Archive | Construction

Home construction remains strong, non-residential slips

Warning: The item below contains a lot of dollar figures & percentages on work completed in the construction sector, hopefully put in perspective.

First, the positive figures for the 12 months through to the June quarter: all work put in place was up $2.6 billion on the previous 12 months to $20.6 billion. Work on new homes was up $1.7 billion to $11 billion, and all residential work was up $1.9 billion to $13.28 billion. Non-residential work rose by $700 million to $7.3 billion.

Work put in place during the latest quarter totalled $5.16 billion – $2.79 billion for new homes, $567 million for other residential work, $1.8 for non-residential.

Now, the percentage shifts.

After strong completion rates right through 2016, building work put in place nationally slumped (comparatively) in the March quarter of this year and growth was low in the June quarter.

Non-residential building work completed in the March quarter was up 5.1% on that quarter in 2016, but fell to 0.2% growth in the June quarter.

Work on new homes rose by 18.9% in the March quarter last year, and then by 26.4%, 27.6% & 24.1% in the next 3 quarters. This year, the growth rate wasn’t sustained but was still positive, falling to 14.8% in the first quarter and to 8.9% in the second.

Those shrinkages took total growth in the first quarter down to 10.9%, and to 4.9% in the second quarter.

On an annual basis, the fall is less visible because the rates of construction are still being held up by the 2016 growth. In the residential sector, after strong growth in 2014 (33.5% in the June 2014 quarter), growth tumbled in mid-2015 to a 9.3% increase in the second quarter and 6.6% in the third. The annual growth rate slipped to 15.9% in the June 2016 year, but rose to 18.4% in the latest 12-month period.

Now, in dollars.

In dollar terms, total work put in place has risen to a new level over the last 4 quarters, from a range down at $3.7 billion in the June 2014 quarter, climbing to $4.9 billion in the June 2016 quarter. Over the last 4 quarters, total work put in place fell just short of $5 billion ($4.935 billion) in the March quarter but was otherwise over $4 billion, reaching $5.157 billion in the latest quarter.

Non-residential work, down at $1.4 billion in early 2015, climbed above $1.6 billion/quarter in 2016, reaching $1.94 billion in the final quarter of the year. This year, non-residential work slipped to $1.68 billion in the first quarter but rose to $1.8 billion in the second.

Work on new homes has been above $2.7 billion/quarter for all the last 4 quarters – $2.8 billion in the December quarter & $2.79 billion in the June 2017 quarter. Annually, that has seen work on new homes rise by $1.7 billion in the last 12 months to $11 billion, and all residential work (including additions & alterations) rise by $1.9 billion to $13.28 billion.

Canterbury winds down, Auckland ramps up

Canterbury’s post-earthquake residential rebuild kept total construction there above $1 billion for every quarter since June 2014, but the total fell to $998 million in the latest quarter.

In Auckland, total work put in place went over the $1 billion mark in the September 2013 quarter, went over $1.5 billion in March 2016 and fell just short of $2 billion ($1.985 billion) in December. This year, it was down to $1.76 billion in the first quarter and back up to $1.95 billion in the second quarter.

Attribution: Statistics NZ tables.

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Housing market share moves away from standalones, but not to apartments

Over the last 5 years, standalones’ share of residential building consents has dropped from around 80% to, in the year to July, just below 70%. The cry from intensification advocates has been “Build up, not out”, so you might suppose the fall in standalones’ market share has been taken up by apartments.

And you’d be wrong. The apartment & retirement village sectors have both been left in the shadow of the suburban townhouses & flats. The demand has been for less garden but still some space, and not too far off the ground.

The statistics don’t differentiate between houses on a full section and cross-leases, but my impression is that cross-leases (including townhouses) are replacing houses on full sections in developments following site aggregation.

These are the shares of consents for houses & townhouses/flats over the last 6 July years:

2012: houses 80.5%, townhouses 6.4%
2013: houses 81.3%, townhouses 7%
2014: houses 76%, townhouses 9.7%
2015: houses 70.6%, townhouses 13.7%
2016: houses 71.5%, townhouses 13%
2017: houses 69.8%, townhouses 15.5%

Apartments & retirement village units shared about 13% of consents in 2012, and about 15% in the last 2 years.

As construction started to grow out of the global financial crisis in 2012, apartments represented only 4% of consents that year, against 9.1% for townhouses.

In the last 2 years, those consent shares rose to 7.7% for apartments and 7.8% for retirement villages in 2016, then to 9.4% for apartments this year, but falling to 5.3% for retirement village units – despite the well publicised growth in the retirement village sector.

More change will occur in Auckland’s suburbs as a result of Auckland Council’s unitary plan replacing all the old zonings, providing for more intensification throughout the suburbs and for taller buildings in & around business centres.

NZ Retail Property Group is developing apartments above its Milford mall and also intends to intensify at Birkenhead, 2 early examples of what will become a trend. On suburban streets, small site aggregations will allow for handfuls of townhouses to be built.

Bolder developers will take on larger aggregations, so you will see bigger developments of townhouses and some apartment blocks, but the focus will remain on adult occupants rather than more space for families.

I’d like to be proven wrong on that point, but I expect it will be some time before we see the US-style condominium developments for family occupancy. The strength of that market in the US, led by large corporate owners, pushed private home ownership down to 62.9% in the second quarter of 2016, the same level it was at in the third quarter of 1965. Ownership peaked at 69.2% in 2004-05. After the 2016 decline, the St Louis Federal Reserve Bank’s index rose to 63.7% in the December 2016 & June 2017 quarters.

