Development update: March 2016

Through my employer RCG, I’ve just put out a research piece giving 2017 as the first time that Auckland will build more attached homes (apartments, terraces) than detached houses.* This is one milestone, but really it’s just one of the ways in which Auckland is changing to become more city-shaped, as Patrick puts it. While the number and percentage of attached homes will bounce around, I believe that they’re increasingly important for Auckland’s growth, and in the long term they’ll make up at least 50% of the new homes we build.

That doesn’t mean that leafy suburbs will be razed wholesale, or that we’ll stop building detached houses, or that everyone will be forced to live in an apartment. According to the 2013 census, Auckland has:

  • 332,000 detached houses
  • 50,000 units in buildings with 1 storey
  • 43,000 units in buildings with 2-3 storeys
  • 16,000 apartments in buildings with 4+ storeys

Clearly, detached houses aren’t going anywhere – it’s just that they’ll be joined by more flats, terraces and apartments too. That means more housing choice.

AKL dwelling consents to Feb 2016

Housing choice is a good thing, but to bring it back to transport: Auckland needs better public and active transport so that it can handle more people, living closer together, without just getting more and more congested. The city needs transport choice as well as housing choice. We’ve often talked about Flat Bush as an area which has denser housing – including plenty of terraces and low-rise apartments – but which has very poor provision for public transport. That’s a recipe for traffic jams, long commutes and worse outcomes across the board. The new growth nodes in the future – Hobsonville, Massey, Takanini, Silverdale – need to avoid these mistakes.

 

The (Very) Big Picture

I try to get a bit ‘big picture’ with these posts, but I want to zoom out even further right now: let’s look at the overall New Zealand construction sector. At the moment, it’s as busy as it’s ever been. Statistics New Zealand measures the amount of “building work put in place” each quarter, showing how much construction is occurring. They say:

“For the December 2015 quarter compared with the September 2015 quarter, after price changes and seasonal variations are removed… total building activity rose 2.5 percent… the trend for all building work grew 1.8 percent, and is at its highest level since the series began in late 1989”.

There are regional differences – Canterbury construction will be tapering off in the next few years as the earthquake rebuild continues, and Auckland construction is booming. On the whole, though, the construction sector is pretty much flat out. Forecasts like the National Construction Pipeline Report, and the latest information on building consents, suggest that the outlook for the next few years is very busy too.

Growing industries are meant to be a “good news” story, and they are, and this means more jobs and more economic activity and all the rest. But it’s not without issues, because the construction industry relies on having a trained workforce, and it’s hard to keep growing the industry at 5% or 10% or 15% a year when construction is already a pretty big part of the economy and most of the people who know how to swing a hammer are already swinging.**

The graph below, from the Household Labour Force Survey, shows the number of people employed in construction at an all-time high:

Construction workers

Many builders are running at capacity already, and there are probably some specialist areas where it’s almost impossible to find builders to take on new projects – or at least, without paying through the nose. Peter’s looked at these issues in road construction previously, and I’ve heard that some Auckland apartment developers are struggling to find builders as well.

So, one issue with a very busy construction industry is that prices go up. Another worry is that there’s less focus on quality control, potentially resulting in buildings which aren’t up to scratch. It’s certainly something the industry, councils and government need to keep a close eye on.

Phew. So that’s the very big picture. It’s a good time to be a builder, but it’s going to be hard to find all the construction workers, tradesmen, consultants and other workers needed in the next few years, and hopefully the quality of the build isn’t compromised.

 

* Technically, we’re predicting 2017 to be the first year that more attached homes get building consent than detached houses. It will probably be 2018 or 2019 before Auckland completes more attached homes than detached houses.

** A hammer, that is.

Unitary Plan Fantasies

Introduction

In this post I discuss two related questions that concern common “fantasies” about the Unitary Plan, specifically:

  • Question #1: To what degree has Auckland’s density changed during the last few decades?
  • Question #2: To what degree does the balance of brownfields/greenfields development in the Unitary Plan differ from the past?

We might be able to agree on answers to these two questions. Why? Well, they are positive questions, insofar as they refer to attributes, i.e. density and brownfields/greenfields development, which are able to be subject to empirical measurement and testing.

Ideally people would agree on answers to important positive questions before moving onto normative questions, because the latter are not empirically testable. An example of a normative question would be: “How much weight should we place on the preferences of existing homeowners versus potential homeowners? I hope the difference is obvious; normative questions tend to be gnarlier.

It’s often helpful to separate positive from normative statements. People can often vehemently disagree on the answers to normative questions, while still agreeing on the answers to positive questions. Hence, in this post I will try to provide clear answers to two important positive questions that seem to be frequently misunderstood by those who oppose the Unitary Plan. Rest assured that I hope to tease out some of the important normative questions in more detail in a subsequent post.

