Melbourne Market Update – Spring 2019

Springtime in Melbourne….....The crowds are gathering for the usual array of significant events such as the AFL Grand Final and Melbourne Cup, not to mention the attendance at the Global Climate Strike on the 20th September. The Strike saw a huge turnout and was a major event for the Architecture and Design industry considering it’s potential to lead, change and shape outcomes in this crucial area.

From a market activity perspective, consistency has returned to the market after the first half of the year. Earlier, we saw up’s and downs primarily to do with the long-running Banking Royal Commission and the May Federal Election. With both of those now behind us, confidence levels are higher, resulting in a more consistent recruitment environment generally.

Several uncertainties during the first half of the year resulted in some studios making redundancies, others recruiting staff and others sitting in the middle in “hold tight mode”. There has been a small number of business closures across the development, construction, design sectors. Along with slowing real estate prices in the headlines, it made for a period where confidence levels were suffering. In this period, virtually all sectors were experiencing lower activity levels than in the previous 2 years.

Despite significant international events such as Brexit, trade wars and issues in the Middle East splashed across the media; locally, the market seems to be stable as we approach the end of the year.

Following changes to the way projects are financed (particularly medium density residential), we have seen longer breaks between project stages. Early conversations about new finance models supporting “build to rent” or “rent to buy” type projects are starting to increase. Activity is expected to continue in these areas into 2020, and with interest rates now having dropped to historic lows, impetus appears to be coming back into the real estate market.

Whilst positive, this new finance model may add an element of complexity when resourcing, managing and delivering projects, with finance more likely to go on hold at certain project stages. With slightly tighter market conditions, tougher fees are something that many studios are contending with within a competitive market.

Our current positions still suggest high levels of activity across the board, though with changes in the mix of projects along with budgets. It is hard to pin-point a consistently busy sector, as some practices who are working in a specific typology are busy, others are quiet.

The apartment market is showing positive signs in recent months, and the usual model of great site, great design, great amenity, and a cashed-up developer continuing to achieve positive results.

An increase of commercial projects in the smaller to the midscale area seems stable. With many large-scale commercial buildings that began construction in the past 12 months due to finish up in 2020, new projects in the pipeline are tending to be mid-scale rather than large.

Highly technical projects including pharmaceutical, bio-medical, rail and Aviation are creating compelling new roles, and Aged Care is on the up. However, a limited number of key players in these sectors mean roles are not widespread.

We have seen a number of new hotel projects committing and these are generally a part of a mixed-use development with a broad range of facilities in the overall project mix. Education, health and institutional sectors have seen an increase in new projects commencing. However, build-value, scale and method of engaging Architectural studios still makes for a tough sector.

Infrastructure spending remains strong in the background, and studios active in this area anticipate further spending on rail, road and infrastructure projects generally from the State Government.

The Interior Design market remains solid, with commercial, apartment and hospitality projects strongly in the mix of our recruitment in the past three months, and these roles continue to come through in steady levels. Some are high profile larger projects with significant demand for new team members, along with activity in the smaller scale, high-end boutique hospitality area.

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