Blue book 2011 by Minh Đoàn

THE BLUE BOOK

Accessible Knowledge for the Property & Construction Industry www.davislangdon.com www.aecom.com

2011

Davis Langdon has compiled the information in this document from a number of sources. Davis Langdon has not verified that such information is correct, accurate or complete. Whilst every care has been taken in the preparation of this document, Davis Langdon makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Historical trends are not necessarily a reliable indicator for actual future performance. Davis Langdon accepts no liability or responsibility to any party in respect of this document. This document has been prepared for the purpose of providing general information, without taking account of any particular personâ&#x20AC;&#x2122;s objectives, situation or needs. You should seek professional advice having regard to your own objectives, situation and needs before taking any action. ÂŠ Davis Langdon Australia Pty Ltd

Mark Beattie Managing Director Davis Langdon, Australia New Zealand

This is the thirteenth edition of The Blue Book and the first since we joined AECOM, one of the world's largest providers of professional, technical and management support services in the world. So what changes? For the most part, there will be no change to the way in which we provide the same quality of service to our clients as we always have done. What will change is our ability to bring forward insights and innovation that help clients look into the future. As part of AECOM we believe Davis Langdon will be able to deliver even better construction consultancy services in the built, natural and social environment. That belief stems from the fact that our services will be founded on real evidence and knowledge gathered from unrivalled local, regional, national and global experience. We are committed to making more knowledge available to our clients and colleagues through publications such as this Blue Book. We work progressively to ensure the information it contains is useful and relevant to our industry. I'm excited to continue in my role as Managing Director for Australia and New Zealand. I can see the immense opportunities and the potential to enable our growth both as a business and for all our staff as we connect with AECOM.

More information on AECOM and its services can be found at www.aecom.com

Foreword

AECOM (NYSE: ACM) is a global provider of professional technical and management support services to a broad range of markets, including transportation, facilities, environmental, energy, water and government. With approximately 51,000 employees around the world, AECOM is a leader in all of the key markets that it serves. AECOM provides a blend of global reach, local knowledge, innovation and collaborative technical excellence in delivering solutions that enhance and sustain the worldâ&#x20AC;&#x2122;s built, natural and social environments. A Fortune 500 company, AECOM serves clients in more than 100 countries and has annual revenue in excess of $6 billion.

KEEPING KEEPING AUSTRALIA & AUSTRALIA’S NEW ZEALAND'S WHEELS TURNING Booming population growth has the potential to affect the productivity, liveability and futurefuture prosperity of Australia. Developing effective strategies to meet these strategies challengestoismeet one of the prosperity of Australia and New Zealand. Developing effective these challenges is one of the most complex issues facing the property and construction industry today. But if we can manage the competing demands of infrastructure and economic growth with sustainable outcomes, we can create a tomorrow that’s beyond the dreams of today. Davis Langdon have the global knowledge, industry experience and creative solutions to get us there.

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Contents One: About Davis Langdon 1 Two: Construction Key Statistics Australia 7 Three: Construction Key Statistics New Zealand 17 Four: Cost Data and Market Data 23 Five: Property Investment Information 45 Six: Emerging Trends 53 Seven: Sustainability 63 Eight: Project Delivery, Strategies and Business Assurance 75 Nine: Working Calendars 93 Ten: Directory of Key Offices 105

Contents

One: About Davis Langdon 6

Lumiere Apartments, Sydney, NSW Davis Langdon, An AECOM Company

About Davis Langdon Utilising its industry strength, Davis Langdon, as part of AECOM, provides clients with property and construction risk and value management. The firm manages time, cost and quality imperatives to achieve successful project outcomes that enhance and sustain the world's built, natural and social environments. It also assists stakeholders with compliance assurance and identification of value improvement possibilities.

One: About Davis Langdon

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Davis Langdon brings together a range of professional services for total project delivery Project Services Project Management

Cost Management

Our Project Managers take responsibility for total project delivery. With a clear understanding of the local business environment, our eyes are focused on your business outcomes.

Designed to deliver professional cost planning and quantity surveying services to a wide range of building and engineering projects, our Cost Management services balance time, cost and quality for optimum outcomes, providing:

Our services are tailored to suit the specific needs of individual projects, including: • managing projects • stakeholder management • strategies for delivery • risk and value management • program management • contract administration • superintendent services • design management • independent overview

• feasibility and early cost advice • cost planning during design • tender documentation and evaluation • project verification services • construction phase cost management • tax depreciation/capital allowance • assessment and optimisation • replacement valuations • life cycle capital planning Cost Planning of Building Engineering Services

One: About Davis Langdon

We specialise in independent cost and value management of Engineering Services in a wide range of building types, technical facilities and infrastructure projects, including:

• evaluation of sustainability focused options • life cycle assessments • capital cost estimating • independent peer reviews • design advice and procurement options • expert witness services • National Australian Built Environment Rating System (NABERS) assessment services

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Building Surveying

Specification Consulting

From an independent, informed position, our Building Surveying services provide unbiased advice and assistance to the property industry in order to understand and meet their regulatory compliance obligations:

Our Specification Consulting is tailored to meet the needs of all parties involved in the design and construction process, including design teams, developers, retailers, government bodies, educational institutions, private companies and manufacturers. Our proprietary document management system is a global database that enables every project-specific specification to be generated and developed as the design and documentation process evolves.

• building permits/private certification • performance-based Building Code of Australia (BCA) solutions • fire safety engineering advice and audits • building compliance audits for due diligence • design consultancy to BCA • approval facilitation • Commonwealth Aged Care Certification assessments • essential fire safety measure inspections Urban Planning Our Urban Planning services are designed to deliver innovative and practical planning solutions based on an agreed strategy to minimise risk and optimise outcomes. Applying knowledge gained from extensive experience in the private and public sector, we offer a service that is reliable, personal and cost effective, providing: • project feasibility studies, highest and best use advice • re-zoning advice and management of approval process

• community consultation and communication • expert evidence in planning appeals • due diligence assessments of planning controls and opportunities • design team participation in master planning projects

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Access Consulting Our Access Consulting team provides an all inclusive service to meet the project brief and the client’s requirements. The aim is to ensure appropriate management of access provision to facilities for all, specifically people with temporary and permanent impairment or disability. Our mission is to enable independent, equitable, functional and safe access and working environments for people of all abilities. We assist design teams, building owners, work place managers and home owners with: • existing building access reviews • design reviews of proposed developments, including new build and alterations • action plans and building management plans • OH&S system advice, safety in design and work site assessments • occupational therapy services • presentations and training • policy development and implementation

One: About Davis Langdon

• facilitation of approval for subdivision, land use and development

Our services also include design management for monitoring of design teams, to ensure design quality and efficiency, minimise time delays and design risk.

We are committed to delivering innovative solutions through our global reach, local knowledge and technical excellence Sustainability

Infrastructure Services

Sustainable Solutions Planning and Delivery

Independent Reviewer/Verification Services

We are committed to helping achieve sustainability goals through our specialist knowledge and expertise nationally and globally. This commitment is the heart of all our services. We work with our clients to meet the environmental, social and economic challenges of developing new buildings and operating existing buildings, offering:

Delivered to large infrastructure projects, we provide verification to project stakeholders that project performance requirements are progressively achieved through design and construction. We work to provide a systematic overview and checking process across the whole project with reporting that provides confidence to stakeholders that the project is on track and compliant.

• definition and implementation of sustainability strategies for new construction and existing buildings • identification of embodied energy in new building designs • identification of an existing building’s environmental performance, planning energy abatement strategies and improvement opportunities and whole of life modelling

One: About Davis Langdon

• creation of green specifications to ensure sustainability outcomes including designing out of waste

• environmental performance auditing with improvement opportunities identified • research to identify best practices emerging from around the world

We review the systems in place to see that they are functioning, assess contractor performance and look forward to inform stakeholders of the project’s direction. We often team with design firms to enable a technical review that is structured and risk focused.

Property Services Property Performance Assessment Assessing the ability of property to meet its expected performance levels, both from an owner and occupier viewpoint, is increasingly important. Building performance has now been heightened by community focus on achieving a greener built environment. We offer comparative assessments of a single building or portfolio of buildings covering condition, environmental impact and social performance. Our assessment results in a high level report that identifies performance, benchmarks and highlights improvement and abatement opportunities.

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Technical Due Diligence Reports Purchasers and vendors of property are increasingly expected to undertake appropriate due diligence that enables well founded investment and divestment decisions. We have developed an approach to the technical and physical building assessment that identifies high risk and high value issues to be clearly evaluated and fully appreciated. Through integration of specialists advice, our reports are comprehensive and easy to understand and many clients use them as a foundation for their ongoing asset management. Building Consultancy Services We assist property and portfolio owners with services aimed at improving investment returns and efficiency of asset management: • maintenance and capex planning implementation • make good assessments and negotiations • essential fire safety measures audits • building defect diagnosis and reporting • DDA access audits/action plans • NABERS Audits/Green Building Fund projects/ energy efficiency consulting • Commercial Building Disclosure ratings and reporting

• SafetyMAP (OH&S) • National Audit Tool (OH&S) We are a recognised service authority for: • CFF (Civil Contractors Federation) Construction Management Code • VicRoads Prequalification Scheme • Good Environmental Choice Australia (GECA) • Green Building Council Australia (GBCA) Product Identification Scheme Evaluation Second Party Auditing As demand for assurance in the property and construction industry increases, more of our clients are undertaking Second Party Audits. These audits are focused on the specific requirements of a client, as opposed to a specific standard. These audits provide objective evidence of compliance to a specification, as agreed between customer and supplier. Product Certification In addition to auditing management systems, Davis Langdon is also working towards the provision of Product Certification – enabling greater assurance for materials used in the construction and wider industries.

• tax depreciation assessments

DEGW

• replacement valuations

DEGW is a specialist business consultancy service that helps clients capitalise on the relationship between people and physical places to enhance organisational performance.

Certification Services Third Party Certification to International and National Standards

Our accredited services: • ISO 9001:2008 (QA) • ISO 14001:2004 (EMS) • AS/NZS 4801:2001 (OH&S) • OHSAS 18001:2007 (OH&S) www.davislangdon.com www.aecom.com

Through rigorous and structured evidence, and by really listening to the aspirations, strategic needs and practical commercial concerns of our clients, DEGW develops insightful solutions to our clients’ challenges. DEGW’s services include research and strategic advice, strategic briefing for working and learning environments, design strategy and management, and change or transition management associated with the physical environment. DEGW provides these services to the corporate, government, education and healthcare sectors.

One: About Davis Langdon

Our assessors come from and understand the industries in which our clients operate. This helps ensure that the certification process adds value and contributes to business improvement. Our processes as a seperate entity, including the physical separation of electronic data, ensure our independence from other operating areas.

Two: Construction Key Statistics - Australia 6

Wheller Gardens Aged Care, Brisbane, Queensland Davis Langdon, An AECOM Company

Two: Construction Key Statistics Australia Construction Output 8 Exchange Rates 8 Industrial Relations 9 Labour Force and Productivity 10 Government Stimulus Investment 11

Value of Building Work Done 12 Building Approvals for New Multi Unit Residential Buildings 13 Value of Engineering Work Done 14

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Two: Construction Key Statistics - Australia

Non-Residential Building Approvals 11

Australian Construction Output The total construction work completed during the year 2009-2010 was A$159.23 billion, equating to 9% more than the previous year. The table below shows the activity level of each sector, while the total output of residential and non-residential building activity is shown by state, in the chart below. Value of Construction Work Done (Public and Private) Type of Work

A$ billion

Residential Building

28%

Non-Residential Building

22%

Total Building Work Done

50%

Engineering Construction

50%

159

100.00%

Total Construction Work Done

Source: ABS 8755.0

|m) Residential and Non-Residential Total Building Work Done â&#x20AC;&#x201C; by States (AS 1,305

865

2,236

18,523

11,263

New South Wales Victoria Queensland

4,805

South Australia Western Australia Tasmania Northern Territory

Australian Capital Territory 22,320

Source: ABS 8755.0

1.40

140

1.20

120

1.00

100

0.80

0.60

0.40

0.20

0.00

USD

GBP

Jul-10

Jul-09

Jan-10

Jul-08

Jan-09

Jan-08

Jul-07

Jul-06

NZD

Jan-07

Jul-05

Jan-06

Jan-05

Jul-04

Jul-03

EUR

Jan-04

Jul-02

Jan-03

Jan-02

Jul-01

Jul-00

Jan-01

Jul-99

Jan-00

Jan-99

USD, EUR, GBP, NZD

AUD Exchange Rates

YEN

Two: Construction Key Statistics - Australia

17,621

YEN (right axis)

Source: Reserve Bank of Australia

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Industrial Relations Working Days Lost to Industrial Disputes per 1,000 Employees (National) 400

350

Working Days Lost

300

250

200

150

100

2006-2007

2007-2008

2008-2009

268.9

393.0

234.1

237.0

237.2

231.7

200.2

90.8

13.9

11.8

31.6

43.3

55.8

105.3

45.1

41.9

30.2

66.9

28.8

21.6

9.9

17.4

13.3

2009-2010

2005-2006

2002-2003

2001-2002

2000-2001

2004-2005

All Industries

2003-2004

Construction

1999-2000

1998-1999

Source: ABS 6321.0.55.001

Working Days Lost to Industrial Disputes per 1,000 Employees (By Sector) 60 50 40 30 20 10

Metal Product Manufacturing and Other Manufacturing Construction Education and Training, Healthcare and Social Assistance Other Industries

0 Source: ABS 6321.0.55.001

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Two: Construction Key Statistics - Australia

The Australian construction industry has historically had a very high level of industrial disputes, with disputes in the non-residential sectors tending to be higher than in the residential sector. The past few years saw industrial disputes reach their lowest levels in history, however the past 24 months has seen a significant leap. Working days lost due to industrial disputes has increased 267% over the past 24 months, albeit off a very low base. Construction still remains one of the sectors least affected by industrial disputes, with 43 days lost per 1,000 employees, compared to metal product manufacturing and other manufacturing for example, which lost 51 days per 1,000 employees due to disputes.

Labour Force and Productivity Labour Force Capacity Constraints Compared to previous economic recoveries, Australia’s labour force has considerably less spare capacity this time around. The expected high single digit unemployment forecast from 2009 did not eventuate as organisations chose to reduce staff hours or shift to part-time labour instead of reducing staff numbers. Businesses were mindful of the skills shortages experienced in the latter half of the past decade and have since begun to replenish full-time positions as the nation’s total hours worked return to pre-GFC levels. Although many industries implemented salary constraints during 2009, the low unemployment rate is now on the cusp of creating wage price pressures that will once again contribute to escalating construction costs. Unemployment Rate – Historical 12% 10% 8% 6%

GFC Jan-05

Nov-00

Sep-96

Mar-09

Recession

Unemployment Rate

Jul-92

Jan-80

May-88

Mar-84

Recession

Two: Construction Key Statistics - Australia

Source: ABS 6202.0, Davis Langdon Research

Construction Productivity Improving the nation’s productivity is imperative to our future economic prosperity. Relative to previous economic downturns the national labour force has considerably less spare capacity plus with an ageing population, the proportion of people within working age will continue to decline. Coupled with strong demand for services, primarily driven by the resources boom, the labour force supply will face challenges meeting future demand. However, recent trends have been favourable with labour productivity in the Australian construction industry improving from 2009 to 2010. Davis Langdon found that the Australian construction workforce (including engineering work) utilised an average of 6.3 jobs for each million dollars worth of work done for the year ending March 2010, compared to 6.8 jobs per million dollars for the same period in 2009. Jobs Required per $1 million of Construction Work Done NSW

VIC

QLD

Australia

16.7

10.6

13.9

14.2

11.6

13.1

Total Work Done (Including Engineering)

8.3

7.3

6.3

6.8

3.5

6.3

Proportion of Engineering Work Done

50%

31%

55%

52%

70%

52%

Residential & Non-Residential Work Done

Figures based on year end March 2010 Source: ABS 6291.0.55.001, ABS 8755.0, Davis Langdon Research

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Government Stimulus Investment Australia and New Zealand delivered the third and fourth highest stimulus measures respectively when compared against other OECD countries. In Australia the bias was towards public sector investment rather than tax cuts, whereas in New Zealand the strategy was reversed in an effort to minimise the systemic impacts of the global financial crisis. Stimulus Cost as a Percentage of 2008 GDP for Selected OECD Countries -7%

Supportive Fiscal Packages 1) Decrease in Tax Revenue 2) Increase in Government Spending

-5%

-3%

-1% 1%

Revenues (Tax Breaks)

