The best long-term growth prospects are for contractors specialising in expanding markets where they can differentiate services on a non-price basis. Contractors operating in these specialist markets may obtain additional profit and ensure long-term growth by reducing their dependence on the building cycle. Specialty markets include existing industry and product markets, which can be developed as niche markets, such as supplying the needs of commercial printers, servicing the food industry with specialist equipment, and installation of illuminated signs and safety switches.
New product markets arising from technological advancements provide a major avenue for specialisation (for example, the installation of electronic communication equipment, data cabling and fibre-optic technology). There is also some evidence to suggest that contractors specialising in niche market areas of installation often pick up additional work, extraneous to that originally contracted for the task (i.e. suggesting to customers that other wiring or electrical work needs to be performed on the premises).
The stronger synchronised cyclical growth in the downstream housing, commercial and industrial building markets, along with the current stimulus from reconstruction activity in southern Queensland, will support solid demand for electrical installation and maintenance.
The industry is forecast to continue expanding by adopting new technologies and following the trend for firms to enter into long-term facilities management contracts. The large-scale contracting firms, which employ economies of scale and product diversity to contest the facility management market, are likely to take an increasing share of the contract electrical maintenance market. This may leave the household maintenance and small building installation market to the smaller independent contractors.
Electrical services industry revenue is forecast to expand at an annualised 3.0% over the five years through 2017-18, with accelerated growth over the short term driven by buoyant installation demand in the housing, commercial building and infrastructure markets. Revenue growth will roughly match that of Australia’s GDP (an annualised 2.9%) and be supported by comparable growth in the value of total building construction (an annualised 3.0%). Industry revenue is forecast to average $13.3 billion over the five years through 2017-18, or 13% above the average of the previous five years.
Continual advances in technological developments of electrical and electronic equipment will provide the basis for steady industry expansion. Market expansion through emerging technologies is forecast to add an annualised 0.5% to industry revenue growth over the next five years. Key areas of growth in industry demand include installing networking systems for electronic data transfer in existing premises; installing and maintaining premises surveillance instrumentation; and installing telephony, broadband and pay-TV services.
Within the housing market, the demand for electrical contractor services will be supported by the projected cyclical growth in the value of total residential construction (an annualised 2.8% over the next five years), and the growth by an annualised 2.6% in the number of housing starts to reach 167,500 in 2017-18. The value of non-residential building construction is projected to grow at an annualised 3.4% over the next five years. Strong demand for the installation of electrical equipment and wiring in offices, hotels, factories and other business premises will stem from an increase in the value of commercial and industrial building construction (an annualised 4.9%). This will outweigh the forecast subdued growth in the institutional building market due to the winding back in the educational building market (an annualised 0.8%).
Demand for electrical services in the non-building infrastructure market is likely to result in a minor cyclical decline of an annualised 1.2% over the five years through 2017-18. However, it will reach record levels of construction and provide a substantial platform for contractors servicing the resources, energy, telecommunications and electricity infrastructure markets. Companies are gearing up to be able to handle work for the public electricity, transport and communication networks, which involve the installation and handling of high voltage equipment and specialised electronic systems. The reconstruction of flood-damaged transport infrastructure will support demand for electrical contractor work in the southern Queensland market in the near term.
Karen Dobie is the general manager of IBISWorld Australia. For more information on this, or any of Australia’s 500 industries, click here.
