Market Update: Melbourne Architecture & Interior Design, May 202328th April 2023 / Market Updates Tips & Advice
If we cast our minds back to the Market update from May 2022 , it was accurately predicted that the peak of the market would be the second quarter of 2022. At that time, the industry had a high volume of work underway and more projects soon to commence, but there were looming external factors flagged to pay special attention to. Back then, we referred to the mega-forces that would influence industry; interest rates were rising, state and federal elections were looming, and international situations in Europe and China undermined confidence. Supply chain issues were also causing delays and cost pressures, peppering all of this with staffing shortages that were a pain point for directors, human resource managers and project teams.
Fast forward 12 months, and we can confirm that the peak of the market was accurately forecasted, and we have entered an era of increased market volatility. But why has this happened? Simply put, we work in an industry that is intrinsically connected to consumer confidence indexing and the ability to secure finance. While the state and federal elections have passed, geopolitical tensions, the rising cost of living, supply issues, and staffing shortages in select A+D professions continue to affect the industry. Anecdotally, we are starting to hear about a decrease in the number of tenders, bids, and submissions. However, this market update will focus on analysing project typology and the industry beyond 2023.
Political Influences on the Architecture & Interior Design Industry
From a political standpoint, public sector spending at both the state and federal government levels underpins many market activity areas. However, the most hyped-about sector, infrastructure, have experienced a lull in hiring whilst the state is given the green light to commence. So, there has not yet been heavy recruitment in this sphere. But, a clearer understanding of the status of these projects will be provided after the independent review of infrastructure investment. Rest assured, there has been recent recruitment activity in the public sector outside the infrastructure sector, particularly in health, social housing and defence project typologies.
Privately Funded Projects
When analysing Melbourne’s privately funded project typology sector, we are pleased to see five project groups heavily recruiting, with large pipelines of committed work. One of these areas is the commercial interior fit-out space, and we have just started to see new activity in the hospitality sector (e.g once-off cafes, bars and restaurants)… It’s exciting to see Melbourne wake from its lockdown hiatus!
On the other hand, smaller residential architectural consultancies and building designers that heavily rely on their clients’ available credit have experienced a decrease in new project commitments. In this instance, the reduced borrowing capacity (and higher interest rates) and inflated material costs have impacted those wanting to extend the family home or build their dream house. However, not all of the single-dwelling residential market is experiencing a decline. Studios with cashed-up clientele who operate within the luxury market segment are still seeing new projects initiated, but not at the volume and consistency experienced in the last two years. Recently, BT&P has seen an increase in new job listings from new architectural consultancies with innovative business models who are expanding their teams to accommodate an increased workflow.
Larger-Scale Privately Backed Projects Sectors
On the larger residential front, multi-residential developments are steadily progressing with caution, and there has been strong activity in BTR developments, as many developers have pivoted to take advantage of the tax incentives reductions. But there is less recruitment activity on large footprint, precinct style commercial-multi-residential mixed-use developments that would typically fall in the construction build value range of $500 million to $1 billion. While there are forces working against new project initiation, there are positive elements that offer some balance. Increased migration, upcoming accommodation shortages for students arriving in Melbourne, and the lack of rental properties will positively influence this market segment, likely resulting in new developments commencing at the end of 2023.
The Architectural Industry Beyond 2023 – Social, Legal & Environmental Influences
From a broader industry perspective, significant social, legal and environmental changes will influence the industry moving forward. A recent draft ruling concerning employees vs independent contractors means that it is more important than ever to go through a payroll service, such as what we offer at Bloomfield Tremayne & Partners (BT&P). BT&P will ensure contractual compliance within this ever-evolving landscape, and the engagement of hourly rate professionals may put studios at risk for significant hidden costs.
Another challenge that needs attention is the gender pay gap in the industry. According to WEGA statistics, Australia’s gender pay gap is sitting at 22.8%, with women earning $26,596 less on average than men each year. Our team is actively working to reduce the gender pay gap within the industry, and for studios or individuals who would like to discuss this matter further, please don’t hesitate to reach out directly. If you’re a professional wondering where you stand in the industry, please download the Rates and Salary Guidelines, which is updated each July.
On a positive note, we are excited about the upcoming new components that will be weaved into the Victorian Architectural registration modules. These changes include First Nations principles in designing for country, and broadening the sustainability competencies. We are enthusiastic about our emerging industry leaders, who will shape the future through thoughtful architecture and design.