After nearly five years of double-digit annual growth in the Australian Building Management & Control Systems (BMCS) market, construction investment is to face the first downturn with an almost 10 per cent decline in 2009.
Commercial building construction activity, particularly office buildings, grew dramatically from approximately $4 billion in 2002/03 to $10.6 billion in 2007/08. The drop in construction investment is mainly in the office, entertainment and warehouse sectors.
According to Frost & Sullivan Australia & New Zealand industry analyst of Industrial Practice, Sarah Wang, the breakout of the financial crisis and fears of a deepening recession have led to the scenario where many approved building projects are now on hold.
"Typically, a BMCS vendor's income comprises 55 per cent of new-built projects and 45 per cent of renovation/refurbishment projects. Thus, the decrease in construction investment will negatively impact revenue from the new-built segment," she said.
However, investment levels in sectors that are generally public-funded such as educational buildings, health and aged care buildings are likely to hold well as the federal and state governments invest to assist economic recovery.
According to Wang, during an economic downturn, costs become a primary concern for all business owners. At the same time, the Australian federal government has committed to cut down 5 to 10 per cent of greenhouse gas emissions by 2020 on 2000 emission levels, as part of its obligations to ratifying the Kyoto Protocol.
"Opportunity arises for the BMCS market when customers seek to be more cost-conscious and are compelled to abide by environmental regulations," Wang said.