Ireland

Italy

Hungary

France

Switzerland

Norway

Poland

Portugal

Austria

Slovakia

Netherlands

Japan

Belgium

Sweden

Government Spending

Denmark

Czech

Germany

Spain

Finland

Canada

Luxembourg

Australia

New Zealand

USA

Korea

Fiscal Balance

Source: OECD

Public sector investment during 2009-2010 has significantly lifted Australia’s construction output due to stimulus investment. When compared to the 2007-2008 financial year, Education and Health sector investment increased 370% and 100% respectively, while investment in Offices contracted by 58%. Non-Residential Building Approvals (Financial Years) 2007 – 2008 2.2bn

1.9bn

2008 – 2009 6.1bn

1.3bn

2.1bn

1.1bn

2009 – 2010 1.3bn 0.7bn 0.6bn

4.7bn

1.6bn

5.8bn

3.8bn 4.2bn

1.8bn

2.9bn

2.7bn 3.4bn 9.9bn

5.5bn

4.9bn

5.9bn

16.1bn

3.4bn Retail and Wholesale Health

Offices Aged Care

Source: ABS 8731.0

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Factories and Warehouses Recreation

Education Non-Residential Accommodation

Two: Construction Key Statistics - Australia

Non-Residential Building Approvals

|m) Value of Building Work Done (AS

Residential

Non-Residential

NSW

VIC

QLD

TAS

ACT National

New Residential

7,245

11,555

8,449

2,212

5,976

591

376

932

37,328

Alterations & Additions

1,927

1,853

1,252

373

687

131

122

6,412

Private Sector

5,852

5,787

4,157

976

3,048

317

201

615

20,948

Public Sector

3,499

3,128

3,766

1,246

1,556

269

211

571

14,242

9,352

8,914

7,922

2,222

4,603

585

414

1,186

35,190

18,523

22,323

17,624

4,807

11,266

1,308

858

2,239

78,930

Total NonResidential Building Total Building

Non-Residential Building Activity 10,000 9,000 8,000 7,000

5,000

4,000

3,000

2,000 1,000

VIC

NSW

QLD

ACT

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

2000-2001

0 1999-2000

Two: Construction Key Statistics - Australia

A$m

6,000

TAS

Source: ABS 8755.0

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Building Approvals for New Multi Unit* Residential Buildings 99-00

00-01

01-02

VIC

4,840

4,439

4,287

NSW

8,006

6,308

11,116

QLD

2,284

2,733

4,019

919

617

283

ACT

120

351

203

167

216

TAS

02-03

03-04

04-05

05-06

06-07

07-08

08-09

09-10

7,750

4,520

3,433

1,921

2,946

3,908

5,164

7,251

11,815

11,864

8,245

6,824

7,297

7,147

4,578

5,134

6,074

6,026

5,304

5,121

4,796

5,952

3,620

3,111

768

1,083

1,424

873

1,914

2,861

875

1,000

560

740

1228

1107

236

328

680

597

763

219

260

460

365

434

372

125

156

282

544

198

349

657

144

610

288

Unit Numbers

Value (A$m) VIC

850

921

1,016

1,891

1,089

794

425

907

1,065

1,411

1,637

NSW

1,271

1,083

1,777

2,231

2,277

1,859

1,650

1,886

1,872

1,145

1,386

QLD

337

414

796

1,380

1,565

1,569

1,467

1,341

2,223

1,564

739

228

107

159

225

327

249

644

1,342

331

378

ACT

106

192

233

102

162

202

108

120

151

127

141

115

122

216

TAS

*4 storey or more apartments Source: ABS 8731.0

14,000

3,000

12,000

2,500

Unit Numbers

8,000 1,500 6,000 1,000

4,000

500

2,000

VIC (no.)

NSW (no.)

QLD (no.)

Source: ABS 8731.0

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WA (no.)

VIC

NSW

QLD

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

2000-2001

0 1999-2000

Two: Construction Key Statistics - Australia

2,000

Approval Value (A$m)

10,000

|m) Value of Engineering Work Done 2009–2010 (AS NSW

VIC

QLD

TAS

ACT

Roads, Highways and Subdivisions

3,324

1,890

5,585

970

2,169

188

152

Bridges, Railways and Harbours

2,605

720

1,475

460

2,304

Electricity Generation, Transmission and Pipelines

3,421

1,705

2,701

1,080

2,590

385

Water Storage and Supply, Sewerage and Drainage

1,897

2,223

1,964

1,180

1,055

148

189 81

Telecommunications

1,327

1,217

563

200

286

Heavy Industry

2,576

1,204

6,535

490

14,528

704

976

592

705

320

1,301

104

Recreation and Other Total

16,126

9,551

19,528

4,700

24,234

964

1,168

404

of which: for Public Sector

9,985

3,170

8,655

2,610

4,073

678

231

201

for Private Sector

6,141

6,380

10,873

2,090

20,161

286

937

203

Source: ABS 8762.0

Value of Engineering Work Done 2009–2010 16,000

14,000

12,000

A$m

Two: Construction Key Statistics - Australia

10,000

8,000

6,000

4,000

2,000

NSW

VIC

QLD

Roads, Highways and Subdivisions Electricity Generation, Transmission etc and Pipelines Telecommunications Bridges, Railways and Harbours

TAS

ACT

Water Storage and Supply, Sewerage and Drainage Heavy Industry Recreation and Other

Source: ABS 8762.0

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|m) Engineering â&#x20AC;&#x201C; Yearly (AS 99-00

00-01

01-02

02-03

03-04

04-05

05-06

06-07

07-08

08-09

ACT

377

278

267

317

308

301

313

307

370

365

317

NSW

8,985

8,620

7,709

8,647

10,188

11,483

12,302

11,444

12,342

16,469

17,128

09-10

400

235

1,688

1,790

2,126

2,137

2,216

1,813

1,280

2,614

1,201

QLD

7,734

6,811

6,560

7,656

7,353

8,892

11,408

13,735

16,787

20,640

20,160

2,076

1,580

1,947

2,375

2,314

2,446

2,152

2,707

2,601

3,592

4,984

TAS

405

684

529

679

787

1,031

940

837

1,011

1,052

VIC

4,869

4,375

4,500

5,487

6,253

7,126

8,518

7,625

7,324

8,300

9,972

4,027

3,165

4,301

6,391

6,427

7,705

13,517

17,130

19,559

22,425

25,564

28,888

25,483

27,662

33,234

35,725

40,951

51,495

55,700

61,100

75,416

80,512

Total

Engineering construction includes: roads, highways and subdivisions; bridges, railways and harbours; heavy industry; electricity generation, transmission and pipelines; water storage and supply; sewerage and drainage; telecommunications; recreation and other. All data seasonally adjusted. Source: ABS 8762.0

Engineering Activity 30,000

25,000

15,000

10,000

5,000

NSW

QLD

Source: ABS 8762.0

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VIC

TAS

Jun-10

Jun-09

Dec-09

Jun-08

Dec-08

Jun-07 NT

Dec-07

Jun-06 WA

Dec-06

Dec-05

Jun-05

Dec-04

Jun-04

Dec-03

Jun-03

Dec-02

Jun-02

Dec-01

Jun-01

Jun-00

Dec-00

ACT

Two: Construction Key Statistics - Australia

A$m

20,000

Three: Construction Key Statistics - New Zealand 16

Waitomo Caves Visitor Centre, Waitomo, New Zealand Davis Langdon, An AECOM Company

Three: Construction Key Statistics New Zealand Construction Output 18 Exchange Rates 18 Outlook for 2011 19 Construction Activity 20

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Three: Construction Key Statistics - New Zealand

Sector Activity 21

New Zealand Construction Output The rate of construction activity contraction in New Zealand has begun to stabilise. Construction output peaked in 2007-2008 at NZ$13.5 billion whereas 2009-2010 saw construction activity fall to NZ$10.7 billion. Overall no particular sector has outperformed any other, with the exception of Education, which increased annual investment by 16% and a further 21% in 2008-2009 and 2009-2010 respectively. The absence of significant public sector stimulus targeted towards the construction industry is a noticeable contrast to Australia. Construction Activity (by Sector) 2007 – 2008 1.43bn

2008 – 2009 1.68bn

8.42bn

0.58bn

2009 – 2010 1.44bn

6.37bn

6.10bn

0.81bn

0.67bn 1.67bn

1.36bn

1.70bn

0.48bn 0.47bn

0.30bn 0.36bn 0.36bn

0.51bn 0.34bn 0.42bn Residential Commercial

Hospitals & Nursing Homes Miscellaneous

Accommodation Education

Factories & Industrial

Source: Statistics New Zealand BAS 008AA

USD

EUR

GBP

Jul-10

Jul-09

Jan-10

Jul-08

Jan-09

Jan-08

Jul-07

Jul-06

AUD

Jan-07

Jul-05

0 Jan-06

0.00 Jan-05

Jul-04

0.20

Jul-03

Jan-04

0.40

Jul-02

Jan-03

0.60

Jan-02

Jul-01

0.80

Jul-00

100

Jan-01

1.00

Jul-99

120

Jan-00

1.20

Jan-99

USD, EUR, GBP, AUD

NZD Exchange Rates

YEN

Three: Construction Key Statistics - New Zealand

0.43bn

YEN (right axis)

Source: Reserve Bank of New Zealand

Davis Langdon, An AECOM Company

New Zealand Outlook for 2011 Transitioning from 2010 to 2011 presents many uncertainties for the New Zealand construction industry. Many economic indicators are predicting that the market is going to remain tight with very little growth prospects for the next year and net migration inflow is half the level it was in September 2009. Dwelling consents issued in the last 12 months are significantly down compared to the last five years. A small rise in consents has been noted since the low point of July 2009, but the industry is still very much constrained to low activity. Coupled with this is the recent disparity between the New Zealand and Australian dollars. The Australian dollar remains very strong. However the New Zealand dollar, whilst maintaining relativity with the US dollar, is losing considerable ground against the Australian dollar. Late September 2010 saw a 10 year low in the New Zealand - Australian cross rate which is impacting on local trade. Other factors indicate positive signs for the construction industry. Commercial yields are up to the highest level in four years and interest rates have remained low and relatively stable. 90 day bank yields in the region of 2.5% have been constant for a long period of time. This has limited inflation which will ultimately benefit the property and construction industry as and when the property market picks up. The New Zealand economy returned to growth in the first half of 2010, albeit at a slower rate than most commentators were predicting. The Reserve Bank of New Zealand made two consecutive interest rate rises in June and July 2010 after they reached a historical low of 2.5%. However the official cash rate level remains well below â&#x20AC;&#x2DC;neutralâ&#x20AC;&#x2122; levels and is expected to remain so until there are more substantial signs of an economic recovery.

A degree of stability has been established in the finance markets. While there appears to be a perception that banks are reluctant to lend money, this is not the case for quality projects. We are noticing significant activity within markets related to the buying, selling and upgrading of existing commercial properties. In November 2010, six local authorities in Auckland combined to become one Council. It is expected that the amalgamation of these Councils will produce streamlining of decisions and a consistent approach to issues in relation to Resource Consents and Building Consents. A logical outcome will be a speedier and more cost effective service. The key deliverable will be to have a consistent approach across all aspects of the consenting process, across the entire region. In our experience, the property market in New Zealand takes four years to recover from a severe downturn. This was evident after the 1987 downturn. Based on this experience we hope 2011 is the year that the market recovers.

www.davislangdon.com www.aecom.com

Three: Construction Key Statistics - New Zealand

The New Zealand construction industry will benefit from changes that have recently been introduced by the Minister of Building, regarding streamlining of the consent processes. The biggest effect will be noticed in the domestic housing market however, it is thought that these changes will have minimal effect on the non-residential construction market.

New Zealand Construction Activity |m) New Zealand Building Work Put In Place (NZS 99-00

00-01

01-02

02-03

03-04

04-05

05-06

06-07

07-08

08-09

09-10

3,895

3,159

3,447

4,707

5,843

6,320

6,162

6,638

7,001

5,004

4,745

750

673

753

884

1,075

1,056

1,262

1,341

1,424

1,370

1,357

4,645

3,832

4,200

5,591

6,918

7,376

7,424

7,979

8,425

6,374

6,102

Residential Buildings New Dwellings Alterations/Additions & Outbuildings Total Residential Buildings Non-Residential Buildings Hotels and Boarding Houses

282

221

242

236

352

647

852

642

430

416

360

Hospitals and Nursing Homes

297

280

259

354

324

294

350

427

468

342

357

Factories and Industrial Buildings

351

335

451

380

490

484

512

423

484

505

296

Commercial Buildings

848

889

867

841

998

1,393

1,628

1,460

1,673

1,702

1,358

Education Buildings

349

420

390

493

556

537

597

523

578

668

805

Miscellaneous Buildings

673

715

918

894

890

1,197

1,262

1,470

1,433

1,680

1,442

3,611

4,554

5,202

4,946

5,067

5,314

4,618

Total Non-Residential Buildings

2,800

2,861

3,128

3,199

Total All Buildings

7,444

6,692

7,326

8,789 10,528 11,930 12,625 12,924 13,491 11,687 10,721

Source: Statistics New Zealand BAS 008AA

9,000 8,000 7,000 6,000

NZ$m

5,000 4,000 3,000 2,000 1,000

Total Residential Buildings

2010

2009

2007

2008

2005

2006

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1991

1992

0 1990

Three: Construction Key Statistics - New Zealand

New Zealand Building Work Put In Place

Total Non-Residential Buildings

Source: Statistics of New Zealand BAS 008AA

Davis Langdon, An AECOM Company

New Zealand Sector Activity Residential There has been a slight rise in residential consent numbers since mid-2009, including an upturn in the number of apartments planned. Despite this, the industry is still very much constrained to low activity. The level of alteration and renovation work put in place has remained steady with only a 5% drop in activity between 2008 and 2010. This compares to the more significant drop of 32% in the construction of new residential dwellings. Challenges faced by this sector include easing net migration levels this year – from an average net migration inflow of 1,800 per month in 2009, to a low of 140 in June 2010. In the longer term the residential sector is expected to benefit from the merging of Auckland local authorities into one ‘Super City’ in November 2010. This is expected to help simplify the Resource Consents and Building Consents processes for the industry. Commercial and Industrial In Davis Langdon’s inaugural New Zealand Construction Sentiment Monitor (September 2010), 83% of respondents nominated the Office sector as the least likely to contribute to growth in the next 12 months. Participants were more optimistic about refurbishing work, with 71% identifying it as most likely to grow. While consents for the non-residential sector remain flat, the Canterbury earthquake recovery works will require considerable effort from the government, consultants and the construction industry in general.

Education One sector to increase activity levels during the downturn was the Education sector due to the ongoing upgrade of New Zealand’s education buildings. While there are few large projects, the majority of these projects have been relatively small in size and scale which has provided a steady workflow for some contractors. Steady rises in consents data also points to further planned activity in this area in the short term. Hotels/Hospitality Tourism is generally considered one of New Zealand’s largest earners of export dollars. However, after the Canterbury region earthquake, there are concerns that overblown media reports of the damage caused may affect tourism numbers in the short-term, although the Rugby World Cup in 2011 should make up for any drop in annualised visitor numbers, with more than 70,000 overseas visitors expected to attend. Sport and Recreation As part of the preparations for hosting the Rugby World Cup, several sporting infrastructure facilities have been upgraded recently. The only new facility will be a stadium in Dunedin to replace the existing venue, with construction continuing through 2010. The existing facilities at Lancaster Park, Christchurch, Eden Park and Auckland, are also being upgraded with new stands. This construction activity is reflected in the number of social and cultural building consents – it was one of the only categories to increase in value in the year to June 2010 when compared to the previous two years. Source: Davis Langdon Construction Sentiment Monitor NZ, Statistics New Zealand

www.davislangdon.com www.aecom.com

Three: Construction Key Statistics - New Zealand

Although there is demand-side uplift for industries in New Zealand exporting to stronger Australian and Asian economies, these gains are being eroded by the strength of the Australian dollar versus the New Zealand dollar. Once solid demand begins to rise, the construction industry is still faced with the hurdle of financing projects.

