Jul 08, 2025
Australia’s construction sector is delivering at pace, but at what cost? With escalation now untethered from traditional demand cycles, developers and asset owners face a strategic imperative: reframe how projects are planned, procured and delivered, or risk being left behind.
Author: Mark Pomeroy, Chief Executive Officer
As we move through 2025, one thing is clear: Australia’s construction industry is operating in a paradox.
Activity levels are at or near historic highs, fuelled by demand across infrastructure, residential, and renewables. Yet cost escalation remains persistently elevated, decoupled from the traditional supply-demand dynamics that once shaped the sector.
According to WT’s June 2025 Australian Construction Market Conditions Report, national building cost escalation sits at 5.3%, with infrastructure closely behind at 5.1%. In several key markets, Brisbane, the Gold Coast and Cairns, escalation is even more pronounced, with forecasts suggesting these pressures may intensify through to 2027.
For developers, asset owners and capital partners, this is more than a short-term challenge, it’s a structural shift and demands a corresponding shift in how we plan, procure, and deliver projects.
At Pomeroy, we believe this moment calls for clear-eyed reassessment. Because if the data tells us anything, it’s this: relying on historical benchmarks or “business-as-usual” assumptions is no longer viable.
The escalation is not solely a reflection of strong activity, it’s the result of layered, systemic pressures that can no longer be treated as temporary.
Global economic uncertainty adds further pressure. Even modest disruptions in international supply chains or material availability can quickly impact pricing, especially for imported components such as steel and facades, where volatility is already being felt. In today’s interconnected market, local resilience depends on our ability to anticipate and absorb these shocks.
Looking ahead, WT forecasts suggest a moderation in escalation is possible by 2026 if the industry invests decisively in capacity and capability. However, initial signs point in the opposite direction. Investment in manufacturing and skilled labour training has not kept pace with the demands of an increasingly ambitious pipeline. And while 2027 is expected to mark an upturn in construction activity, particularly in commercial, utilities, and apartments, this revival risks triggering another spike in escalation if underlying capacity issues remain unresolved.
This “revival without readiness” scenario could lead to a destabilising feedback loop: booming demand outpaces delivery capacity, margins compress further, and uncertainty deters new capital investment.
In this context, agility and foresight are not optional, they are imperative. At Pomeroy , we are advising clients to take a more surgical approach to project strategy, including:
These measures aren’t just about managing risk; they’re about maintaining momentum. In a market where volatility is the new normal, the ability to plan confidently, respond quickly and execute with discipline will separate the successful from the exposed. It’s not about being the biggest player; it’s about being the most prepared.
As development advisors and project managers, our role is not just to respond to market conditions but to anticipate them and to lead where others wait. The WT Report makes it clear: sustained escalation is not just a cost issue; it is a strategic risk. The next two years will determine whether the industry learns to work with this new reality or be left reacting to its consequences.
At Pomeroy, we’re leaning in. We’re working with clients to build smarter, more resilient strategies that transform volatility into competitive advantage through sharper feasibility modelling, flexible procurement structures, and deeply informed delivery planning.
If you’re navigating these challenges and want a partner who brings clarity, conviction and extensive experience to the table, we’re ready to talk.