Australia’s commercial air conditioning industry is being hit on all fronts with contracting issues at the forefront of stalled projects.
High construction costs coupled with rising interest rates, economic uncertainty and wafer thin margins for contractors are all having an impact on the HVAC market.
Labour shortages are another cause for concern as contractors struggle to retain talent.
Overall housing starts sit below the 200,000 per annum needed between 2022 and 2025, dipping to its lowest over 2022-23 before rebounding in 2026-27, according to the latest forecasts from Master Builders Australia (MBA).
Whilst detached housing and renovations are stable or steadily growing off the back of the Covid stimulus boom, medium to high density remains hardest hit.
MBA CEO, Denita Wawn, said this segment is more sensitive to interest rate fluctuations and is still recovering from the absence of inward migration over the past three years.
“Even before the pandemic, higher density dwellings were in decline,” she said.
“The challenge will be to make sure that we put downward pressure on building and construction costs to increase output.
“At present these challenges relate to supply of housing, workforce shortages and bottlenecks in the market for key building materials and products.”
Despite record investment in infrastructure by all levels of government, small to medium sized contractors are struggling to survive.
In an interview on the Competitive Contractor Podcast, the CEO of the Civil Contractors Federation of New South Wales (CCF), David Castledine, said are struggling to deliver projects within anticipated timeframes.
“If industry reform doesn't occur, we'll see a fundamental structural shift in how the markets are arranged with massive tier one contractors and labour-hire companies,” he warned.
“Tier two contractors, that traditionally form the backbone and workforce of the industry, may be lost.”
In late 2021, CCF surveyed members and found 30 per cent of respondents (contractors) had lost money.
“About 25 per cent of that group made less than five per cent in profit. We’re seeing wafer-thin margins,” Castledine said.
“In that 2021 survey, 40 per cent of our respondents had a decrease in revenue compared to 2018 and 16 per cent of them had cuts in revenue growth. That’s not a picture that’s synonymous with an infrastructure boom.”
As populations grow older and experienced workers reach retirement, organisations are faced with the arduous task of replacing them, particularly among specialised workers in fields such as manufacturing, mechanical engineering and building services.
Australian students should be encouraged to pursue required skills like engineering at university and, secondly, Australia should look to attract migrants who have those skills.
Katya Vladislavleva, CEO of DataStories, a Partners in Performance company, said organisations need foresight as they enter 2023.
“This is the perfect time for organisations to use prescriptive analytics to unleash potential and overcome these labour challenges,” she said.
“With industry professionals retiring, prescriptive analytics is the ideal tool to train or retrain new talent so that operations aren’t impacted.
“Organisations who find ways to preserve knowledge in the face of labour challenges will have an edge to help them achieve success in 2023 and beyond.”