Infrastructure projects help drive capital’s boom
Wellington is on the verge of a big construction boom.
The value of building and construction activity in Wellington is expected to grow by 38 per cent from 2012 to 2019, according to a National Construction Pipeline report compiled by the Building Research Association (BRANZ) and Pacifecon (NZ) Ltd.
Of particular encouragement to the commercial property sector is the report’s forecast that non-residential Wellington construction activity is expected to surge ahead by 49 per cent in the 2012 – 2019 period, says Mark Hourigan, Wellington commercial and industrial director for Bayleys.
“Wellington is on the verge of its biggest construction boom in many decades – with upcoming major infrastructure projects fuelling the province’s commercial and industrial property market recovery,” Hourigan says.
He noted that the 38 per cent Wellington growth prediction – encompassing Wellington central, the Hutt Valley, Porirua, Kapiti Coast, Masterton, Carterton and South Wairarapa districts – was above the forecast national average increase of 32 per cent.
“The biggest contributor to this increased activity will be the major transport infrastructure projects, and in particular the 100 kilometre Northern Corridor Highway from Wellington to Levin, and hopefully, eventually, a runway extension at Wellington airport,” Hourigan says.
“These important projects will help drive future business growth in Wellington by improving customer connections – with the lower and central North Island via the Northern Corridor and nationally and internationally via airport improvements, particularly to accommodate long haul air services.
“In a domino effect, business development drives the commercial property market. It generates more tenants and owner occupiers for buildings, creates new investment and development opportunities, and attracts investment capital.”
Hourigan says the increases in construction activity are coming at an opportune time.
“Wellington has a fairly conservative investment environment and it generally takes longer for things to turn around than in Auckland. But there’s been a noticeable improvement in the mood of the market and pent up demand is now coming to the surface.”
This was reflected in multiple offers being received on tender properties such as Bayleys’ sale of the Harbour City Centre building on Lambton Quay for $45.85 million and a revival in the auction market with 11 out of 14 properties selling under the hammer at Bayleys’ last two Wellington Total Property auctions in 2014.
In the agency’s final Wellington auctions for last year, two substantial Ngauranga industrial properties occupied by Fonterra and Armourguard sold for close to $6 million.
“The more buoyant market conditions that prevailed in the latter part of 2014 are expected to continue in 2015,” Hourigan says. “The economy is performing well, interest rates are forecast to remain at current low levels for most, if not all, of the year and commercial property demand should continue to outstrip supply.”
Commercial and industrial development hotspots identified by Bayleys Wellington are:
- The Northern Corridor – whichwill significantly improve travel times between Wellington and the lower North Island and assist businesses with distribution centres in the Wellington region by increasing speed to market and bypassing many existing bottlenecks and more hazardous stretches of State Highway One.
- Wellington Airport – where work commenced in November on a $58 million, 18-month project to extend Wellington Airport’s main terminal by a third to provide extra aircraft gates and more space in gate lounges. The extension is part of a $250 million, five-year airport development plan, with other projects including $30 million worth of airfield engineering work, further car park extensions and a new Rydges Hotel.
Wellington City Council also voted in December to contribute $1.95 million to start the formal consenting process of a proposal to extend Wellington Airport’s runway by 350 metres to the south. The extension to facilitate international long-haul services is considered essential to unlocking the region’s economic potential by exporting and importing businesses, tourism operators, universities and the diplomatic community.
- Big box retail expansion – with thissector set for growth assisted by a proposed expansion of Wellington Airport’s retail park in Rongotai and new development being encouraged in West Petone with the council’s Plan Change 29 being made operative.Wellington Airport Retail Park, located at the southwest boundary of the airport, is looking to expand its bulk retail centre with The Warehouse, Kathmandu, Bed Bath and Beyond all renewing their leases, leaving no vacancy in the current centre. The expansion will contain four to five new bulk retail tenancies adding 2395 sq m of space on the northern end of the current centre. West Petone looks set for a significant bulk retail expansion as a result of Plan Change 29 which permits a range of Mixed Use activities. Briscoes is planning to develop Briscoes and Rebel Sports stores on the ex Colgate site on Nevis Street which the company has purchased. On the other side of Nevis St the New Zealand Mail Centre has been sold to local developers Seaview HP, associated with the Hodge family, which has obtained resource consent to convert all but the two-storey front offices to a Bunnings Warehouse store.
- CBD rejuvenation -The first stage of development of a one hectare site on the corner of Cuba St and Dixon St in central Wellington, owned by Willis Bond, is scheduled to commence this autumn. It will encompass a new six storey building, housing 1500 sq m of prime retail space and a 9000 sq m campus. Focused on creative and performing arts, it being developed in conjunction with the Whitireia WelTec Strategic Partnership.“There will also be continuing seismic upgrading across all commercial premises as the result of raised occupant awareness and demands around earthquake ratings,” Hourigan says.
Mike Hourigan, Bayleys.