Four: Cost Data and Market Data 22

Port of Brisbane HQ, Brisbane, Queensland Davis Langdon, An AECOM Company

Four: Cost Data and Market Data International Building Costs 24 International Building Cost Comparisons 25 Australasian Building Costs: – Commercial 26 – Industrial 30 – Residential 32 – Retail 35 – Tourism 36 – Sports and Recreation 37 – Health and Aged Care 38 – Education 40

Australian Labour Material Ratios 43

www.davislangdon.com www.aecom.com

Four: Cost Data and Market Data

Major Rates for Australia and New Zealand 42

655

2,450 1,020

Individual Prestige Houses

2,970 2,420 2,100 2,060 1,800 3,200

655 2,125#

915 1,090

900 1,300 3,400 3,500 3,800 3,050-4,660

760

715

London

Bangkok

2,820 1,730 1,650 1,900 1,900 2,050

New York

Manila

San Francisco

Kuala Lumpur

Luxury Unit High Rise

Los Angeles

Singapore

770 1,070 3,450 3,550 3,700 2,010-2,890

Hong Kong

790

Doha

440

Abu Dhabi

1,475

Bahrain

480

Auckland

Average Multi 2,130 1,380 1,325 1,360 1,370 1,670 Unit High Rise

US$/m2

Sydney

Beijing

Johannesburg

International Building Costs

Residential

995 1,082 1,600 4,000 4,200 4,200 2,730-3,780

Commercial/Retail Average Standard Offices High Rise

2,380 1,240 1,200 1,500 1,780 1,930

785

700 1,140 3,700 3,900 4,000 2,490-3,130

Prestige Offices High Rise

2,550 1,660 1,325 1,650 2,000 2,430 1,070 2,050^ 1,050 1,020

915 1,400 4,200 4,400 4,500 2,970-4,020

1,680 Major Shopping Centre (CBD)

970 1,465 1,565 1,395 2,445 1,090

1,835

2,195

870

890

870 1,000 2,800 3,100 3,200 1,570-2,010

Industrial Light Duty Factory

530

415

660

890 1,066

N/A

935

420

400

560

410 1,200 1,400 1,200

675-860

Heavy Duty Factory

610

520

740

880

990 1,163

N/A

1,155

496

445

910

460 1,600 1,800 1,900 1,110-1,285

Hotel 3 Star Budget

2,060 1,865 1,920 1,910 2,055 2,440 1,005 2,270* 1,460 1,165 1,275 1,900 2,100 2,200 2,250 1,485-1,845

5 Star Luxury

3,160 2,420 2,700 3,130 3,250 3,105 1,650 3,060* 2,130 1,500 1,800 2,800 4,500 4,600 4,700 2,570-3,530

Resort Style

2,810 1,860 3,300 3,410 3,560

N/A

N/A 3,060* 1,270 1,210 2,110 2,150 4,500 4,600

N/A

870

395

645

270

900

400-725

District Hospital

2,660 2,490 2,500 3,290 3,425 2,890

990

N/A

940 1,210

N/A 1,230 6,900 6,900 6,000 2,490-3,130

Primary & Secondary Schools

2,040 1,310 1,630 2,330 1,100 1,330

530

930

275

N/A

Four: Cost Data and Market Data

Other

Multi Storey Car Park

645

330

660

800

655

435

735

325

400

850

880

700 3,000 3,200 3,600 1,850-2,810

Exchange Rates (Avg. 2nd Qtr. 2010)

AUD NZD BHD AED QAR HKD RMB

SGD MYR PHP THB ZAR USD USD USD

GBP

US$1 =

1.19 1.46 0.38 3.67

1.40 3.23 46.50 32.42

0.67

3.67 7.78 6.78

7.6

Rate includes parking and minimal external works ^ Rate includes raised flooring and ceiling to tenanted areas * Rate includes FF&E Prices exclude land, site works, professional fees, tenant fit-out and equipment Exchange rates as of July 2010 Source: Davis Langdon Research

Davis Langdon, An AECOM Company

www.davislangdon.com www.aecom.com

1,800

1,600

1,200

2,000

800

1,500

600

1,000

400

500

200

San Francisco

1,400

3,000 San Francisco New York

Doha

Abu Dhabi

Hong Kong

London

Bahrain Sydney

Auckland

Johannesburg

Beijing Manila

San Francisco

Los Angeles

New York

US$/m² 6,000

New York

2,500

5,000

Los Angeles

3 Star Budget

Hong Kong

5 Star Luxury

Doha

5,000

4,000

Singapore

1,500

Abu Dhabi London

4,000

Bahrain

3,000

Auckland Abu Dhabi Doha Singapore Hong Kong Sydney London Los Angeles

3,500

Bangkok

Hotels 3,000

Bahrain

Major Shopping Centre (CBD)

Kuala Lumpur Sydney

Kuala Lumpur

1,000

Manila Johannesburg

2,000 US$/m²

2,000

Bangkok Kuala Lumpur Beijing

New York

7,000

Auckland

Los Angeles San Francisco

3,500

Manila

500 London

8,000

Johannesburg

3,500

US$/m² 1,000

Singapore Hong Kong

4,000

Auckland Singapore Hong Kong Sydney London Los Angeles San Francisco New York

Doha

Abu Dhabi

Average Multi Unit High-Rise

Industrial

2,000

Light Duty Factory

Heavy Duty Factory

1,000

Four: Cost Data and Market Data

Source: Davis Langdon Research

Los Angeles San Francisco New York

4,000 Bahrain

2,500

Abu Dhabi Sydney

US$/m² 3,000

Abu Dhabi Sydney Doha

4,500

London Singapore Hong Kong

1,000

Doha Bahrain

500

Auckland Johannesburg Beijing

1,000

Kuala Lumpur Beijing Bangkok Manila Johannesburg

1,500

Auckland Bahrain Johannesburg

Bangkok Kuala Lumpur Manila

US$/m² 2,000

Bangkok Kuala Lumpur

Manila Beijing

US$/m²

International Building Cost Comparisons District Hospital

Commercial 5,000

Prestige Offices High Rise Average Standard Offices High Rise

2,500 3,000

2,000

Australasian Building Costs Commercial Construction Christchurch

Wellington

Auckland

Townsville

Sydney

Perth

Melbourne

NZ$/m2

Hobart

Darwin

Canberra

Cairns

Brisbane

Building Type

Adelaide

A$/m2

Australasian Overall Average Standard Building Rates* Offices

Engineering Services (Mechanical)

Engineering Services (Electrical)

Four: Cost Data and Market Data

Engineering Services (Fire)

Low Rise

2,160 2,120 2,010 2,160 2,530 2,120 2,200 2,400 2,170 2,390

1,600 1,600 1,600

Medium Rise

2,540 2,480 2,360 2,530 2,970 2,490 2,580 2,800 2,540 2,800

1,800 1,850 1,850

High Rise

2,930 2,860 2,720 2,920 3,420 2,870 2,980 3,000 2,930 3,230

1,950 2,100 2,100

High Standard Offices

3,270 3,200 3,040 3,260 3,820 3,210 3,330 3,500 3,280 3,610

2,250 2,300 2,300

Average Standard Offices Low Rise

235

230

220

235

275

230

240

255

235

260

220

270

Medium Rise

315

310

290

315

370

310

320

315

350

300

270

High Rise

345

335

320

345

400

335

350

400

345

380

325

340

320

High Standard Offices

415

405

385

410

485

405

420

550

415

455

400

Low Rise

140

135

130

135

160

135

140

150

130

Medium Rise

165

155

165

195

165

170

180

165

185

150

High Rise

215

210

200

215

255

210

220

215

240

160

High Standard Offices

255

250

235

255

300

250

260

270

255

285

225

250

Low Rise

Medium Rise

High Rise

High Standard Offices

Average Standard Offices

*Inclusive of builders preliminaries and profit but exclusive of site works, external services, land and interest costs Mechanical – Rates are for typical base building (excluding fit-out) mechanical services commensurate with the standard of building indicated, including as appropriate, statutory essential mechanical services Electrical – Rates are for typical base building (excluding fit-out) electrical services commensurate with the standard of building indicated, including light and power, statutory essential services and where appropriate, communications, security and MATV back bone systems Fire – Rates are for statutory base building (excluding fit-out) fire services including, as appropriate, hydrants, hose reels, alarms and/or sprinklers Low Rise: Less than 3 storeys Medium Rise: 3-10 storeys High Rise: 10+ storeys All rates generally relate to a building achieving a 4 green star rating and a 4.5 NABERS energy base building rating. In broad terms increases of 5-10% would be applicable for achieving 5 Star Green Star and 6 Star Green Star respectively Source: Davis Langdon Research

Davis Langdon, An AECOM Company

Commercial Commentary New development in the commercial property market was hit hard by the economic downturn but the challenges faced in Australia were not nearly as extreme as in other parts of the world. There are promising signs for growth in the sector with vacancy rates and commercial values stabilising in some capital cities. Incentives applied to office leases have also begun to unwind, raising net effective rents, although net face rents remained relatively stable. Tight lending combined with lower valuations is making it difficult to get developments off the ground, although specific projects with solid pre-commitment still have proceeded while speculative development remains practically non-existent. In the meantime, rising levels of existing building stock have undergone refurbishment in order to uplift the value of the assets and attract future prospective tenants at higher rental rates while also improving the environmental performance of the buildings. Nationally, demand for office space is showing signs of improvement. According to the Property Council’s 2 Office Market Report, Australia’s office market recorded net absorption of 332,922m in the first half of 2 2010 compared to the negative net absorption of -159,661m in the same period of 2009. Even though demand is strengthening and leading to promising absorption rates in several CBD markets, Australia’s CBD office market vacancy rate rose from 8.0% to 8.9% in the first half of 2010. As white collar employment continues to grow, demand for new stock will remain strong and further developments will be required. Looking forward, the short term forecast is for steady growth in new office projects however the development lag means this will not reach new supply for 2-3 years. Construction Forecast – Offices 10,000 Forecast

8,000

4,000

2,000

Source: Construction Forecasting Council 2010

www.davislangdon.com www.aecom.com

2017-2018

2016-2017

2015-2016

2014-2015

2013-2014

2012-2013

2011-2012

2010-2011

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

2000-2001

Four: Cost Data and Market Data

A$m

6,000

2009

2010

2011

Townsville

2008

Sydney

137 141 143 144 146 147 149 160 165 167 171 172 175 178 180 180 177 174 171 170 168 168 168 169 170 172

Perth

2007

146 147 150 152 156 158 159 164 168 169 172 176 180 185 184 182 183 183 183 184 184 184 185 186 187 188

Melbourne

2006

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr

Hobart

2005

Darwin

Date

Canberra

Cairns

159 162 164 166 169 172 174 176 178 180 182 183 187 191 191 191 182 180 178 176 176 177 178 178 179 181

Adelaide

Brisbane

Davis Langdon Tender Price Index â&#x20AC;&#x201C; Commercial

180 183 187 185 183 179 178 179 180 182 184 186 188 189

149 152 153 154 157 158 160 162 164 167 171 174 179 191 194 198 201 202 204 207 209 212 215 216 218 219

146 148 150 152 154 156 158 161 164 168 171 173 178 180 181 181 179 178 180 182 185 187 187 186 185 185

160 160 159 160 165 169 172 175 179 181 185 188 191 194 195 190 185 185 185 182 182 184 186 188 191 192

148 152 155 158 165 171 178 180 186 189 194 200 206 211 215 214 206 204 200 196 197 176 176 176 177 178

163 166 168 169 170 172 174 175 176 178 180 181 182 185 189 186 186 186 186 186 186 187 187 188 188 190

167 169 172 172 178 182 183 184 184 186 191 192 201 211 213 212 209 205 202 201 200 200 200 201 202 203

Grey areas indicate Forecast Indices. Davis Langdon prepares its Tender Price Index as a measure of price movement within the building industry for metropolitan projects, as well as a reasonable comparison between cities. The index is compiled by pricing, on a quarterly basis, the same basket of work items typical for construction projects, excluding GST.

Forecast

200

180

Index 160

140

Brisbane

Cairns

Canberra

Hobart

Melbourne Perth

Sydney

2nd

4th

2011 1st

3rd

2nd

2010 1st

4th

3rd

2nd

4th

2009 1st

3rd

2nd

4th Darwin

2008 1st

3rd

2nd

2007 1st

4th

3rd

2nd

4th

3rd

Adelaide

2006 1st

Year

2nd

120 Quarter

2005 1st

Four: Cost Data and Market Data

220

Townsville

Source: Davis Langdon Research

Davis Langdon, An AECOM Company

Australian Property Market – Commercial Overview Melbourne CBD

Sydney CBD 12

4,800,000

4,600,000

4,400,000

4,200,000

4,000,000

3,800,000

Vacancy

Rent *

6.5

300 – 520

Yields **

Rent *

8.5

425 – 650

Jul-09

Jul-10

Jul-08

Jul-06

Jul-07

Yields ** 6.50 – 7.25

Brisbane CBD

2,000,000

1,800,000

1,900,000

1,600,000

1,800,000

Vacancy

Rent *

13.6

375 – 450

Jul-10

Jul-09

Jul-08

Jul-07

Jul-06

Jul-05

Jul-00

Rent *

10.9

Yields ** 7.25 – 8.25

Rent *

7.0

250 – 325

Jul-10

Jul-09

Jul-08

Jul-07

Jul-06

Jul-05

Jul-04

Jul-03

Vacancy

Yields ** 8.50 – 9.50

Vacancy Rate (%)

2 0

1,200,000 Jul-10

880,000

1,250,000 Jul-09

Jul-08

900,000

Jul-07

Jul-06

920,000

1,300,000

Jul-05

1,350,000

Jul-04

940,000

Jul-03

Jul-02

960,000

1,450,000 1,400,000

Jul-01

Jul-00

980,000

1,500,000

Total Stock (m2)

Vacancy Rate (%)

1,000,000

Vacancy

Rent *

Yields **

9.9

450 – 650

7.0 – 8.50

= Total stock (m2) as at June 2010 = Vacancy Rate (%) as at June 2010 * Rent = Prime Net Effective Rent (A$/m2) as at June 2010 ** Yields = Prime Yields (%) as at June 2010 www.davislangdon.com www.aecom.com

Source: Property Council of Australia; Knight Frank Research

Four: Cost Data and Market Data

Jul-02

Vacancy

Perth CBD

1,020,000

Jul-01

1,400,000

N/A

Adelaide Core

Jul-00

1,500,000

Yields **

N/A

1,600,000

Jul-10

Jul-09

Jul-08

Jul-07

Jul-06

Jul-05

Jul-04

Jul-03

Jul-02

Jul-01

Jul-00

1,700,000

Jul-04

1,200,000

Jul-03

1,400,000

Jul-01

2,000,000

Vacancy Rate (%)

2,100,000

Total Stock (m2)

2,200,000

Vacancy Rate (%)

Jul-02

2,200,000

Total Stock (m2)

Vacancy

6.75 – 7.25

Canberra

Total Stock (m2)

Jul-04

Jul-00

Jul-10

Jul-09

Jul-07

Jul-08

Jul-06

Jul-04

Jul-05

0 Jul-03

2,800,000 Jul-01

2 Jul-02

3,000,000

Jul-05

3,200,000

Jul-03

3,400,000

Jul-01

Jul-02

3,600,000

Jul-00

Total Stock (m2)

3,800,000

Vacancy Rate (%)

5,000,000

4,000,000

Vacancy Rate (%)

Total Stock (m2)

4,200,000

Industrial Construction

Cairns

Canberra

Darwin

Hobart

Melbourne

Perth

Sydney

Townsville

Auckland

Wellington

Christchurch

Industrial Light Industrial Low Bay, Tilt-Up Heavy Industrial High Bay, Tilt-Up Attached Offices

Brisbane

Building Type Australasian Overall Building Rates*

NZ$/m2

Adelaide

A$/m2

640

625

595

635

745

625

650

635

640

705

550

650

785

770

730

785

920

770

800

785

790

870

700

750

2,070 2,020 1,920 2,060 2,420 2,020 2,100 2,250 2,070 2,280

1,400 1,500 1,500

Engineering Services (Mechanical)

Light Industrial

Engineering Services (Electrical)

Light Industrial

Attached Offices

142

140

132

142

166

140

146

142

158

130

124

118

Engineering Services (Fire)

Light Industrial Attached Offices

15 17

14 16

15 17

17 20

14 16

15 17

16 18

15 25

Attached Offices

235

230

220

235

275

230

240

265

235

260

150

210

220

Construction Forecast – Industrial 6,000

Forecast

5,000

A$m

3,000

2,000

1,000

2017-2018

2016-2017

2015-2016

2014-2015

2013-2014

2012-2013

2011-2012

2010-2011

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

0 2000-2001

Four: Cost Data and Market Data

4,000

Source: Construction Forecasting Council 2010

Davis Langdon, An AECOM Company

Industrial Commentary The industrial sector was one of the worst hit during the downturn and except for a few select locations across the country, it is yet to show any solid indications of recovery. In some regions there is a threat of oversupply and diminishing demand, while in other regions the pause in supply during the downturn is leading to early signs of rental pressures over the medium term outlook. The industry’s outlook remains cautious. Certain parts of the country are anticipating further buoyancy from the mining sector, but until this transpires there is little impetus for supporting industrial development in those areas. However, port volumes are rising, with further infrastructure works planned to keep pace with rising export and import traffic. Total container activity for the year was up 3-6% in the nation’s largest ports, driven by commodity exports and a strong Australian dollar boosting import activity. Major road additions and upgrades have also been beneficial to the industrial sector. The Construction Forecasting Council of Australia is expecting a gradual return to development activity from 2010-11 onwards, as confidence in the sector improves. Key Challenges Excluding a few owner-occupiers such as retailers looking to expand their distribution spaces, there has been very little development activity in the industrial sector. Speculative investment has been impeded by feasibilities constrained by low rental returns and difficulties securing finance. Developers are generally reliant on tenants’ pre-commitment in order to get financing for industrial projects, although there have been several purchases of key land parcels which shows some confidence may be returning to this sector. The industrial market continues to experience competitive conditions. With low activity levels – in industrial and other sectors – construction prices remain competitive, creating a very attractive environment for developers who can construct at low capital cost and sell or lease into a market. Industrial Market Overview

