Construction lawyers have every reason for ‘cautious optimism’ this year following a relatively strong finish to the calendar year 2014.
Lander & Rogers partner Ian Gordon says the firm’s practice saw a higher degree of activity in NSW than anticipated last year, leveling out some the slowdown in growth experienced in the Victorian market.
Construction practices in NSW were aided by the Sydney Light Rail PPP project, which kept a host of firms busy in different roles.
Lander & Rogers, which acted for First State Super as part of the equity consortium on the Sydney Light Rail project, sees the PPP as an indicator of an emerging trend: the increased interest from domestic and international superannuation funds in infrastructure assets.
“They [super funds] are one of the few participants in the market at this point with access to a large amount of funds, and they like infrastructure because it provides a long-term secure income stream,” Gordon says.
Gordon also expects more work from inbound Asian investors, both public and private, particularly from China, Singapore and Malaysia.
“These investors see Australia as a safe haven for their investment dollars and are increasingly becoming a more and more substantial part of our work. Some smaller interests are picking up assets and looking to develop them, and that has a follow-on for the construction industry.”
Gordon gave the example of a Singapore-based listed entity buying a commercial office building in Albany, WA, due to the better returns the company could get when compared with its home market.
“I think there is going to be a cycle of acquisition and asset redevelopment for increased growth, which is great for those clients and great for the construction legal industry,” Gordon said.
Optimism for construction lawyers this year could be tempered by uncertainty over the future of both Federal and State governments.
“We are cautiously optimistic, but it probably won’t be a barn burner; there is significant uncertainty at the moment in relation to the Federal Government’s position and particularly that of the Senate, and the extent to which economic reforms can be undertaken.”
Gordon said many clients are waiting before making capital commitments. State government elections in both Queensland and NSW will also shut down those markets for short periods.
Gordon said clients were still reluctant to resort to contentious dispute resolution ‘unless absolutely necessary’ in the construction sector, preferring to ensure their money was generating revenue.
“We haven’t seen a flood of Security of Payments litigation, nor a flood of general litigation arising out of construction matters. Clients are being very select and strategic, pursuing only disputes that are important.”