Statistics NZ said in 2014, on the basis of the 2013 census, that individual home ownership here fell to 49.8%, down from 53.2% in 2006. In addition, homes owned by family trusts increased from 12.3% in 2006 to 14.8% in 2013, taking the totals in private ownership to 65.5% in 2006, and 64.6% in 2013.

The New Zealand way of doing intensive developments in the last 35 years has been for developers to sell individual units, and construction quality failures don’t seem to have dented the enthusiasm for this kind of individual investment.

The retirement village model could be replicated in the apartment & townhouse development sectors, where a corporate holds ownership for medium-term occupants, but there’s no sign of that happening yet. Developers here still look on development as their function in life, not a develop-&-beyond model.

If we had a more mature sharemarket where long-term thinking was espoused, there would be a natural place for developers & corporate owners of such property, but that, too, is a long way off.

1 September 2017: Consent movement on hold

Attribution: Statistics NZ tables, St Louis Fed chart.

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Consent movement on hold

In Wednesday’s newsletter I wrote: “Figures just released by Statistics NZ – building consents for new homes down 49 in July from July last year at 2762 – a lift in standalone house consents, falls in all 3 intensive housing categories (apartments, retirement village units and suburban townhouses & units).”

The first one relates to standalone housing’s share of the residential market, but I’ve run some statistical comparisons on that in a separate item.

Here are the details from Statistics NZ’s Wednesday release of the July figures:

New home consents up in mixed year

Consents for 2762 new homes were issued nationally in July, the third highest monthly tally this year but below a purple patch of 3 months last June-August.

This year, consents have been over 2700 in 3 months, but were down at 2100 in April, so it’s been a mixed picture.

In those 3 purple months last year, 2752 consents were issued in June, 2811 in July, 2834 in August. The volumes remained high through to December, including 3005 consents issued in November.

The election and constraints by the Reserve Bank & commercial banks have been blamed for a quieter housing period, and a drastic fall in foreign buyers (mostly Chinese) for a decline in the secondary housing market.

Given those circumstances, consent figures close to those of a year ago can be regarded as healthy, but it’s hardly surprising that consent numbers for new homes were up only 4.5% for the year and down 1.7% for the month, led down by all 3 intensive segments of the new housing market.

Annual consent level stuck in narrow band

The 30,404 consents for new homes – only 320 more than for the previous 12 months – maintains the consent level in a band just above 30,000/year, which was reached last October.

The national consent numbers for July and the year to July, compared to July last year, and the latest 12 months compared to the previous 12 months:

Total consents for new homes: 2762 (2811), down 1.7%; 30,404 (29,084), up 4.5%
Total values for new homes:  $1.18 billion ($1.03 billion), up 14.1%; $12.92 billion ($11.75 billion), up 10%
Standalone homes: 1900 (1761), 21,229 (20,790)
Apartments: 367 (425), 2855 (2242)
Retirement village units: 145 (189), 1607 (2278)
Suburban townhouses & flats: 350 (436), 4713 (3774)
Standalone share of consents: 68.8% (62.6%), 69.8% (71.5%)
Suburban townhouses & flats share of consents: 12.7% (15.5%), 15.8% (13.1%)

Auckland residential consents fall 28.8% for month

Consents for new homes in the Auckland region fell 28.8% this July compared to last July, but rose by 4.5% for the year. Consents for the month rose in 6 wards and fell in 7.

Auckland residential consents for July, compared to July last year, and the latest 12 months compared to the previous 12 months:

Region: 774 (1087), 10,051 (9622)
Rodney: 83 (71), 1004 (935)
Albany: 159 (215), 2529 (2250)
North Shore: 38 (18), 516 (502)
Waitakere: 42 (72), 576 (568)
Waitemata & Gulf: 183 (353), 870 (1032)
Whau: 16 (41), 353 (252)
Albert-Eden-Roskill: 14 (55), 800 (525)
Orakei: 27 (20), 255 (366)
Maungakiekie-Tamaki: 34 (16), 482 (388)
Howick: 34 (64), 363 (616)
Manukau: 18 (15), 404 (464)
Manurewa-Papakura: 55 (79), 949 (951)
Franklin: 71 (68), 950 (773)

All construction for July compared to July last year, and the latest 12 months compared to the previous 12 months:
Total: $1.786 billion ($1.675 billion), up 6.6%; $19.53 billion ($18.54 billion), up 5.3%
Non-residential: $576 million ($614 million), down 6.1%; $6.2 billion ($6.3 billion), down 1.5%

1 September 2017: Housing market share moves away from standalones, but not to apartments

Attribution: Statistics NZ tables.

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Top construction achievers all from one company, major awards for Wellington work, scholarships for aspirational projects

Above: Supreme award winner Andrew King.

All 3 young achiever award winners at the NZ Institute of Building on Friday night were from the same company, Dominion Constructors Ltd.

And the winners of the institute’s supreme, innovation & safety awards all won for their work on projects in the Wellington region.

In addition to those special & price category awards, the institute also honoured the convenor of its judging panel, Simon Barnes, and its charitable trust made its inaugural scholarship awards.

The institute awards recognise the professional excellence of individuals in the building & construction process, rather than the project or completed structure.

Supreme award for work on Wellington airport extension

The supreme award went to Hawkins Wellington project director Andrew King for his role in managing the Wellington Airport terminal extension – 6000m2 of combined new build & refurbishment at the southern end of the airport’s main terminal building and the reconfiguration of the airport’s southern apron.

The institute’s judging panel said: “Working within a live airport environment created multiple constraints around access, security, noise & other unique airline requirements. Having to work on a live airport apron meant that workers were placed within 20m of moving aircraft, and worker safety was of paramount importance.

“Due to the extreme operating environment, it was necessary to undertake a significant amount of high risk works out of peak hours. This resulted in nightshifts with up to 70 workers being run across a 22-month period. By utilising the resources & knowledge of the entire team, Andrew was able to deliver a high quality product within an agreed budget & programme.”

