Auckland is a construction ‘boom’ town

5:00 AM Saturday July 9, 2016 Colin Taylor

Construction cranes dominate the landscape at Auckland’s Wynyard Quarter.

The future has never looked rosier for the commercial property construction sector which is ‘booming’ in Auckland and simultaneously across multiple market sectors at an unprecedented rate, says John Church, national commercial director Bayleys Real Estate. 

“This construction underpins commercial property requirements for additional offices, industrial and retail premises, as well as infrastructure like roads, schools and hospitals to support Auckland’s fast-growing number of residents,” Church says. 

He says the ‘boom’ is a national one and attributes this to New Zealand’s stronger macroeconomic fundamentals post the global financial crisis compared to many other nations within the Organisation for Economic Co-operation and Development as well as:

• a backlog of infrastructure and public sector projects as a result of inadequate investment in infrastructure in the past and patchy building activity in comparison to global standards;

• record net inward migration which shows no signs of abating and which has resulted in a severe shortage of housing – especially in Auckland;

• commercial developments in the pipeline, especially in Auckland where there is a long-term shortfall in commercial building activity;

• high infrastructure demand; and,

• normal building activity.

“Nationally, the value of total new buildings consented over the last year to February 2016 was $13.5 billion with $4.3 billion of this within the commercial sector,” Church says.

“This total is the highest ever in both nominal and real inflation-adjusted terms and reflects the level of confidence that there is both in New Zealand and in the building sector.

“The value of New Zealand’s property-building in the March quarter was $4.4 billion with $1.6 billion taking place in the commercial sector according to Statistics New Zealand.

“The amount of work rose in the March quarter on the back of residential increasing 5.5 percent and non-residential five percent in the December quarter.

“Auckland accounts for about one third of all building and construction by value and is dominating the national demand for building and construction at $1.6 billion, even with the impact of the Canterbury rebuild at $1.1 billion.”

Church’s observations are reinforced by the fifth edition of the biannual Rider Levett Bucknall (RLB) Crane Index for the second quarter of 2016, which highlights another period of growth in New Zealand’s construction industry – primarily driven out of Auckland.

The method used by RLB is to physically track the number of cranes in the country’s key cities and thereby provide a simplified measure of their construction workload.

True Commercial - Karangahape Rd station - interior - artist%27s impression.jpg

An artist’s impression of the Karangahape Rd station on Auckland’s City Rail Link. 

The index shows that since the last analysis in the fourth quarter of 2015, there are 19 more cranes nationally – rising from 79 to 98 - constituting a 24 per cent increase. A total of 62 cranes have been commissioned and 43 have been removed.

The data also shows that since the inception of the index in the second quarter of 2014, the index has risen 38 per cent nationally. When it comes to Auckland, the RLB Crane Index shows that, despite key cities in New Zealand recording increased or steady crane activity, Auckland is firmly in the lead after a slight lull in the first half of 2015.

Auckland accounts for 14 of the additional cranes in the country since the last index having a total of 47 cranes, while Christchurch follows with 30 and Wellington with nine.

According to Rider Levett Bucknall, over the past six months 33 new tower cranes were erected in Auckland while 19 were dismantled as site work on construction projects came to an end.

“This constitutes a 42 per cent increase in Auckland, which highlights it as the epicentre of crane activity,” Church says.

According to the National Construction Pipeline report produced by the Ministry of Business, Innovation and Employment (MBIE), the value of all building and construction in Auckland is forecast to increase steadily to a peak of $16.3 billion in 2018, which constitutes 73 per cent growth from 2013.

The report forecasts non-residential building and construction growing by 30 per cent from 2013 to 2020.

This will include a number of major office developments in the CBD including:

• NZX-listed Precinct Properties’ development of a $500 million 36-level glass tower with some 37,000sq m of office space on Queen Elizabeth Square at the bottom of Queen Street;

• the new 16,735sq m office building that is being developed for Datacom in Auckland's Wynyard Quarter for $86.2 million;

• other Wynyard Quarter commercial building development; and

• a $100 million investment in a new office tower in Britomart mooted by Cooper & Company which appears on the Auckland Council’s City Rail Link (CRL) map as a potential development.

Church says a surge in tourism numbers has increased the requirement for more high-end visitor facilities and accommodation.

Some of the bigger projects in this field are SkyCity's international conference centre valued at $500 million; and luxury hotels for the Wynyard Quarter, for SkyCity, and within the $350 million, 52-level NDG Auckland Centre tower building.

Church says big education projects include the Engineering, Technology and Design building on the south campus of the Auckland University of Technology and the University of Auckland’s Science Centre project which is nearing completion.

“A number of civil projects across the city are now playing ‘catch-up’ occupying 13 per cent of cranes operating in Auckland – making it the second most active sector,” he says.

The civil works programmes include:

• construction of the $2.4 billion Auckland City Rail Link;

• the ongoing construction of the Waterview Connection motorway network at Avondale – with the tunnel now bored through and motorway flyovers being hoisted into place with opening scheduled for next year;

• the $1.5 billion Auckland Manukau Eastern Transport Initiative (AMETI); and

• expansion of facilities at Auckland Prison.

John Church, of Bayleys.jpg

John Church, Bayleys.