Almost 92ha of new warehouse space consented last year but new retail projects are few and far between

A reasonably strong pipeline of commercial building work was put in place last year, which should keep commercial building contractors busy over the next couple of years.

However, there are ongoing shifts in the type of commercial building projects being undertaken, according to Statistics NZ's building consent figures.

At the top of list, construction of new warehouses and storage building is likely to keep proceeding at pace.

A record, the figures go back to 1991, 919,830 square metres of new warehouse and storage space was consented last year, up by 14.6% compared to 2021, which was also a record.

That is almost 92 hectares of new storage space.

If the amount of new warehouse space being consented each year keeps increasing at the current rate then it will pass the one million square metre mark this year.

The increase in the amount of new storage space being consented is mainly due to the the increasing size of the buildings being consented rather than the number of consents.

Last year the average size of new storage building consented was 1825 square metres, which means their average size has increased by 46% over the last five years.

There is also likely to be a substantial amount of new factories and other industrial building work undertaken this year, with 465,927 square metres of new buildings consented last year.

That was down slightly from the 476,597 square meters of factory and industrial space consented in 2021, but was still a respectable number, with anything over 400,000 square metres of space a year being a significant amount.

As with storage buildings, the growth in the amount of factory and industrial space being consented is mainly due to the increasing size of the buildings being consented rather than the number of buildings being consented.

Last year the average size of new factories and industrial buildings consented was 917 square metres, up 47% over the previous five years.

Construction of new office buildings should also be strong, with 191,741 square metres of space consented, a five year high.

That growth has also mainly been driven by the increasing size of new developments rather than the number of them.

There has also been some staggering increases in the construction costs of new office buildings, with consented costs increasing from an average $2976 per square metre in 2019 to 6224 per square metre last year, which means average costs have more than doubled over the last three years.

Although the construction industry has experienced considerable inflationary pressures over the last couple of years, the size of that increase suggests there has also been a strong movement towards the upper end of the market in terms of the type and quality of office buildings being consented.

The two areas of the commercial property market where new building work is languishing are retail premises and short term accommodation such as hotels and motels.

From 2017 to 2020 the amount of short term accommodation space consented each year ranged from 108,292 to 143,493 square metres, but that dropped away to 57,219 square metres in 2021 and 60,680 square metres 2022.

That is not surprising given the international turmoil that has affected the travel and hospitality industries, which are still finding their feet.

If developers are drawing up plans for major new projects as these industries recover, it appears that many are not yet off the drawing boards.

It is probably also not a surprise that development of retail premises is pretty much in the doldrums, with the industry being knocked about by lockdowns and changes in shopping patterns such as the move to online shopping, probably also one of the major drivers of the record amount of warehouse space consented last year.

Just 177,231 square metres of new retail space was consented last year, the lowest amount of new space consented since 1998. There were just 244 new retail consents issued last year, which was the lowest number since Statistics NZ began the data series in 1991.

With household budgets coming under continuing pressure it's likely that demand for new retail space will remain subdued in short term at least, and that much of the emphasis will be on the refurbishment of existing retail premises.

A regional analysis of commercial building consent trends, which includes quarterly data on average size and average consented cost per square metre by building type, is available on our Commercial Building Consent Analysis page.

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