Prime Secondary Business Space/Hi-Tech

Melbourne

Prime Secondary

Brisbane

7.75 – 8.75

85 – 135

8.75 – 9.75

175 – 225

7.75 – 8.50

73 – 125

7.75 – 8.75

50 – 90

9.50 – 11.00

150 – 250

7.50 – 9.00

Prime

105 –115

8.25 – 9.00

90 – 100

9.25 – 10.00

Business Space/Hi-Tech Prime Secondary Perth

100 – 165

Business Space/Hi-Tech Secondary Adelaide

Prime Yields (%)

175 – 225

8.50 – 9.25

75 – 130

8.00 – 8.85

55 – 80

9.00 – 10.00

Business Space/Hi-Tech

150 – 220

8.00 – 8.85

Prime

110 – 120

7.75 – 8.50

75 – 90

8.75 – 9.25

100 – 125

8.00 – 8.50

Secondary Business Space/Hi-Tech Source: Knight Frank Research as at June 2010

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Four: Cost Data and Market Data

Sydney

Prime Net Face Rents ($A/m2)

High-Rise Residential Construction

Engineering Services (Electrical)

Four: Cost Data and Market Data 32

Christchurch

Wellington

Auckland

Townsville

Sydney

Perth

Melbourne

Hobart

Darwin

Canberra

Cairns

1,900 2,000 1,950

2,660 2,600 2,470 2,650 3,100 2,600 2,700 2,650 2,660 2,930

2,150 2,250 2,250

2,760 2,690 2,560 2,740 3,220 2,700 2,800 2,740 2,760 3,040 3,000 2,930 2,780 2,990 3,510 2,940 3,050 2,990 3,000 3,320

2,300 2,500 2,400 3,250 3,300 3,000

Podium Car Parking 835 700 775 835 975 820 850 835 835 925 Basement Car 1,330 1,100 1,230 1,320 1,550 1,300 1,350 1,250 1,330 1,470 Parking

650 650 650 1,000 1,100 1,200

Medium Quality Multi Unit Low Rise High Rise (A/C inc.)

106

215

210

200

215

255

210

220

215

240

225

High Quality Low Rise (A/C inc.)

196

192

182

196

230

192

200

196

198

218

240

326

High Rise (A/C inc.)

285

280

265

285

335

280

290

285

315

300

325

Podium Car Parking Basement Car Parking

N/A 69

N/A 67

N/A 64

N/A 69

N/A 81

N/A 67

N/A 70

N/A 69

N/A 76

35 65

105

100

105

120

100

105

115

120

115

110

120

140

115

120

130

155 185

150 185

140 175

150 185

180 220

150 185

155 190

150 185

155 185

170 205

140 165

145 180

44 44

43 43

41 41

44 44

52 52

43 43

45 45

44 44

49 49

35 35

40 40

13 64 9 49

13 63 9 48

12 59 8 46

13 64 9 49

15 75 10 57

13 63 9 48

13 65 9 50

13 70 9 49

13 64 9 49

14 71 10 54

25 65 10 55

28 65 10 55

28 67 14 72

Medium Quality Multi Unit Low Rise High Rise (A/C inc.) High Quality Low Rise (A/C inc.) High Rise (A/C inc.) Podium Car Parking Basement Car Parking

Engineering Services (Fire)

NZ$/m2

1,970 1,920 1,830 1,960 2,300 1,930 2,000 1,960 1,970 2,170

High Quality Low Rise High Rise

Engineering Services (Mechanical)

Brisbane

Building Type Australasian Overall Medium Quality Building Rates* Multi Unit Low Rise High Rise

Adelaide

A$/m2

Medium Quality Multi Unit Low Rise High Rise High Quality Low Rise (A/C inc.) High Rise Podium Car Parking Basement Car Parking

Low Rise: Less than 3 storeys; Medium Rise: 3-10 storeys; High Rise: 10+ storeys *Inclusive of builderâ&#x20AC;&#x2122;s preliminaries & profit but exclusive of site works, external services, land and interest costs Source: Davis Langdon Research

Davis Langdon, An AECOM Company

Residential Commentary Australiaâ&#x20AC;&#x2122;s residential sector has remained relatively resilient during the recent downturn compared to other sectors of the construction industry. While there are notable discrepancies between certain markets, for the most part residential building development has been ongoing, spurred on by the underlying fundamentals of the sector. With an existing shortfall in dwellings further exacerbated by above trend migration levels in recent years, demand remained strong for residential accommodation. The Real Estate Institute of Australia reported that the national median average house price for the June quarter 2010 was 16% higher compared to the previous year, although this momentum is expected to cool off over the coming year. While there are less first home buyers than last year when there were more government incentives and lower interest rates, investors continue to be attracted by tight rental markets and the prospect for strong capital growth. This trend is evident in the housing finance figures for owner-occupiers which have eased back to pre-stimulus levels. Investors have gradually returned to the market through 2010 with investor finance returning to levels last seen in early 2008. However, rising interest rates could stifle further activity in the market to some extent as the Reserve Bank of Australia grapples with inflationary pressures and the possible re-emergence of a two-speed economy.

Housing Finance Trend 20 18 16 14

A$bn

12 10 8

4 First Home Owners Grant Boost

Owner Occupiers Source: ABS 5609.0

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Investors

Jun-10

Mar-10

Dec-09

Sep-09

Jun-09

Mar-09

Dec-08

Sep-08

Jun-08

Mar-08

Dec-07

Sep-07

Jun-07

Four: Cost Data and Market Data

Residential Drivers and Challenges Population Growth Population growth continues to be a key factor in the demand for housing in Australia. Even though net migration rates softened in 2010, Australiaâ&#x20AC;&#x2122;s average annual population growth over the last five years was 387,000 per annum â&#x20AC;&#x201C; a 57% rise on the previous five year average of 246,000, whereas the housing supply side is not keeping up with this demand. The National Housing Supply Council projections show that 3.2 million additional dwellings will be required to meet underlying demand by 2030, based on net migration, fertility rates and household formation trends. It estimates that the gap between demand and supply will grow to over 300,000 dwellings by 2014, and by 2030, the cumulative gap will be over 640,000 (based on assumptions of medium growth in supply and demand). Supply Constraints The building industry continues to face numerous challenges in the supply of new dwellings. Many developers experienced challenges in securing finance, with banks requiring higher levels of pre-commitment and tighter loan to value ratios. Increasing demand for sustainability initiatives and the impact of the new BCA Part J amendments have added to the costs of construction. Planning hurdles also impacted the rate of housing supply, particularly in established areas where higher density development is strongly advocated for. The density debate is expected to gain prominence as industry and governments endeavour to make better use of established urban areas. Source: NHSC, ABS, REIA

Population Growth vs Dwellings 2.20

1.80

Percent

Deficit

1.60

1.40

1.20

Australia Population Growth (annual)

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1.00 1999

Four: Cost Data and Market Data

2.00

Australia New Dwellings Growth (annual)

Source: ABS 3101.0, ABS 4102.0

Davis Langdon, An AECOM Company

Retail Construction

Engineering Services (Mechanical)

Engineering Services (Electrical)

Engineering Services (Fire)

Retail District Centre 1,760 1,720 1,630 1,750 2,060 1,730 1,790 1,750 1,760 1,950 Regional Centre 2,340 2,290 2,170 2,330 2,740 2,290 2,380 2,330 2,340 2,590 Strip Shopping 1,440 1,400 1,330 1,430 1,680 1,410 1,460 1,430 1,440 1,590 Local Shop. Centre 245 240 230 245 290 240 250 245 245 270 (No Malls) Regional Centre 295 290 275 295 345 290 300 295 295 325 Strip Shopping 178 174 164 176 206 174 180 176 178 196 Local Shop. Centre 118 116 110 118 138 116 120 118 118 130 (No Malls) Regional Centre 124 120 114 122 144 120 126 122 124 136 Strip Shopping 89 87 82 88 103 87 90 88 89 98 Local Shop. Centre 69 67 64 69 81 67 70 69 69 76 (No Malls) Regional Centre 64 63 59 64 75 63 65 70 64 71 Strip Shopping 15 14 14 15 17 14 15 15 15 16

Christchurch

Wellington

Auckland

Townsville

Sydney

Perth

NZ$/m2 Melbourne

Hobart

Darwin

Canberra

Cairns

Brisbane

Building Type Australasian Overall Building Rates*

Adelaide

A$/m2

1,350 1,400 1,400 1,550 1,600 1,600 1,100 1,200 1,200 220 235 220 260 220 120

295 230 120

280 220 126

140 100 55

156 100 57

60 25

57 25

*See following page for footnote details. Source: Davis Langdon Research

Retail Commentary The retail sector has not suffered as much as expected during the global financial crisis. Heavily discounted sales, low interest rates and fewer job losses than expected have all buoyed the sector. Although 2008-2009 and 2009-2010 saw very little new retail stock, projections for 2010-2011 are increasingly positive. Construction value is expected to grow by 16%, equating to approximately A$5 billion in new retail construction projects. Retail Overview Sydney

Brisbane

Adelaide

Perth

Prime Net Face Rents ($A/m2) 1,500 – 2,000 750 – 950 500 – 625 200 – 300 1,200 – 1,800 550 – 900 350 – 800 200 – 300 950 – 1,400 675 – 900 375 – 750 175 – 270 900 – 1,150 600 – 750 325 – 550 175 – 270 1,000 – 1,500 600 – 900

Prime Yields (%) 6.00 – 7.00 7.25 – 8.25 7.50 – 8.50 8.00 – 9.25 6.50 – 7.25 7.25 – 8.25 7.75 – 8.50 8.00 – 9.25 6.50 – 7.50 7.75 – 8.75 7.50 – 9.00 8.00 – 9.50 6.75 – 7.75 8.50 – 9.00 7.25 – 8.25 9.50 – 10.50 6.75 – 7.25 7.50 – 8.25

Neighbourhood

350 – 650

8.00 – 8.50

Bulky Goods

190 – 235

8.00 – 9.00

Source: Knight Frank Research as at June 2010

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Four: Cost Data and Market Data

Melbourne

Regional Sub-Regional Neighbourhood Bulky Goods Regional Sub-Regional Neighbourhood Bulky Goods Regional Sub-Regional Neighbourhood Bulky Goods Regional Sub-Regional Neighbourhood Bulky Goods Regional Sub-Regional

Tourism Construction

Australasian Overall Building Rates*

Engineering Services (Mechanical)

Engineering Services (Electrical)

Four: Cost Data and Market Data

Engineering Services (Fire)

Christchurch

Wellington

Auckland

Townsville

Sydney

Perth

Melbourne

NZ$/m2

Hobart

Darwin

Canberra

Cairns

Brisbane

Building Type Hotel incl. FF&E

Adelaide

A$/m2

Resort

3,440 3,370 3,200 3,430 4,020 3,370 3,500 3,430 3,450 3,800

2,700 2,750 2,700

3 Star Budget

2,760 2,690 2,560 2,740 3,220 2,700 2,800 2,850 2,760 3,040

2,700 2,700 2,700

5 Star/Luxury

3,840 3,750 3,560 3,820 4,490 3,760 3,900 4,250 3,840 4,240

3,500 3,600 3,500

Suburban Motel

2,160 2,120 2,010 2,160 2,530 2,120 2,200 2,200 2,170 2,390

2,250 2,500 2,500

Resort

325

315

300

325

380

320

330

325

360

400

350

300

3 Star Budget

280

275

260

280

330

275

285

350

280

310

260

270

5 Star/Luxury

415

405

385

410

485

405

420

550

415

455

350

345

Suburban Motel

206

202

192

206

242

202

210

206

228

206

250

248

Resort

205

200

190

205

240

200

210

205

230

260

3 Star Budget

190

180

190

225

190

195

200

190

210

270

5 Star/Luxury

265

260

245

265

310

260

270

265

295

300

320

Suburban Motel

138

134

128

138

162

134

140

138

152

136

190

Resort

3 Star Budget

5 Star/Luxury

110

104

Suburban Motel

Tourism Commentary The tourism sector in Australia has seen steady growth from the international and domestic markets. In response to the global financial crisis and against the backdrop of a 4.3% decline in global tourism, Australia has outperformed the rest of the world and is now poised for future growth. In 2009-2010 the value of building work completed on accommodation associated with tourism represented around A$1.1 billion. Although this was a decline on the previous year, it is a likely reflection of the difficult operating environment in the accommodation industry in 2009 combined with tighter credit conditions. Davis Langdon, An AECOM Company

Tourism Commentary (cont.) The top destinations attracting the majority of international visitor expenditure are Sydney, Melbourne, the Gold Coast, Queensland and Perth. These destinations have seen government and private sector investment commitments for maintenance and development of significant tourism venues to attract visitors to existing well established destinations. Construction Forecast â&#x20AC;&#x201C; Tourism 1,600 Forecast 1,400 1,200

A$m

1,000 800 600 400 200

2017-2018

2016-2017

2015-2016

2014-2015

2013-2014

2012-2013

2011-2012

2010-2011

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

2000-2001

Source: Construction Forecasting Council 2010

Sports and Recreation Commentary

Federal and State Governments plus the private sector continue to invest heavily in sports infrastructure for established events including the Australian Open and the Australian Grand Prix plus new bids for the Gold Coast Commonwealth Games in 2018 and the FIFA World Cup in 2022. Stadia, arenas, aquatic centres, sports halls, and multi-purpose venues are seen as playing an integral part in providing a sense of community within society, activating areas for development as part of larger mixed use developments and promoting a sustainable legacy for future generations. Individual communities in Australia continue to benefit from a strong rate of investment in regional sporting and community hubs, comprising aquatic centres, multi-purpose sports facilities and outdoor sports precincts catering for the wide variety of sporting activities pursued by the public. This area of the sports sector has benefited considerably from the Commonwealth Governments' regional and local community infrastructure investment programmes.

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Four: Cost Data and Market Data

Australia maintains its position on the global stage as a home for sports events at an elite level with world class sports precincts such as Sydney Olympic Park and Melbourne Olympic Park, which was recently voted by Sports Business World as the best sporting precinct in the world.

Health and Aged Care Construction

Health District Medical Centre District Hospital Nursing Home (A/C inc.)

