Our industry is in the midst of enormous change, pressured by both domestic and global challenges. With world events changing on almost a daily basis, staying on top of the current sentiment is more important than ever, which is why we’ve increased the frequency of our surveys from twice yearly to quarterly. In this Findings Report, we explore the results of our seventh Davis Langdon Sentiment Survey. During the past three months, Davis Langdon’s Construction Sentiment Index fell 19 points to reach 51 – leaving the index at its lowest point yet. We hope the findings of this interim update are insightful for you and we look forward to keeping you up to date with new results again in June 2009.

1. CONSTRUCTION
SENTIMENT MONITOR
Findings Report Seven
March 2009
Executive Summary
Our industry is in the midst of enormous change, pressured by both domestic and global challenges. With world events changing on
almost a daily basis, staying on top of the current sentiment is more important than ever, which is why we’ve increased the frequency
of our surveys from twice yearly to quarterly. In this Findings Report, we explore the results of our seventh Davis Langdon Sentiment
Survey. During the past three months, Davis Langdon’s Construction Sentiment Index fell 19 points to reach 51 – leaving the index at
its lowest point yet.
We hope the findings of this interim update are insightful for you and we look forward to keeping you up to date with new results again
in June 2009.
Key Findings
• 'Anxiety' driving sentiment lower
• Economic concern – tops hottest issues
• Falling workload – takes a front seat
• Competition heats up
• Manufacturing, Tourism and Retail at rock bottom
The Hot Issues Construction Costs, Risks & Margins
Government Issues/Stimulus
Just a year ago, we reported in the findings of this survey that 54% of survey Business Sentiment
participants were so affected by the skills shortage that they ranked it as the hottest Miscellaneous
issue. Now, just a year on, the world couldn’t be a more different place. The skills Obtaining Finance
shortage has dropped so far down the list of hot issues that it ranked just 4% this Economic Contraction
survey. Similarly, last survey’s hottest issue Construction Costs, Risks & Margins Skills Shortage &
Trade Shortages
fell to its lowest rating since the commencement of the survey – now just 1% (down
ESD & Carbon Trading
29%). The term 'anxiety' became a catch cry for participants this survey. Participants Industrial Relations &
expressed fears of an impending recession, concerns about finance, falling business Federal Government
Workplace Legislation
sentiment, reduced access to finance, falling forward workload and the global economic Reduced Construction
Activity/Forward Workload
downturn as the hottest issues. Quality of Construction & Documentation
The economy moved into top place with 24% of respondents considering Economic
Contraction the hottest issue in the industry at the moment, running an equal tie with Reduced Construction Activity/Forward Workload
(24%). Anxiety about Obtaining Finance came in at a close second this survey, with 19% of participants rating it as the second hottest
issue in the industry at the moment, while Interest Rates altogether dropped off the list as a concern – previously 12%.
Problems in the Industry Lack of Pre Commitments
91% of participants now feel that there are problems in the industry, up 9% on last Miscellaneous
survey. The credit squeeze and economic slowdown featured as the greatest problem in Skills Shortage
the industry for 33% of participants (up 14% since last survey, and 20% during the past Costs
Planning Approvals
year). In a similar vein, a further 9% cited that business sentiment is now the greatest
Government Issues
problem currently faced by the industry – a new category for this report. Participants
Industrial Relations
said that the inability to raise finance for projects due to the current state of the credit
Credit Squeeze
markets is directly affecting the feasibility of projects. Making its debut on this list for the
Economic Slowdown
first time is the Shortage of Projects, which now ranks as the second greatest problem
Business Sentiment
in the industry at the moment, according to 17% of respondents.
Shortage of Projects
Industry concern has eased markedly toward the Skills Shortage, which slid 20% since
the last survey. Previously considered the greatest problem in the industry, the Skills Shortage now ranks fourth, accounting for just 12%
of responses. While industry players have been grappling with escalating costs for some years now, this survey saw an instant reprieve.
Concern about Costs slid 19% since last survey (when it ranked as the second greatest concern) to reach just 9% this time around.
Planning approvals remained unchanged, at just 1% of responses – overshadowed by the more immediate economic environment.

2. New Business - Sliding
Has the level of new business in your company changed in the last six months?
Conditions are changing rapidly in terms of the level of new business being January 2008 July 2008 January 2009
%
experienced. 40
For the first time since the commencement of this survey, those reporting that their
level of new business had diminished in some way increased 32% to account for 50% 30
of all respondents.