Question #1: To what degree has Auckland’s density changed during the last few decades?

The answer to this question is simple: In the last 10-15 years the population density of Auckland has increased. In this working paper, Peter quantifies the density for various New Zealand cities, which are summarised in the following table. We see that Auckland’s population-weighted density (i.e. the density at which the average resident lives) has increased by around one-third (33%) in just over a decade.

As Peter discusses in this post, increased density is consistent with other empirical data. When we look at population growth in Auckland, we find that the population of central areas, especially the city centre, is growing faster than other places in the region. Waitemata (which covers most of what we refer to as the “Isthmus”) stands head and shoulders above the rest in terms of population growth, both in total and relative (%) terms, as shown below.

The increase in density observed in central areas doesn’t seem to be caused by regulations on urban expansion. Instead, Auckland seems to have grown denser primarily because there is increasing demand from people to live and work centrally, i.e. as a result of people’s preferences. Research by Arthur Grimes, for example, has found that Auckland’s central areas have become much more valuable relative to less central areas, as illustrated in the figure below.

This change is significant, and is mirrored in cities elsewhere, such as Amsterdam (NB: Amsterdam has always controlled urban expansion, providing further evidence to suggest that controls on urban expansion are not behind changes in the relative values attached to centrality). Increasing density in Auckland are also consistent with the experience in Sydney and Melbourne, as illustrated in the figure below (NB This figure is taken, incidentally, from the excellent ChartingTransport website). Here we see that density in both Sydney and Melbourne increased by a similar % to that observed in Auckland. 

So from where I’m sitting the answer to the first question is fairly clear: Over the last 10-15 years or so Auckland has become a much denser place, and it’s become denser because more people and firms want to locate in central areas. As far as I know the sky hasn’t fallen on our heads. Indeed, from what I can tell Auckland has been doing relatively well of late. 

In this context, the imposition of regulations preventing intensification would seem to have the following impacts:

  1. Reduced development and higher property prices;
  2. Fewer people and jobs being located in central areas;
  3. Increased urban expansion, with associated infrastructure, congestion, and energy costs; and
  4. Transfer of wealth from those who have less to those who have more (further reading).

The likes of Richard Burton, Dushko Bogunovich, and David Seymour may argue that the costs of regulations preventing intensification are outweighed by the benefits, e.g. maintaining the “character” of inner-city suburbs.

I know of no quantitative evidence to show this is the case. On this basis I think it’ fair to say that their claims are unsubstantiated, at least in quantitative sense. I note that recent changes to the RMA (passed, incidentally, with the support of the ACT Party) places a higher bar on the economic evidence needed to support restrictions on development. In the absence of such evidence, and given the large body of quantitative evidence that demonstrates the costs of regulations that prevent intensification, arguments against intensification would seem to be rather flimsy. I can only hope that the IHP agrees.

Question #2: To what degree does the balance of brownfields/greenfields development in the Unitary Plan differ from the past?

The answer to this question is hinted to in the previous discussion: In the last two decades most development has happened within the existing urban area, i.e. brownfields. More specifically, development has been split 71% and 29% between brownfields/greenfields respectively. Data supporting this analysis is summarised in the table below, which is extracted from the Development Strategy published by the Auckland Council (available here).

The historical percentage of brownfields/greenfields development is similar to that enabled by the Unitary Plan (60-70% and 30-40% for brownfields and greenfields respectively). At this point I think it’s worth highlighting a rather extraordinary exchange from Peter’s recent post on the linear city (source).

Capture2

To explain:

  • “Brian” asks Duskho Bogunovich (who works for Unitec and has publicly criticized many aspects of the Unitary Plan) what proportion of Auckland’s historical growth has been accommodated within the urban area (“brownfields”) and what proportion has been outside (“greenfields”); and
  • Duskho replies with “I don’t know” but then suggests a ratio of 1 part brownfields to 5-10 parts greenfields. Converting this into percentages would imply that Dushko believes 9-17% of historical development has been brownfields, with the balance in greenfields.

Dushko’s numbers are at odds with the data presented above. Indeed the data flips his percentages around completely. Now, in Dushko’s defense this particular question asked about the last *30* years whereas the data presented above goes back only *20* years. On the other hand I can’t see this ratio changing too dramatically though even if we went back one more decade.

The key takeaway message from this exchange is that 1) Dushko doesn’t know the actual brownfields/greenfields ratio and 2) the data which is available suggests a brownfields/greenfields ratio that is at odds with his intuition. I personally would expect that those who oppose the Unitary Plan, such as Dushko, would spend some time familiarizing themselves with the empirical evidence, especially when such evidence is crucial to the argument they are themselves advancing.