Engineering Services (Mechanical)

Engineering Services (Electrical)

Engineering Services (Fire)

Christchurch

Wellington

Auckland

Townsville

Sydney

Perth

Melbourne

NZ$/m2

Hobart

Darwin

Canberra

Cairns

Brisbane

Building Type Australasian Overall Building Rates*

Adelaide

A$/m2

3,100 3,030 2,880 3,090 3,620 3,040 3,150 3,090 3,100 3,420

1,900 2,000 2,400

3,720 3,640 3,450 3,700 4,350 3,640 3,780 3,700 3,720 4,110

3,800 4,100 3,800

2,560 2,500 2,370 2,550 2,990 2,510 2,600 2,800 2,560 2,830

2,700 2,800 2,700

District Medical Centre

355

345

330

355

415

345

360

355

390

300

290

280

District Hospital

550

540

510

550

645

540

560

550

610

525

580

565

Nursing Home

255

250

235

255

300

250

260

255

285

220

260

District Medical Centre

295

290

275

295

345

290

300

295

325

350

360

District Hospital

345

335

320

345

400

335

350

345

380

500

Nursing Home

265

260

245

265

310

260

270

265

295

215

280

District Medical Centre

District Hospital Nursing Home

108 69

106 67

100 64

108 69

126 81

106 67

110 70

108 69

120 76

66 55

72 52

Four: Cost Data and Market Data

Health Commentary

The Health sector continues to be a major contributor to the construction industry, with planned future expenditure brought forward to support the construction industry during the GFC. In 2009-2010 building approvals for health projects leapt to A$5.8 billion – or 17% of total non-residential projects – compared to just A$1.8 billion in 2008-2009. The predicted increase in health construction activity over the next two years will be largely driven by projects that were announced one to three years ago. This is witnessed by the unprecedentedly high volume of building approvals during 2009-2010 that will support construction workloads over the coming years. Demand for health facilities remains high as a result of strong population growth which is exacerbated by the nation’s ageing population. Major investment is planned for all types of health facilities including mental health, multi-use health centres, aged care and major tertiary facilities are planned for major investment. Funding remains a constraint, particularly for states whose economies have suffered during the GFC. However, most states have ambitious health capital works expenditure programmes over the next few years in addition to the Federal Government’s commitment to reallocate funding to regional areas as part of the 2010 federal election agreement. It is anticipated that the health sector’s contribution to the construction industry will remain dominant for several years. Davis Langdon, An AECOM Company

Aged Care Commentary The number of people aged 70+ in Australia is rapidly increasing, causing an anticipated increase in demand for aged care and independent living facilities. The population within this demographic will increase by 1.1 million or 56% by 2020. Consequently, demand for residential Aged Care facility beds in Australia is expected to increase from approximately 208,000 to 325,000 beds in this same period based on demographics and existing penetration rates of 10.4%. Senior living residents are also demanding more of their providers in terms of extra services, activities, technology access and sustainable design. The challenge for the industry is delivering on these demands, balanced with developing and operating viable facilities within an increasingly competitive landscape. The need for traditional residential care will continue to grow, but with the majority of ageing Australians preferring to stay in their homes as long as possible and continued government focus on less costly non-residential care options such as home and community care, it is likely that options such as retirement villages, apartments and affordable housing options will grow at a faster rate. The retirement village industry is predicted to be one of the fastest growing property sectors, with projected investment in construction in excess of A$40 billion over the next 15 years. Currently the portion of the population living in retirement villages is 5.25% and could rise to 7.5%-8.0% in the next 15 years. It is estimated that as many as 600 new villages will be required in addition to the existing 1,750 to support this demand. Source: ABS, Department of Health and Ageing, Davis Langdon Research

Construction Forecast â&#x20AC;&#x201C; Health and Aged Care 5,000 Forecast

4,000

2,000

1,000

Source: Construction Forecasting Council 2010

www.davislangdon.com www.aecom.com

2017-2018

2016-2017

2015-2016

2014-2015

2013-2014

2012-2013

2011-2012

2010-2011

2009-2010

2008-2009

2007-2008

2006-2007

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

2000-2001

Four: Cost Data and Market Data

A$m

3,000

Education Construction

Christchurch

Wellington

Auckland

Townsville

Sydney

Perth

Melbourne

NZ$/m2

Hobart

Darwin

Canberra

Cairns

Building Type Australasian Overall Building Rates*

Brisbane

Adelaide

A$/m2

Education Primary Schools

1,430 1,390 1,320 1,420 1,670 1,400 1,450 1,800 1,430 1,580 1,900 1,900 1,900

Secondary Schools 1,670 1,640 1,550 1,670 1,950 1,640 1,700 2,200 1,670 1,850 2,300 2,300 2,300 Engineering Services (Mechanical)

Primary and Secondary Schools

118

116

110

118

138

116

120

118

130

176

Primary and Secondary Schools (A/C inc.)

215

210

200 215

255

210

220

230

215

240

220

255

Engineering Services (Electrical)

Primary and Secondary Schools

255

250

235 255

300

250

260

255

285

125

145

Engineering Services (Fire)

Primary and Secondary Schools

Construction Forecast – Education 10,000 Forecast

6,000

A$m 4,000

2,000

2017-2018

2016-2017

2015-2016

2014-2015

2013-2014

2012-2013

2011-2012

2010-2011

2009-2010

2008-2009

2006-2007

2007-2008

2005-2006

2004-2005

2003-2004

2002-2003

2001-2002

0 2000-2001

Four: Cost Data and Market Data

8,000

Source: Construction Forecasting Council 2010

Davis Langdon, An AECOM Company

Education Commentary In March 2009 the Federal Government announced the A$42 billion Nation Building Economic Stimulus Plan of which $16.2 billion was allocated to improving facilities in all schools around the country as part of the Building the Education Revolution (BER). The task faced by the industry to deliver 24,000 projects across 9,400 schools with short lead times was undoubtedly a challenge the construction industry has never faced before on a national scale. During late 2008 non-residential construction activity levels declined sharply and fear of a prolonged economic slowdown was at the time justified as global activity was expected to contract for the first time in 60 years. Domestically, the decline was evident in all sectors across state and territory markets. However in 2010, demand has begun to rise and confidence has returned to the market. The expedited BER projects ensured that workloads continued in lieu of diminished private sector activity. The program stimulated non-residential construction activity levels through 2009-2010 and as a consequence, planned activity levels were maintained close to the 10 year trend. National Non-Residential Construction Activity 10

8 Stimulus Boost

A$bn

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Total Work Done (Including Stimulus Funding)

Mar-10

Sep-09

Mar-09

Sep-08

Mar-08

Sep-07

Mar-07

Sep-06

Mar-06

Sep-05

Mar-05

Sep-04

Mar-04

Sep-03

Work Done (Excluding Stimulus Funding) Source: ABS 8752.0, Davis Langdon Research

Four: Cost Data and Market Data

Major Rates for Australia and New Zealand

Description

Unit

Brisbane

Cairns

Canberra

Darwin

Hobart

Melbourne

Perth

Sydney

Townsville

Auckland

Wellington

Christchurch

Basement Excavation

m³

Foundation Excavation

m³

Imported Structural Fill

m³

110

104

Concrete in Pad Footing (25MPa)

m³

270

250

270

315

265

275

285

270

300

285

295

230

Concrete in Wall (32MPa)

m³

310

285

290

310

360

305

315

355

310

340

295

300

280

Concrete in Suspended Slab (32MPa) m³

285

260

265

285

335

280

290

325

285

315

290

295

270

Formwork to Slab Soffit

m²

130

110

120

125

150

125

130

145

130

140

135

140

Formwork to Side and Soffit of Beam

m²

118

116

110

118

138

116

120

156

118

130

146

150

100

Precast Wall Panel Architectural with Sand Blast Finish Reinforcement in Beam

m²

405

395

375

400

470

395

410

400

405

445

300

320

280

2800 2300 2600 2790 3280 2750 2850 2500 2810 3100

2500 2800 2750

Structural Steel in Beam

6400 6000 5930 6370 7470 6270 6500 6370 6400 7070

4000 4500 5500

Structural Steel in Truss

6790 6300 6300 6760 7930 6650 6900 6760 6800 7500

5000 6000 6000

Four: Cost Data and Market Data

Aluminium Framed Window 6.5mm m² Clear Glass Aluminium Panel Curtain Wall System m² (including structural system) Steel Stud Partition (framing) m²

NZ$/m2

Adelaide

A$/m2

610

595

565

610

715

600

620

610

675

400

490

450

875

855

815

870 1025

860

890

870

875

965

650

800

750

Plasterboard 13mm thick to Partition

m²

Suspended Mineral Fibre Ceiling Tile

m²

Paint on Plasterboard Wall

m²

Ceramic Tiles to Wall

m²

138

134

128

138

162

134

140

138

152

120

130

120

Non Slip Vinyl to Wet Areas

m²

Anti Static Carpet Tile to Office & m² Admin Areas Anti Static Broadloom Carpet to Office m² & Admin Areas Aluminium Framed Shopfront m²

570

560

530

570

665

560

580

570

630

400

475

Rates are subcontract rates inclusive of labour and material fixed in position complete and include competitive margins for overhead and profit; are for projects constructed in the CBD area of average specification and of medium/high rise construction The rates are net of GST The rates are not intended to be used for tendering and/or the assessment of variations The rates are net of preliminaries Source: Davis Langdon Research

Davis Langdon, An AECOM Company

Australian Labour Material Ratios Material

Plant

35%

65%

Bricklayer & Blocklayer

50%

Carpenter

45%

55%

Carpet Layer

10%

90%

Demolish

85%

10%

Drainer

60%

40%

Electrical

40%

60%

Excavator

38%

10%

52%

Fire Service

45%

55%

Formworker

70%

30%

Glazier

20%

80%

In Situ Concretor

25%

75%

Joiner

15%

85%

Lifts

25%

75%

Mason

10%

90%

Metalworker

25%

75%

Painter

75%

25%

Pavior

75%

25%

Piler

20%

55%

25%

Plasterer

40%

60%

Precast Concretor

20%

80%

Preliminaries

40%

10%

50%

Reinforcement Fixer

20%

80%

Roadworker & External Pavior

15%

85%

Structural Steelwork

10%

90%

Suspended Ceiling Fixer

40%

60%

Tiler

55%

45%

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Four: Cost Data and Market Data

Labour Air Conditioning Specialist

Five: Property Investment Information 44

Home HQ, Artarmon, New South Wales Davis Langdon, An AECOM Company

Five: Property Investment Information Property Taxes 46 Due Diligence 48 Commercial Building Disclosure 49 Make Good Works 49 Importance of Tax Depreciation 50

Efficiency Factors 51

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Five: Property Investment Information

Short Term Interest Rate Movements 51

Property Taxes Real Property Stamp Duty Value

Duty

New South Wales

Up to $14,000 $14,000–$30,000 $30,000–$80,000 $80,000–$300,000 $300,000–$1,000,000 Above $1,000,000 Premium Property Duty >$3million

$1.25 per $100 or part of dutiable value $175+$1.50 per $100 in excess of $14,000 $415+$1.75 per $100 in excess of $30,000 $1,290+$3.50 per $100 in excess of $80,000 $8,990+$4.50 per $100 in excess of $300,000 $40,490+$5.50 per $100 in excess of $1,000,000 $150,490+$7 for every $100 in excess of $3,000,000

Queensland

Up to $5,000 $5,001–$75,000 $75,000–$540,000 $540,000–$980,000 Above $980,000

Nil $1.50 per $100 in excess of $5,000 $1,050+$3.50 per $100 in excess of $75,000 $17,325+$4.50 per $100 in excess of $540,000 $37,125+$5.25 per $100 in excess of $980,000

South Australia

Up to $12,000 $12,000–$30,000 $30,000–$50,000 $50,000–$100,000 $100,000–$200,000 $200,000–$250,000 $250,000–$300,000 $300,000–$500,000 Above $500,000

$1 per $100 or part of $100 $120+$2 per $100 in excess of $12,000 $480+$3 per $100 in excess of $30,000 $1,080+$3.50 per $100 in excess of $50,000 $2,830+$4 per $100 in excess of $100,000 $6,830+$4.25 per $100 in excess of $200,000 $8,955+$4.75 per $100 in excess of $250,000 $11,330+$5 per $100 in excess of $300,000 $21,330+$5.50 per $100 in excess of $500,000

Tasmania

Up to $1,300 $1,301–$10,000 $10,001–$30,000 $30,001–$75,000 $75,001–$150,000 $150,001–$225,000 Above $225,000

$20 $1.50 per $100 or part of $100 $150+$2 per $100 in excess of $10,000 $550+$2.50 per $100 in excess of $30,000 $1,675+$3 per $100 in excess of $75,000 $3,925+$3.50 per $100 in excess of $150,000 $6,550+$4 per $100 in excess of $225,000

Victoria

Up to $25,000 $25,001–$130,000 $130,001–$440,000 $440,001–$550,000 $550,001–$960,000 Above $960,000

1.4% $350+2.4% of above $25,000 $2,870+6% of above $130,000 $18,370+6% of above $440,000 $28,070+6% of above $550,000 5.5% of dutiable value

Western Australia

Up to $80,000 $80,001–$100,000 $100,001–$250,000 $250,001–$500,000 Above $500,001

$1.90 per $100 or part of $100 $1,520+$2.85 per $100 in excess of $80,000 $2,090+$3.80 per $100 in excess of $100,000 $7,790+$4.75 per $100 in excess of $250,000 $19,665+$5.15 per $100 in excess of $500,000

Northern Territory

Up to $525,000 Above $525,000

.065*V2+15V where V is Value/1000 4.95% of total value

Five: Property Investment Information

Australian Capital Territory

Up to $100,000 $100,001–$200,000 $200,001–$300,000 $300,001–$500,000 $500,001–$1,000,000 Above $1,000,000

$20 or $2 per $100 or part thereof $2,000+$3.50 per $100 in excess of $100,000 $5,500+$4 per $100 in excess of $200,000 $9,500+$5.50 per $100 in excess of $300,000 $20,500+$5.75 per $100 in excess of $500,000 $49,250+$6.75 per $100in excess of $1,000,000

Davis Langdon, An AECOM Company

Land Taxes and Stamp Duties – as at September 2010

Australian Capital Territory

Taxable Land Value Residential: $0–$75,000 $75,001–$150,000 $150,001–$275,000 $275,001 and above Commercial: $0–$150,000 $150,001–$275,000 $275,001 and above

New South Wales

Up to $376,000 $376,000–$2,299,000 $2,299,000 and above

Queensland

Companies & Trusts: $0–$349,999 $350,000–$2,249,999 $2,250,000–$4,999,999 $5,000,000 and above Individuals: $0–$599,999 $600,000–$999,999 $1,000,000–$2,999,999 $3,000,000–$4,999,999 $5,000,000 and above

Land Tax 0.60% 0.89% 1.15% 1.40% 0.89% 1.25% 1.59% Nil $100+1.6% for amount in excess of $376,000 $100+2.0% for amount in excess of $2,299,000 +1.6% for amount in excess of $376,000 Nil $1,450+1.7% of above $350,000 $37,500+1.5% of above $2,250,000 $75,000+ 0.2% of above $5,000,000 Nil $500+ 0.01% of above $600,000 $4,500+1.65% of above $1,000,000 $37,500+1.25% of above $3,000,000 $62,500+1.75% of above $5,000,000

$0–$300,000 $300,001–$550,000 $550,001–$800,000 $800,001–$1,000,000 Above $1,000,000

Nil $0.50 for every $100 in excess of $300,000 $1,250+$1.65 for every $100 in excess of $550,000 $5,375+$2.40 for every $100 in excess of $800,000 $10,175+$3.70 for every $100 in excess of $1,000,000

Tasmania

Up to $24,999 $25,000–$349,999 $350,000–$749,999 $750,000 and above

Nil $50+0.55% of above $25,000 $1,837.50+2% of above $350,000 $9,837.50+2.5% of above $750,000

Victoria

$0–$250,000 $250,000–$600,000 $600,000–$1,000,000 $1,000,000–$1,800,000 $1,800,000–$3,000,000 $3,000,000 and above

Nil $275+0.2% of above $250,000 $975+0.5% of above $600,000 $2,975+0.8% of above $1,000,000 $9,375+1.3% of above $1,800,000 $24,975+2.25% of above $3,000,000

Western Australia

$0–$300,000 $300,000–$1,000,000 $1,000,000–$2,200,000 $2,200,000–$5,500,000 $5,500,000–$11,000,000 $11,000,000 and above

Nil 0.09 cents for each $1 in excess of $300,000 $630+0.47 cents for each $1 in excess of $1,000,000 $6,270+$1.22 for each $1 in excess of $2,200,000 $46,530+$1.46 for each $1 in excess of $5,500,000 $126,830+$2.16 for each $1 in excess of $11,000,000

Northern Territory

No Land Tax is payable in Northern Territory

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Five: Property Investment Information

South Australia

Corporate governance standards require objective and comprehensive due diligence for property acquisition Due Diligence Due diligence prior to a property purchase must be an integrated process that recognises that each of the component parts impacts upon the other, the price of the asset and the holding and recurrent cost of the property. Each part cannot be treated in isolation: VALUATION

PHYSICAL

• right price of acquisition • future capital expenditure provided for • certainty of market and revenue streams • demographics

DUE

• condition, performance and maintenance of building fabric and services • regulatory and essential services compliance • lettable areas title, easements and encroachments • environmental issues • town planning

Five: Property Investment Information

DILIGENCE

• • • • • •

maintenance capital expenditure outgoings insurance tax depreciation Green Star/NABERS energy performance • asset registers

OTHER

• lease conditions • contracts of sale • development agreements • agreements to lease

LEGAL

Accordingly, a useful due diligence audit for any prospective owner/investor must identify all of the issues surrounding the inherent physical condition of the property as they relate to and/or impact upon future capital expenditure, valuation, the lease or leases and the commercial legal documentation. Usually the technical due diligence report includes a review of all matters affecting and impacting upon building compliance, fabric, façade, structure, finishes and services as well as the environment together with land, title and photographic surveys. Other items such as assessment of current green performance, tax depreciation schedules, town planning and geological surveys may be included depending on the type of property and the ownership strategy. Davis Langdon, An AECOM Company

Building Energy Efficiency Disclosure Act 2010 (Commercial Building Disclosure) The Building Energy Efficiency Disclosure Bill was passed in June 2010 by the Australian Parliament, enforcing Commercial Building Disclosure from November 2010. Vendors, landlords and sub-landlords of buildings or parts of a building that have office areas in excess of 2,000m2 are required to disclose the energy efficiency upon sale or lease of a whole building, tenancy or sublease space. During the transitional period from 1 November 2010 to 31 October 2011, the only requirement will be the disclosure of a valid NABERS Energy base or whole building rating. From 1 November 2011 all prospective tenants or buyers must be provided with a Building Energy Efficiency Certificate (BEEC) which is valid for one year that includes: • a NABERS Energy rating • an assessment of tenancy lighting in the area of the building that is being sold or leased • suggestions on how to improve the energy efficiency of the building These regulations will have significant ramifications for property owners. Building owners are strongly advised to be fully prepared for the requirements of this scheme – comprehensive advice is vital in order to reduce any future unexpected costs.

