BT&P

Market Update: Melbourne Architecture & Interior Design, December 2023

30th November 2023 / Market Updates
Photo: Wold Zimmermann

As we rush headlong into the end of 2023, there’s lots to talk about in this update!

This time around, we want to take a look at forces on the market over the last 6 months, and what this possibly means for the first half of 2024. We’ll be focusing on recruitment trends, overall market activity and a few other points of interest to us here at BT&P Melbourne.

Looking back from our last Update in May, a number of factors remain similar, with volatility around interest rate increases, finance availability, construction costs and a lower number of tender and bid submissions which has resulted in a relatively tight market in the broader commercial and mixed-use sectors.

Right now, the most common term we are hearing is that the usual rules don’t seem to apply and this is impacting on confidence. Many studios have interesting projects in early stages but are unsure when projects will become real, and move into documentation and delivery stages.

Photo: Ran Gu

The apartment market has been underpinned by the B2R sector, with a number of projects of a large scale being committed. However, the build to sell sector is still impacted by interest rate increases, meaning a purchaser’s ability to borrow is far below the level available back in April 2022. Factors relating to the increase in build costs, and recent Victorian State Government Land Tax increases, have all combined to create strong head winds in this sector. Having said that, the market in the $30 – $50M range still has reasonable movement when a good site and design result come together. We are hearing build costs are now approaching the $13,000 to $15,000 per square meter level which will impact what locations and sites are ultimately viable.

Recent State Government changes to increase the speed of Planning Decisions (while making for good rhetoric) has yet to reveal how it will work in reality, with confusion around the process still an issue for many.

All of this at a time when our population growth continues to climb at historically high levels, so the usual rules around demand vs supply aren’t exactly aligning at the moment.

Large scale commercial development remains tight, with several sites under consideration for the next big commercial tower, however commercial occupancy rates post covid in the CBD remain at relatively low levels. As such the viability of these type of projects remains a question, when large property groups see potential of actually de-valuing their existing commercial assets if a new tower goes ahead.

Most recently, the long-awaited Federal Government review of Infrastructure Spending has now been completed. We anticipate some good activity in this space into 2024 now that there’s clarity around which projects will progress. This will mean a number of studios will be busy in this space, however, this is a relatively small field in terms of overall numbers of Architecture practices involved.

Several large health projects are likely to be awarded around March, which will mean some recruitment activity in this space, most likely second quarter 2024.

There are limited other large scale State Government projects on the horizon outside of the infrastructure space now the NGV Contemporary, Footscray Hospital, and Melbourne Metro projects are well underway. It is still a waiting game on the anticipated Victorian Housing Statement, which will open up anticipated government owned social housing sites moving forward.

That said, on a Federal level, defence spending has also been under review, and we anticipate a number of projects in the $500M – $1B range will emerge in 2024.

Photo: Arun Clarke

We are starting to see activity move ahead in the Aged Care and Education space. This looks likely to be spread across a wide range of smaller to mid-sized studios, with aged care projects spanning refurbishment and new build, often in the $30M scale, and other larger ones circa $120M.

We have been working with a number of studios with substantial overseas works in early stages, and with the Australian Dollar at relatively low levels, a number of groups with the capability to work on off shore projects believe they have a strong competitive advantage. Some exciting projects are being discussed in this sector!

The interiors sector has remained consistent. The shifting activity we have seen across architecture has not has the same effect on interiors -based studios with workplace projects backed by the everchanging office environment, maintaining strong pipelines. New hotels and high-end private residential projects have also kept this sector afloat. However, newly created roles have generally come with very specialised project backgrounds and skill sets.

An increasing trend over the past few years has been local studios expanding interstate, and we are now regularly working on roles across Australia. We have current positions in Perth, Adelaide, Brisbane and Sydney, along with more regional positions in Byron Bay, Queensland beaches and inland Victoria.

Photo: Arnaud Mesureur

So, as far as predictions for 2024, we expect to see some studios with big growth plans, others holding solid and a number who will make redundancies, either late 2023 or early 2024. We had predicted that the residential apartment market would come back strongly, however for the reasons mentioned earlier, some projects will kick ahead strongly while others will take longer than anticipated.

While there have been some negative points raised around the economy and overall confidence levels, we don’t want to be painting an overly negative picture around the Melbourne market. With a number of groups using this time to strategise and restructure, we feel that the first half of the year will have its challenges in certain sectors before strengthening to a degree after that.

The team at BT&P has been consistently busy throughout 2023 with many senior strategic roles being a signature part of our workload. As we head into 2024, we are working across a wide range of Principal and Associate level roles including Practice Managers. There are a number of studios looking at strategically recruiting mid-career Architects and Interior Designers with strong client facing skills who will form the next tier of a practice’s succession plans.

We expect recruitment in the first quarter of 2024 to focus on experienced people with key skills in specific project sectors. After that, an increase in more team-based roles as projects progress into delivery stages throughout the year.

Additionally, we have been busy recruiting on broader roles that make up the entirety of a studio, with roles in Finance, BID coordination, Graphic Design, Document Control, Administration and Executive Assistants.

We have also seen an increase in the number of contract roles coming through, and while these generally have very specific skillsets attached, contracting has been a big part of the activity we’ve seen.

Photo: Jeremy Bishop

The team here at Bloomfield Tremayne have been proud primary sponsors of The Archisoccer Competition over the past 4 years. We are excited to remain associated again this year (albeit as a secondary sponsor) as the competition has grown to include Sydney for the first time.

Great work as always by Adrian and Darian in keeping the Archisoccer competition thriving and growing!

As we head into 2024, we wish you a safe and enjoyable break, and we look forward to working with you again and experiencing what the New Year brings!

ARCHITECTS AWARD CHANGES – Effective 1st January 2024

A quick reminder following the decision in October from Fair Work confirming that the “Prescribed Competencies”, will be replaced in The Architects Award effective January 1, 2024.

This is particularly relevant for Graduates of Architecture who will sit their Architectural Practice Examination after January 1, 2024.

Please access the following link which outlines these changes. https://www.fairwork.gov.au/newsroom/news/changes-architects-award

Bruce Whetters

Partner – Melbourne

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