Keep this issue in mind when you consider another one of Dushko’s comments (source):

But forcing massive intensification inside Auckland cannot fix the housing crisis anyway … The city must grow both ways – up and out – to allow the land and housing market work properly. And getting the ‘up/out’ ratio right is crucial … this ratio for Auckland is probably 1:2. That is, 1/3 should be growth by intensification, and 2/3 by growing out (new suburbs; satellite towns; redistribution to the outer region – Waikato and Northland). Sadly, the council, in its ‘compact city’ ideological zeal, managed to get this ratio exactly the opposite – 2:1. The ‘70% fantasy’. This is PAUP’s fatal flaw. That’s why the Plan is a dud. And will never be implementable. Unless we use the North Korean approach.

In Dushko’s world, Council via the Unitary Plan is “forcing massive intensification” that is at odds with the “right ratio” for intensification. Dushko’s sees evidence of “ideological zeal” and “fantasy”, ultimately concluding that the PAUP is “fatally flawed” and a “dud”, which will not be able to be implemented unless we resort to North Korean style policies. Hyperbole much?

Especially when one considers the empirical data. Put simply, the Unitary Plan simply is proposing to continue long-established trends in Auckland’s urban development, which have resulted in steadily increasing density with a 70%/30% brownfields/greenfields split.

People like Dushko might argue that we would be better off if changing these trends. I’d disagree but, hey, let’s have that debate. It’s fair game.

What doesn’t seem fair game is for people like Dushko to criticize Council’s Unitary Plan and suggest it represents a “radical” change from the past, when in most respects it’s business-as-usual. Perhaps the only way the Unitary Plan can be described as “radical” is that it provides for only 80,000 new homes to be developed over coming decades, when official population projections suggest we will need approximately 400,000.

Conclusions

I started this post by posing two “positive” questions, to which I have since suggested the following answers:

  • Question #1: To what degree has Auckland’s density changed during the last few decades? Auckland has become 33% denser since 2001. This change appears to be driven more by the growing desire of people and firms to locate centrally, rather than regulatory controls on urban expansion. The increase in density observed in Auckland, and the increasing value placed on central locations, is consistent with trends observed in cities overseas, such as Sydney, Melbourne, and Amsterdam; and
  • Question #2: To what degree does the balance of brownfields/greenfields development in the Unitary Plan differ from the past? The last two decades of Auckland’s developent has seen a 71% to 29% split between brownfields/greenfields development respectively. This data seems to be at odds with the views of many people that oppose the Unitary Plan, who argue that Council is forcing “intensification” and a “compact city” on Aucklanders.

What do you think is fact or fantasy when it comes to the Unitary Plan? And on that note, what is your fantasy for Auckland. In 20 years time would you prefer to be 1) more dense; 2) less dense; or 3) about the same as now? Vote below.

Development update: February 2016

Auckland’s population keeps on growing, with a hearty mix of migration and wee bairns. And with that comes demand for development of all kinds. Residential gets most of the attention, and fair enough too: we’re still struggling to build enough homes for everyone who wants to live here.

The Auckland Housing Accord between the government and council is into its third year. I’m eagerly awaiting the release of Auckland Housing Accord Monitoring report #9, hopefully by the end of this month. Will it be a riveting read like Auckland Housing Accord Monitoring report #8, or prescription medication for insomniacs like Auckland Housing Accord Monitoring report #5? Find out right here on TransportBlog.

Seriously, though, getting new homes built is a pressing issue for many reasons. And one of the main tools in the Housing Accord is identifying “Special Housing Areas” where approval processes can be streamlined and new zoning can be used.

The latest ‘tranche’ of SHAs was announced earlier this month, and as with all the other tranches, the urban/ infill/ apartment/ terrace ones have been mapped in the RCG Development Tracker, along with another 600-odd developments in many sectors.

The council has closed off requests for new SHAs, so that they can focus on the requests they already have. With the legislation set to expire in September, there’ll probably be just one more tranche to come.

 

Building Consents

Building consents are the best measure of how many homes are being built, or about to be built.

In Auckland, 9,251 homes were given building consent in 2015, up 21% from 2014 (7,632 homes). This is progress, but those numbers need to keep growing – to at least 13,000 a year, or even higher to start chipping away at the undersupply.

AKL consents

 

Down in Canterbury, home building activity is tailing off. Christchurch is still a little way off replacing all the homes lost in the earthquakes, but it’s getting there. The number of building consents peaked in 2014 at almost 6,700 homes were given building consent in 2014, and that’s fallen back to 5,800 for 2015. Many construction workers will look to move up to Auckland where there’s still plenty of demand for new housing.

