The first signs of a downturn in construction activity may be starting to appear, with the amount of new commercial building space being consented falling to an almost 30 year low.
According to Statistics NZ, 62,403 square metres of new commercial buildings were consented in the first quarter of this year, down from 93,666 in the fourth quarter of last year and 85,122 in the third quarter.
Although the amount of new commercial space consented was lower in the third quarter of 2020 at 58,682 square metres, consent issuance was unusually low from the second quarter of 2020 to the first quarter of 2021, due to pandemic effects.
However, apart from the third quarter of 2020, the amount of new building space consented in the first quarter of this year was at its lowest level in any quarter of the year since the second quarter of 1993.
If that trend continues, the amount of new building work available could start to reduce dramatically over the next couple of years as existing projects are completed.
The downturn in the amount of new commercial space being consented is particularly concerning because the amount of new industrial space, such as factories and warehouses, remains elevated.
In the first quarter of this year, 392,012 square metres of new industrial space was consented, the largest amount since the second quarter of 2019 and the second highest amount since the first quarter of 2004.
However while industrial buildings usually take up a lot of floor space, they are also usually relatively cheap and quick to build, compared to other types of buildings such as office blocks or hotels.
New industrial buildings consented in the first quarter of this year had an average build cost of $1442 per square metre, compared to $3715 per square metre for retail buildings consented over the same period. So relatively speaking, industrial buildings don't provide as much work for the building industry as other types of projects.
The big downturns in new space being consented have been for office and retail buildings.
In the first quarter of this year just 24,274 square metres of new office space was consented, which apart from the Covid-affected period from the second quarter of 2020 to the first quarter of 2021, was the lowest amount of new office space consented in any quarter of the year since the second quarter of 2003.
The amount of new retail space being consented is also unusually low, with just 38,129 square metres of new retail premises consented in the first quarter.
Apart form the fourth quarter of 2020, that was the lowest amount of retail space consented since the fourth quarter of 2017.
Interest.co.nz's Commercial Building Consent Analysis Page provides a quarterly breakdown of consents issued for office, industrial, retail and hotel/motel buildings, by the total amount of space consented, the average size of projects consented, their average construction cost and their average construction cost per square metre. Separate figures are provided for each region where there is a significant amount of commercial construction activity.
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