Image: Sundry Photography/stock.adobe.com
Coates has developed a guide to understanding the trends, challenges and opportunities that will shape the construction industry in 2025.
The Australian Construction Industry Forum predicts just 0.9 per cent growth in the construction industry for the year ahead, reflecting slowing economic conditions, cost and inflationary pressure, and continued challenges around the availability of skilled labour.
“Ultimately, 2025 will see a shift in several key trends that shape construction. Critically, we are seeing a compositional shift in investment focus, creating new challenges and opportunities across the industry,” says James Lawrence, group manager – customer and markets at Coates.
This industry outlook explores some of the trends that will define the year ahead and highlights how the rental industry can ease pressure on construction businesses as they navigate the changing landscape.
Growth in engineering construction
Despite slight deceleration in building construction, demand remains strong in engineering construction as the industry moves into a utilities-driven cycle. Investment in large-scale renewable energy infrastructure will drive demand for accommodation, amenities and regional development to support these major projects.
“As the engineering construction boom for long road and rail infrastructure nears its peak, the next phase of growth in renewables, utilities and resources is ramping up,” says Lawrence.
“The push towards net zero is driving a surge in energy transition investment, with large-scale renewable energy generation, transmission and storage projects being constructed across the country.
“With equipment, solutions and expertise that align with the growing activity in these sectors, Coates is well-placed to support construction businesses in exploiting these opportunities. This shift will be a core strength for Coates and its customers in 2025.”
Key takeaways:
- With a forecasted six-fold increase in renewable energy construction over the next five years, utilities will become the biggest sector of the Australian engineering construction market, according to Oxford Economics Australia’s Engineering construction in Australia – Q4 2024 update.
- This growth is shaping state-based demand, with particularly strong growth forecast for Queensland and Western Australia over the next five years.
- Bolstered by a mining rebound, economists also predict that WA will surpass New South Wales to become the largest state for engineering construction activity by the end of the decade, according to Oxford Economics Australia’s Engineering construction in Australia – Q4 2024 update.
Shifting building activity
The commercial and industrial building sectors will experience a decline in growth in 2025. The residential construction sector will also see a slowdown, with Australia’s population-driven housing boom yet to arrive.
“Lingering sentiment in the Australian economy is causing some stagnation to remain, particularly around private investment in building construction. Once this sentiment lifts, the market will start to grow again,” says Lawrence. “Declining activity in these construction markets is expected to be offset by growth in the health, utilities and institutional sectors, including defence projects.”
Changing project geography
A shift in major project location from metro to regional areas is another trend currently shaping the construction industry.
“During the decade-long transport infrastructure boom, Coates supported many of the country’s largest metro-based capital works projects, including Metronet in WA; West Gate Tunnel in Victoria; and the M7-M12 integration in NSW,” says Lawrence. “As focus shifts towards building large-scale renewable energy infrastructure, we are supporting a growing number of projects in regional and remote locations across the country.”
Workforce challenges
Labour shortages will continue to challenge construction businesses in 2025, exacerbated by historically slow productivity gains.
“Coates is focused on helping customers to improve productivity and efficiency,” says Lawrence. “Our turnkey solutions can ease workforce pressures and help customers to transfer some of the risk.”
How can equipment rental support the construction industry amid challenges?
“While the sharp spike in construction material prices has moderated, costs remain high due to tight infrastructure market capacity, increased public debt, and challenges related to the cost of living and wages,” says Lawrence. “Hiring equipment presents a strategic solution for businesses looking to reduce capex, manage costs, and scale up or down quickly as needed.”
Reducing capex, improving cash flow
With rising construction costs, it’s often more cost-effective for businesses to allocate capital to renting instead of purchasing construction equipment.
“By hiring equipment, customers avoid having to make loan repayments or front the full cost of purchased equipment,” says Lawrence. “This approach also creates a more predictable and manageable cost structure to support accelerated decision-making.”
Additional benefits of hiring construction equipment include:
- Mitigating the risk and liability of owned assets
- Shifting the cost and responsibility for maintenance, servicing and insurance to the hire company
- Avoiding the depreciation of owned assets
- Preventing the cost and inconvenience of reselling and/or replacing end-of-life equipment
Circularity and emissions reduction
To deliver major projects, businesses must be able to meet the growing sustainability provisions in construction contracts. Among a wide range of considerations, in 2025 there will be greater focus on circular construction practices and reducing Scope 3 emissions – the indirect greenhouse gas emissions (GHG) that occur in a company’s value chain.
“Choosing to hire construction equipment is inherently circular, as the equipment is deployed to multiple projects throughout its lifecycle, improving efficiency and utilisation,” says Lawrence. “Hire equipment also gives customers access to the latest technology and innovation to improve utilisation, inform hire choices and work more sustainably and efficiently.”
Coates is uniquely placed to support customers in reducing their GHG emissions with its Greener Choices range of battery electric, hybrid, solar, low-pollutant engines and biofuel-compatible equipment across categories including access, materials handling and lighting.
“Lighting is a key category on the way to decarbonisation, together with increasing hybridisation of power generation with multiple benefits, including reduced noise and particulate pollution,” says Lawrence. “We are also tackling temporary site accommodation, typically one of the highest energy users on project sites, with a range of more energy-efficient solutions, augmented by renewables and hybrid power sources.”
With one of Australia’s largest fleets, a national branch network and a deep understanding of what it takes to support the delivery of major projects nationwide, Coates looks forward to supporting customers as they navigate 2025.
For support and advice, reach out to Coates today.