Chch consents

Development update: January 2016

2015 was a good year for the retail sector, and early indications are that stores had a good Christmas too. December is the busiest time of the year for retailers. They’ll move mountains to make sure that new shops (and shopping centres) are open in time for Christmas trading.

Up until 2007, the retail sector was on a roll, and new shopping centres were being built all over the place. That changed when the recession hit in 2008 (and online shopping has no doubt had a big influence as well).

Retail development has been coming back to life over the last couple of years, and 2015-2016 sees the biggest expansion since the GFC. These centres are all shown on the RCG Development Tracker page (not to mention apartments, terraces and a host of other things).

In Auckland, we’ve already had the NorthWest Shopping Centre open out in Westgate. This was the first “new build” regional mall since Westfield Albany opened in 2007. At a more urban level, Lynnmall opened its new Brickworks precinct.

IMG_4183

The Brickworks at Lynnmall. Source: Kiwi Property

 

On a smaller scale, there are the centres that consist of a supermarket and a few small shops, usually of the ‘day-to-day’ shopping variety. The new Countdown-based centre in Hobsonville falls into this category, and even the first stage of the Ormiston Town Centre (based around Pak ‘N Save) for that matter. In Christchurch, there were two new ones, Spitfire Square at the airport, and The Landing at Wigram.

2016 will be a reasonably big year for retail too, with new centres like Tauranga Crossing and (in Westgate again) Zone 7, a large format centre.

Although the Christchurch CBD rebuild still has some way to go, three of the largest retail/ office developments – The Crossing, the BNZ Centre (aka Cashel Square) and The Terrace – will have their first stages open in time for Christmas.

d4545ee47ed6515e

The Crossing – soon to be the largest shopping centre in the Christchurch CBD. Source http://www.rebuildchristchurch.co.nz/blog/2015/3/vision-for-the-crossing-unveiled

 

Last August, I wrote:

With ongoing population growth, and some niches emerging, there will be more opportunities for retail – but with fewer new centres than last decade. And if the economics of new malls don’t stack up, could we see renewed interest in the “high street”?

Rhetorical question that one, the answer is “yes”.

As for residential development, December/ January has been a bit quiet in terms of new launches – real estate agents try to get these launched at least a few weeks before Christmas, otherwise they’ll leave them until the new year. Summer is obviously a busy time for builders, with long days, so it’s all go on various building sites around the place (I can hear one out my window right now). There’s a few projects finishing up this summer as well – Summit on Symonds, The Orange, The Seddon or Parkview Residences to name a few. More on that next month.

The high cost of free parking

The announcement of the Commercial Bay development last week got me thinking about minimum parking requirements.

MPRs were removed from the city centre back in the late 1990s. Prior to that point,all new developments were required to provide parking at roughly the same rate as suburban developments. After that point, individual developers, businesses, and residents got to choice how much parking they wanted.

I’ve always thought that this was a strong factor in the downtown revival we’ve seen since then. If they hadn’t been removed, money that has gone into developing housing and space for businesses would have been diverted into unproductive parking spaces instead.

City Centre Population - 1996-2015 2

Precinct’s new 39-storey tower on the waterfront shows what a difference MPRs make to development. Commercial Bay will ultimately have 39,000 m2 of commercial office space, 18,000 m2 of retail space, and 278 carparks. It’s going to be a big, bold addition to the waterfront. But it simply wouldn’t be possible if MPRs were still in place.

Tower 1

To get a sense of the difference that MPRs would make, I went back to the Auckland isthmus district plan, which will soon be replaced by the Unitary Plan. For developments outside the city centre, it required:

  • one carpark for every 40m2 of office space, and
  • one carpark for every 17m2 of retail space.

In other words, if those MPRs still applied to the city centre, Commercial Bay would have required over 2000 carparks. That’s seven times as much parking as the developers actually want to build. Effectively, it would mean constructing the equivalent of AT’s Downtown Car Park at the bottom of the tower. Say goodbye to ground-floor retail. Say goodbye to laneways through the building. Say hello to bad air quality and inhospitable accessways cutting up the footpath.

Furthermore, MPRs would have dire financial implications for the project. According to Precinct, Commercial Bay will cost $681 million to build. If MPRs required the development to include another 1750 carparks, at a cost of $30-50,000 apiece, it would add $50-90 million to the cost of the project. That suggests that MPRs would impose a “regulatory tax” of  7-13% on downtown development.

But would all those extra carparks have any value? In a word, no. The fact that Precinct chose not to build them suggests that they don’t see the value in providing parking spaces rather than office or retail space. And, as a corollary, it’s likely that their tenants and customers don’t see the value in having seven times as much parking, either.