Aucklanders collect young achievers awards

James Reed.

This year, as last year, the young achievers awards sponsored by the Building & Construction Industry Training Organisation went to 2 recipients, Dominion Constructors senior project manager James Reed and Dominion Residential project leader Chris Bassett. Another Dominion project manager, Stephen Peters, was highly commended.

Mr Reed began his career with Dominion Constructors in 2007 as a cadet/trainee supervisor and has since undertaken site supervision & project management roles across a range of commercial & civil construction projects, and completed a bachelor of construction management degree.

The judging panel said: “James is Dominion’s youngest senior project manager, and an example of a new breed of construction managers who embrace technology and the advantages it brings to effective site & job management. He is an advocate for building information management (BIM) system and encouraged the company’s other project managers to adopt the technology. As chair of Dominion’s cadet committee, James manages the company’s cadetship programme, which includes 18 cadets.”

Chris Bassett.

Mr Bassett joined the construction industry as a carpentry apprentice straight from school. After a period of self-employment, he worked with a mid-sized company specialising in leaky homes and saw first-hand the results of poor design & workmanship. This provided him with the knowledge & skills to ensure that buildings he’s involved in are watertight. He joined Dominion Constructors in 2011 and within a year was in charge of a $23 million apartment complex.

In 2013 Dominion had identified the growth in multi-residential projects of scale in the Auckland market, and decided to develop specific capability to deliver large residential developments. The company created a residential division and Mr Bassett was part of the new team. He also leads & manages the Dominion apprenticeship programme, which currently has 15 apprentices.

Church restrengthening has ongoing benefits

Kerrin Manuel.

The winner of the innovation award, LT McGuinness Ltd project manager Kerrin Manuel, was driven by budgetary demands (the project was funded by donations & grants) & practicality for the strengthening of the St Mary of the Angels Church in Wellington, a heritage listed building damaged in the 2013 Seddon earthquake. The structure comprises 10 portals, made up of 15m-high archways on supporting columns that hold up both roof & walls. Restrengthening involved new foundation beams, new columns and most of the portals themselves.

The awards judges said: “Given the budgetary constraints, Kerrin developed a quicker & safer way to handle the core job. This involved making the temporary support towers for each portal mobile by adding structural castor wheels. This idea was further developed to become the internal rolling gantry that was ultimately used. Not only was the innovation practical, it cut 15 weeks out of the programme. This innovative approach had immediate benefits for the St Mary of the Angels project, while providing longer-term benefits for the construction industry, as the system can be utilised for other projects.”

It’s not hard, says safety award winner

Sarah McDonald.

Sarah McDonald won the safety award for her work on the $630 million Mackays-Peka Peka Expressway on the Kapiti Coast, delivered by the M2PP Alliance. She was alliance partner Fletcher Construction’s lead operational advisor for the project’s health, safety & wellbeing team and developed a strong safety culture among the teams assembled to deliver the 18km expressway.

The NZIOB judges said: “This was a significant challenge, given that there were up to 600 people working on site at any time. The M2PP Alliance invested $1.5 million into the creation of comprehensive HSW programmes that Sarah developed & put in place. The scale of HSW programmes was immense, with 5100 people delivering over 5 million working hours across the project’s lifetime.

“Sarah not only delivered the extensive induction training, she provided regular toolbox events& information forums, all of which were designed to achieve compliance and to instil a genuine culture change across all teams.

“One of the elements of Sarah’s performance that impressed the judges was that she implemented several key initiatives that could be successfully adapted for use by the wider construction sector.”

Ms McDonald told Friday’s awards function: “A lot of people make health & safety hard. It’s not hard. All we need to do is engage with our people. We used to lose about 20 people/year in 1999, when Site Safe was set up, and we’ve brought that number down.”

WorkSafe NZ statistics show the construction industry has had 39 workplace fatalities since 2010, well behind the 119 in agriculture and just ahead of transport, postal & warehousing (31) and forestry (30).

The construction sector has had 6 fatalities so far this year, the same number as for the whole of 2016.

Ms McDonald also said she’d moved to Site Safe this month to take safety education to a wider audience.

Simon Barnes.

Judging convenor gets award too

Institute fellow & convenor of its judging panel, Simon Barnes, congratulated the award entrants, and was then honoured himself when he received the NZIOB medal, the first time it’s been awarded since 2012.

Mr Barnes, a quantity surveyor, has 40 years’ experience in a wide range of commercial, residential, industrial & retail developments and was awarded the institute medal for his significant contribution to industry practice. He was a director of Davis Langdon and its predecessors for 25 years before its sale to Aecom in 2010. With Scott Beagley & David Doherr, he formed a new project consultancy, Barnes Beagley Doherr Ltd, in 2013.

Category & overall awards (sponsors in brackets):

Supreme award (Gib): Andrew King, Hawkins Wellington project director
Innovation (James Hardie): Excellence, Kerrin Manuel, LT McGuinness project director for St Mary of the Angels Church, Wellington; highly commended, Brett Naylor, Beca digital delivery leader & project director for the Mason Bros building, Wynyard Quarter
Safety (Site Safe): Excellence, Sarah McDonald, M2PP-Fletcher Construction senior health & safety advisor for the Mackays-Peka Peka Expressway, Kapiti Coast
Young achiever (BCITO): Excellence, James Reed, Dominion Constructors project manager; and Chris Bassett, Dominion Constructors project leader; highly commended, Stephen Peters, Dominion Constructors project manager

The winners of the 7 project cost category awards were:

