A dramatic turn around in construction costs in Western Australia has meant that many stalled development projects may once again become viable and new projects are looking far more attractive, according to international property and construction consultants Davis Langdon.

Perth director for Davis Langdon, Neil Dickson, said the whole dynamic of the construction market had changed in the past six months with client’s and developers now clearly having the upper hand when it came to construction costs.

Developers who had put projects on hold due to escalating construction costs in early to middle 2008 should now review their plans, said Mr Dickson.

“We are seeing construction prices today at the same level that they were in early 2008, and there is potential for them to drop even further,” he said.

“There is now much more labour available in the market as contractors who had fairly full books are now finding that a lot of their projects have been put on hold and they are scrambling around for work.

“In the middle of last year, developers generally struggled to generate list of contractors to bid for their work but now we are seeing healthy competition at both main and sub-contractor level.

“The balance of power in the construction sector has now definitely shifted where before it was with the contractors, it is now with developers as contractor’s seek to fill voids in their order books.”

Davis Langdon has analysed and projected construction costs that show the escalation rate of 10-12%  seen in early to mid 2008 has dropped to around zero in early 2009.

The projection averaged across non-CBD commercial developments predicts that construction costs will remain relatively low into the foreseeable future, with an escalation of only four per cent per annum predicted through to 2014.

“However developers should be ensuring that project capital costs issued any time in the last year are updated, that they re-assess their procurement options and programme their projects to bring them to the market at the most opportune time that balances construction cost with demand for their product.”

For further information, contact Meaghan Jones on +61 3 9933 8800 or email mjones2@davislangdon.com.au