It’s not as though there are any pressing social requirements for another 1750 carparks, either. Three six-car electric trains can deliver the same number of people to the city centre. At present, Britomart can do that every ten minutes at peak times. After the City Rail Link is constructed, it will be possible to double rail frequencies through the city centre. And our public transport system can do all of this without adding to road congestion – which you can’t say about people driving into the city centre.

AT Rail Capacity Image

The high costs of minimum parking requirements aren’t limited to the city centre. Down in Christchurch, for example, a neighbourhood bar and restaurant is having to shut up shop due to MPRs:

Two Christchurch business owners are “disgusted” by the city council’s ruling they need to create 62 extra car parks to continue operating as is, saying they will likely close their bar.

Dwayne and Tiffany Vaughan, who run Kaizuka Eatery and Garden Bar in Cashmere, have been engaged in a year-long stoush with the Christchurch City Council over its licensing arrangements.

The council said the owners changed the scale of the business operating under the on-licence. The cafe was initially a small part of a garden centre but had grown to take over the premises.

The owners needed an on-licence variation that would in turn trigger resource management and building consent requirements.

According to the City Plan, 10 carpark spaces were required per 100 square metres of public floor area, but reductions could apply. The 800sqm bar had 18 car parks, meaning it would need another 62 to meet the requirements.

Setting aside the complete insanity of even having MPRs for bars – why on earth would we want to encourage people to drive to the pub? – this requirement imposes large costs for parking spaces that don’t seem to be necessary for the business. (After all, it’s been operating since March 2014 with the current number of parking spaces.)

It would probably cost over $1 million for the bar’s owners to comply with MPRs, assuming that they would have to spend around $20,000 to buy land and build carparks. The benefits of this policy are vaguely defined and potentially negative, if abundant parking encourages more people to drive and drink.

All of which begs the question: Why do we still have this costly and useless policy?

Development update: December 2015

This is the last “development update” post for the year, so I want to look back on some of the big news from the year (and things which weren’t ‘news’ in the media sense but which I think are important). Christchurch gets special attention, because of the massive changes that have had to happen down there.

Housing

This was the year that Christchurch started to get on top of its post-earthquake shortage. Consents peaked at around the start of 2015 on an annualised basis, and have started to decrease slightly. The housing situation is starting to return to normal. Rents went up hugely after the quakes, and that has eased off; it’s a similar story with house prices. People’s lives are still being disrupted by the rebuild, and there are ongoing insurance battles and the like, but most people (not all) are now living in repaired homes.

Annual Homes Consented

It’s going to be a much bigger challenge for Auckland to get its housing shortage under control, but I’m sure we all knew that. Auckland building consents have kept increasing, albeit more slowly than anyone would have liked. Much of the gain has come from “attached” dwellings, not detached houses.

Other parts of NZ haven’t had quite the same growth pressures, and have seen a much smaller rise in construction.

We’ve given particular attention to apartments and terraces in Auckland. There have been about 1,000 completed this year, and the Development Tracker is showing 5,325 under construction (up from 3,177 at the start of the year), and 2,255 in the pre-sales stage (up from 1,566 at the start of the year). Things ramp up in 2016 – I’m expecting more than 3,000 units to be complete next year, and even more in the years to come.

Christchurch CBD

After a long wait, some of the biggest projects in the city began this year. In the “Retail Precinct” identified in the CBD blueprint, those projects include The Crossing, The Terrace, BNZ Centre (aka Cashel Square), and the ANZ Centre. These are major developments; this will be the densest part of the CBD, with the most foot traffic. They’ll be finished in the next 1-2 years, so by December 2017, it should be possible to walk around downtown Christchurch in much more buzzing surrounds.

In the “Innovation Precinct”, a number of buildings are underway, including new headquarters for Vodafone (South Island HQ) and Kathmandu. Most of these will be complete in the first half of 2016.

These are all positive things, and will bring people back to the Christchurch CBD – workers, shoppers, hopefully to be joined by tourists and residents.

However, the Cathedral itself, and most of the sites surrounding the square, remains painfully barren. Many other parts of the CBD are still home to empty, damaged buildings, or gravel carparks. It will take years more to sort this all out.

7 ChristChurch Cathedral(1)

Source: http://gg.govt.nz/sites/all/files/images/7%20ChristChurch%20Cathedral%281%29.jpg. Image from 2012, but the Cathedral looked much the same when I was there this year.

Some of the “anchor projects” the government announced have been stalled or delayed. The bus interchange is complete, the justice precinct well underway, and funding has been agreed for the sports facility – but the convention centre is still up in the air, the performing arts precinct lagging, the stadium looking unlikely, the Breathe Urban Village now on hold. No doubt we’ll hear more on these next year, and perhaps some plans will have to change.

