Construcciones Yamaro: Coates’ 2024 construction industry outlook

The Australian engineering and construction industry experienced a busy year in 2023, and Coates anticipates that this momentum will continue in 2024. Coates group manager for customer and markets James Lawrence notes a cautious optimism prevailing for the upcoming year.

“While residential construction is declining, nationally the market remains in an upward cycle driven by concurrent booms in road, railway and renewables construction,” says Lawrence. “Although buoyant, 2024 may still be challenging for some construction businesses, with demand surging in some markets and flattening in others.”

“Construction costs also continue to rise, although at a slower pace than the past two years, and planning approvals and labour market constraints persist.

“If businesses can successfully navigate these challenges and retain the talent to deliver on demand, the next decade will be a rewarding time to be working in this industry.”

Coates foresees the following developments for engineering and construction businesses in the year ahead.

Current trends and market conditions

Despite challenges, the overall position of Australia’s construction markets remains strong.

State-based demand

The value of construction work is a key indicator of the health of economies and, based on current forecasts, Queensland and Western Australia are expected to outperform New South Wales and Victoria in coming years on a percentage growth factor.

“These states have relatively strong foundations for demand this decade, with growing populations, mineral and renewable resources, relatively low debt and major events like the 2032 Olympics in Brisbane stimulating further opportunities,” says Lawrence.

Growth sectors

Nationally, the construction of transportation, utilities, renewables, transmission, industrial, road and rail infrastructure projects will continue to drive significant activity in 2024, providing longevity for engineering and construction businesses. Coates also continues to experience strong demand across all equipment and service categories, to support Australia’s expanding infrastructure project pipeline.

“We’re seeing considerable expansion into social institution infrastructure in areas like health and education, particularly in regional locations,” says Lawrence. “We’re also starting to see the return of private investment in large-scale multi-dwelling projects, which will be essential for meeting the needs of Australia’s growing population.”

Renewable energy infrastructure is expected to surge significantly in 2024, notably in the Eastern states. According to Macromonitor’s Renewable energy construction outlook report from March 2023, spending on renewable energy infrastructure is projected to increase by 49 per cent, reaching $5.2 billion in FY24 and is anticipated to grow further to $12 billion in FY26.

The proposed 2024 Integrated System Plan (ISP) from the Australian Energy Market Operator (AEMO) indicates there will be continued escalation in infrastructure for large-scale renewable generation, distribution and storage, and a contraction in traditional sources of power generation. The impact of this investment will be truly national as indicated on the ISP project roadmap.

“Coates is well-placed to support customers in delivering on demand for renewable energy infrastructure, with more than 145 branches in key locations across the country; Australia’s largest hire fleet; and experience supporting the delivery of major infrastructure projects Australia-wide,” says Lawrence. “The growth in renewable energy sector projects aligns with Coates’ sustainability framework.”

Challenges

Market capacity, capability, cost and carbon reduction remain key focus areas for construction in 2024.

Capacity and capability

As the pipeline of construction work continues to surpass the availability of skilled and unskilled labour, workforce challenges will persist. “To address labour and capability issues, construction businesses can partner with providers like Coates, with in-house design and engineering capability and turnkey solutions, to boost the capacity to deliver on project requirements,” says Lawrence.

Cost inflation

The rising costs and tightening margins that have hampered construction businesses in 2023 look set to continue into 2024 as low margin projects come to fruition. Although a slight resettling of costs – albeit at a higher level – the completion of the Federal Government’s infrastructure review will bring more surety to the industry.

“To meet demand there needs to be a general acceptance that costs will be higher, and that tendering will happen at those higher rates,” says Lawrence.

Carbon

Navigating changing environmental regulations and the need to deliver on carbon reduction targets and strategies is another factor that will shape construction activity and the cost of delivering construction projects in 2024 and beyond.

“Initiatives and legislation, such as the Sustainable Buildings SEPP in NSW, are shifting from reducing operating emissions to reducing embodied carbon – that is the carbon associated with construction materials, their transport to and from site, and the construction process itself,” says Lawrence. “Construction businesses will increasingly need to consider embodied carbon in the early stages of the project life cycle.”

Opportunities

Across all sectors and geographies, there is potential for construction businesses to improve productivity and ease cost and capacity constraints. “It’s really about doing more with less,” says Lawrence.

Utilising technology

“Technology has a role to play in easing labour pressures and offsetting rising construction costs,” says Lawrence. “By offering telemetry-enabled equipment and technologies like SiteIQ for asset management during industrial shutdowns and maintenance and Coates Connect, our customer portal, Coates’ customers have visibility to what’s on hire, where it is located, utilisation rates, and the ability to proactively manage all hire assets.”

“This intelligence provides a powerful means for improving tool time, cost efficiency, productivity and project outcomes.”

Embedding more sustainable practices

While the path to net zero presents significant challenges for the industry, it also offers opportunities. Embedding circular economy principles – such as reusing materials, designing structures for disassembly and reducing waste – can yield significant benefits including increased efficiencies that can lead to cost savings and reductions in embodied carbon.

Hiring rather than buying construction equipment allows construction businesses to participate in the circular economy, to be responsive and asset light.

“Coates Engineering Solutions can support customers with temporary works equipment and expertise, such as reusable propping and hydraulic shoring systems, which help reduce embodied materials and carbon emissions,” says Lawrence. “Our Greener Choices range of lower-emission and more sustainable equipment also enables customers to reduce their project Scope 1 greenhouse gas emissions.”

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