Combined builder-developers showing resistance to industry challenges

The construction industry has faced significant challenges since 2020, with a combination of Covid, supply chain disruptions, labour shortages, and rising costs creating a "profitless construction boom."

As of April 2024, there have been more than 2,100 construction company insolvencies so far this financial year, raising concerns amid the current housing crisis.

While it may appear the worst is over, Rawlinson’s construction cost update expects further escalation in costs in the range of 4 to 6 per cent over the course of the year. While it’s encouraging to see a slowdown, these projections are still double the historic average, indicating that challenges persist.

The impact is not confined to the building sector alone; the development industry is also struggling. Developers are finding it increasingly difficult to make projects financially viable. Moreover, off-the-plan sales are proving to be unprofitable, adding to the industry’s woes.

Despite these challenges, the emergence of builder-developers is showing promising signs of resistance.

These streamlined organisations integrate both development and construction functions, requiring fewer overheads and employing efficient, non-combative contractual processes. This approach minimises waste and allows more time for hard dollar tasks like pouring concrete.

Gold Coast builder-developer Paul Slijderink, Director of PGS Invest, who has more than 10 years of experience in the construction industry, emphasises the importance of coordination and time management.

“Some of the hardest costs to manage are the finishes and fit outs - trades just don’t have time to come back two or three times to finish off like they used to.”

Specialising in restaurant fit-outs, Mr Slijderink highlights the challenges of managing projects with strict compliance requirements and tight deadlines.

“Every job is completely different and they are also time-critical and must look right and function immediately at handover.”

Project funding remains an issue

A developer is responsible for the funding of the entire project, preparing the plans for blocks, the estate and the streets and organising permits and marketing for the entire development. Builders are responsible for the actual construction of the property. A builder-developer is legally empowered to construct or execute work on a building unit, building or structure and/or land development.

As a builder-developer, Mr Slijderink has successfully integrated development outcomes with construction demands.

“Builders and trades jumping from job to job find it extremely difficult.

“There are big advantages turning up to the one site for years at a time.”

Funding remains a significant hurdle for many developers and builders.

Mr Slijderink points out that funders often require developers to engage a separate builder to share risk, limiting the ability to manage both aspects of their projects effectively.

“The ability for fast decision-making results in better outcomes for trades, less overheads, faster response times, less errors, and ultimately a better end product.

“We have found this in our residential and commercial developments.”

There have been countless people impacted by construction insolvencies in the recent years, yet despite these challenges there seems to be light at the end of the tunnel.

With economic conditions stabilising and builder developers gaining traction, many companies are taking further control of their projects to ensure proper delivery.

Their ability to navigate the complexities of the current construction landscape has them well positioned to contribute to the construction industry’s recovery and growth.

In order for Australia’s blue-collar workers to prosper, adaption is imperative and will not only benefit employers but also consumers who rely on these companies to deliver.