Auckland Retail

The NorthWest Shopping Centre opened in October, the first new mall in Auckland for eight years. The Herald called it a “monster mall”, which seemed a little overblown – it’s either the 9th or 10th largest enclosed shopping mall in Auckland, not counting ‘bulk retail’ centres. Taken as a whole, though, the Westgate area is indeed a retail monster – it’ll be roughly the size of Albany when it’s done.

Much of the retail action, though, was on main streets and in town centres, rather than in shopping malls. Farmers reopened on Queen St. Topshop opened for the first time.

Farmers Queen St

The new Farmers, with the new version of Santa. RIP the previous creepy version.

Here’s an interesting stat I read a few months ago – according to Whillans Realty, rents at the lower end of Queen St went up 30% in six months. These increases, in what was already the most expensive retail precinct in New Zealand, really show the value of foot traffic (and tourism too).

Auckland Offices

As we heard earlier this year, there’s a real shortage of high-end office space in Auckland. 151 Victoria Street West (occupied by NZME and various other media businesses) was the only major building completed in 2015, but more are on the way: Fonterra and Bayleys buildings in Wynyard Quarter, which should be ready in the next few months, a refurbished and reoccupied 125 Queen St not long after that, and so on. 1 Mills Lane, on the site of the old Herald headquarters, was also one of the big announcements this year: an office tower, billed as Auckland’s highest, with a hotel and shops too.

Downtown redevelopment, aka Commercial Bay

Lastly, what better way to finish than with the announcement last week that the Downtown Shopping Centre redevelopment will be going ahead – the area will be branded as Commercial Bay, with the new building to be known as the PwC Tower.

Precinct Properties New Zealand Limited (Precinct) (NZX: PCT) announced today that it will proceed with a $681 million development including a new 39 level commercial office tower and a world class retail centre at its Downtown Shopping Centre site on Auckland’s waterfront.

A construction contract for the development has been entered into with Fletcher Construction. Reflecting Precinct’s development agreement with Auckland Council, construction will also include works to complete tunnels under Commercial Bay for the City Rail Link.

Commercial Bay will integrate the adjoining Precinct owned towers’ PwC Tower, AMP Centre, HSBC House and Zurich House, to create a new central business, entertainment and retail destination. On completion, Precinct estimate 10,000 workers will occupy space within these five towers, each of which will have direct access to the retail centre.

The decision to proceed had been taken as the tower had achieved 52% pre-commitment, with Precinct delighted to welcome another four businesses as foundation clients. The retail leasing has recently commenced and negotiations are advancing with a range of mini major retailers for the flagship stores.

Work is expected to begin with the demolition of the existing Downtown Shopping Centre in June 2016. The Commercial Bay retail centre is expected to open by October 2018, with the office tower completed in mid-2019.

Commercial Bay

Precinct Properties have confirmed that they’ll proceed with the $681 million redevelopment of the Downtown Shopping Centre – which includes the construction of a 39 storey office building – after reaching their target of having 50% of the development pre-leased.

Tower 1

Precinct own the current mall, along with the HSBC, Zurich, PWC and AMP towers and are grouping them all into a precinct they’re calling Commercial Bay which is the name originally given to the area before the land was reclaimed. Combined they say the area will be occupied by 10,000 workers. The new tower itself will be named PWC tower with PWC moving from the tower across Albert St.

Commercial Bay workers

The project includes

  • 39,000 m2 of commercial office space including a 1,400m2 sky terrace on level 7
  • 18,000 m2 of retail space over three levels with ~100 retailers – they are saying they have a big name international retailer not currently in NZ already lined up.
  • Along with the CRL tunnels there will be additional parking which I imagine will be primarily used by commercial tenants as there 278 carparks all up.
  • There is a 6m wide east-west lane through the development located on centreline of Britomart. It will be open 24/7 and link the train station to the new bus interchange being built on Albert St.

Work is due to start on demolishing the current mall in June and they will build this section of the City Rail Link through the site – linking it to the separate works along Albert St and at Britomart. They say they expect the retail to open in October 2018 and the office tower will be completed in mid 2019

Here are some more images they’ve provided

Corner of Queen and Customs Streets

Combined with the CRL Lower Queen St outside Britomart will be pedrestrianised. With the development occurring over QE Square which was sold by the council.

Lower Queen Street - public space and facade

The retail part of the development certainly has a boxy feel to it.

Lower Queen Street - East-West Laneway

And a video of it all.

Fletcher Building on housing

Fletcher Building is the biggest construction company in New Zealand, and a major home builder, so it’s worth keeping an eye on what they say about their residential business and the market. They recently gave a presentation on this.

