”
But Brisbane developers are also finding success in designing for more “developable” projects.
Speaking at The Urban Developer’s industry roundtable lunch, delivered in partnership with GPS Development Finance, Core Property Partners managing director Nathan Andersen says they are regularly brought in to look at projects where developers cannot secure a builder.
“Even in the hottest of markets no builder is building [a highly complex project],” he says.
“People just come along and they chase their tail in a feasibility, predominantly on the Gold Coast. They will put another 10 storeys on a tower, then need another two basements on an 800sq m block, between two towers. No builder is ever going to look at that.”
Making a project less complex was Andersen’s secret sauce in luring a NSW builder to The Abbotsford project at Bowen Hills in Brisbane’s inner city.
He says the project had to be “big enough to sink their teeth into” but without too many complexities.
“We’ll generally look at things as less is more and a lot of people don’t like when we try to half the size of their developments. But we’ll say to them, ‘Now it’s developable, now we can go and get a builder, and a financier’, rather than just thinking more is more,” Andersen says.
“I love the saying ‘highest and best use’ because everyone goes for as high as it can be on the assumption that it’s the best that it can be.”
Going back to the drawing board is something Pikos chief executive Michelle Wooldridge is also familiar with.
Wooldridge joined Pikos as work began onsite at Skye, Kangaroo Point. But it was the Gaia project down the road that would really test her mettle.
Wooldridge says she applied a critical lens to the project, which had languished for many years, and realised it would not be built.
And with some fresh perspective and a strict rationale for delivering “attainable luxury”, Wooldridge set about finding a solution to the problem.
“We’ve had a crazy 12 months, taking Gaia from DA to under construction in nine months,” Wooldridge said.
“That was all around the commercial viability of that project.”
Gaia’s third “clunky” building at the back of the site was redesigned, which reduced complexity on site.
The project is being built in partnership with Gold Coast builder-developer Aniko Group under an Issued for Construction contract.
This, Wooldridge says, requires 100 per cent documentation, which has been challenging in and of itself.
“What we’ve found on Gaia is that consultants are not geared up to document that quickly. I think they’re used to getting that feedback from subbies, but now they’ve had to take up a notch where you’re not getting that subbie buy-in to help that project evolve,” she says.
“No builder wants to do a design and construct anymore, but it’s so contrary to how the system should work. We need to think about the builder as strategically as you would about a sales marketing campaign. Before you would get your docs and go to tender.”
Wooldridge says crystal-balling for 12 months ahead was challenging in the current market because it was moving quickly.
“You’re getting this lag in the program that I don’t think the architects and the consultants are geared up for,” she says.
“I feel like the next five years is going to be tumultuous because this contracting environment is going to come back [to bite].”
With more than 30 years of experience in direct construction finance lending, GPS Development Finance founder Richard Woodhead has seen his fair share of market cycles.
But for Woodhead there is one thing, which he places above all else when assessing a project’s merits.
“We’re a relationship lender,” he says.
“We support the jockey, not the horse. I really like builder-developers because they’ve got skin in the game.
“I’ve built a business off relationships, and I’ve loved watching people come through and develop. It’s all about developing that relationship and being there and being part of the team.”
Molti founder Ben Teague is navigating development across Queensland and Victoria and says each of the markets presents a different challenge.
“If it was easy everyone would be doing it,” Teague says.
“The challenges are there but they’re different in different places between Victoria and Queensland. It’s a bit more focused on builders and labour availability up here, whereas down there it’s revenue challenges.”
Building capacity is a major sticking point for the industry.
Even family-owned builder-developers, including Gardner Vaughan Group and Bellevue, are finding the lack of labour supply challenging.
Focusing on the suburban and inner-city areas has been a winning formula for the Brisbane-based developers, but the war for talent persists.
Gardner Vaughan Group has a construction turnover of about $100 million a year and a sales rate and delivery rate of about 2000 lots a year, according to director Sam Gardner.
“But the biggest hurdle is the war for talent, particularly the high-level project managers and site managers,” he says.
“The disparity in wages is growing in that area, but it’s what you need to do to play the game.”
R&W agent Owen Moore says the focus needs to be on developing the right product for the right location.
“Brisbane is really evolving and I’m pretty excited about where it’s going to go in the next five years,” Moore says.
“There’s a lot of good interest in Brisbane but I think it’s the right product type that everyone’s trying to get working and get into the market.”
Whether developers are chasing the lucrative downsizer market or the relatively untapped attainable luxury, creating projects with less building complexity could be a key to nailing down a builder in the current shortage.