Make Good Works Tenant Make Good obligations almost invariably lead to disputes between landlord and tenant at the end of the lease term with consequent additional costs. RICS Australia published a Best Practice Guidance Note and Protocol in relation to schedules of make good works in late 2004. This was endorsed by the Property Council of Australia, to provide professional objectivity and benchmarking and introducing best practice procedures for the make good process for the benefit of both landlord and tenant. The Schedule identifies alleged breaches of covenant within the lease, and cross references the relevant lease clauses with the state of repair or breach and the cost to make good. This assists in highlighting the landlord’s rights and provides clarity to the tenant regarding their lease obligations. Final Schedule A Schedule of Make Good is usually served on the tenant no more than six months before lease expiry in regarding to work requiring completion at expiry or earlier termination of the lease. The outcome can be either a cash settlement or physical make good by the tenant. However, normally a cash settlement is agreed. Interim Schedule A Schedule of Make Good can be served during the lease term identifying items of disrepair where the tenant has failed to comply with the repairing and maintenance covenants of the lease which require remedy during the lease term. The outcome is physical make good and focuses the tenant on his/her repair and maintenance obligations. Schedule of Condition Preparation of a Schedule of Condition prior to lease commencement is recommended to record the condition of the premises, listing of landlord’s fixtures and other relevant information, by written and photographic record, which should be agreed to by the landlord and tenant. It should be referenced in and attached to the lease document. These recommended practices limit make good disputes at the end of the lease. With more tenants engaging tenant representation, tenants and landlords are appreciating the benefits of utilising the above processes. www.davislangdon.com www.aecom.com

Five: Property Investment Information

Types of Schedules of Make Good

Importance of Tax Depreciation Taxation advantages offered in the form of depreciation allowances are particularly important to property owners and portfolio managers alike. Significant benefits are available to owners of properties that produce income, whether they are an owner-occupier of a commercial building or the owner of any property available for lease. The financial benefits obtained in maximising depreciation are worthy of specialist advice. Divisions 40 and 43 of the Income Tax Assessment Act 1997 contain the laws governing depreciation. Division 40 – Depreciable Assets Division 40 of the Act deals with the allowances that relate to depreciable assets such as plant, equipment or furnishings. These have a defined or definite effective life after which they are deemed to have a zero value. Every year the Australian Tax Office updates the list of effective lives for hundreds of items. Special provisions are made for plant in high use situations that may have a shorter life than usual, or items that have a life terminated by a special event. For depreciation, the purchase cost is used as the base cost or a portion where it is part of a larger acquisition. Specialist advice is often required to ascertain the true apportionment of costs. The table below illustrates a range of allowances that could be available under Division 40 for various property types.

Five: Property Investment Information

Type of Property

Range of Division 40 Depreciation Assets Content

Residential

5 – 30%

Hotel

15 – 50%

CBD Office

30 – 55%

Office Fit-out

40 – 80%

Shopping Centre

30 – 60%

Industrial

5 – 45%

Division 43 – Capital Works or Structural Improvement Division 43 of the Act relates to an allowance for capital works or structural improvement. This relates to the structural envelope of a building or hardstandings, carparking, etc which are outside the footprint of the building but within the site. This allowance is calculated on the original cost of construction, not the cost of acquisition. The construction cost of older buildings is not always known and specialist advice should be sought in this regard. It is not possible to estimate a range of values for allowances under Division 43 as they are building and date-specific.

Davis Langdon, An AECOM Company

Short Term Interest Rate Movements 18.00 16.00 14.00

Percent

12.00 10.00 8.00 6.00 4.00 2.00

Australia

New Zealand*

Japan

United Kingdom

United States

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1991

1992

1990

0.00

Euro area

*Interbank lending rate used prior to the establishment of an official cash rate

Efficiency Factors Efficiency Factors of Various Building Types (Net Useable Area/Gross Floor Area) Offices

Retail

Hospital

Net Useable Area

82% – 89%

Net Lettable Area

Suburban

90% – 95%

5 Star

85% – 92%

3 Star

90%

Resort

90% – 92%

Service Apartment

90%

Regional

75% – 80%

Sub-Regional

80% – 85%

Neighbourhood

80% – 85%

Bulky Goods

85% – 95%

Home Centre

90%

Department Net/Department Gross

75% – 80%

Includes accommodation, back of house, front of house and circulation

Net Lettable Area

Total Department Net/Gross Floor Area 80% – 85% Nursing Home

Apartments

85%

Includes accommodation, support area and circulation area

Low Rise

90%

High Rise

75% – 85%

Includes apartments, circulation area and lobbies

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Five: Property Investment Information

Hotels

Efficiency Factor Range CBD

Six: Emerging Trends 52

Sydney Town Hall, Sydney, New South Wales Davis Langdon, An AECOM Company

Six: Emerging Trends Population Projections: â&#x20AC;&#x201C; Urban Planning 54 â&#x20AC;&#x201C; Infrastructure Investment and Labour Force 56 Disability Standards 58 Building Energy Efficiency Disclosure Act 2010 60 Corporate Social Responsibility Commitment 61

Six: Emerging Trends

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Population Projections Urban Planning How is planning tackling the housing shortage? One of the key issues facing Australia is the need for housing in light of rapid population growth. Planning can respond by targeting strategic areas for growth and streamlining approval processes. Development is maximised in key areas and private and public housing is designed to complement the surrounding area. Australian Population Projections 40

Million

High

Medium

2050

2048

2046

2044

2042

2040

2038

2036

2034

2032

2030

2028

2026

2024

2022

2020

2018

2016

2014

2012

2010

2008

2006

Low

Source: ABS 3222

Commonwealth The National Housing Supply Council monitors land supply and dwelling construction in relation to projected demand. Several programs have been initiated to tackle housing affordability: • the Building Better Regional Cities would invest $200 million to build up to 15,000 affordable homes in regional cities. Councils would receive funding for infrastructure to support regional centres that are experiencing positive employment and population growth • the Social Housing Initiative, part of the Commonwealth’s Nation Building Economic Stimulus Plan, will provide $5.2 billion over three years to 2012 for social housing • the National Rental Affordability Scheme encourages private and non-profit housing developers to provide affordable rental housing by offering tax credits or grants. It aims to increase the supply of affordable rental dwellings by up to 50,000 by 2012

Six: Emerging Trends

What is being done – state by state

Victoria Melbourne’s population is predicted to reach over 7 million people by 2051. In August 2010, the Victorian Parliament legislated to expand Melbourne’s urban growth boundary. Land will be re-zoned for urban development to accommodate 284,000 of the 600,000 new homes required in Melbourne by 2030. This means that approximately 316,000 dwellings will need to be built in Melbourne’s established areas where public transport and other services are available – although issues of capacity will need to be considered. Lessons have been learnt from the Nation Building Economic Stimulus Plan in terms of facilitation of infill housing and it is hoped some of these initiatives may improve the efficiency of supply. For example, consultants were appointed to certify planning applications with a review mechanism established at state government level. Davis Langdon, An AECOM Company

Population Projections (cont.) New South Wales New South Wales has a number of strategies designed to keep up with projected demand; the Department of Planning is aiming for an additional 640,000 homes in Sydney by 2031. Whilst the NSW planning system is relatively complex compared with other states, the government has sought to increase housing through the Affordable Rental Housing State Environmental Planning Policy: • encouraging partnerships between the private and community housing sector by offering density bonuses for constructions that include a portion of affordable housing • streamlining the development assessment process for affordable housing • assisting in the provision of affordable housing near major employment areas • allowing the development of boarding homes in all appropriate zones • allowing the development of secondary dwellings (granny flats) in all residential zones The NSW Housing Code also allows faster application assessments (10 days) for one or two storey homes. These initiatives provide an incentive to supply both private and affordable housing by streamlining approval timeframes and other bonuses. Queensland The Queensland Housing Affordability Strategy aims to get land and housing on the market quickly by reducing the timelines and associated holding costs required for new housing. The strategy includes: • establishment of an Urban Land Development Authority (ULDA) • improving the planning and development assessment process • increasing the supply of land ready for development • regulating infrastructure charging plans across the state • designating land for housing in regional areas of high demand The ULDA improves housing affordability and streamlines the planning process in key urban development areas, where the ULDA may assume the planning power of local government and some state agencies. Currently, the government is working with the ULDA, local government and the development industry to accelerate 42 greenfield areas in South-East Queensland. It is envisioned that these greenfield areas will provide significant investment opportunities, with certain areas already zoned for residential development.

In an effort to keep up with the area’s growing population, the government launched its 'Directions 2031 and Beyond' program, which includes a target of 47% infill development. Housing growth targets for local governments in the Perth and Peel regions will aim to encourage greater medium density development. Additional reforms include the Development Assessment Panels which will streamline the development approval process and the expansion of the online subdivision approvals system. The Urban Development Program is also being prepared and will act as a land and infrastructure staging strategy intended to deliver more effective land use and development in areas targeted as priority.

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Six: Emerging Trends

Western Australia The Western Australia Planning Committee (WAPC) is the statutory authority for urban, rural and regional land use, planning and land development. The WAPC and the Department of Planning anticipate the construction of 9,796 dwellings in the Perth and Peel regions in 2010-2011, with more than 74,000 conditional residential lots currently approved across WA.

Population Projections (cont.) Infrastructure Investment and Labour Force A ‘Big Australia’ will inevitably occur and the country needs to come to grips with infrastructure expenditure in the trillions of dollars as the population heads towards 40 million. As Australia’s population grows, so too does the need for infrastructure and support for the resources sector. The high level of demand for skilled labour in this sector is a challenge for the future. Davis Langdon’s research into projected infrastructure sector growth examined the aggregate investment in road, rail, electricity generation and distribution, water storage and supply, sewerage, telecommunications, ports and heavy industry. The findings reveal that annualised work by 2050 could be as high as 350% of today’s annual investment. This will be required in order to support the infrastructure demands of a population of almost 40 million and a resilient resources boom. The question of how big and how fast the population will grow by 2050 is subject to various supply and demand scenarios, but either way the property and construction industry is destined for significant investment in new and upgraded infrastructure and public services. The growing need for transportation, utilities and distribution of imports and exports requires planning and skills training to support these service areas. Australia’s prosperous economy, shortages in labour force and high standards of living are all attractions to foreigners looking to call Australia home, and the potential impact of a growing population on existing infrastructure requires a highly efficient and viable growth strategy. The Australian Bureau of Statistics (ABS) has released three estimates of Australia’s population by 2050 ranging from 30.2 million up to 39.6 million. In addition to the three population scenarios, Davis Langdon investigated three infrastructure demand scenarios. Infrastructure Investment per Capita 3,500 3,000

$/capita

2,500 2,000 1,500 1,000

Low Projection

Medium Projection

2008

2009

2007

2005

2006

2004

2003

2001

2002

2000

1999

1998

1996

1997

1994

1995

1993

1992

1991

1990

1989

1988

0 1987

Six: Emerging Trends

500

High Projection

Values converted to 2010 dollars Source: ABS, Davis Langdon Research

Davis Langdon, An AECOM Company

Population Projections (cont.) Low infrastructure investment and low population projections would see the existing construction workforce grow by 170,000 (or 23%) by 2050, while high infrastructure investment and high population projections – the more likely scenario – would result in an expansion of 2,187,000 jobs (or almost three times more than current levels). Infrastructure Labour Force Projections

Infrastructure Investment Projection Scenarios

High

Medium

Low

Population Projection Scenarios

Low Projection

907,000

1,021,000

1,191,000

Medium Projection

1,568,000

1,764,000

2,058,000

High Projection

2,228,000

2,508,000

2,925,000

Source: Davis Langdon Research Current infrastructure labour force = 738,000 (ABS 6291.0)

Labour efficiency in the infrastructure sector has doubled over the past six years of the resources boom – improving from 16 jobs per million dollars of work done to 8.9. But there are limitations on just how far this efficiency factor can improve. Currently, Australia’s infrastructure labour force equates to 3.3% of the total population but if demand for resources projects, community-based services and infrastructure continues to follow recent trends, this sector’s employment would represent up to 7% when compared to ABS population projections. The impact of population growth will have a significant bearing on future economic prosperity as Australia’s construction industry represents 7% of the National Gross Domestic Product. High trade-based employment growth will be required to support the expanding resources industry, which will unquestionably require significant levels of skilled migration in the future. The resources boom has drawn trade-based resources to the minerals states of Western Australia and Queensland in search of the higher remuneration on offer. Consequently, a skills shortage has been developing in all states over recent years as ‘backfill’ trade employment in other states is left unfilled. Early planning remains the key to sustaining future performance of the sector and preventing exacerbated skills shortages and wage price escalation as Australia grows as a nation.

Six: Emerging Trends

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Disability Standards Access to Premises – Buildings The Australian Government’s Disability Discrimination Act 1992 (DDA) prohibits discrimination against people with a disability or their associates in a range of areas including transport, education, employment, accommodation and premises to which the public is entitled to enter or use. To date, the DDA had not referenced a technical standard outlining detailed requirements for providing access to premises. Previously a number of Australian Standards provided direction. The new Disability (Access to Premises – Buildings) Standards will provide detailed guidance to ensure buildings are accessible to all members of the community. The Disability Standards are intended to act as a codification of requirements under the DDA. In conjunction with developing these new Premises Standards, the Australian Building Codes Board has also revised the Building Code of Australia (BCA). The changes will align building regulation with Federal disability discrimination laws and also provide certainty for building owners, operators, designers and certifiers in the provision of these requirements. Premises Standards The DDA sets out specific areas in which it prohibits a person being discriminated against on the grounds of their disability. This includes access to or use of “any premises that the public, or a section of the public, is entitled or allowed to enter or use”. The DDA definition of “premises” is very broad and includes: • existing buildings, including heritage buildings • proposed or new buildings • car parks • open air sports venues • pathways, public gardens and parks The new Premises Standards will apply to all new buildings and refurbishments requiring building certification. They apply to common areas of apartment blocks if they have dwellings available for short term rent. However, all other private residences are exempt.

Six: Emerging Trends

The Premises Standards will be mandatory from 1 May 2011 – aligned with BCA 2011 amendments. This will allow time to establish processes for dealing with applications to vary the access requirements by means of modifications or alternative solutions.

Recognised as a very significant issue for all in the property and construction industry, the standard aims to make buildings as accessible as possible, while avoiding what the legislation describes as an unjustifiable hardship on building owners and occupiers. These new standards will impact existing and pre-purchase due diligence processes, where consideration must be made for changing space and amenities requirements which may result in the loss of net lettable area. Implementation and Concessions All new buildings will need to meet the Premises Standards, as will all “New Parts” of existing buildings which includes extended or modified parts of an existing building. “Affected Parts” will also require access – defined as the principal entry of an existing building that contains a new part, as well as the path of travel from the entry to the new part.

