2017 will be the Year of the Terrace.
Not these terraces. RIP. Image source: Te Ara
Terraced homes, built in rows: neighbours on either side, but not or above or below. They’re relatively cheap to build, and they’re within the reach of many small/ medium-sized building firms, ones which have traditionally concentrated on detached houses.
Of course, Auckland is building many kinds of housing – from detached McMansions right through to compact apartments. But terraces are a nice middle ground for many people, and this year they’ll be built in all corners of Auckland, and in many of the more central parts as well.
Which corners? For starters, Orewa, Silverdale, Whangaparaoa, Long Bay, Albany, Hobsonville, Massey, Sunnyvale, New Lynn, Mt Wellington, Flat Bush, Mangere Bridge, Takanini, and Papakura. As a rough guide, terraces will get built anywhere in the city where they’re allowed, and where the land values aren’t too high.
In high land value areas, people will probably hold off and try to build apartments instead. This may be a bit of a waiting game depending on the area. The high value areas include the central suburbs, much of the North Shore, etc. Many of these suburbs have already had their share of ‘intensification’, with sausage flats and back sections subdivided over the last 50 years or so. In these areas, it’s only apartments which will give a big enough leap in value for them to get further intensified.
Many of those apartments will be low-rise, maybe 2-3 storeys. They’re not much more complicated than terraces, so a lot of builders could start to look at them as well – and the Unitary Plan gives more flexibility around where they can be built. 2018 could be their year, but terraces have had a head start.
The RCG Development Tracker shows hundreds of apartment and terrace projects across Auckland. Big ones and small ones, private and public, and many Special Housing Areas. Enough to house many thousands of Aucklanders, if we could just get them all built.
So let’s check out the growth trend for terraces:
In Auckland, we’re now at near-record levels for terrace consents. Over 2,000 homes per year being approved, with a strong upward trend. Contrast that to apartments – which hit 2,000 a year but have eased back – and retirement village units, which have also eased back.
All of these “attached” dwellings combined add up to 4,443 homes approved in the last year, still less than the 5,694 detached houses approved. I’ve previously claimed that 2017 will be the first time Auckland approves more “attached” homes than detached ones – that prediction will succeed or fail based on how terraces do this year.
Here’s the other graph that makes terraces a winner in 2017:
The average house now costs almost $450,000 to build (just the construction cost, not any of the other costs. Tell that to the next person who mentions Demographia). Most of the homes we build in NZ are detached houses: over the last 25 years costs have tended to increase smoothly, although there’s a sharper trend at the moment with builders under pressure.
There aren’t that many apartments built, so the line is a lot jerkier based on individual developments having an influence. Very few were consented from at least 2008-2013, so don’t pay too much attention to that part of the graph. The real kicker, though, is the huge cost increase in the last year or so: the average apartment now costs more to build than the average new house!
I put this down to the small number of builders who can handle apartment construction – mainly big commercial firms, most of who are very busy, not just with apartments but with offices, the Christchurch rebuild and all the rest. If any Australian builders are reading this, they’ll be looking at the graph and wondering how soon they can set up an office in Auckland. Hopefully some are, we desperately need the competition. Apartments should be much cheaper to build than they are at the moment.
Retirement villages are in the same boat, and up to almost $400,000 per unit. Of course, most of these units are apartments – Auckland’s retirement villages have started to build upwards in a big way.
Terraces have had a much smoother cost curve, like houses. They’ve avoided the huge cost inflation of apartments in the last year, and the average terrace now costs about $230,000 to build.
There’s a lot of other costs that go into new homes besides just the construction – but at the moment, terraces have a big cost advantage. Add that to the fact they use a lot less land, and you can see why developers all over Auckland are trying to get into terraces.
2016 has been a big year for development, and by “development” I mean the process of getting new homes built, or any other new buildings for that matter.
In the last “development update” post for the year, I wanted to look back at some of the highlights which you might have missed. You can click through to these at the bottom of the RCG Development Tracker page.
- January focused on retail. “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 [but] 2015-2016 sees the biggest expansion since the GFC”.
- In March, I covered some research I did with RCG, and some other housing stuff. “In the long term [attached homes will] make up at least 50% of the new homes we build”. I’ve picked that in 2017, we’ll consent more of those than detached houses. Will we get there? Hard to say at this point.
- June was all about housing. I looked at the pipeline for ‘attached dwellings’, which I’ll update in the new year.
- July compared construction trends for Auckland and Christchurch
- August focused on Stonefields, a 2,500-home development. “Looking at Stonefields today, you could be fooled into thinking it’s almost finished, but the reality is it’s not even halfway”.
- September covered office development across Auckland (most of it is in the city centre)
- November looked at some of the housing projects which haven’t gone ahead, for various reasons.