Fletchers are now established in the “high density” market, having built several apartment buildings at Stonefields in a joint venture with Todd Property. There’s still more to come, both at Stonefields and Three Kings – where the first building, on Mt Eden Rd, is already going up.

As for their “low/ medium density” offerings, Fletcher’s “product range [is] increasing in density and will include light-weight apartments”.

Slide 18 of their presentation is interesting, showing the journey from raw land worth $80-$200/sqm, to subdivided sections at $600-$800/sqm, to completed houses, with a “build margin” of $50,000-$100,000 or more.

Slide 18

This is obviously based on detached houses, with the model a bit different for higher density homes. But the gap between raw land and sections is a big one – it has to accommodate infrastructure (including local roads), development contributions and GST, among other things.

 

Slides 20 to 22 show how Fletchers want to scale up the number of homes they build, from 200-400 a year over the last decade to 1,500 in the future – although it will take them a while to get there, beyond their 2018 forecast horizon.

Slide 20

This would make Fletchers the biggest home builder in New Zealand, although of course other companies will also be aiming for growth.

These slides indicate that Fletchers are moving back into being a developer, not just a house builder, and that they’ll be building more ‘attached’ homes – those are a major focus of most of their Auckland and Christchurch projects.

 

Lastly, Fletchers have an interesting slide looking at the market overview, saying “There is a structural shortage of housing in Auckland”, and “on current estimates this will take 10-30 years to reverse”.

Slide 37

I agree with them, although I note that this doesn’t mean we’ll have rapidly increasing house prices for 10-30 years. We simply need to get to the point where people have confidence that housing supply is increasing, and that we’ll be starting to chip away at that shortage, and that should help to reintroduce some sanity to the market.

The Herald have covered the presentation here, mainly in relation to Three Kings locals opposing Fletcher’s plans for the old quarry. I’ll just quote one comment here:

Garry Bryant, Three Kings United president, said… “Why does Three Kings, which is the smallest in land size [than plans for three other sites] have the most residential density which is 50 per cent more than Whenuapai which has a land size of 31ha? The very area that needs the most open space has next to nothing compared to the other three sites where land is abundant”.

It’s pretty obvious to me why Three Kings (brownfields, 8 km from the CBD along Mt Eden Rd) will have much higher density than Whenuapai (greenfields, 24 km from the CBD). The density planned there will also enable better quality, better utilised public open spaces. Putting my economist hat on, why is the community group trying to regulate what other people do with their land? What’s the externality they’re trying to solve? Surely the density of the site is a question for the developer and the eventual residents?

Panuku priority development areas confirmed

The council’s Development Committee have confirmed the areas where Panuku Development Auckland will focus on with Manukau and Onehunga the first to be focused on. This should hopefully see some of the great place making that is making Wynyard a fantastic place spread to more locations.

Manukau and Onehunga are set for significant long-term improvements as part of 19 locations across the city that have been identified by Auckland’s new urban regeneration agency. The Auckland Development Committee this morning approved the list of urban locations from Whangaparaoa in the north to Pukekohe in the south that were recommended by Panuku Development Auckland (see map attached and video link below).

The metropolitan centre of Manukau along with the Onehunga town centre and port were approved as the flagship projects. These locations will undergo a transformation similar in scale to the award-winning regeneration of the Wynyard Quarter, while retaining their unique identity so that the collective aspirations and needs of their communities are achieved.

In Manukau, Panuku will work with Central Government to create more housing, including affordable housing located close to employment opportunities. We will also make better use of council-owned sites in the centre – all of which will leverage off existing investment in the area.

In Onehunga, Panuku will use available land holdings in the town centre, along with the Onehunga Port in the future, to attract and enable developers to build high quality, mixed style housing close to public transport and the water’s edge. Changing the port to more public use is seen as the key to unlocking the economic, recreation and transportation potential of the Manukau Harbour. There is also an opportunity to work with the Government on more housing in the wider area.

Mayor Len Brown says the breadth of the locations will see benefits delivered right across the city – from additional housing to revamped town centres for Aucklanders to enjoy.

“These developments are just one of a number of ways we are dealing with the record growth Auckland is experiencing. We must all work together with a shared vision to make more of what we’ve got.”

In addition to the major transformations of Manukau and Onehunga, town centres in Northcote, Takapuna and Henderson have also been approved for revitalisation, with Panuku working with Government and private developers to unlock the full business potential of these locations.

Deputy Mayor and Committee chair Penny Hulse says communities in a number of the selected locations have been eagerly awaiting these developments.