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Disability Standards (cont.) A number of concessions have been made to reduce the cost of implementation: • a lessee concession – a lessee’s work to a new part of the building will not see the “affected parts” requiring access • a lift concession – an existing lift within a new or “affected part” that does not travel more than 12m will not require modifications for increased floor space • a toilet concession – existing accessible sanitary facilities and compartments within a new or “affected part” of an existing building will not require modifications if they meet the superseded AS 1428.1 (2001) Key Changes from the Current BCA The Premises Standards will refine the provisions in the current BCA to ensure full compliance with the DDA. The main changes will include: • Class 1b and Class 2 buildings offering short term accommodation are to be incorporated • AS 1428.1 (2009) will be the main referenced standard. Spatially this standard generally cites the ‘90th percentile wheelchair footprint’ (that is a footprint which is intended to represent 90% of wheelchairs available) where previously the ‘80th percentile’ was used. In practical terms this means larger circulation spaces to doors, sanitary facilities, lifts, etc • proportion of accessible sole-occupancy units to Class 1b, 3 and 9c buildings increased • swimming pools with perimeters greater than 40m to be accessible • accessible car parking must comply with AS 2890.6. This is a narrower space with the addition of a shared space protected with a bollard at the roadway • proportion of wheelchair spaces to be included in auditoria is increased • stair platform lifts and vertical platform lifts are now referenced (i.e. AS 1735 parts 7, 8, 14, 15 and 16 lifts) • sanitary facilities for people with ambulant disabilities will be required in all banks of toilets (in addition to an accessible sanitary facility) • accessible sanitary facilities to be provided on every storey, and where more than one bank of toilets is provided, to not less than 50% of those banks • various building elements within public transport facilities have a timetable of achieving access (100% by 2022) by complying with a mixture of AS 1428 part 1 and 2 and the superseded versions of parts 1 and 4 • furniture and fit-out remains outside the scope of the access to premises standard and would continue to be enforced via the complaint system under the DDA

Even though sole occupancy units within residential buildings are effectively exempt from the Disability (Access to Premises – Buildings) Standards, it is important to note that accessibility in Class 1 and 2 buildings is being regulated at a state and municipal level in many locations. Many Development Control Plans in NSW require ‘adaptable’ sole occupancy units to be provided (i.e. in accordance with AS 4299); SA and ACT building regulations require a proportion of ‘accessible’ sole occupancy units (i.e. in accordance with AS1428 parts 1 and 2), and Victoria is including a state-based revision to the BCA with a number of requirements for accessibility in all Class 1 and a proportion of Class 2 buildings.

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Six: Emerging Trends

Housing Initiatives

Building Energy Efficiency Disclosure Act 2010 Commercial Building Disclosure In 2009, The Council of Australian Governments (COAG) agreed that a national scheme for reporting energy efficiency in the commercial office market was required. This will have significant ramifications for property owners. The Building Energy Efficiency Disclosure Bill was passed in June 2010, enforcing Commercial Building Disclosure which began on 1 November 2010. As part of a broader National Strategy on Energy Efficiency, COAG is also considering an expansion of the program to cover other building types (such as hotels, shopping centres and hospitals) from 2012. The scheme aims to create a strong market-based incentive for owners to improve their properties with cost-effective energy efficient upgrades. Components of the Scheme Vendors, landlords and sub-landlords of buildings or parts of a building that have office areas in excess 2 of 2,000m are required to disclose the energy efficiency upon sale or lease of a whole building, tenancy or sub-lease space. During the transitional period from 1 November 2010 to 31 October 2011, the only requirement will be the disclosure of a valid NABERS Energy base or whole building rating. From 1 November 2011, all prospective tenants or buyers must be provided with a Building Energy Efficiency Certificate (BEEC) which is valid for one year and includes: • a NABERS Energy rating • an assessment of tenancy lighting in the area of the building that is being sold or leased • suggestions on how to improve the energy efficiency of the building The NABERS Office Energy rating tool will be used across all states, however it excludes the use of Green Energy. The scheme is mandatory for corporations and the Crown, however, non-corporate entities can participate voluntarily and new buildings will receive a two-year grace period. Civil penalties of up to $110,000 for the first day and $11,000 for each subsequent day may be imposed by a Court for each breach of a disclosure obligation. What should you do? The first NABERS Office Energy base building star rating assessment can take time and building owners are strongly advised to be fully prepared for the requirements of this scheme. Building owners need to ensure that:

Six: Emerging Trends

• sub-metering is correctly installed as per the requirements of the NABERS Office Energy reporting process

• current net lettable floor area surveys are undertaken based on the Property Council of Australia Method of Measurement for Lettable Area March 1997 Davis Langdon has in-house NABERS Assessors with the capacity to provide NABERS assessments and strategic advice to improve your building or tenancy, whilst also managing the cost implications. Early preparation and comprehensive advice is vital in order to reduce any future unexpected costs.

Davis Langdon, An AECOM Company

Corporate Social Responsibility Commitment Davis Langdon recognises its shared responsibility to make every effort to improve the sustainability of the environment and surrounding communities. This responsibility requires the organisation and employees to adjust the way we do business and go about our daily lives. Our Sustainability Strategy outlines a staged approach to improving the environmental and social performance of our Australian and New Zealand offices. The strategy further outlines Sustainability Targets and a Communication Strategy to help increase employee awareness and engagement level. Davis Langdon is a National Gold Corporate Donor of the Property Industry Foundation â&#x20AC;&#x201C; the charity of choice for the property and construction industry. Through Davis Langdonâ&#x20AC;&#x2122;s Corporate Social Responsibility (CSR) Committee we have established a CSR agenda to develop a program providing meaningful environmental and social sustainability actions. We participate in a variety of charity initiatives and events including the support of a national charity of the year, organise employee volunteering events and promote environmentally responsible business practices. Davis Langdon further supports needy organisations through pro bono projects. All Davis Langdon offices are committed to energy efficiency with several of our Australian offices proud CitySwitch signatories. CitySwitch Green Office works with tenants to achieve improved office energy efficiency and reduce greenhouse gas emissions associated with climate change. Our Sydney office is also a signatory to the Department of Environment, Climate Change and Water NSW Sustainability Advantage program and has been recognised as a Bronze Partner for its sustainability initiatives. The Sustainability Advantage program is a business support service designed to help organisations better understand and manage sustainability.

Six: Emerging Trends

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Seven: Sustainability 62

Karori Wildlife Sanctuary Visitors Centre, Wellington, New Zealand Davis Langdon, An AECOM Company

Seven: Sustainability Sustainability 64 Sustainability Rating Tools 65 Capital Cost Impacts 67 Corporate Sustainability Reporting 68 eBook â&#x20AC;&#x201C; The Road to 'Green Property' 69 Davis Langdon's Embodied Carbon Metric (ECM) 70 Cost of Utilities 72

Seven: Sustainability

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A growing public knowledge of sustainable practices has changed the face of 'business as usual' Sustainability The last few years have seen momentous change as governments, economies and businesses gear up for a carbon constrained future. The global economic downturn together with rising materials and energy costs has effectively forced investment decisions that pursue both greater value and solutions with reduced ongoing maintenance, waste, energy and water costs. There is also growing evidence that insurance companies now consider properties with these credentials in a more favourable light when calculating premiums. Benefits for building owners, by adopting sustainability initiatives, include: • potentially higher occupancy rates • higher future capital value • reduced risk of obsolescence • less need for refurbishment in the future • ability to command higher lease rates • higher demand from institutional investors • lower operating costs • mandatory for a growing number of tenants • lower tenant turnover • costs less to maintain and operate As carbon trading and carbon related tax and energy price increases are rigorously debated, a carbon price is inevitable but yet to be understood with confidence. A growing public knowledge of the impacts of climate change is gathering momentum and this shift in public opinion will be a driving force of future policy.

Seven: Sustainability

New Zealand Emissions Trading Scheme

New Zealand is the first country outside of Europe to implement a nation-wide mandatory carbon pricing scheme – an accomplishment yet to be achieved by the US, Canada, Japan and Australia despite on-going debate. Although the New Zealand Emissions Trading Scheme will be phased in over time, 1 July 2010 marked a milestone day as power, industrial processes and transport fuels sectors began mandatory reporting and trading of emissions. The following sectors will be phased in over time: • 1 January 2008 – Forestry • 1 July 2010 – Stationary energy and industrial processes • 1 July 2010 – Liquid fossil fuels and transport • 1 January 2013 – Waste and all remaining sectors • 1 January 2015 – Agriculture Davis Langdon, An AECOM Company

Sustainability Rating Tools The uptake of green rating tools has increased globally, especially in the UK and the US where their use has become mandatory in many areas.

Global Green Rating

IPD Environment Code

CASBEE

Green Star

LEED

Criteria

BREEAM

A common feature of the international, Australian Green Star and NABERS tools, is that they are strong on environmental issues, but largely silent on social and economic issues – all three required for ‘triple bottom line’ reporting.

Launch Date

1990

1998

2003

2004

2008

2008/09

Domain

Australia

Japan

Global

Europe

Building Typologies Covered

Not Known

14+

Not Known

Planning

Yes

Design

Yes

Existing/Operation

Yes

Not Known

Yes

Green Star The growth of the Green Building Council Australia’s Green Star tool has also been strong, both in terms of certified projects (227 as of August 2010) and accredited professionals (6,118 as of August 2010). The Green Star tools currently available are: • Green Star – Education v1 • Green Star – Healthcare v1 • Green Star – Industrial v1 • Green Star – Multi Unit Residential v1 • Green Star – Office Design v3 • Green Star – Office As Built v3 • Green Star – Office Interiors v1.1 • Green Star – Retail Centre v1 The Green Star PILOT and Draft rating tools currently available are: • Green Star – Convention Centre Design PILOT • Green Star – Communities – DRAFT FRAMEWORK • Green Star – Public Building PILOT • Green Star – Custom PILOT

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Seven: Sustainability

• Green Star – Office Existing Building EXTENDED PILOT

Likely Green Star Credits 1

Management

4 Star

5 Star

Credits Available

Indoor Environmental Quality

6 Star

Transport Water Materials Land Use and Ecology Emissions Innovation

Seven: Sustainability

9 Green Star Accredited Professional Commissioning Clauses Building Tuning Independent Commissioning Report Building Users' Guide Environmental Management Waste Management Ventilation Rates Air Change Effectiveness Carbon Dioxide Monitoring and Control Daylight Daylight Glare Control High Frequency Ballasts Electric Lighting Levels External Views Thermal Comfort Individual Comfort Control Hazardous Materials Internal Noise Levels Volatile Organic Compounds Formaldehyde Minimisation Mould Prevention Tenant Exhaust Riser Greenhouse Gas Emissions Energy Sub-metering Lighting Power Density Lighting Zoning Peak Energy Demand Reduction Provision of Car Parking Fuel-Efficient Transport Cyclist Facilities Commuting Mass Transport Occupant Amenity Water Water Meters Landscape Irrigation Heat Rejection Water Fire System Water Consumption Recycling Waste Storage Building Reuse Reused Materials Shell and Core or Integrated Fitout Concrete Steel PVC Minimisation Sustainable Timber Design for Disassembly Dematerialisation Topsoil Reuse of Land Reclaimed Contaminated Land Change of Ecology Value Refrigerant ODP Refrigerant GWP Refrigerant Leaks Watercourse Pollution Discharge of Sewer Light Pollution Legionella Insulant ODP Innovative Strategies and Technologies Exceeding Green Star Benchmarks

Energy

Environmental Design Initiatives

Source: Green Building Council of Australia Technical Manual Green Star Office Design Version 3

Davis Langdon, An AECOM Company

Capital Cost Impacts Green design strategies have become ‘the norm’ for higher quality buildings in Australia, especially for office buildings as a result of the Property Council of Australia’s Guide to Office Building Quality requiring buildings to meet a minimum of 4 Star Green Star and 4.5 Star NABERS rating. With this change, the perception of ‘extra’ cost has diminished. Green Star Capital Cost Impacts 15%

10%

-5%

-10% Office Design & As Built

Office Interiors

Source: Davis Langdon Research

Healthcare

Business As Usual

Multi Unit Residential 4 Star

5 Star

Retail

6 Star

NABERS The NABERS suite of assessment tools includes existing offices, homes, retail and hotels. With over 80% of Australia’s commercial office stock over 10 years of age, the importance of a tool to benchmark operational performance is imperative. NABERS is a performance-based rating system for the built environment that measures an existing building’s overall operational performance from an environmental viewpoint. The scheme allows building owners and tenants to benchmark their greenhouse performance by measuring the environmental impact of the management and operation of the building and/or tenancy. The system provides a simple rating as an indication of how well these environmental impacts are being managed. The ratings range from 1 (low) to 5 (high). The introduction of mandatory Commercial Building Disclosure requires NABERS assessments as the only method to measure building performance. Further details can be found in Chapter Six. NABERS tools currently available for use or under development are listed below: Offices • NABERS Energy • NABERS Waste • NABERS Indoor Environment • NABERS for Data Centres – Under development • NABERS Commuter Transport – Under development Homes, Retail and Hotels • NABERS Energy • NABERS Water www.davislangdon.com www.aecom.com

Seven: Sustainability

• NABERS Water

Corporate Sustainability Reporting Since 2006, the Australian Institute of Company Directors has encouraged companies to become engaged in Corporate Social Responsibility (CSR) practices relevant to their operations and to communicate with shareholders and stakeholders about their contributions to improved sustainability performance. Triple bottom line reporting, corporate social responsibility reporting and sustainability reporting are terms synonymously used to express the practice of measuring, disclosing and being accountable to internal and external stakeholders for economic, environmental and social impacts. The Global Reporting Initiative The Global Reporting Initiative (GRI) is a network-based organisation behind the world’s most commonly used sustainability reporting framework. The GRI Reporting Framework includes principles and indicators to measure and report on economic, environmental and social performance. Using the framework ensures the highest degree of technical quality, credibility, and relevance. It further gives the opportunity to benchmark organisational performance, demonstrate commitment to sustainable development and compare performance measures over time, including: • economic performance • environmental performance indicators • labour practices and decent work performance • human rights performance • society performance • product responsibility performance The basis of the framework is the sustainability reporting guidelines. Other components include the sector supplements with industry sector specific indicators and the national annexes with country specific information. In accordance with the GRI Framework, users should declare the level to which they have applied the GRI Reporting Framework. Three ‘Application Levels’, A, B and C are available, reflecting the coverage of disclosure. In addition to the mandatory self declaration, report makers can choose to have a third party provide an opinion on the self declaration and/or request the GRI to check the self-declaration. A+, B+ and C+ indicate the use of external assurance for the report.

Seven: Sustainability

Corporate Responsibility Reporting Guide

In an effort to encourage further corporate responsibility reporting by Australian property companies, the Property Council of Australia has put together a guide to assist companies. Many property companies, small and large, are yet to take on the challenge of providing greater transparency in their social, environmental and economic practices. This guide will help property companies report their corporate responsibility performance. A voluntary template is provided for corporate responsibility reporting that can be customised to the needs of individual corporations.

Davis Langdon, An AECOM Company

eBook – The Road to ‘Green Property’ At the Green Cities 2010 conference, Davis Langdon launched the first edition of our eBook, The Road to ‘Green Property’, a guide to the many different and diverse aspects of achieving a greener built environment. The eBook is updated regularly and remains a leading source for environmental topics in the property and construction industry. It features valuable information on topics such as: • Green Star Rating Tools • Emerging Issues • Embodied Carbon Metric (ECM) • Government Incentives and Regulations • Green Leases • Green Jobs • Building Code of Australia Changes • Retrofitting Office Buildings • Water Savings from Green Star • Energy Performance Contracting • Environmentally Sustainable Development Technologies • Triple Bottom Line Reporting • Davis Langdon’s CSR Commitment

Make sure you keep the link to our publication – it will be updated often as new information becomes available.

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Seven: Sustainability

Visit Davis Langdon’s sustainability sector site at www.davislangdon.com.au/ANZ/Sectors/Sustainability

Davis Langdon’s Embodied Carbon Metric (ECM) Studies indicate that the embodied energy in buildings may be equivalent to 11-23 years worth of operational energy, depending on the complexity of the building. The World Resources Institute has estimated the world total greenhouse gas emissions in 2005 at 44,153 MtCO2-e. The operation of buildings equates to 16.5% of these emissions, 10.2% for residential and 6.3% for commercial buildings. Davis Langdon believes operational as well as embodied greenhouse gas emissions in new projects will continue to be one of the biggest challenges facing the property and construction industry. In order to help clients make informed design decisions, around financial costs, operational efficiencies, Green Star compliance, but also around the greenhouse gas legacy of buildings, we have developed the Embodied Carbon Metric (ECM). The ECM calculates the embodied greenhouse gas emissions of proposed developments, assisting with material selection in the design process as well as the calculation of the overall carbon footprint of the development. Calculations are based on Australia-specific emission factors derived using a life cycle assessment approach including emissions from the extraction of raw materials, primary energy sources, manufacture, transport and on-site construction. The ECM will help avoid higher than desired carbon content and additional costs by enabling selection of construction materials in the design process that reduce a development’s overall carbon footprint. Direct and indirect benefits include: • the opportunity for environmental benefits through the enabling of material selection based on embodied carbon intensity • the opportunity to design a development with lower embodied carbon enabling a clear path to achieve carbon neutrality • improved brand reputation • improved tenant and employee interest, engagement and awareness • long term tenant and employee retention In the same way that operating and maintenance costs need detailed consideration, it is important that the day-one carbon impact of a project is understood and mitigated. A low-energy building may have a wind turbine, photovoltaics and insulation, but unless there is an accurate assessment of how much carbon has been emitted in construction, it is impossible to effectively calculate the building’s overall carbon impact.