Tracking housing and other projects
The RCG Development Tracker has an interactive map, now showing 827 projects across the country, including every brownfields Special Housing Area, big growth nodes like Hobsonville Point and Stonefields, plus billions of dollars’ worth of retail, office and accommodation developments.
It also shows Auckland’s Rapid Transit Network – the trains, the Northern Busway, plus some new links which will be built in the next few years such as the City Rail Link (now thankfully underway) and AMETI busway (which continues to languish). The Northwestern busway isn’t on there, as it’s even further away and doesn’t have any funding yet.*
In Auckland, we’re building some of everything. Shopping centres, offices, industrial buildings; hotels and other accommodation; and of course homes of all types and sizes. Apartments, terraces, retirement villages, and “traditional” detached houses (more on those later). Just about everything is booming. This year I’ve written on the tourism boom, migration boom, international education boom and construction crunch (which is really a boom as well).
So those are all positive, I guess, but there are issues that come with them. The big issue being a shortage of housing, with real effects on people’s quality of life. Other issues being high construction costs, and what looks like low wage/ productivity/ real income growth (so we’re not that much better off on a ‘per capita’ basis). Plus, there are some wobbles starting to emerge: house prices flattening or starting to fall, and signs of real problems in the international education industry.
How many homes are we really building?
Most months, I put together a graph showing the number of building consents for new homes. This is a good indicator of how many homes are going to be built. By the time a development gets its building consent approved, it already has planning approvals, and the design is pretty much complete. The developer has 12 months to start building (otherwise the consent expires), and almost all consents do eventually turn into homes.
Here’s the latest consents data, which shows that 9,800 new homes were consented in the 12 months to October 2016:
There’s obviously a lag between building consents being approved and the home being completed. Historically, the average lag is about six months, but this lag is getting much longer. Only 7,700 homes were completed in the 12 months to June 2016, but 9,251 homes were consented in 2015, and 7,632 were consented in 2014.
So, consents do get converted into homes, but we’re well behind on doing it.
Why the delays?
There are two reasons for the delays. One is that builders everywhere are busy, so they’re struggling to put enough resources together.
The other reason is that apartments take longer to build than terraces, and terraces take longer to build than detached houses. As Auckland builds a larger share of attached dwellings, the lag between consents and completions would be getting bigger even if builders weren’t flat out. At a guess, we probably need to allow at least two years for apartments from consent to completion, and at least one year for terraces.
So does that mean that we need to build more detached houses if we want to solve Auckland’s housing crisis? Surprisingly, the answer is no – in the long term, we’ll get more homes built if we focus on attached homes, like apartments and terraces.
There’s nothing very traditional about the detached houses being built today. They average a whopping 235 square metres – what is that, six bedrooms? – and they’re often double storey, with complicated shapes compared to the brick-and-tile boxes of the past. Plus, they’re mainly on the edges of the city. Affordable housing they are not.
Apartments and terraces, of course, tend to be much smaller in size. Although they cost a bit more to build on a ‘per square metre’ basis (especially for apartments), they tend to be cheaper overall.
And on that note, have a great summer everyone, take care when getting around and remember to wear sunblock!
* Motorways aren’t shown; they get enough attention already. Suffice it to say, the government is widening pretty much any motorway they can, and trying to put new motorways anywhere they can, and the costs are never questioned.
I’ve just updated the RCG Development Tracker for November – it’s now got almost 800 developments listed, across all property sectors but with a focus on higher density residential.
The ones which didn’t make it
In the last month, we’ve had a bit of media coverage about developments being cancelled. It’s always sad when a project doesn’t proceed, especially for first home buyers who put down deposits, and were looking forward to owning their own home. They’ll get their deposit back, but in the meantime property prices have kept going up, and their plans for moving home are disrupted.
Unfortunately, developments being cancelled (or put on hold, or reworked) is not new. No development is a sure thing, and some won’t go ahead, despite the glitzy marketing and the flowery statements from real estate agents. It’s part of a healthy market where some things work and some things don’t.
CBRE summed this up well when they said that cancellations boil down to “developers launching the wrong project, at the wrong place, at the wrong price”. I’d add “wrong time” to that list – some projects might have worked if they’d been a bit earlier or a bit later – but it underscores that projects can fall over if they don’t have all the right ingredients.