Under $2.5 million (Resene): Excellence, Sam Hill, Hawkins Central project manager for Good Union project, Cambridge; highly commended, Russell Smith, NZ Strong project manager for Auckland Airport project
$2.5-5 million (Steel Construction): Excellence, Greg King, Aspec Construction Ltd site manager & cadet mentor for the Bishop Selwyn Chapel at the Holy Trinity Cathedral, Parnell; highly commended, Scott Crowe, NZ Strong project manager for elective surgery centre link bridge at North Shore Hospital, Takapuna
$5-10 million (Hays Construction): Excellence, David Rayson, Aspec Construction site manager & cadet mentor for a Mackelvie St redevelopment, Ponsonby; highly commended, Ben Tomason, Griffiths & Associates project manager for Hora Hora School batch 11, Whangarei
$10-25 million (Colorsteel): Excellence, Jimmy Corric, with NZ Strong project manager for the Mason Bros building, Wynyard Quarter; highly commended, Anthony Tahana, Hawkins Central site manager for Red Stag sawmill, Hamilton; and Chris Murray, LT McGuinness project manager & quantity surveyor for David Jones department store, Wellington
$25-50 million (Allied Concrete): Excellence, Andrew King, Hawkins Wellington project director for the Wellington Airport terminal extension; highly commended, Aaron Stephens, Fletcher Construction project manager for 133 Molesworth St project, Wellington
$50-75 million (Hilti): Excellence, Tony Kavanagh, Arrow International (NZ) project & design manager for the Rototuna Junior & Senior High School, Hamilton
$75-100 million (Metro Performance Glass): no award
Over $100 million (Aecom): Excellence, John Palm, M2PP Alliance–Fletcher Construction project manager for the Mackays-Peka Peka Expressway, Kapiti Coast

Scholarships to encourage aspiration

On top of the awards for past excellence, the institute’s charitable trust awarded its inaugural scholarships aimed at lifting the construction sector’s sights.

The 2 winners of $10,000 cash prizes are Professor Robyn Phipps from Massey University Auckland and Ged Finch, a post-graduate student from the School of Architecture & Design at Victoria University of Wellington.

Trust chair Gina Jones said: “The trust introduced these awards to encourage aspirational thinking with the potential to advance the design, construction or management of buildings in New Zealand, and thereby enhance the quality of our built environment.”

Professor Robyn Phipps.

The scholarships are intended to encourage recipients from a trade, technical or professional role to pursue a project linked to building through research, practice or professional development. There were 15 entries for the inaugural scholarships.

Intention to advance façade engineering

The trust’s awards panel, 3 past presidents of the institute, said: “Professor Phipps has qualifications in building science & architecture and is internationally recognised as a teacher & researcher in a range of building & construction fields. She’s observed the problems faced by both the designers of new buildings and consenting authorities in assessing building façades to ensure they won’t leak and that they perform all the functions required of modern buildings.

“There are a limited number of façade engineers in New Zealand because there are no home-grown courses of study available, so they have had to obtain their qualifications and experience overseas.”

Professor Phipps, an institute member, will use her award to travel to a centre of excellence in façade engineering, to investigate how to deliver building façade training to suitably qualified building practitioners in this country.

She was highly commended in last year’s institute innovation awards for her project on low cost solar heating for schools.

Aim to cut construction waste at end of lifecycle

Ged Finch.

Mr Finch is a student member of the institute who has a bachelor of architecture studies degree and is completing a master of architecture degree. He has worked as an academic research assistant in New Zealand and for architectural firms overseas, and is researching how best to avoid waste at the end of a building’s lifecycle.

The panel said: “This research is significant, given that some 50% of all New Zealand’s waste (amounting to 1.6 million tonnes annually) is generated by the construction sector. His proposition is that planning & designing for the disassembly of buildings at the end of their useful lives has the potential to greatly reduce the quantity of waste produced.

“The award will enable Mr Finch to conduct fullscale tests of structural & architectural systems that have been designed to eliminate construction waste. This will effectively amount to a ‘real world’ test of those systems.”

To be eligible for an NZIOB Charitable Trust award, applicants must be New Zealand residents or citizens and actively involved in the building & construction industry.

The trust wants to offer these scholarships annually and has begun a fundraising programme so the $20,000 scholarship grants are paid from earnings rather than from capital.

Attribution: Awards, institute releases.

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Readymix production over 1 million m³/quarter again

Readymix concrete production was over 1 million m³ again in the June quarter, after the customary March quarter dip.

Statistics NZ’s production graph shows readymix fell just short of 1 million m³ in the June 2007 quarter, at the start of the global financial crisis, hit a low point in the first quarter of 2009 and stayed there for the next 3 years.

Production rose steadily until it passed 1 million m³ in the December 2015 quarter, then dived sharply in the March 2016 quarter. It fell again in the March 2017 quarter, but less dramatically.

Production in the June 2017 quarter was 1.03 million cubic metres, down 2 percent from the June 2016 quarter (when it was at a record 1.05 million cubic metres).

“Ready-mix concrete production has been running above 1 million cubic metres per quarter for over a year, except in March quarters,” construction statistics manager Melissa McKenzie said. “This June quarter, enough concrete was produced to build almost 69 Sky Towers.”

The Auckland region accounted for over one-third of the total – 377,000m³ of the total 1.03 million m³ in the June quarter. Both the national & Auckland production totals fell 2% below the June 2016 level.

In Canterbury, the 176,000m³ of readymix was down 17% from the June 2016 level.

Production nationally was 4.07 million m³ in the June 2017 quarter, up from a low of 2.64 million m³ in the December 2011 year.

Attribution: Statistics NZ release.

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Christchurch convention centre tender introduces Cimic to major NZ projects

When the Government awarded the $240 million contract to complete the design & construction of the Christchurch Convention & Exhibition Centre to CPB Contractors Pty Ltd last Thursday, few people outside the industry would have been much the wiser. CPB?