Seven: Sustainability

The ECM enables this measurement, allowing developers and design consultants to use optimal materials and practices to achieve a low carbon outcome.

Davis Langdon, An AECOM Company

ECM (cont.) The ECM was used in 2009-2010 in the design stage for a development in NSW. A number of scenarios and design options were modelled including a current industry typical practice scenario and an improved performance scenario. The current industry typical practice scenario resulted in an overall carbon footprint of close to 8,000 tonnes of CO2-e. This is the equivalent of driving a passenger car 715 laps around the equator, the equivalent annual electricity use of 1,250 Australian households or 1,800 Olympic-sized swimming pools filled with carbon dioxide. By introducing a number of sustainability initiatives, for example cement replacement in concrete using ground granulated blast furnace slag and the lowering of concrete strength where applicable, an overall reduction in embodied greenhouse gas emissions of over 20% was achievable without significant cost implications. Material Input by Weight

Material Input by Weight 1.0%

1.0%

0.4% 4.0%

4.0% 2.0% Concrete

88.0%

Glass Tiles Aluminium Steel Gravel and Sand Other

ECM Contribution to Carbon Footprint

Contribution to Carbon Footprint 5.0%

1.0% 24.0%

37.0%

Concrete Glass Aluminium Steel Gravel and Sand Other

6.0% 1.0%

27.0%

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Seven: Sustainability

Tiles

Cost of Utilities Electricity and Gas As we move forward, any energy cost increase will start to have a significant impact on alternative energy solutions. The rush is already on to find a sustainable large scale alternative to coal. Globally, alternative power options are being utilised to varying degrees, including wind, hydrogen, solar, clean coal, nuclear and even geothermal power. The following charts detail the cost and escalation rates forecast for the next 15 years. Although these general rates of escalation are based on the introduction of the CPRS in 2011 â&#x20AC;&#x201C; as originally planned by the Federal Government â&#x20AC;&#x201C; Davis Langdon estimates that the forecasts remain relevant with the exception of the spike in 2011. Electricity generators will continue to future proof their assets by investing in carbon mitigation research and development (at a cost to be passed onto consumers). There is an awareness that, whilst leadership changes have created uncertainty about whether the CPRS will remain shelved until 2015, some form of emissions trading or tax will occur within this decade. Water Irrespective of the chosen solution to Australiaâ&#x20AC;&#x2122;s growing water crisis, the fact remains that water is likely to get more expensive. A waterless future ultimately means: desalination, recycled water, third pipes systems, grey water, black water, water tanks and associated cost increases.

Seven: Sustainability

The following charts detail the cost and escalation rates forecast for the next 15 years. Drought conditions around Australia have placed many regions under water restrictions which has changed the consumption habits of Australians. Consequently, a drop in demand has reduced profitability for water retailers which has ultimately lead to higher prices to cover operational costs. In an effort to combat diminishing water supplies, state governments are planning new infrastructure to meet demand, resulting in a higher than trend expectation for water price escalation.

Davis Langdon, An AECOM Company

Retail Electricity Price Forecast 50%

300 250

$/MWh

200

40% Reduced Estimate Minus CPRS

30%

150 Anticipated Carbon Price Impact

100

20% 10%

50 0

2010

2011

2012

2013

2014

2015

2016

2017

2019

2018

Yearly Escalation Rate (RHS)

2020

2021

2022

2023

2024

2025

Retail Electricity Price (LHS)

Source: Federal Treasury, Davis Langdon Research

Retail Water Price Forecast 4.00

14%

3.50

12%

3.00

10%

$/kL

2.50

2.00

1.50

1.00

0.50 0.00

2010

2011

2012

2013

2014

2015

2016

2017

2018

Yearly Escalation Rate (RHS)

Source: CSIRO

2019

2020

2021

2022

2023

2024

2025

Retail Water Price (LHS)

Retail Gas Price Forecast 18

14%

12%

$/GJ

2 0

2010

2011

2012

2013

2014

2015

2016

2017

Yearly Escalation Rate (RHS) www.davislangdon.com www.aecom.com

2018

2019

2020

2021

Retail Gas Price (LHS)

2022

2023

2024

2025

Seven: Sustainability

10%

Eight: Project Delivery, Strategies and Business Assurance 74

Queensland Academy of Creative Industries, Brisbane, Queensland Davis Langdon, An AECOM Company

Eight: Project Delivery, Strategies and Business Assurance Life Cycle Cost Analysis 76 Engineering Services 77 Specifications 79 Design Management 81 Building Controls â&#x20AC;&#x201C; Accreditation Framework 82 Building Controls Legislation 84 Verification of Deliverables 87 Construction Industry Contracts 87 Certification Services 88 DEGW 90

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Eight: Project Delivery, Strategies and Business Assurance

Value Management Facilitation 78

Life Cycle Cost Analysis The Life Cycle Cost (LCC) assessment compares whole life costs of a building or any of its component parts. Clients can establish the best value for money solution to meet their needs. LCC can also provide useful comparisons with similar property types and benchmarking information for future acquisitions/ developments. A good example of the importance of operational phase costs is hospitals where typically operating costs over 2.4 years are approximately equal to the acquisition/construction phase costs. An additional tool used in the evaluation process is Net Present Value (NPV). This is a technique that calculates the discounted present day cost of all expenses associated with the asset during the evaluation period. LCC and NPV analyses are of interest to many parties including: • developers • tenants • property portfolio owners and operators • government or government-owned and occupied buildings • owners of privately owned and occupied buildings

• PPP facilities management providers • facilities management providers Life cycle cost analyses will become increasingly important in the new age of reduced emissions, greater emphasis on sustainability and greater consciousness of the need to further reduce operational costs. 250,000

200,000

150,000 Payback period for Option 2 – approximately 10 years

Eight: Project Delivery, Strategies and Business Assurance

• Public Private Partnership (PPP) proponents

100,000 Construction Phase Operational Phase

50,000

Land Acquisition, Planning and Design Phase

0 1

11 12 13

14 15

Year

Option 1

16 17

18 19 20 21 22

23 24 25 26 27

Option 2

Davis Langdon, An AECOM Company

Engineering Services Engineering services typically represent between 40-50% of a project’s building cost as new and emerging technologies impact in the quest for sustainable buildings. The focus on engineering services (mechanical, electrical, communications, fire and hydraulics) within projects and the provision of the most appropriate design solution, not only in capital expenditure but also in recurrent operational cost terms, has never been of greater importance. With the primary goal of obtaining the best value outcomes for the client, the experienced, impartial view of specialist engineering services cost advice (independent from the services engineer undertaking the design) can be invaluable on many projects. To assist in this process, we have identified the following key tips for projects striving for best value engineering services solutions: • establish early in the process what the client’s goals are for engineering services and agree what constitutes best value • seek active participation in any value management process from suitably qualified independent engineering services cost planners – a fresh set of eyes can be particularly helpful, especially when critical decisions on technical matters may be required

• set energy targets • undertake comprehensive life cycle analysis – ensure the investment being made is the right one for the life of the building • listen to the client’s resident engineer (if one exists) as they have a depth of project knowledge that will be invaluable to the team • coordinate, coordinate, coordinate – ensure the architectural/structural and engineering services documents are fully and comprehensively coordinated • ensure detailed monitoring and assessment of engineering services costs throughout the project, particularly post-contract variations • undertake comprehensive commissioning of the plant and equipment – fine tune your buildings to make sure they work as efficiently and cost effectively as possible • ensure appropriate maintenance is undertaken at regular intervals • undertake regular energy benchmarking 10%

Building Works Engineering Services Overlap Between Building/Engineering 40-50% 50-60%

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Eight: Project Delivery, Strategies and Business Assurance

• challenge the basis of decisions, plant sizing etc – ensure you’re not paying for something that will never be utilised

Value Management Facilitation Definition and Purpose Value Management Facilitation involves a collaborative process between all stakeholders to achieve the best project outcomes. One of the key principles in Value Management Facilitation is that value and value for money are two distinct concepts. The value of an item or service is the benefit that its useful purpose provides, relative to its importance to that organisation. The term Value Management emerged with broader management applications, while still focusing on the lowest cost to perform required functions and value for money from whole systems. Principles and Practices of Value Management Facilitation Value Management Facilitation is a strategy designed to determine what the project values are, what they mean and whether they are sustainable to achieve best value. A primary objective is achieving the maximum performance at the lowest possible cost. This involves facilitation of collaborative workshops comprising of multiple disciplines to achieve the following: Build shared knowledge and understanding

‹

• reach agreement with the group on the what the primary purpose of the entity is

‹

• bring together a diverse and multi disciplined key stakeholder group

• create a non-threatening, learning and collaborative environment

Develop proposals

• develop proposals that represent those values

‹

Evaluate the ideas

• collectively develop a value statement describing useful purposes, benefits & important characteristics • identify and agree on the criteria that will be used to measure success

‹

Eight: Project Delivery, Strategies and Business Assurance

• distribute an agreed pre-workshop plan

Create ideas

Decisions and recommendations

• make recommendations and prepare action plans • implement actions and report

Benefits of Value Management: • improve the likelihood of successful project outcomes • implement a clearly defined stakeholder framework • extend stakeholder interests • create a shared vision and purpose • improve stakeholder relationships • create project efficiencies • increase knowledge and understanding • achieve realistic/tangible targets • realise value benefits Davis Langdon, An AECOM Company

Specifications Written specifications are but one document in a morass of information used by designers, contractors and owners for procuring projects. On small scale projects they often don’t exist with specification information conveyed on the drawings. Specifications should be seen as the transmission of knowledge from one party to another. The golden rule is not to produce unnecessary volumes; the larger the project the greater the need for clear, concise, coordinated information flow between the parties involved.

The Importance of an ‘Onerous Task’ It is far cheaper for the client and the architect to change a line on a drawing or a clause in a specification than to alter a manufactured product after delivery or installation. The best specifications are the most accurate ones and rushed tender documents inevitably lead to additional costs, delays and disputes. Specifications should be planned well in advance, reflect the architect’s requirements and be properly integrated with other tender documents – all of which takes time to resolve.

REFLECT

ESTABLISH

• design intent • form of contract and procurement • program requirements • regulatory standards

• quality of construction • clarity in drawings • performance benchmarks

Specifications

• procedures and responsibilities • compliance checks • links to other contract documents

SUPPORT

• clients from exposure claims and cost increases • architects design and interests

PROTECT

Specifications define quality and responsibility. Therefore, they need to be sufficiently flexible to reflect the various forms of procurement and contract used in our industry today.

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Eight: Project Delivery, Strategies and Business Assurance

Specifications are a key contract document, contractually more important than the drawings. Done properly, the specification should:

Specifications (cont.) Format and Content Australia does not have an independently recognised nation-wide trade category system and therefore the options available are either to subscribe to a number of off-the-shelf specification products or to develop a tailored system. Many architects have opted to produce their own systems using such products as a starting point. Whichever system is selected, it is essential that consistency is maintained and that database information is kept up to date by the purchase of regular updates or the use of dedicated specification production teams. Content considerations

• how will materials and products noted on the drawings be cross-referenced to the specification? • what will the specification be used for? • does the architect’s appointment contain stipulations to be reflected in the specifications? • what are the requirements for submittals such as samples, prototypes, benchmarks, testing etc?

Eight: Project Delivery, Strategies and Business Assurance

• how are these submittals documented and agreed to ensure the best quality of products?

Specification production should start as early in the design process as possible and be developed continuously, alongside the drawings. The biggest mistake a specification consultant and architect can make is to leave it until the last minute, take a copy of a document written for a similar project and issue it under the new project title. By developing specifications throughout the design process, the designer has the best chance of achieving a clear and unambiguous document. Today and Beyond Through strategic global alliances Davis Langdon aims to: •

provide training and assist educational institutions to establish specification writing as a core subject

•

provide a forum to discuss specification related issues, encouraging clients, designers, suppliers and contractors to understand each others’ issues and aspirations

•

develop the full potential of online and other technologies, including Building Information Modelling as a means of accessing and producing project specifications

•

publish specifications linked to product libraries

•

develop, with the support of the various institutions, an independent common arrangement of works sectors (AUSCAWS) for the Australian construction industry

Specifications are a vital document. They are used at every stage of the project but become even more important if a dispute arises. In such circumstances, specifications must contain clear and unambiguous statements that resolve the argument. As such, the specification document should be referred to closely throughout the construction process. Proceed without it at your peril!

Davis Langdon, An AECOM Company

Design Management Davis Langdon’s Specification Consultancy services has naturally progressed to a service of Design Management (DM), which provides the next level of certainty. DM is a specialist service for the management and monitoring of design teams. Our approach is based on a thorough understanding of the design process through our experiences of working as part of design teams throughout the world. The modern design process requires a new type of thinking where innovative design is backed up by clear and flexible design management procedures. We understand the challenges faced by architects, design teams and clients, as well as the level of support required to provide the necessary solutions. Our service can vary from being a daily ‘hands-on’ supporting role to an abridged design health check service. It can be applied to any design project, in any location worldwide. Davis Langdon’s DM service: • frees up the design team to concentrate solely on design tasks • ensures timely key decisions are made to enable design progress • provides outside help with a fresh outlook, sympathetic to the design team’s needs • gives reassurance that issues vital to the success of the design are being managed

Proper management techniques achieve milestones and exceed expectations without stifling design creativity. DM processes benefit the client and design team through: • maximised design quality • maximised cost savings • minimised time delays • minimised design risk • aiding decision making Davis Langdon DM employs a number of useful tools to manage the fluid nature of design. Visual tools are more commonly used to reflect the design process including the example below of a ‘design web’ – a graphical aid to represent the design team's program and progress. Design Web – Progress Summary Building Core Fire Engineering

Floor Plans

0% 20% 40% 60% 80% 100% Stairs

Acoustics

Building Sections

Toilets Lighting

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Target Actual

Eight: Project Delivery, Strategies and Business Assurance

• includes the ability to draw upon a wide range of construction consultancy services and experience within Davis Langdon when required

Building Controls – Accreditation Framework New South Wales Category

Work Scope

Functions

Grade A1 Building Surveyor

• Unrestricted

• Assess and issue relevant Construction Certification within Grade parameters • Undertake inspections during construction • Assess and issue Occupation Certificates within Grade parameters

Grade A2 Building Surveyor

• Restricted to Class 1 and 10 buildings 2 • Class 2 to 9 with a floor area ≤ 2,000m or a rise in storeys not more than 3 • Buildings of not more than 4 storeys comprising 1 storey of Class 7 or not more than 3 storeys of Class 2

• Assess and issue relevant Construction Certification within Grade parameters • Undertake inspections during construction • Assess and issue Occupation Certificates within Grade parameters

• Restricted to Class 1 and 10 buildings • Class 2 to 9 with a floor area ≤ 500m and a maximum rise of 2 storeys

• Assess and issue relevant Construction Certification within Grade parameters • Undertake inspections during construction • Assess and issue Occupation Certificates within Grade parameters

• Restricted to Class 1 and Class 10 buildings

• Undertake inspections except for the Final Inspection

Eight: Project Delivery, Strategies and Business Assurance

Grade A3 Building Surveyor

Grade A3 Building Inspector

• Class 2 to 9 with a floor area ≤ 500m and a maximum rise of 2 storeys

Queensland Category

Work Scope

Functions

Building Surveyor

• Unrestricted

• Assess documentation for the issue of a Development Permit for Building Work • Carry out inspections of building work during construction • Issue Final Inspection Certificates and Certificate of Classification

Assistant Building Surveyor

Building Surveying Technician

• Restricted to all classes of building having a rise in storeys of not more than 3 and a total 2 floor area ≤ 2,000m without supervision

• Assess documentation for the issue of a Development Permit for Building Work

• Under the supervision of a building surveyor help in assessing and inspecting all classes of buildings and structures

• Under supervision assist a building surveyor in inspecting other buildings and structures

• Restricted to Class 1 and 10 buildings if the technician has more than 1 year experience

• Wtih the parameters outlined, assist a building surveyor

• Carry out inspections of building work during construction. Issue Final Inspection Certificates and Certificate of Classification

Davis Langdon, An AECOM Company

Building Controls – Accreditation Framework (cont.) Victoria Category

Work Scope

Functions

Building Surveyor Unlimited

• Unrestricted

• • • •

Building Surveyor Limited

• Restricted scope of work – able to certify buildings up to three storeys with a maximum floor area of 2 2,000m

Building Inspector Unlimited

• Unrestricted

Building Inspector Limited

• Restricted to certain classes of building determined by the Building Practitioners Board

• Undertake inspections during construction • Undertake inspections on certain classes of buildings during construction