Construction costs are picking up as surging infrastructure and civil work increases demand for skilled workers in sectors ranging from formwork in Sydney to demolition and asbestos removal in Adelaide.

FIA President, A&G Formworkers manager Alex Angelucci, on the construction site for a new data centre in Sydney's Macquarie Park, says he is not seeing any fall in demand. Peter Braig

While Sydney is likely to undergo the strongest price growth of 4.9 per cent this year, conditions in the NSW capital will ease and Brisbane will overtake it next year as construction swings to mixed-use projects from residential, while Adelaide is set to take the lead in coming years as a slew of defence and infrastructure work lifts prices in South Australia, according to quantity surveying firm RLB's latest Oceania Report of tender prices.

Rising prices are already putting pressure on builders in Victoria, where mid-tier contractor Bayside Construct went under last week, citing tight profit margins as a reason for collapsing under debts worth up to $20 million.

Even as high-rise residential work shows signs of easing, it is being offset by civil transport and infrastructure work as well as privately funded non-residential commercial work.

In Sydney, pay rates for formworkers have risen between 6 per cent and 10 per cent over the past year, said Formwork Industry Association President Alex Angelucci, the manager of family-owned A&G Formworkers.

"For the past couple of years the market has been booming and we're not seeing any fall in demand," Mr Angelucci said from the Macquarie Park site where his company is working on a new data centre for ASX-listed NextDC.

"[It'll be a] whole mix of infrastructure work, of residential, of office buildings."

In Sydney, as in other cities, the biggest price pressures are caused by shortages of skilled labour, the result of an ageing workforce that is not being replaced by younger workers.

"Shortages of skilled labour and rising material costs are adding pressure on costs across the country," said Ewen McDonald, RLB's newly appointed Oceania chairman said.

Shortages of skilled labour and rising material costs are adding pressure on costs across the country, says Rider Levett Bucknall Oceania chairman Ewen McDonald. RLB

"With above-GDP growth in the residential, non-residential, roads and rail sectors over the past five years, pressure on labour availability is seeing escalation rates generally increasing across the country during 2018 over 2017 levels."

Mr Angelucci agreed.

"There is huge demand for skilled workers," he said. "And formwork companies are required to increase the pay to workers to attract them and hold them.

"Also, we need to employ extra staff to deal with supervising unskilled workers because the current workforce is stretched. We have an ageing, skilled workforce and the trade's not attracting new, young workers and that's also creating a shortage in our trade."

In Brisbane, tender price growth will more than halve to 3 per cent this year from its 2016 peak of 7.2 per cent, but will pick up again next year to a country-leading 4.1 per cent as a result of a slew of projects, including planned hospital expansions at Logan and Caboolture, two inner-city vertical schools, and the expansion of Capricornia prison in Rockhampton, in addition to the Townsville stadium currently under construction.

Construction prices in Melbourne are likely to hold steady at above-inflation rates and the recovery in Perth's construction market will likely see tender price inflation rise to 2.5 per cent next year from zero growth last year, RLB says.

But the national dark horse in construction costs is likely to be Adelaide, where price growth will pick up from 3.5 per cent this year to the country's highest of 4.5 per cent in 2021, as defence projects such as the Air 7000 upgrade of Edinburgh airbase and expansion of the ASC site for the Offshore Patrol Vessel and Frigate and Submarine projects dovetail with projects such as demolition of the old Royal Adelaide Hospital and Football Park-AAMI Stadium.

"Adelaide's changed a lot in the last 18 months from where it was," said John Flavel, the national asbestos manager for Adelaide-based construction services company McMahon Services. "There's a lot of major projects going on."

With permission - AFR Jul 11 2018.