Counting cranes to get a measure of economy
The renewed activity will be a fillip for the ravaged construction sector, which had four major companies go to the wall last year. But experts still warn the sector faces headwinds for a further six months, or until more projects come online.
One of these is said to be a tender being put out by Sydney University for the $150 million redevelopment of its business school.
There is also the planned upgrade of the Direct Factory Outlets at Homebush, the Sydney Cricket Ground, Macquarie shopping centre and Westfield Eastgardens.
The inaugural Rider Levett Bucknall Crane Index recorded 12 cranes in the Sydney central business district (incorporating Lend Lease's Barangaroo and the joint Frasers Property/Sekisui House Australia Central Park development in Chippendale), six cranes in Parramatta (predominantly for new residential apartment projects), four in North Sydney (again, residential projects) and four in Chatswood.
The index will biannually track the number of cranes operating across the Sydney market.
The director of Rider Levett Bucknall, Stephen Mee, said that while the numbers of cranes recorded indicated varied construction workloads, the future workload remained uncertain.
"There is clearly a head of steam in the construction sector but we don't believe things will really turn a corner until about mid-2013," Mr Mee said.
"It is positive to see so many cranes on the horizon but there will be a time lag, so tough times will still prevail into the start of [the] year."
One of the other concerns is the slowing resources sector. According to research from Citi, record investment in Australian mining projects has resulted in an escalation in the cost of projects.
"As a result of the fall in commodity prices driven by the slowdown in China growth and global economic uncertainty, resource companies are focusing on reining in capital costs and cutting operating costs to boost cash flow and improve margins," the research says.
One of the key concerns for the country's construction sector is the cost of employment. In a global context, Australia's average resource construction hourly wage is 1.4 times higher than in Canada, 1.7 times the US and 5.5 times higher than South Africa and Brazil. Australian engineering wages are 60 per cent higher than the global average.
Frequently Asked Questions about this Article…
The Rider Levett Bucknall Crane Index is a biannual count of the number of tower cranes operating across the Sydney market. For everyday investors it’s a simple, visual economic indicator: more cranes generally signal rising construction activity and development pipelines, while fewer cranes can indicate a slowdown. The index helps investors gauge momentum in the construction sector and property-related investment opportunities.
Cranes are a direct sign of active building work. The article notes that a rise in crane numbers — driven by projects such as the Sydney convention centre redevelopment and other major works — is a boost for the struggling construction sector. However, experts warn there is a time lag, so even with more cranes visible, the sector may still face headwinds for months before conditions fully improve.
The article highlights several projects boosting crane counts: the more than $1 billion redevelopment of the Sydney convention centre and parts of Darling Harbour, a reported $150 million redevelopment tender at Sydney University’s business school, upgrades to Direct Factory Outlets at Homebush, works at the Sydney Cricket Ground, Macquarie shopping centre and Westfield Eastgardens, plus large developments like Lend Lease’s Barangaroo and the Frasers Property / Sekisui House Australia Central Park project in Chippendale.
The inaugural index recorded 12 cranes in the Sydney central business district (including projects at Barangaroo and Central Park), six cranes in Parramatta (mainly residential apartments), four in North Sydney (also residential) and four in Chatswood. This distribution highlights both CBD and suburban residential development activity.
Rider Levett Bucknall director Stephen Mee said that while there’s renewed activity and ‘a head of steam’ in the sector, things are unlikely to fully turn a corner until about mid-2013. He warned of a time lag, meaning tough conditions could persist for another six months or so until more projects come online.
The article cites Citi research showing that record investment in Australian mining pushed project costs up, and a recent fall in commodity prices—driven by slower growth in China and global uncertainty—has prompted resource companies to rein in capital and cut operating costs. Reduced resource investment can damp demand for related construction work and weigh on investor sentiment for construction‑linked businesses.
High employment costs are a key concern: the article notes Australia’s average resource construction hourly wage is about 1.4 times Canada’s, 1.7 times the US, and 5.5 times higher than South Africa and Brazil. Australian engineering wages are reported as 60% above the global average. For investors, higher local labour costs can squeeze project margins and affect the competitiveness of construction and resource projects.
Yes, but with caution. Counting cranes is a useful, tangible indicator of construction activity and development pipelines, which can inform investment views on property, construction stocks and local economic momentum. However, the article stresses there is a time lag between cranes appearing and meaningful sector recovery, and other factors—like a slowing resources sector and high labour costs—can affect outcomes. Use crane counts alongside other data and research when making investment decisions.
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