Australian Commercial Construction Companies See Growth With Asian Capital Investment

City expansion has been a problem for almost the last 60 years now, seeing most new home buyers purchasing property with a commute time of between 1 hour and 3 hours each way. There has been only a little ability to purchase apartments closer to the city, since many early developments were released primarily to investors rather than the public.

However things are starting to change. In the last 10 years, more Asian style of property development has hit the major cities. While early towers were suitable for apartments only, large Asian construction companies have arrived and partnered with most of the large Australian construction companies to build a more township based development, which will remain stable financially to body corporate due to its 3 tier development style.

3 tier development (or sometimes 4 tier) comprises of lower level shops, middle level offices and top level apartments, with 4 tier developments incorporating small storage facilities in an industrial level. These mixed interests ensure that there is a range of investment coming from the development. And hence its future body corporate fees is obtained easily to maintain the structures into the future.

There are currently around 30 of these developments in Melbourne with more throughout the country. It’s becoming a common sight to see illuminated tower crane signage above buildings in capital cities with the names of foreign construction companies advertised.

These types of developments are currently being targeted to upper middle class buyers. However in Asia, these type of developments occur even for entry level priced investments. The reason we haven’t seen much of these, is the mentality of governments to expand cities rather than grow them vertically. Land returns more tax and is easier to manage. This has combined with the mentality much like America has of the “Great American Dream”, where any property, that is not on your own piece of freehold land, isn’t worthy of investment.

However with commute times growing, retail and commercial demand in outer suburbs slowing, and a complete lack of remaining land within the inner metro areas, the only option left now is to produce these mixed use towers that combine 3 or 4 council zones within the one building.

Currently this is taking part only throughout the inner metro areas, but we expect this type of construction to grow into the suburbs within 10 more years. It makes more sense and although it will be hard for some to accept, Australian capital cities need a rapid increase in all 4 zones in order to keep prices affordable in the future. This can only be done by tower developments.

While the cost of tower development in Australia is still extremely high, Asian companies have partnered and provided most of the capital required to construct these types of developments. In return, local companies get a cut of the profits, and are able to handle the regulatory requirements, provide employment for laborers and skilled construction workers, and provide more zoned land per square metre than any other developments can currently offer.

With more experience will come more demand for these developments. Currently this is only attractive to upper middle class income households. But in future, it is highly possible to cater these types of developments to all household incomes. Asian cities have shown this to be possible. We just need the recognition, demand and examples built today to influence councils into the future that these types of developments are socially and financially stable.

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