The expected downturn in the building industry is likely to extend beyond residential construction, with the entire building industry likely to be affected.
Last week interest.co.nz reported that the number of building consents issued for new dwellings in the first quarter of this year was down 21% compared to a year earlier, suggesting a significant downturn in residential building activity.
However the figures for non-residential building work are even worse.
According to Statistics NZ, just 876 building consents for new, non-residential buildings were issued in the first quarter of this year, down 28.7% compared to the first quarter of last year.
That was the first time the number of non-residential consents issued was below 1000 in any quarter of the year since 1992.
The total floor area of new, non-residential buildings consented in the first quarter of this year was 610,176 square metres, down 24.6% compared to the first quarter of last year.
That was the lowest amount of new non-commercial floor space consented in any quarter of the year since 2016 and the fourth consecutive quarter that new floor space consented has been below what it was in the same quarter of the previous year.
Those figures all point to a serious downturn in planned non-residential construction activity once existing projects are completed.
However this may take longer to show up in economic indicators because non-commercial buildings, which include everything from schools and hospitals to offices, shops and warehouses, generally take longer to complete on average than residential buildings.
On the commercial property front the the biggest declines have been in consents for new warehouses and factories.
The amount of new warehouse and other storage building space consented in the first quarter of this year was at a two year low and was down 38% compared to the first quarter of last year.
New factories and other industrial buildings have taken an even steeper tumble, with the amount of new space consented in the first quarter of this year down 57% compared to a the same quarter of last year.
That meant the amount of new factory/industrial space consented in the first quarter (Q1) 2023 was the lowest it has been in any quarter of the year, except Covid-lockdown affected Q2 2020, since Q1 2017.
The slowdown in consents for new warehouses and factories is especially significant because they have been the two most buoyant sectors in the commercial development space, suggesting the strong growth in demand evident over the last few years may be past its peak.
Coming on top of an expected slowdown in residential construction, the figures suggest a significant slowdown is on the way for the entire building industry.
An analysis of building consents which gives average size and average value per square metre for new office, warehouse, retail and factory buildings in each of the main urban areas, is available on our Commercial Building Consent Analysis page.
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24 Comments
However this may take longer to show up in economic indicators because non-commercial buildings, which include everything from schools and hospitals to offices, shops and warehouses, generally take longer to complete on average than residential buildings.
By the time commercial slows down builders will focus back on residential to build enough dwellings to house the hundreds of thousands of migrants needing homes by 2025.
Expensive. Might be a good time to invest in something the new punters can afford: Tent, caravan and garage makers.
Tent, caravan and garage makers.
Favelas? Rio de Janeiro and Sao Paolo have better climate for such living.
The lucky country is showing us the way forward. Rent out your backyard for $130 p/w; those fortunate enough to score this prime piece of real estate should supply their own tent or shed.
We've been hearing about this building slowdown since 2017. I'd be glad when it arrives, just so that we can stop hearing about it.
The squeeze on warehousing created by bloated inventories will dissipate massively over the next 12 months. My 3pl recently sent out an email asking for feedback on inventories as they enter negotations with their landlord, sqm rates are through the roof, I guess if you get caught paying last years rates and your clients are storing less with you the hurt comes on pretty fast.
So many shitty filing cabinet houses being completed in Auckland. 1000's to be completed in the next 4 weeks. Who will buy them?
you need to start reading facebook investor pages. The immigrants will buy them.
do the investers not want to buy them???
Yes, because they are running out of BBQ stories, these are egonomically important. However, immigrants have buckets of cash.
Will be interesting to see what TradeMe rental listings look like in a month or so
How many people entering NZ every week though? 2-3k on net?
Yes, the new slums.
What a lucky well managed country we are!
So why flood the country with immigrants when we have all these and other capable practical people who will be out of work soon?
The government will sacrifice any body and anything to keep the low wage low productivity housing boom ponzie economy going.
Yep. As I have said before, a whole lot of recent migrants working in construction and hospo will be heading home.
Absurd,ey
Cos cuz they don't have to work under a socialist neo Ardernist society
Ease off on attacking our aging socialist pensioners, mate.
Below is a definition of socialism. The last socialist government in NZ was under National with Muldoon. You don't need to like Ardern or Labour, but neither are Communist or Socialist.
Socialism is a social and economic doctrine that calls for public rather than private ownership or control of property and natural resources.
Feck off dude you dreaming!...
Your argument backs up my point bro.
Ardern and Clark between them brought back Kiwibank, NZ railways, among other state controlled s, love the state to controll your lives more than anyone.
Thier motto is " we know what is best for you"! We being the statel
Comrade Ardern liked to brag about her association with Socialist International.
HW2 must be nervous. If he waits 3 months he could build his hi rise for half the price 😉
Layoffs and unemployment card falls.
Not many card holding the " kind house" up !
IMO 2 bedroom units or apartments aren't what NZ needs.
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