Except that, whoever this contractor was, it needed close watching, as the Minister supporting Christchurch Regeneration, Nicky Wagner, confirmed in her release: “CPB has committed to completing construction in the first quarter of 2020 and the Government will be closely monitoring its progress,” she said.

That’s not the kind of public warning you issue to someone you’ve supposedly had sufficient confidence in to award them a very large contract – unless the recent performance of New Zealand’s biggest contractor, The Fletcher Construction Co Ltd, is making you extra-jittery about every contractor. [Fletcher Building Ltd, Fletcher Construction’s parent, reports its annual result Wednesday morning.]

Ms Wagner said work would start soon on what would be “a world-class boutique facility, capable of hosting international conferences as well as community meetings, balls, galas & weddings.”

It will offer options of:

  • an auditorium for 1400 delegates (divisible into 2 700-person auditoriums)
  • a 1250-person banquet hall
  • 14 interconnected meeting rooms for up to 1400 people
  • 4400m² of pre-function spaces for up to 1400 people, and
  • a 3600m² multi-use exhibition hall for 200 exhibition stalls.

“The convention centre will be a cornerstone of the revitalised central city and help bring domestic & international visitors back to the central business district.

“The direct economic benefit of the convention centre is estimated to be more than $320 million in the first 8 years, and $57 million every year after that.

“It’s also expected to increase private sector investment, open up business networks & opportunities and create new jobs.”

The contract was let by Otakaro Ltd, a Government-owned company whose job is to deliver Crown-led anchor projects in central Christchurch and divest the balance of Crown land. The company bears the Ngai Tuahuriri name for the Avon River that runs through Christchurch.

Who is CPB?

As for the main works contractor, CPB changed its name from Leighton last year. The New Zealand company is a subsidiary of Cimic Group Ltd, which is 73% owned by Hochtief AG of Germany, which in turn is now 71.8% owned by ACS Group SA of Spain. Those stakes make the Spanish group 52.2% owner of Cimic.

All are big names in construction internationally, with current heavy focus on major infrastructure projects, especially through public-private partnerships.

Other international contractors have looked at New Zealand but uncertainty over the future order book has been a deterrent.

Attitude talks inclusion

Cimic Group chief executive Adolfo Valderas.

For the Christchurch job, Cimic Group chief executive Adolfo Valderas said: “Cimic & CPB Contractors’ market-leading & cost-effective capabilities in delivering major commercial & social infrastructure position us strongly for projects such as the Christchurch Convention & Exhibition Centre.

“Cimic is committed to delivering this project as part of the rebuilding of Christchurch. The project will deliver a vibrant & world-class piece of infrastructure supporting sustained economic & cultural benefits for the Christchurch community.”

CPB Contractors managing director Román Garrido said: “By utilising our international expertise & local project experience in Christchurch, our team consistently delivers value-for-money design & construction methodologies that ensure quality outcomes.

“We are focused on providing opportunities for local businesses, a socially inclusive procurement strategy to broaden community benefits, and enhancing local workforce capabilities to the benefit of future building & infrastructure projects in the region.”

Business model transformed

Cimic reported a strong first-half result last month and said it would lead to improved outcomes. The company lifted first-half revenue by 28% to $A6.3 billion, net profit after tax by 22% to $A323 million and operating cashflows up $A523 million. It has $A35.2 billion of work in hand.

ACS Group executive chair Marcelino Fernández Verdes.

Group executive chair Marcelino Fernández Verdes said: “The compelling numbers we reported today are a testament, not only to the transformation of our business model which we commenced in 2014, but also to the ongoing drive of our people to improve, innovate & grow.

“Through continually evolving how we deliver projects, we are achieving favourable outcomes for clients, which improves the position of our group to win further work. We have also substantially increased our net cash position, which allows us to better reward shareholders and more efficiently allocate capital.”

And group chief executive Adolfo Valderas added: “By securing new work of $8.9 billion during the period, we have brought work in hand to $35.2 billion – a level equivalent to more than 2 years’ revenue.

“We are in an ideal position to build on our strategy of providing clients with end-to-end solutions – from financing to engineering, construction, mining, operations & maintenance. Doing so will further diversify our income streams and add more recurring revenue through the expansion of our services business with the successful integration of UGL.”

New projects

Among its early scores in New Zealand is the design, construction & financing of a New Zealand schools public-private partnership – a $103 million project for CPB Contractors & Pacific Partnerships Pty Ltd. Cimic is also tendering for major Sydney rail & road projects and the deep tunnel sewerage system in Singapore.

In its half-year report, Cimic said it had won one of Australia’s biggest public infrastructure projects: “CPB Contractors is in charge of stage 2 of the Metro expansion in Sydney. Cimic’s share of the overall contract value of $NZ3 billion is 45%. The trust our customers place in us with major infrastructure projects was yet again confirmed by CPB Contractors’ recent selection as the preferred proponent to deliver a part of the Melbourne Metro tunnel, Victoria’s largest-ever public infrastructure project.”

Cimic Group
ACS Group

Attribution: Company & ministerial release, group websites.

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Construction pipeline report continues to show high optimism bias

The annual national construction pipeline report acknowledges an optimism bias in forecasting, then doesn’t seem to take it into account.

In an election year, in particular, optimism about funding is a critical factor for all construction, but the Reserve Bank has had some success in dampening housing expectations and Australia’s Big 4 banks have been clawing money back to meet regulatory expectations of bank funding strength.

International expectations are anybody’s guess, depending largely on the reactions & impulses of one man, US President Donald Trump.