20
Just 11% of respondents reported that new business had increased significantly – 16%
down on the results of our last survey.
10
One quarter of participants reported their levels of new business remain unchanged.
0
Increased Increased Remained Diminished Diminished
significantly slightly the same slightly significantly
(>10%) (>10%)
Industrial Relations Takes a Tumble
How do you perceive Industrial Relations?
During the past At the moment During the upcoming
Sentiment toward Industrial Relations took a slide since our last survey, now with 11% 6 months 12 months
of respondents agreeing that industrial relations are Bad to Very Bad at the moment
81
(up 8%). Sentiment has worsened 10% on the results from a survey we conducted at
78
71
the same time last year, when just 1% of respondents perceived Industrial Relations to
be Bad to Very Bad.
Worsening conditions are expected looking forward, with 26% of respondents
anticipating Bad to Very Bad Industrial Relations in the next 12 months.
24
16
11
11
3
2
2
0
0
Very Good
Very Bad Bad Good
Greatest Obstacles in Building Development
What are the greatest obstacles in the building development process?
For the second consecutive survey,
sentiment worsened toward obstacles in the At the moment
Greatest
obstable
During the next 12 months
building development process. (n) Place in Sentiment Report 6
How things have changed. Just one year ago 1 - Obtaining Finance (6)
respondents reported that Obtaining Finance 2 - Obtaining Pre-sales (9)
3 - Risks of Development (2)
was the slightest obstacle in the building 4 - Obtaining End-user Pre Commitment (5)
development process. 5 - Low Sale or Yield Expectations (-)
6 - Obtaining Town Planning Approval (4)
There is indeed wisdom in crowds. Last 7 - Costs of Construction (1)
survey our participant’s predicted, fairly 8 - Availability of Appropriate Sites (7)
Slightest
obstable
accurately, that Obtaining Finance would 9 - Time to Construct (8)
10 - Interest Rate Volatility (3)
be one of the top two obstacles in building
1 2 3 4 5 6 7 8 9 10
development in the next 12 months. Now, just
six months later, it has already reached the
number one obstacle. In terms of sentiment, it doesn’t get any worse. This issue has ranked the most serious concern of any topic we
have covered since the commencement of the survey. But there is some light on the horizon, with participants expecting the situation to
ease slightly during the next 12 months.
Obtaining pre-sales is now the second greatest concern to participants – leaping seven places since last survey. Participants feel that
this situation will continue to deteriorate further during the next 12 months. We expect it will remain in the top two obstacles for the short
to medium term.
The Risks of Development remained in the top three obstacles since last survey, however participants have indicated that they expect
this to improve marginally during the upcoming 12 months.
Concerns about the Costs of Construction fell six places, down from number one obstacle last survey. There is a strong consensus
among participants that this will continue to ease significantly across the upcoming year.
Interest Rate Volatility, which was previously considered the third greatest obstacle to building development, dropped seven places to
become the slightest concern. Our survey participants hold a general consensus that interest rates will continue to ease further during
the upcoming 12 months and we anticipate that they are unlikely to pose much of an obstacle for some time.

3. Government Projects
What government factors do you think affect the industry?
Planning & Approval Process
Participants agreed that the Governments’ stimulus package (and monetary policy in Budgets
general) is the greatest influence the Government has on the industry at the moment. PPP
Exposure to Government projects contracted slightly (down by 6%) with 74% of the Elections
industry now reporting that their business is in some way involved in Government Industrial Relations
projects. Of those who are involved in Government work, State Government work
Tender Process
continues to be more dominant – making up 50% of these respondents workload (up
Risk Allocation
10% on last survey). On average, Federal Government projects accounted for just 10%
Monetary Policy/
of participant’s total business (unchanged on last survey). Stimulus
Government Bureaucracy
Miscellaneous
Procurement Preferences
What is your preferred method of procurement?
Negotiated contracts are by far the preferred favourite, with 29% of respondents
citing them as their preferred procurement method (up 1% across the past year).
Conventional Lump Sum contracts are also becoming increasingly preferred as the
industry continues to become more competitive – up 6% during the last 12 months.
Participants continue to lose interest in Partnership/Alliance contracts, which fell a
further 5% in popularity across the year and are now preferred by just 9% of participants.
