Labour Shortages Critical Risk for SE Queensland Developers

“If you don’t have a building arm, or a builder under your arm it’s very hard to make projects work.”

After stitching together close to 100 site transactions on the Gold Coast in the past nine years, GV Property director Antonio Mercuri is seeing the challenges of construction at the front end of the development cycle. 

Speaking at an industry lunch in partnership with Procore, Mercuri said he believed the market was entering a better phase. 

“There’s plenty of stock coming out of the ground, and plenty still to come out of the ground, just at a slower rate,” Mercuri said.

“There’s a lot of recycled sites coming back to market, the majority of them being C-grade or D-grade, so it’s very hard to make them work. 

“But if you’ve got a long-term mindset there’s plenty of opportunity [in south-east Queensland].”

Construction risk continues to be a major challenge for south-east Queensland development with a constrained labour market and limited building capacity in the face of a big infrastructure pipeline. 

Builder-developer Gardner Vaughan Group has been active in the south-east Queensland market, recently filing plans for its first foray into the Moreton Bay region. 

▲ Productivity and labour shortages are at critical levels. Pictured top left: Trent George; top right: Matthew Evans.

Gardner Vaughan Group quality assurance manager Trent George said having a fully integrated business had helped it to address construction cost challenges. 

“We’re very client focused and engaged in what they want and we like to bring that into design for the future buildings, and look for ways to try and reduce our square metre rate to do it,” he said. 

“We look for ways along the way, not to cut corners, but if it’s not bringing value to the end user we try and do away with it or change that path that we’re on.”

Construction costing impacting industry

Home builders McCarthy Homes have been around for more than 30 years and the family-owned business has weathered price shocks and diversified the business recently into the multi-residential market. 

Speaking at the lunch, commercial manager Declan O’Sullivan said the move into townhouses had been a beneficial one, as pressure mounts on volume home builders.

O’Sullivan said McCarthy Homes had developed strong relationships with subcontractors, which had ensured a loyal labour supply. 

“I think the past few years has exposed a lot of people (in the volume building business), I think we’ve been lucky with our network of subcontractors and suppliers that we can lean on,” O’Sullivan said. 

“A lot of our subbies have been working for us for 15 or 20 years. They’re relationships that myself and my brother, Nick, have inherited from our father. So I think it’s been pretty important, especially in those tough times during Covid too.”

O’Sullivan said construction prices had significantly impacted the market, particularly for townhouses. 

“Town homes are definitely competitive, it has to be a lot more competitive. We do projects that are selling from $500,000 up to $1.7 million. 

“We’re not really seeing that $500,000 per box apartment really stack up anymore. We used to be able to build one of those townhouses for $190,000, now it’s $330,000 in round figures, so it’s changed massively.”

O’Sullivan said construction timeframes on a $1-million house had crept up to 14 months last year, largely due to weather conditions, but said build times had gone back down to about 11 months. 

Commercial builders boosting prelims

But for commercial builders and developers, such as Evans Long director Matthew Evans, site productivity is increasingly challenging in terms of project delivery. 

“The labour market is probably the biggest challenge for us. We just finished a big project on the Gold Coast that experienced some delays through lack of labour through that period,” Evans said.

“It’s probably six or seven months late on what probably should have been 14 months (build time).”

Evans said commercial builders were pricing in preliminaries, that were historically about 7 per cent, at up to 14 per cent due to productivity and labour issues. 

“We’re a non-EBA Tier 2 builder, but the labour pool just trickles out through those bigger projects like Queensland Health rolling out a fairly significant program at the moment and if people can work 3.5 or 4 days a week for 20 per cent more they generally will.”