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The COVID-19 lockdown appears to have had a bigger impact on commercial building projects than residential construction

The COVID-19 lockdown appears to have had a bigger impact on commercial building projects than residential construction

The total value of building work commenced in the first quarter of this year was down 4.2% compared to the first quarter of last year.

According to Statistics NZ's quarterly survey of Building Work Put in Place, $5.853 billion of building work was commenced in the first quarter of this year, down from $6.11 billion in the March quarter of last year and down 10.7% compared to the fourth quarter of last year.

There was $3.806 billion of new residential building work commenced in the first quarter of this year, down 2.8% compared to the first quarter of last year.

Within the residential construction sector, the biggest annual decline was for dwelling alterations and additions, the value of which was down 9% in the first quarter of this year compared to the same quarter of last year.

The value new dwelling construction starts were down just 1.7% over the same period.

There was a bigger annual decline in the value of non-residential construction starts, which dropped from $2.195 billion in the first quarter of last year to $2.047 billion in the first quarter of this year (-6.7%).

The biggest decline was in the value of new educational buildings commenced in the first quarter which was down 25.8% compared to the first quarter of last year, followed by farm buildings -25.7%, retail buildings -16.0%, storage buildings such as warehouses -14.1% and office buildings -11.6%.

Conversely, the value of new starts for hotels and motels was up 16% in the first quarter of this year compared to the same period of last year.

The COVID-19 Level 4 lockdown came into effect at the end of the first quarter of this year, on March 25.

This meant that at least four working days were lost from the end of the month, with activity likely to have also eased in the days leading up to the lockdown.

"Building activity has been generally growing for about eight years, initially driven by the Canterbury earthquake rebuild, then by developments in Auckland," Statistics NZ Acting Building Statistics Manager Dave Adair said.

"The level of activity has flattened in recent quarters, after running at historically high levels for about four years.

"We can expect the lockdown to have a more significant impact on the June 2020 quarter as virtually all construction work stopped until at least April 28 with the move to Level 3 restrictions."

Although 20% of the survey's respondents noted that financial problems were an issue for their projects, 5% or less cited concerns over issues such as limited availability of supplies, reduced productivity, limited availability of workers and reduced market confidence.

In a First Impressions newsletter on the figures, Westpac Senior Economist Satish Ranchhod said although construction activity was springing back, the sector would likely face another significant downturn next year.

"Job losses, stretched balance sheets and nervousness about the economic backdrop will result in fewer new projects coming to market over the coming months," Ranchhod said.

"That will see privately funded residential and commercial building activity falling well below pre-COVID levels over 2021."

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3 Comments

April to June will be worse.

Important to see how it unfolds in last Quarter.

"the value of new starts for hotels and motels was up 16% in the first quarter of this year compared to the same period of last year"

Oh dear. That doesn't bode well.

And this is all before the structural effects of WFH, reduced commutes, excess commercial space, online vs B&M etc, all start to work their wicked ways....