Staffing Expectations
Thinking about your own staffing levels, how have these changed? Permanent Staff last six months next six months
Permanent staffing levels are still reasonably strong given the current market Contract Staff last six months next six months
conditions. 41% of respondents reported their permanent staffing levels remained the %
same (up 10% since last survey) while a further 16% reported increases of up to 20%
in permanent staff. Nevertheless, 33% reported that their levels of permanent staff had
44
41
decreased by up to 20%.
39
38
33
32
The outlook for the upcoming six months indicates that participants expect a fairly
20
16
15
14
subdued period ahead, 38% expecting staffing levels to remain the same and 35%
6
anticipating decreases in permanent staffing levels (by up to 10%).
3
Decreased by
Increased by Remained the
Contract staffing is still expected to be the worst hit – with 53% of participants up to 20%
up to 20% same
expecting their contract staff numbers to decrease during the upcoming six months.
Just 6% expect contract staffing numbers to remain the same.
Skills Shortages
Skilled trades shortages – which areas are worst affected?
Skills shortages made some subtle %
fluctuations since last survey, with some 60 Professional Design Services
January 2009
Construction & Project Mgt Services
trades and professions performing July 2008
unexpectedly – signalling more uncertain 50
times for the industry. Nevertheless,
shortages were reported by fewer than 30% 40
of respondents, which is a first for the survey.
Professional Design Services shortages 30
Plumbers
Electricians
continued to ease during the past six months
Form Workers
Bricklayers
Plasterers
(down 5.8%), now at their lowest level
Carpenters
Concreters
Metal Workers
20
since the commencement of the survey and
Tilers
affecting 24% of participants. The availability
Glaziers
10
of Construction & Project Management
Services worsened fractionally (up 1.3%)
with 22% of respondents now reporting a 0
shortage.
Among the skilled trades, shortages of Plumbers, Electricians and Bricklayers all worsened, becoming the top three trades facing
shortages at the moment. Plumber shortages increased 9.3% to reach 20%, while Electrician and Bricklayer shortages increased 2.4%
and 6.2% respectively (to reach 16% and 14%).
Participants still blame a lack of training and education in the industry over the last few decades as the root cause of shortages we’ve
been experiencing in skilled labour.

4. Competition Heats Up
How do you rate the level of competitiveness at the moment?
Competition among General Contractors
Contractors Sub Contractors
and Sub Contractors has reached its highest
3%
since the commencement of this survey 0%
11%
13%
four years ago. Nationally, 90% of General
40% 29%
Contractors and 84% of Sub Contractors are
experiencing Fairly to Extremely Competitive Fairly Uncompetitive
conditions (up 21% and 24% respectively). Not Competitive
We expect that these keenly priced General Extremely Competitive
Contractors have been factoring in a more Fairly Competitive
49% 55%
competitive Sub Contractor base for some
time, and pricing accordingly to secure their
book. If Sub Contractor competitiveness
continues to heat up at this rate, Major
Contractors may still have opportunity to
manufacture a degree of margin by the time
projects come on line.
The Next 12 Months
Which segments do you think will most contribute to growth during the
We asked participants to share their views
upcoming 12 months?
about the segments that will contribute to
growth during the upcoming 12 months. Most Least
Health remains firmly in focus, with 90% Health
of participants considering it the sector Civil and Resource
most likely to contribute to growth in the
Restoration and Refurbishing
construction industry over the next 12 months
Retirement and Aged Care Accommodation
(up 16% on last survey).
Multi Unit Residential
The Civil and Resource sector also crept up,
now with 77% of respondents considering Office
it as a major contributor to growth over the Retail
upcoming 12 months (up 7%) – not entirely Tourism
surprising given the volume of money
Manufacturing
expected to enter these sectors as a result of 0 20 40 60 80 100
the Government stimulus package. %
Interestingly, Restoration and Refurbishment entered the top three for the first time since the commencement of the survey, indicating
to us that companies are taking the opportunity to refurbish while the market is flat, in anticipation of market recovery.
At the bottom of the rung, the three sectors that will contribute least to growth in the upcoming year are Manufacturing, Tourism and Retail.
If you would like to discuss the details of this report further, please contact Rachel Kelloway, Davis Langdon’s National Research
Manager, by email: rkelloway@davislangdon.com.au or by phone: 03 9933 8800
www.davislangdon.com
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