According to the Rider Levett Bucknall (RLB) 4th Quarter 2018 International Report, skilled labour shortages are being seen within the industry across New Zealand.
With historically low investment in technology, plant and training, given the cyclical nature of the industry, shortages of skills and static productivity are some of the contributors to increased costs and project performance.
Growth hampered by capacity and finance constraints
Geoff Speck, Director of RLB in Auckland noted, ‘Despite broad-based shortages in construction workers, the level of construction activity remains high and construction demand remains strong, but growth is hampered by continued capacity and financing constraints, with some developments put on hold given they no longer meet feasibility criteria.’
‘For 2019, we are forecasting construction cost growth of 3.5% in Auckland, 2.0% in Christchurch and 4.0% in Wellington,’ he added.
Auckland infrastructure sector remains active
In the Auckland region there are many large building projects currently in the construction phase. These include the Skycity International Convention Centre, the Commercial Bay retail and commercial development and the redevelopment of the Sylvia Park and 277 Newmarket retail centres. Auckland University also has several large projects underway or in planning.
There is also significant activity within the infrastructure sector, including the City Rail Loop, other significant road and rail projects, and the planned redevelopment of the waterfront public spaces and America’s Cup Village.
Geoff continued, ‘Securing appropriate contractors and subcontractors to deliver projects over NZD 100 million in Auckland continues to be difficult, and project timelines are likely to be compromised. Future cost escalation is forecast at 6.0% for 2018.’
Key projects renew impetus in Christchurch CBD
In Christchurch, several key CBD anchor projects are underway or recently completed, which should give some certainty to the Central City and Cathedral Square area. The Crossing Retail development in the CBD is providing renewed impetus in CBD retail, while the Terraces Hospitality precinct, ENTX entertainment centre and Tūranga – the new Central Library, have all recently opened.
Neil O’Donnell, Director of RLB in Christchurch said, ‘Construction escalation in Christchurch has slowed somewhat, however, there are still various major projects underway. This will continue to put pressure on key trades for the foreseeable future and result in continuing tender price increases. Major and complex projects still see trade-related and extraordinary escalation spikes.’
Wellington construction industry continues to grow
While various larger projects are nearing completion, there are new projects in the pipeline ready to start. Major civil projects north of Wellington are gearing up for commencement of the major concrete construction phase.
This work will continue for the next two to three years impacting resources across the region. Several other large building projects are in the later design phases and are likely to come to market early in the new year.
Grant Watkins, Director of RLB in Wellington noted, ‘Building cost escalation in Wellington continues to outstrip inflation levels by some margin. Subcontract resources are stretched and significant price increases in various trades are being seen due to a lack of competitive tension, rather than market inflation.’
‘Many companies are continuing to experience labour shortages, due to a lack of personnel coming into the Wellington market given the strong construction volumes being experienced in most other regions of New Zealand,’ he concluded.
Download PDF: RLB Global Construction Market Intelligence Report Q4 2018
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