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Market Update: Melbourne Architecture & Interior Design, April 2024

24th April 2024 / Market Updates

Lots to cover as always, so let’s fly right in!

This time around, we are going to have a look at activity in various sectors of the market and some of the forces around these, along with some recruitment trends that we are seeing currently.

Photo: Geraldine Lewa

There’s a lot of talk around the market at the moment about things tightening up in different sectors and, in short, those reading this update will either agree or disagree depending on their own individual viewpoint and circumstances. Some studios are travelling along well, others are seeing a tightening of new projects and are reacting to this in the way of redundancies or 4 day working weeks. In reality we have been experiencing a similar environment since the middle of 2023 where general factors such as increased construction costs, interest rates and finance availability along with higher competition for new projects have all converged at the same time. In this sense, these bigger picture factors have created headwinds, even in project sectors where high demand exists.

Are we in a recession? Probably not. Are we in a downturn across the market? Yes! The maths on this one is straightforward – are there more people coming onto the market when there are fewer roles out there? – for sure. On the flip side however, are there new roles being created? – Yes!

So, with this as the framework, lets drill down further.

Looking across different project sectors, there are very few that you can point to highlight where one sector is stronger than another, so in short, larger issues are impacting development across various sectors rather than a traditional cyclical downturn in one sector or demand and supply issues generally.

Photo: Bulkan Evcimen

Let’s take a look at the apartment sector as one example. As interest rate increases started in May of 22, a purchaser’s borrowing capacity has diminished at the same time as construction costs have increased, with the end result being a wide gap in the viability of many of these projects. The Build To Rent (B2R) sector has emerged strongly during this time, however this fills a particular space in the development environment and is not the model that suits all. Social housing has seen a lot of rhetoric from State Government, and whilst some practices are working in this space, further clarity around procurement and a clear path forward are yet to be established. Student Housing is still a growth area although available finance in this sector has some projects awaiting final commitment to go into construction.

So with all of those headwinds in the mix, the reality is population growth continues dramatically and therefore demand for all types of residential development remain at a high level.

Photo: Adrian Sulyok 

In the past year there has been a lot of positive interest in the commercial / industrial sectors, specifically data centres and large-scale warehousing and distribution and the outlook is positive in these sectors, however still tempered with construction costs and finance issues in some cases.

The outlook for Government projects in Victoria remains uncertain, however a number are waiting for the May Budget to see what will actually go ahead, so more to be revealed in the next month. Some uncertainties exist around the States current budget situation however. Large infrastructure continues with teams in further bid stages, so more to come here, and a large announcement imminent on a large hospital project.

We have also seen a number of one-off type projects moving ahead, across sports and recreation, social housing, aged care, hotel and the high-end residential sectors, all creating new opportunities.

The commercial space has several potential sites with larger tower developments being considered, and big tenants looking at moving, so there is some potential here, however the developers are still wary in this area when factoring in construction costs. Certainly, the A Grade commercial building are in demand, however this will most likely impact values in older or B Grade buildings.

Interiors remains solid across the residential and commercial sectors, albeit at lower levels to those seen in 2023. With a number of large-scale apartments and commercial tenancies underway, along with some quality one-off projects in the hospitality and institutional spaces, there are some good projects happening on the interiors front.

So what roles are we recruiting on at the moment?

As in the past, when the market tightens, roles that are listed with us tend to be more specific around the type of project that has been committed, therefore in this regard, it will either work for or against job seekers dependant on their project experience. The trend for strategic recruitment by a number of practices continues, with some exciting long-term opportunities in the rail and Infrastructure space, defence, large scale sporting facilities, and those with client facing and Business Development skills in multi residential, aged care and education sectors.

Photo: Danist Soh

Architects and Interior Designers with strong Revit skills and a focus toward either design or delivery are still seeing some good opportunities, along with Revit Technicians with strong BIM capabilities, however there is less activity generally for team member type roles as overall project activity has softened.

We have also seen an increase in contract roles coming through which reflects the current market, and a number of firms are considering contract offers where their workload is clear for 3 to 6 months, so opportunities exist in this space.

Where to from here? The next 3 to 6 months will see some practices experience difficulties as finance availability and construction costs see projects delayed, however demand across the majority of project sectors remains strong, and the desire from developers to get projects moving is clear, so ultimately the demand versus supply model should see the market correct, however to what degree and when needs a much smarter mind than mine!

There are however a number of positive opportunities however tending to be more in the mid-scale size and these projects are based across a range of different sectors, so some positive action ahead.

As mentioned at the outset of this article, studios and job hunters will all have a different view of the market based on their own experiences, either positive or negative, and whilst there remain many challenges around projects, there are certainly some positive stories and outlooks around.

Bruce Whetters

Partner – Melbourne

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