CBRE counted 31 apartment projects which have been shelved since 2013, making about 15% of the total launched since then. Many of these were well covered in the Herald. As a few examples:
- Flo Avondale. The cancellation of this one sparked the media look at other stalled developments;
- Springpark, which had a troubled history over the last few years. The property was sold and has now emerged as Richmond, with a different developer and with a different plan for the later stages;
- Mt Richmond Mews, cancelled earlier this year;
- Soto Apartments, marketed for a while in 2013-2014;
- The Grove in Albany. This project was marketed from 2013 onwards, and didn’t actually have resource consent. It was eventually consented for 50 homes, rather than the 65 proposed. The property was sold in 2015 and has re-emerged as Verdant Lane;
- We’ve also had the case of the Rose Garden Apartments, which are well under construction, although they’re taking much longer to build than initially expected. Here, the original off-the-plan purchasers have been asked to agree to higher prices than what they signed up for, or have their contracts cancelled. It’s a sad turn of events, and can’t be good for buyer confidence. It’s even more surprising in this case, given that Rose Garden is stage one of a multi-stage development;
- Going back to 2014, there was “Xanadu”, which adopted the unusual marketing technique of being an over-50s complex. A new developer took over, and put together new plans for the site, now known as Union Green.
There are also cases where the developer has had to take a more cautious approach – scaling back their plans, or pulling a project off the market to wait for a better time. Some examples are 88 Broadway and Orakei Bay Village, both by Equinox Group. At 88 Broadway, Equinox was planning to demolish the existing building on Broadway for a large master-planned development. They then decided to retain the building instead, and have refurbished it for offices and retail. At some point, new plans will presumably emerge for the rest of the site.
At Orakei Bay Village, apartment plans have been put on hold for now, and some old buildings are being refurbished for retail tenants. Putting some work into existing buildings is a lower cost, lower risk development option. It’s like a mild form of land banking: the developer gets a bit of a return off the property, but in the long term they’ll expect to demolish the buildings and put something more substantial there. Ponsonby Central and City Works Depot are also examples of this.
But it’s not all doom and gloom, far from it. New housing projects keep getting announced, and there will be many more to come. Like the ones that came before, developers (and buyers) will have to take their chances as to what goes ahead and what doesn’t.
In many cases, the new launches show the Special Housing Area programme finally bearing fruit – projects like Fabric Of Onehunga, The Victor (Browns Bay) and Station 580 (Kingsland) are all SHAs. They join a large number of SHA projects which are already on the market, with some under construction.
Hypatia, in the second tranche of SHAs and (I think) the first apartment SHA to begin construction, back in Feb 2015. Image source: Bracewell Construction
We’re seeing the first signs of construction on other projects, too. This often starts small, by demolishing existing buildings or doing some earthworks. There’s also a large number of projects which are well underway, unremarked by the media but well covered in places like Skyscrapercity, where builders just keep plugging away towards the eventual completion.
As another sign of what’s coming up, here are the latest figures for building consents. The middle of the year was quite flat (i.e. no growth in consents vs 2015), but that’s coming back up again now.
In total, 9,960 homes were consented in Auckland in the last 12 months. That annual figure should hit 10,000 for 2016 – a bit of a benchmark, and also one of the targets in the Auckland Plan.
The Auckland Plan aims for Auckland to build 400,000 homes in 30 years, or about 13,000 per year. However, it recognised that it would take time to reach this level, and assumed that we’d average 10,000 per year in the first decade (2012-2021). We’re finally hitting that, halfway through the decade, so there’s obviously still a lot of scaling up to do. The target for the second decade (2022-2031) is 17,000 homes a year…
This will be the last “development update” post for a while, as I’ll be off on holiday for a month. The RCG Development Tracker has just been updated and I’ll get back onto things in November. Oh, and one of the updates is that I’ve added in the Northern Busway and (proposed) AMETI busway.
It’s been a pretty big month for office development, with two major new office buildings announced in August. Let’s take a look at the offices popping up around Auckland.
Without a doubt, the city centre is leader of the pack for offices. The rents are higher and the buildings are bigger. I did a post a year ago looking at office development in the city centre; as a quick update of that:
- 125 Queen Street has almost finished its refurbishment, with 15,000 sqm of space soon to be available.
- The buildings at 2-4 Grantham Street, known as “151 Victoria Street West”, “NZME Central” and various other names, are now complete. 17,600 square metres (sqm) of office space, developed by Mansons TCLM.
- One Mill Lane fell by the wayside, and is up for sale by its owners, Mansons TCLM. It could potentially become apartments, but it all depends on what the new buyer wants to do with it.
- Commercial Bay, aka the Downtown Shopping Centre site, is underway, and will add 35,000 sqm of office space in early 2019. The developer is Precinct Properties.
- Precinct is also developing 48,000 sqm of office space across five buildings in Wynyard quarter, with the first stage of 12,000 sqm underway.
- Mansons TCLM are developing 10 Sale Street, with 10,000 sqm of space.
- Goodman are developing 40,000 sqm across several buildings at the southern end of Wynyard Quarter – Fonterra and Bayleys, both finished, and Datacom, due for completion next year.
All up, that’s a whopping 166,000 sqm completed, underway or planned for the next few years, enough space to accommodate at least 13,000 workers (based on Colliers metrics).
