Sarah Group boss warns of cost hit from deepening labour shortages

South Australian builder Sarah Group has surged past $500m in annual revenue, but its new boss says labour shortages are emerging as a major challenge for the industry.

Sarah Group managing director Matt Woodrow at The Osmond development in Norwood. Picture: Sarah Group

Modular construction and other technological innovations will be critical for the building industry to keep up with a burgeoning pipeline of housing and infrastructure projects, Sarah Group boss Matt Woodrow says, warning that a deepening shortage of workers threatens to blow out costs on sites across the country.

Mr Woodrow was elevated to the role of managing director at the Adelaide-based commercial construction company in September, as third-generation owners Tim and James Sarah transitioned to non-executive roles on the company’s board.

Sarah Group reported a 15.3 per cent increase in revenue in the year to June to $500.5m, and it expects to deliver a further 20 per cent growth in 2024-25.

Mr Woodrow said labour shortages were emerging as a major impediment to further growth, and represented the biggest challenge facing the industry as it geared up for record spending on new housing and infrastructure.

“There’s more demand at the moment in the industry than there is capacity to deliver on that demand,” he said.

“We’re keeping a watchful eye on things like North-South Corridor, the new Women’s and Children’s Hospital, Brisbane Olympics and other major projects that are going to draw a lot of labour out of other parts of the market – our market.

“The other challenge, more at a macro level, is going to be what does that do for the cost of construction? Because the more scarce the resource, the more you’ve got to pay for said resource. That’s a challenge that we need to solve, and I think it goes back to improving productivity and better use of technology.”

Construction of the new Adelaide Aquatic Centre is being led by Sarah Constructions.

Mr Woodrow said the federal government’s new $900m national productivity fund would go some way towards supporting the industry’s efforts to adopt so-called modern methods of construction, such as pre-fabricated and modular processes that involve doing more work in controlled settings off-site.

Sarah Group opened a modular construction facility at Regency Park in 2020, using it to deliver a series of school upgrades and other projects across South Australia.

Mr Woodrow describes it as part of a “progressive” push by the company to improve the productivity of its construction sites.

“The construction industry is inherently among the least innovative, and if you benchmark it against, say, manufacturing, we’re just so far behind,” he said.

“I think structurally, it’s probably because margins are inherently lower, so it’s harder to invest. But we certainly see that the industry needs to invest to improve productivity.

“We’re being more progressive around how we can improve productivity and really maximise the input from our people, and it’s good to see the government taking a bit more leadership in the space.”

Sarah Group’s commercial construction division generated $366m in revenue in 2023-24, while its residential arm, Longridge Group, contributed $88m and its Hindmarsh Plumbing business turned over $36m.

The group delivered a $12.9m profit, up from $10.1m in the previous year.

Major projects currently include construction of a new $135m Adelaide Aquatic Centre at North Adelaide, and Flinders University’s Factory of the Future and Tonsley Technical College at the Tonsley precinct, where Sarah Constructions is using a range of innovative building materials including cross-laminated and glue-laminated timber.

The group opened its first interstate office in November with the launch of a Hindmarsh Plumbing office in Perth, and has started work on its first property development – a $60m luxury apartment project on the site of the Hungarian Club in Norwood.