Commercial or vertical construction appears to be weathering the current economic conditions well. Or maybe, at the very least, the effects of high interest rates are taking a while to work through.
The value of non-residential building consents is up 13 per cent on the previous year. This could be attributed to the fact that these projects are larger, have a much longer tail, or are more immune to the interest rate rises as owners look through the current short-term high interest rate market. Of course, there is also the effect of construction inflation, amplifying the growth, to consider.
Commercial projects include schools, retirement villages where demand is high, office fit-outs and seismic upgrades (which are required operationally), residential projects (including build-to-rent) setting up for a potential market rebound, student accommodation, social housing, aged care, or other such projects that have found a niche.
Colliers Project Leaders are pleased to be busy in these sectors and amongst over 150 projects around the country are delivering multiple school projects and several large tertiary education projects that will provide better amenity for students, while progressing several vertical residential projects.
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Specific works include the build-to-rent residential complex for Kiwi Property at Sylvia Park, The Foundation Village, a retirement complex in Parnell for Generus Living Group, and the Recreation and Wellness Centre, a multi-storey, multi-use recreation centre for the University of Auckland.
Phil Eaton, Development Director at Colliers Project Leaders, says factors impacting the vertical construction sector are well documented and include supply chain issues, productivity, and cost increases.
Keep an eye on those if you are trying to work out if it's green shoots or a false floor over the coming months. But there are further issues to keep an eye on, Eaton says.
Immigration, regardless of which party wins the upcoming election, now has more relaxed settings, which will stimulate growth. Those immigrants will want to buy and/or rent, stimulating demand for housing and products.
Related to this is the acceleration of the build-to-rent sector. While new to New Zealand, it is well established overseas, and is less affected by the current interest rates, as owners take a long-term view. However, setbacks have occurred with inconsistent treatment on policies like depreciation, and there is one thing that markets don t like and that is uncertainty. This sector likely needs more favourable policy settings to attract international capital.
International students have not bounced back to pre-Covid levels, yet student accommodation is in high demand. An influx of international student numbers would contribute to further construction of more accommodation and educational facilities.
The National Policy Statement on Urban Development is causing the most significant planning changes in decades, enabling more density and height in key areas where demand is high.
This change should ignite some more activity in areas where it was not previously possible. Most of the political parties support the extra height and intensification around rapid transit stations and metropolitan centres, Eaton says, although this may take time to flow through to buildable projects.
- Article supplied by Colliers