And a highly important factor in New Zealand construction – the level of immigration – depends on who wins the election. A government led by Labour is likely to see cuts, and a lift in Australia’s mining sector will result in a migration swing back to that country.

Those economic factors don’t filter through to the pipeline report, resulting in an even greater optimism bias this year than in the 4 previous reports.

The report, commissioned by the Ministry of Business, Innovation & Employment, is based on building & construction forecasting by BRANZ, and Pacifecon NZ Ltd data on known non-residential building & infrastructure intentions. It has a 6-year horizon.

Despite the absence of critical factors, the report does contain findings. These are its main 6:

  1. The national forecast shows a higher peak with a longer duration than previously forecast
  2. Dwelling unit consents are forecast to reach a new peak for the next 5 years (34,500)
  3. Growth in non-residential buildings is forecast to continue for longer and to a higher level than previously forecast
  4. Growth in building & construction in Auckland is expected to be sustained for a longer time than in other regions
  5. Dwelling consents in the rest of New Zealand grew 27% in 2016, and
  6. House sizes have plateaued & decreased in some regions in the last decade.

Earlier story:
27 July 2016: $200 billion construction pipeline forecast for next 6 years

Attribution: Pipeline report & release.

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Housing altimeter sticks on 30,000

Consents for new homes exceeded 30,000/year in the 12 months to October 2016, the first breach of that round figure in 11 years, and there the altimeter has stuck.

While a crisis is normally something short, what in New Zealand has widely come to be called a housing crisis has run long – since the immigration spikes of 2003-04.

Construction hasn’t keep up with migrant demand since that spike, and has fallen well short of demand from the natural increase combined with the more recent spike that began 5 years ago after a net outflow of 3191 in the June 2012 year.

Net immigration of 72,305 people in the latest 12 months would require 26,780 extra homes at the national household average of 2.7 occupants.

According to Statistics NZ’s population clock, the population ticked over 4.8 million on 20 July and has since added another 2437 people (post-census estimates). The estimate at 31 December 2015 was 680 short of 4.6 million, so in 19 months our population has risen by 203,000, or 10,700/month, or 128,300/year, requiring 47,500 extra houses (net of demolitions)/year.

Stats NZ now estimates completion rates

Experimental dwelling statistics that Statistics NZ issued today, alongside its regular monthly figures, indicate a completion rate of 86.6% of consents issued over the last 5 years, rising to 88.8% over the last 2 years.

The experimental statistics (which Statistics NZ warns are not final and shouldn’t be relied on yet for decision-making), show 123,222 homes consented since the June quarter of 2012 and 106,746 completions. For the last 2 years, the figures are 58,415 consents, 51,863 completions. On the average of 2.7 persons/household, those completions in the last year would house 140,000 people – about 12,000 more than the net population rise over those 2 years, and excluding demolitions.

But, while the population clock continues to creep up, construction has stagnated. After passing 30,000 consents/year last October, the annual figure dipped below 30,000 in December and, since then, the strongest month was May at 30,645 consents/year.

Reduce it to actual built numbers (and that’s currently an average 10 months after consent is issued, according to the experimental figures), completions would be about 27,200/year – 57% of the required 47,500.

Home number down from May, annual rate stagnating

Consents for new homes dropped from 2794 in May to 2560 in June, taking the annual figure down as well, though it remained above 30,000.

Statistics NZ read the positive in its release: 30,453 new houses, apartments, townhouses & flats consented in the year to June, up 4.7% on the 29,097 in the previous 12 months.

I’ve read it as stagnation since the 30,161 in the 12 months to October, with an upward range of under 500 on a rolling 12-monthly basis since then, and a fall from the top of that range, 30,645 in the year to May.

Statistics NZ prices, accommodation & construction senior manager Jason Attewell said in today’s release: “Annual new home numbers are nearing those last seen in 2004, although they remain well below the all-time peak of the mid-1970s, when consents reached about 39,000/year.”

The secondary residential market in Auckland has softened in response to Reserve Bank measures constraining lending and the exit of Chinese investors who’d been prepared to pay top dollar without question, after unrestrained lending & the Chinese investment clamour pushed the market sharply upward last year and for a short revival this year.

That, in turn, should raise uncertainty in the residential construction markets, as price levelling if not sharp falls becomes more evident.

Suburban flats & townhouses jump again

One change in the overall new-build market has been in the market share of standalone housing, down from 81.1% in 2012 & 2013 to 69.25% in the latest 12 months. Apartment & retirement village consents are more volatile as they’re mostly for large developments, but the share of suburban flats & townhouses has risen strongly over the last 5 years, from 6.1% of consents nationally to 15.8%.

The national consent numbers for June and the year to June, compared to June last year, and the latest 12 months compared to the previous 12 months:

Total consents for new homes: 2560 (2752), down 7%; 30,453 (29,097), up 4.7%
Total values for new homes:  $1.05 billion ($1.08 billion), down 2.9%; $12.78 billion ($11.69 billion), up 9.3%
Standalone homes: 1691 (1863), 21,090 (20,828)
Apartments: 268 (236), 2913 (2261)
Retirement village units: 222 (289), 1651 (2206)
Suburban townhouses & flats: 379 (364), 4799 (3802)
Standalone share of consents: 66.6% (67%), 69.25% (71.6%)
Suburban townhouses & flats share of consents: 14.8% (17.7%), 15.8% (13.1%)

Auckland residential consents fall 1.6% for month

Consents for new homes in the Auckland region fell 1.6% this June compared to last June, but rose by 7.4% for the year. Consents for the month rose in 6 wards and fell in 7.