Another factor in the city centre, and not as prevalent elsewhere, is older office buildings being converted to other uses – apartments, accommodation or education. As such, the ‘total’ amount of office space won’t increase as much as the figures above suggest.
In August, Mansons TCLM launched a new project in Newmarket, currently known as “33 Broadway” although it will most likely be given another name when it’s finished. A lot goes on behind the scenes – by the time the building was announced in the Herald, Mansons were just about ready to begin construction.
Mercury Energy was already signed up for two-thirds of the space, and the shops in the existing buildings were getting ready to close. Demolition is now underway. The Herald article mentioned that there was 4,600 sqm of space left to lease, which makes the building sound a bit smaller than it is – it’s close to 12,000 sqm all up. That makes it the second largest office building in Newmarket, if I’m not mistaken (Watercare House, also built by Mansons TCLM a few years ago, is a little bigger).
At Sylvia Park, a new office building is just getting underway, with new headquarters for IAG. This is significant in that it’s the first office building at Sylvia Park – in fact, just about the first office building to be built within a ‘shopping centre’ in NZ. This is quite common overseas, and Sylvia Park in particular is poised to become more of a mixed-use hub. The new building is around 12,000 sqm, so a pretty sizeable development.
In the ‘St Georges Bay Rd’ part of Parnell, another major building is underway: 10,400 sqm, and again it’s by Mansons TCLM (as you will have seen, this name comes up a lot in office development!).
Smales Farm is also significant – new headquarters for Vodafone coming in at around 10,000 sqm, and of course the office park still has plenty of room to grow.
There’s also a bit happening at Albany, Highbrook and Auckland Airport, and in the “Southern Corridor” (Great South Rd in the Ellerslie/ Penrose area).
Looking at building consents across the various Auckland wards, 42% of office floor space is being created in the Waitemata & Gulf ward (which includes the city centre). That share rises to 51% when looking at the figures by dollar value.
Consented office space in Auckland, 2011-2016
* Figures for Jan 2011- Jul 2016 inclusive, essentially the entire period since council amalgamation
One key shift in recent years has been buildings with large floor plates (i.e. large sites with mid-rise buildings, rather than narrow towers). Many of the new buildings also have Green Star ratings.
In terms of location, most new offices are going up where there’s good ‘rapid transit’ access – the city centre obviously has this in spades, but Newmarket, Smales Farm and even Ellerslie all have their own high-quality public transport links. This will only become more important in the future: it’s about accessibility.
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.
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:
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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)
The Maritime Apartments
Connect Anzac Apartments
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.
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
The RCG Development Tracker page has just been updated for October, and there’s plenty of new stuff in there. There are a few areas which are getting major makeovers in the next couple of years – Sale St is one, and Beach Rd/ Anzac Ave is similar with three sizeable apartment projects just about to launch (technically they’re only doing ‘expressions of interest’ at the moment, not actually selling the apartments off the plans). That’s The Maritime, Connect Anzac and The Antipodean, all of which are down around lower Anzac Ave. Several hundred new residents and a few new shops could really help to rejuvenate the area, tidying up a few of the more run-down sites in the process.
On a smaller, more local scale, Browns Bay has seen quite a bit of development recently. The Norfolk Apartments were marketed in late 2013, with the building completed in late 2014. The developers bought the neighbouring site as well, and that’s now under construction as The Pines apartments.
Norfolk Apartments, with the site to the lower left now under construction as “The Pines”. Image source: http://truecommercial.nzherald.co.nz/news/property-articles/competitive-price-expected-for-browns-bay-unit/
The Anzac Lofts terraces are currently being marketed, and the former New World supermarket has been designated as a Special Housing Area. Of note, the SHA mentions:
“The proposed scheme has been developed in close liaison with local real estate agents who have identified significant demand, particularly from older residents seeking to downsize and remain in the suburb”.
Overall, that’s about 170 new homes being added to the town centre, which will give it a boost. I’m sure the ‘wanting to downsize but stay in the same area’ point will be on the minds of a lot empty nesters over the next few years.
The Development Tracker also shows some changes at retirement villages in Browns Bay – new units at Aria Bay, and a comprehensive redevelopment of the 55-bed Maureen Plowman Rest Home into a integrated facility with 62 retirement village units and 40 rest home beds.
In retail, there’s a range of things happening – too small to show in the Tracker (I don’t show retail developments smaller than 5,000 square metres), but there’s a brand new New World supermarket which replaced the old one, and the old Palmers garden centre has been redeveloped for convenience shops, and I’m sure I saw another new convenience block somewhere (Inverness Rd? Maybe a local can help me out here).
It’d be great to see this kind of thing replicated around the city, or the country for that matter. I’m sure there would be lots of town centres which would love to see new investments there, whether it’s new homes, new shops or better public spaces.