Slowdown in residential and commercial construction in first half of 2009

SINGAPORE: Analysts said residential and commercial construction projects in Asia have taken the brunt of this economic slowdown.

And with banks and developers still hesitant in committing to such projects without market momentum, experts said these sectors will continue to drag down the Asian construction market.

Government spending has kept the regional construction industry going with public sector projects while private construction projects have been hard hit.

According to construction data firm BCI Asia, residential construction spending across Asia declined by eight per cent on-year, to an average of US$4.8 billion.

Spending on retail and exhibition projects fell by 10 per cent in the same period to US$1.3 billion.

In contrast, spending for infrastructure construction jumped 80 per cent to US$4.8 billion.

Experts said construction for residential and commercial projects will remain slow for the rest of 2009 as developers take their time to re-enter the market.

Philipp Rode, general manager, BCI Asia, said: "Developers actually go through a phase of re-tendering, starting to slowing do the projects again, maybe on a different scale. Maybe they are asking for a different design. That also means they may have smaller units rather than bigger units."

But it won't be a completely quiet time for the sector.

With a lack of new projects, observers say new work can be found in upgrading existing buildings.

Louis Lee, director, BCI Asia, said: "What are they going to do about the existing buildings that they have? How are they going to compete? I guess this is where retrofitting will come in handy and this is where they come in to compete."

Analysts said the quiet commercial and retail construction scene is likely to affect the strong private sectors in developed economies like Hong Kong and Singapore the most.

But experts said that Hong Kong will take the bigger hit. Lacking mega projects like Singapore's Integrated Resorts, Hong Kong's construction sector will have little to keep it busy beyond the end of the year.

Source: Channel News Asia, 10 Aug 2009