Auckland residential consents for June, compared to June last year, and the latest 12 months compared to the previous 12 months:

Region: 906 (921), 10,364 (9651)
Rodney: 105 (78), 992 (938)
Albany: 247 (211), 2585 (2270)
North Shore: 45 (70), 496 (526)
Waitakere: 45 (65), 606 (551)
Waitemata & Gulf: 61 (114), 1040 (957)
Whau: 91 (52), 378 (231)
Albert-Eden-Roskill: 160 (50), 841 (499)
Orakei: 12 (44), 248 (374)
Maungakiekie-Tamaki: 20 (24), 464 (495)
Howick: 32 (40), 393 (636)
Manukau: 23 (19), 401 (490)
Manurewa-Papakura: 19 (111), 973 (937)
Franklin: 46 (43), 947 (747)

All construction for June compared to June last year, and the latest 12 months compared to the previous 12 months:

Total: $1.536 billion ($1.847 billion), down 16.8%; $19.4 billion ($18.3 billion), up 6%
Non-residential: $451 million ($739 million), down 38.9%; $6.24 billion ($6.14 billion), up 1.6%

Earlier stories:
7 July 2017: New statistics show 97% of consents result in home
6 March 2017: Auckland above 10,000 home consents/year again
10 February 2017: Smith exultant about figures that are plainly inflated
10 February 2017: Townhouses & flats dominate shift in home styles
19 January 2017: Building consent highs still don’t match migrant demand
7 January 2017: Intensive housing moves further ahead in suburbs
20 December 2016: Consents breach 30,000/year mark
29 July 2016: New home consents top 29,000/year

Attribution: Statistics NZ releases & tables.

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XLam to double cross-laminate production

XLam NZ Ltd announced plans on Friday to install an extra fabrication machine that will more than double production at its Nelson manufacturing facility. The first of 5 expansion stages is scheduled for completion in February 2018.

XLam chief executive Gary Caulfield said the company had ordered a Hundegger PBA 3 computer numerical control (CNC) cross-laminated timber (CLT) machine, which would improve the processing time and increase the volume of timber processed, more than doubling production outputs.

XLam’s first Australian plant, a 12,600m² factory in the 567ha Logic business zone on the outskirts of northern Victoria city Wodonga, is also scheduled for completion in 2018. It’s beside the Hume Freeway, the inland route between Sydney & Melbourne, and is on the Sydney-Melbourne rail & gas lines & main fibre-optic cable route.

Nelson brothers Robin & Ian Jack began the XLam business in 2010, started production in 2012 and began exporting to Australia in 2015 after getting financial support from Queensland timber company Hyne & Son Pty Ltd. Hyne acquired half of XLam in late 2015 and bought the whole company in early 2016.

Link: XLam

Attribution: Company release.

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Councillors air their views, oh, and agree to housing taskforce steering group

It could have taken Auckland Council’s governing body a couple of minutes yesterday to tick off the appointment of a 10-member steering group to ensure the efforts of the mayoral taskforce on housing isn’t lost.

But that’s not the way councillors work. Their habit is to talk about what they want to talk about, not deal efficiently with the business in front of them.

Their questions & debate, for a couple of hours, had nothing to do with who would be on the steering group, didn’t get to grips with the roles of either the steering group or the taskforce, but did venture near some of the direction mayor Phil Goff wants to lead the council on housing issues.

The steering group members, all but one from with the council & council-controlled organisations, will be: The mayor, Phil Goff, deputy mayor Bill Cashmore and 2 councillors, planning committee chair Chris Darby and regulatory committee chair Linda Cooper; council chief operating officer Dean Kimpton, strategy chief Jim Quinn, finance & policy director David Wood from the mayor’s office, Independent Maori Statutory Board chair David Taipari, and 2 senior managers from Auckland Transport & Watercare Services Ltd.

The targets: council process, and central government

The taskforce, on the other hand, drew a wide range of participants from the private sector who identified 2 council-related issues and another which would take considerable negotiation with central government.

The mayor said that if he’d led the taskforce off on some of his pet housing subjects he would have got nowhere: “I had some battles with the minister of housing development [I think that means minister of building & construction, Nick Smith], he didn’t want people there, but we were able to turn him & the Government around, they were able to attend as active participants and they were very active.”

There was a time when relations between central & local government were abysmal, but since the late stages of the last council term Auckland & Wellington have (almost) stopped talking past each other and have jointly confronted a number of issues – though still with a long way to go before regular sensible discussion & resolution occurs.

For instance, Mr Goff said: “Because we don’t have independent revenue, I keep having to go cap in hand to the Government. But the last council, getting the unitary plan through – that gives us credibility to say we’ve got the planning, let’s get on with the infrastructure.”

Topic was steering forward, but talk was about taskforce

The original recommendation before the council yesterday was for the steering group to report to the governing body “periodically”. This was changed to 6-monthly. The mayor talked about the taskforce being brought together again, which he said participants were enthusiastic about. However, that wasn’t up for debate.

The talk yesterday should have been about the taskforce’s recommendations, and who would be best to advance work on them. Instead, councillors commented on taskforce points – fine, but ultimately useless.

The steering group’s primary tasks will be to lead change in council processes that affect housing, ensure the zoning changes resulting from the new unitary plan are effective in opening up more scope for housing development and – the biggest task – negotiating change with the Government.

Jared Boow, housing portfolio manager in the mayor’s office, said in his report to the governing body on the taskforce, it identified 3 key areas where changes are needed to deliver more homes in Auckland:

  1. Remove impediments to the construction sector developing at scale, including identifying investors who can build through the dips to lift construction in the peaks
  2. Unlock the availability of land with appropriate zoning & infrastructure, at the right price, to enable more development, faster, and
  3. Deliver efficient & certain planning, consenting & risk management to reduce costs, enable innovation in construction & delivery and create communities with high quality built & urban form outcomes.