“Residents have been telling us through the Auckland Plan and their Local Board plans that they want to see thriving town centres, as well as housing and commercial developments that strengthen the community and reinforce the local character.”

“They’re ready for change and now that the selection process is completed and the objectives are clear, it will be the role of Panuku to get on and work with the local communities to roll out these developments.”

Panuku Interim Chief Executive John Dalzell says while work is underway on a number of existing locations such as Hobsonville, Papetoetoe and Whangaparaoa, for the likes of Manukau and Onehunga it may well be future generations who enjoy the fruits of these developments.

“Panuku will take a long-term view of suburbs and town centres to ensure what is built today stands the test of time.

“We need a transformational shift in the way that urban development is delivered and our approach will focus on customised solutions for each location as we recognise their unique character and the specific wishes of the local community.

“Through careful planning we will invest in initiatives which leverage public sector land and bring to market opportunities that can be led by private developers.”

The Panuku Board used feedback from key stakeholders such as Iwi and Local Boards to confirm the final selections at its November Board meeting, with the selections going to today’s Auckland Development Committee for final approval.

Panuku categorised the locations (seven of the nine identified by council as well as those inherited from Waterfront Auckland and Auckland Council Property Ltd*) as follows:

1. Transform: create change through urban regeneration

Approved new locations: Manukau metropolitan centre and surrounds, and Onehunga town centre and port.

Existing locations: Wynyard Quarter and Tamaki regeneration (in partnership with the Government).

2. Unlock: act as the facilitator to create opportunities for others

Approved new locations: Takapuna central, Northcote town centre and surrounds, and Henderson metropolitan centre.

Existing locations: Hobsonville, Ormiston town centre and nearby Flat Bush sites, Old Papatoetoe and City centre.

3. Support: enable development of council-owned land

Approved new locations: Avondale and Otahuhu

Existing locations: New Lynn (Totara Avenue), Pukekohe, Stonefields (Morrin, Merton and Donnelly roads), Howick (Fencible Drive), Mt Eden (Dominion and Valley roads) and Whangaparaoa (Link Crescent).

The criteria used to categorise the locations included:

  • critical mass of Council land holdings (scale) and the ability to stage quicker wins with long term goals (impact). A key part of this is community readiness for change.
  • partnership opportunities, particularly with the Crown, but also within the Council family
    ability to leverage off previous public and private investment and consider future investment
  • commercial proposition of the site and market attractiveness
  • access to public transport.

The two locations provided by Council that were not included were Newmarket, where at this stage Panuku sees no clear benefit in getting involved, and Mt Eden Station which is part of the City Rail Link project. The station will be a future project once the City Rail Link is further progressed physically.

Panuku will now produce high level project plans for the selected locations which will outline the key milestones for each development.

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Development update: November 2015

Spring is usually a busy time in the residential property market. I’ve always thought that the best time to check out a house is winter, so you can get an idea of whether it stays warm or not, but what do I know?

This spring has also been a very busy time for launches of new residential projects – i.e. they’ve started going on sale, whether or not they’re actually being built yet. Since September, 13 apartment/ terrace projects have launched by my count, with 810 homes between them, and there’s still half of November to go.

Launched in spring 2015:
West Edge (stage 1)
Atelier
Daisy apartments
Juliette Lofts
Wyndham Residences
The Maritime Apartments
The Antipodean
Connect Anzac Apartments
St Marks
Stonefields – Verto Apartments
Whitaker Park Central
Stonefields – Bellus Apartments
Merchant Quarter MQ2

It’s a pretty big ‘pipeline’ of potential new apartments, most of which will be completed in 2017, assuming they sell well. You can take a look at these, and another 500+ projects around the country, over on our RCG Development Tracker page. It’s quite amazing how much is going on around the CBD and the fringe suburbs like Ponsonby, Grey Lynn and Eden Terrace.

There’s not much to report this month in terms of building consents. Some news articles said that consents for Auckland had dropped, which they had relative to the previous month – but not the same month of the previous year. So, like the are-house-prices-going-up-or-down stories this month, it depends on how you want to look at the data.*

Building consents are a good ‘leading indicator’ of how many homes are going to get built in the next year, because when the consent has been approved, the builder is free to get on with building them, and the consent lapses if work isn’t started within a year.

Auckland Dwelling Consents to Sep 2015

The graph above looks at consents on a “moving annual” basis, so it’s showing how many homes are consented in each 12-month period – in this case, the latest data is for October 2014 to September 2015. There’s only been a small rise vs last month, driven by detached homes (4,966 consented in the last year). However, I think we’ll see apartment consents heading upwards in the next few months.

* Similar issue there – REINZ were looking at Oct 2015 vs Sep 2015, QV were looking at Oct 2015 vs Oct 2014