Q4 2023 Australia Report [Darwin]: The Northern Territory market is experiencing strong growth due to government allocation of a record $4bn in the 2023-24 budget to spend on its infrastructure program. This includes the Darwin ship lift facility, and the establishment of new infrastructure, such as roads, aerodromes, jetties, bridges and public transport.
Charles Darwin University (CDU) is currently constructing it’s largest project in the CBD and has the new Health Education Training Center at it’s Casuarina campus out for tender.
The other project of significance, currently in the planning phase, is the National Aboriginal Arts Gallery in Alice Springs and the State Square Art Gallery and Precinct Redevelopment currently under construction in the Darwin CBD.
Cost increases in the Northern Territory have been experienced in most trades caused by fragmented supply chain issues and an increase in fuel prices and labour shortages which have led to volatile pricing in areas of the subcontract market, however not to the same levels experienced in 2022 and Q1 2023. Subcontractor shortages across several key trades including blockwork, precast concrete, joinery and electrical services, which is having an impact on construction costs and as a result clients are looking at alternative design measures.
Private residential sector investment continues to slow with residential developers “struggling to make projects stack-up” due to higher construction costs combined with a flattening in sale prices.
Private developers are finding it increasing difficult to secure funds from financial institutions, in particular residential property developers, due to financial risk associated with increasing construction costs coupled with steadying sale / rental prices.
Labour shortages have been identified across all trades, resulting in employers paying higher wages with additional benefits. The NT is currently experiencing a shortage of skilled labour across multiple trades. Trades like blockwork that has traditionally been the preferred building material in the NT for a long period of time, is being impacted due to quality concerns / issues.
Design consultants have addressed their concerns over the availability and affordability of Professional Indemnity (PI) insurance, due to their liability requirements. This is having a commercial impact on the consultant fees on project, in particular public projects due to the standard consultant service contracts the NTG use.
Escalation insights
New Section J Energy Efficiency Performance Requirements are having a commercial impact on building services costs. ESD solutions being explored on public and private projects result in higher capital costs. A lot of ESD solutions being explored don’t suit the Northern Territory due to size, and the tropical climate i.e. water storage. Overseas prefabrication modules are being explored in the residential sector due to the commercial savings, high quality finish and potential programme savings. Prefabricated modules are typically used in remote communities where trades are not available / or feasible.
Earthquake and cyclone rating design requirements for projects in the NT, typically make it more expensive to build in the NT compared to other locations around Australia. Careful consideration needs to go into selecting / incorporating appropriate materials into the design to ensure they meet the design requirements, are readily available and commercially viable.
Material costs continue to fluctuate, due to high demand for certain materials like precast concrete and structural steel. With limited suppliers in the NT, contractors are now trying to source materials from interstate, resulting in increased cost due to fuel and transport costs.
Fragmented supply chain issues continue to be experienced in most trades. Developers and contractors are now sourcing new suppliers interstate and overseas for alternative materials, which is impacting lead times on projects and contractor securities.
Photo: Darwin Waterfront
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