Lendlease, Brookfield Cut Staff Amid Development Slowdown

Two development and construction giants have laid off staff as rising interest rates slow the pace of new projects.

Lendlease cut 740 workers across the globe, or roughly 10% of its workforce, the Sydney Morning Herald reports. The Australian firm, which primarily performs construction but also has a large development pipeline, said it would lay off 5% of its Australian staff and 15% of its workers in other markets. The move is expected to save the company at least $54.4M annually.

Lendlease CEO Tony Lombardo told staff in an internal memo that the cuts would "align to our permanent shift to being an investment-led company with a leaner operating structure, where resources are shared and not replicated in market," the Morning Herald reported.

Brookfield Properties also laid off dozens of workers in its North American development division, fewer than 100 full-time employees in total, CoStar reported. Brookfield Properties is a subsidiary of Brookfield Asset Management, an alternative asset firm with some $800B in assets under management that employs about 200,000 people globally, CoStar reported. Brookfield Properties has about 1,400 staff.

Brookfield told CoStar the cuts were done as it streamlines its divisions in North America into a single entity to focus on its $2.5B pipeline.

The layoffs come as construction starts are responding to interest rate hikes and a decline on new projects. Multifamily, one of the most active asset classes in the past decade, saw new construction drop from 727,000 in new units in 2022 to 220,000 this year, CoStar reported. The amount of office space under construction in major U.S. markets dropped from 50M SF in 2022 to 43M SF, according to Colliers.

While the construction industry went through 2022 with an unemployment rate of 4.6% — the second-lowest ever — according to Construction Dive, the construction industry is among the riskiest for job cuts in the next few months, according to the Job Loss Risk Index from the nonprofit The Conference Board, just behind the information service industry and transportation and warehousing.

The assessment was based on a number of indicators, including sensitivity to monetary policy, longer-term labor demand changes and the recovery from the job losses suffered during the pandemic.

The construction industry lost 9,000 jobs in March, according to the U.S. Bureau of Labor Statistics and compiled by the Associated Builders and Contractors. ABC’s Chief Economist Anirban Basu told the publication Equipment World recently that capital for projects is likely to dry up due to interest rate hikes and supply chain challenges, which will decrease the demand for construction labor.