Tactics & systems

Within each category, he said, the taskforce identified a mix of ‘tactical’ interventions that could be done soon, without significant legislative or policy change, and ‘systemic’ interventions that participants believed might take longer to deliver but which would have the potential to have a large & long-term impact on housing supply outcomes.

“In their view, ‘delivering these interventions will require partnership & collaboration between Auckland Council (and its wider family of organisations such as Auckland Transport & Watercare), central government and the development sector’.

“They also point out that focusing on short-term interventions without addressing systemic challenges will not fully address Auckland’s housing supply challenges. They note that their recommended ‘tactical’ changes ‘can help create the platform for deeper policy changes, but are not a substitute for more fundamental change in a market that has not built enough homes for several decades’.”

The taskforce’s report contains 33 recommendations. Mr Boow said 16 of those recommendations were aimed at the council, and work was underway on two-thirds of them.

Among councillor comments & responses:

Cllr Cathy Casey looked for innovative ways to build cheaper housing: “I don’t see that in here [the taskforce report]. My worry is there’s an awful lot in here to do and no prioritising.”

Mr Boow: “One of the first tasks for the steering group is to prioritise.”

Former deputy mayor, Cllr Penny Hulse: “Is the list of to-dos to be done by the taskforce?

Mr Boow: “One thing we didn’t want to do was reinvent the wheel. 16 of the 33 recommendations are aimed at council, two-thirds are work that’s underway.”

Mr Goff said there were 2 fundamental points: “What we didn’t want to happen was to have a report that came out and everyone said, ‘Yep, great ideas’, and then it sat on the shelf. And 2, to ensure there is advocacy to central government. This was a high-powered group and they have said, can we reconvene in 6, 12, 18 months.”

Cllr Hulse: “The missing piece of the puzzle is still the Government & private sector response to this. Was any thought made to appoint an inter-party group?

Mr Goff: “We have asked the Government to appoint a points person to be responsible for liaising with us, and that should be the minister in charge of MBIE (the Ministry of Business, Innovation & Employment). The private sector is a little harder because there aren’t always organisations available. I think the value of the taskforce is the followup that we have agreed to do.”

Cllr Wayne Walker was concerned at the limited nature of what’s on the table: “’Meets the demands of the rate of population growth’ – what are the demands? What hopes do we have of influencing that? Very long-term assets that are normally funded intergenerationally… I don’t know if we’re going to get anywhere, so I endorse the comments Cllr Hulse made about the involvement of the Government in this.”

Mr Boow: “A role of the steering group would be advocacy to government.”

Cllr Walker: “Is this taskforce going to be making some observations around population growth, because you don’t know what you’re going to be responding to?”

Mr Goff: “I’ve got views on demand management & tax, and I wouldn’t have got anywhere with those because they’re not views shared by the Government. We decided to concentrate on things we could get movement on.”

Cllr Richard Hills: “Greenfield tips the balance away from the unitary plan. I think we need to be a little more creative. How are we going to be able to use the Panuku developments better? What can we do to make sure it’s first-homebuyers or affordable housing only, to make sure it’s not just investment properties?”

Council executive officer Megan Tyler on greenfields: “This report doesn’t sit in isolation of any other work you are doing. Rebalancing will be part of the work you do through the long-term plan. I see a great opportunity for you over the next 12 months to decide where the funding of infrastructure is best put.”

Cllr Casey: “One recommendation I don’t think is housing at all and that’s to implement congestion charging. That’s a long way away from affordable housing.”

Mr Goff: “That’s a recommendation of the taskforce. They are what they are. There was broad support for a fuel tax, broad support for a congestion tax. So the reason that it is in a housing report is to enable affordable housing, you need decent transport. There is currently a joint working group between council & government on transport charging.”

Cllr Casey: “This is a wide-ranging remit for a taskforce. The taskforce wasn’t a council report, even a mayoral report.

Mr Goff: “I wasn’t in the position to say no, you can only recommend what we like. It’s not for us to say what should or should not go into this report.”

Casey: “How do we get involvement?”

Cllr Alf Filipaina: “The governing body will end up deciding what we will be pushing for.”

Cllr Bill Cashmore: “We’ve done some of the work already – the unitary plan, the infrastructure shortfalls have been identified and the highlight numbers have been worked through by our staff.

The insufficient builds for many years have probably created a 30,000 shortfall, and that is causing stress. Immigration has also caused stress. We need to know the tools in the toolbox. What we do know is the investment needs to increase if we are to provide more affordable housing and more housing in this city. The financial arrangements we’ve announced in the last 2 weeks I’m not going to take a set position, I want to understand what all the tools are and what the options are. But the decisions to be made by this council? We will make.”

Cllr Hulse – “having lived & breathed housing for the last 6 years and being somewhat jaundiced” – supported putting the mayoral stamp on the taskforce and said it was well overdue: “What I’m hoping is we might end up with a more sophisticated approach. Deputy prime minister, now prime minister Bill English has had reports like this over the last 2 years and there’s been not a lot of action. What are the key changes that would actually change the central government approach to this? The council has almost wrung the cloth dry. But without the Government agreeing to put some serious building targets in place, and what I think is a seriously marginal Housing NZ building rate, if the Government are to make a serious difference they need to make the funding available for infrastructure.

“If we’re going to get houses built we’re going to have to fund infrastructure. We need to change some of the banking methodology and the structure to do that. Developers – how fine many of them are – are there to make money, and good on them. But if the banking sector will not allow that to happen, actually the banking sector needs to assist with that and the Government needs to assist with that.

“But the bit I’m interested in is, who’s going to be sitting around the tables in Wellington. I hope that is what the taskforce is focusing on.”

Attribution: Council governing body meeting.

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