Decline in the amount of new retail, office, warehouse and factory space being consented in Auckland

Decline in the amount of new retail, office, warehouse and factory space being consented in Auckland

In what may be an ominous sign for the construction industry there has been a significant downturn in the amount of commercial building space being consented in Auckland.

Statistics NZ figures show that the value of new commercial building consents issued in Auckland dropped from $228.2 million in the first quarter of this year, to $153 million in the second quarter and $146.8 million in the third quarter.

That has been matched by a slide in the value of commercial consents issued as a percentage of the national total, which has fallen from 67% in the first quarter of this year to 48% in the third quarter.

The decline in new commercial space was across all four of the main types of commercial premises - retail, office, storage/warehouses and factories/industrial.

It was most noticeable with retail, with just 10,251 square metres of new retail space consented in the third quarter of this year, about a quarter of what was consented in each of the previous three quarters and the lowest amount of new retail space consented in Auckland since the fourth quarter of 2017.

The figures also suggest that most of the new space consented in the third quarter of this year was for smaller projects, with the average floor area of new retail projects consented in Q3 2019 dropping to 513 square metres, roughly a third of the average over the previous three quarters.

The amount of new office space being consented in Auckland is also down sharply, falling from 37,512 square metres in the first quarter of this year to 14,581 square metres in the second quarter and 13,481 in the third quarter.

Over the same period the average floor area of new office projects consented in Auckland dropped form 1786 square metres to 613 square metres.

Consents for new storage buildings such as warehouses were also down, with 53,913 square metres of new storage space consented in Auckland in the third quarter.

However, that was possibly less surprising because of the very high levels of new storage space consented in the previous two quarters, with a record 178,755 square metres consented in the second quarter of this year and 106,123 square metres consented in the first quarter.

The amount of new factory/industrial space consented in Auckland dropped back to 21,733 square metres in the third quarter of this year from 42,144 square metres in the second quarter.

The downturn in new commercial consents being issued in Auckland may mark a turning point in the construction sector because Auckland has increasingly dominated the commercial premises construction market over the last few years.

In the 12 months to September this year, Auckland accounted 57% of new commercial building consents (by value) throughout the country, including 59% of new retail consents, 54% of new office consents, 53% of new storage consents but just 26% of new factory/industrial consents.

However, if the downturn in Auckland's commercial consents that's been evident over the last couple of quarters turns into a longer term trend it may have a silver lining, by releasing more resources into the residential construction sector, which is still facing capacity constraints.

  • Readers interested in commercial property should check out our Commercial Property Sales page, which has photographs and details of commercial property sales from around the country, including selling prices and yields.

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"by releasing more resources into the residential construction sector, which is still facing capacity constraints."

That's exactly what's happening... the residential construction sector is humming on..

There's going to be a surge over the next couple of months

Great bring on supply and hopefully some price competition as compared to Australia it seems pricing here is off the charts.

Bring on supply and any noticeable decrease in property values may encourage any speculators holding empty homes to also assist with supply.

Many investors and capital gain speculators already seem to be bailing out in Auckland, lots of listings with overseas owners for sale, and lots of rentals (tennant keen to stay on etc.).
Still some impressive flips going on, but at least they actually improve the home. nearly didn't recognize the one below when it popped up for sale.

Before: https://ponsonby.ljhooker.co.nz/ASFGUK/2_6a-kallu-crescent-mount-roskill
After https://www.barfoot.co.nz/property/residential/auckland-city/mt-roskill/...

Don't know what is going on at the back of the house (development I guess), might be a hard sell

Not just the back, there is a pretty run down house directly in front, and then on three sides there is bare scraped dirt waiting for housing NZ development. So apart from the next year or so being nothing but construction noise, dust and construction workers, you'll get high density 2 or three story housing NZ houses all around once they are done.

Looks nice. The fake grass in the photos make me wonder what else they have touched up in photoshop.

Many investors and capital gain speculators already seem to be bailing out in Auckland, lots of listings with overseas owners for sale

It may have been tough in recent months watching their investment value in US$ decline such a lot.

Better for all if these building resources headed to high-demand regions instead of adding to the oversupply of tiny, overpriced homes in far-flung Auckland suburbs.
There is also ample demand for commercial construction in BOP, Waikato, Wellington, HB and Otago.

There's a demand for housing at Auckland, just not for 50sqm apartments at $650K.

Yes and that is the main reason I see residential development falling away. It just doesn't stack up much of the time. It's hard for developers to get prices on apartments much lower than that and still return a reasonable profit.

Releasing more resources into the residential sector?
Nope. Won't be needed. A downturn in that sector is coming.

This doesn't bode well for employment.
Commercial Bay will be finished in a few months, then less pipeline.
At least we have the ' broken windows fallacy' of the convention centre.

SkyCity Convention Centre should drag for quite a while longer.. once the lawyers figure out who is paying for it.

Yep. It is going to be tools down there for a while yet.

We should be taking bets on what is going to finish first - the Takanini motorway improvements, or the convention center.

how bout Commercial Bay? The top of the building seems to have been going at snails pace for a lonnnnnnnggggggg time....

We already know whose going to be paying for it, don't we? And, you, are one of them...

Fletcher shareholders....?

Our whole Building Code is based around the broken window fallacy.

By allowing construction that does not meet today's front end standards for warm, dry, healthy homes, and will require expensive back end renovation in the future ala leaky homes repairs.

The amount of money that has gone into housing through inflated rentier land prices and fixing of poorly built property that could of gone into other more productive areas of the economy, is our economy.

Then we allow the council to be chased for costs of shoddy construction work rather than having a compulsory building industry insurance scheme too. Bit silly. It's impossible to have any code that can fully prevent an industry of dubious character from providing shoddy end results, so why do we insist the taxpayer should be on the hook for their poor workmanship?

Agree that no code can FULLY prevent shoddy results, but the right code can prevent shoddy results becoming the norm.

Insurance is meant to provide cover for the exception to the norm, but when the exception becomes the norm, no insurer in their right mind will provide cover.

Every industry has at least a relative shoddy component variability , but when the legal compliance level is even lower, as it is in NZ, then poor workmanship can still be better than the legal minimum, and therefore is not a crime, a legal one at least. All council can do is make sure the work is carried out to at least the legal minimum, which can still happen with poor workmanship, but either way these two issues are decoupled as to whether the work conforms to basic building physics.

In jurisdictions that have higher standards, their worse legally allowed performer can still be better than our good performer.

We reap the results of the benchmark we set.

The boom in hotel building in Auckland is also nearing an end.
It's going to be interesting to see the migration figures in 4-6 months. I suspect there will be thousands of construction sector workers on visas returning to their homelands.
That's going to place downwards pressure on rents.

Of course all that nasty business confidence data for last few months was all doom and gloom and not reflective of TRUE state of economy.....

Exactly. The gloom was well founded it takes time to filter through.

So what, surely at some point there is enough

It's a good point.
There's a been a big burst of retail, offices, hotels etc.
We will have enough until when we get to the next point in the cycle, maybe 5-10 years later, when we need more.
Assuming the population growth ponzi continues, which it probably will.

The lull could be due to structural engineers all in a panic over professional standards finally being exposed as horribly insufficient in the media over the past few months and pulling back on projects to make sure the calcs actually work?
In anycase, the Waikato Expressway is currently melting and disintegrating in this balmy spring weather, my predictions are for complete collapse in late January 2020 and a rebuild being required. Get into roading!