Dunedin’s building bonanza

Port Otago’s $9.45 million new-build for Steel & Tube in Dunedin. Photo: Gerard O'Brien.
Port Otago’s $9.45 million new-build for Steel & Tube in Dunedin. Photo: Gerard O'Brien.
Dunedin is riding the wave of a $340 million commercial property boom.

All up, $340.9 million has been invested in commercial properties around the city  during the past three years in 21 projects.

There are expectations  a further $80 million-plus is in the pipeline from the health, education, local body and university sectors.

The work started modestly in 2014-15, with the previous year’s value of consented work rising 60% to $37.5 million.

However, it rose 116% the following year to $59.67 million.

Already this current financial year,  beginning July 1,  seven projects are in hand valued at $236 million,  boosted significantly by the university’s $125 million dental school project.

Consent  data for those periods was collated and supplied by the DCC, covering individual commercial building work worth more than $3 million.

Major contractors from Dunedin and others are welcoming the boom, but are aware this is a "top of the cycle" situation and construction remains a tough and highly competitive sector.

Two of the city’s biggest builders, Naylor Love and Amalgamated Builders, believe the biggest issue facing the sector is lack of experienced staff.

Both  companies are still well down on employee numbers following the work slump after the global financial crisis of 2007-08.

Amalgamated Builders Ltd (ABL) managing director Richard Johnston  said for companies and sub-contractors relying on commercial work, the period since

the global financial crisis,  had been "very tough".

"Some moved from commercial into the housing sector for a while. They were tough times for a lot of people," he said.

University work was the "key" to construction in Dunedin, spread between relatively regular annual building work and "one-offs", such as the dental school.Naylor Love Dunedin regional manager Ian McKie said the university was "crucial" for Dunedin’s sector.

However, he believed there was "easily" between $50 million and  $80 million of new work in the pipeline, largely from the health, local body and education sectors during the next three years.

Both companies’ employee numbers are well down on pre-financial crisis period.

"Now the hunt’s on for people," Mr McKie said Invercargill-founded ABL has been in Dunedin since the mid-1980s.

It employs  just over 50 staff at present, including six apprentices, and also has branches in Invercargill, Queenstown and Christchurch.

"The issue for Dunedin will be whether we have enough resources, mostly human resources," Mr Johnston said.

While it had  a large number of staff with more than 20 years’ service, construction was "still a tough game" and the experience of those staff was vital.

Naylor Love, established in Dunedin in 1910, has 420 staff spread between Christchurch, Auckland, Waikato-Bay of Plenty, Wellington and Central Otago.

Mr McKie said there were about 65 construction staff in Dunedin and  that number should be boosted to more than 100 tradesmen, similar to the last building peak.

"The industry’s been sweating it out for a long time; now there’s going to be work for everyone," he said.

Both Mr McKie and Mr Johnston said Christchurch’s rebuild had not created the boom  many predicted,  as it was highly competitive and oversupplied with staff and companies had  to pay  over-inflated rents.

Surprisingly, Mr Johnston was relatively supportive of outside contractors putting in competing tenders, such as the Leighs Cockram joint venture for the School of Dentistry.

"They don’t help our cause, but the [Dunedin] subcontractors and suppliers will pick up some work. Ultimately the industry is better off in general," he said.

Mr McKie said "The reality is the local market couldn’t deliver [with so many projects under way]. It was disappointing — we would have liked to have had the work."

In general, the construction sector’s profit margins were single digit, given the long, flat period since the financial crisis, Mr McKie said.

"Since 2008, there has been a low volume of work — so quiet  for so long," he said.

Unlike the North Island, where up to 95% of work was "subbed out", ABL used the "Southern model", in that it undertook all carpentry and concreting, with about 70% of work subbed out.

simon.hartley@odt.co.nz

 

Big projects

Value of consented projects

2013-14                                     $15m 
2014-15                                     $27.5m 
2015-16                                     $59.67m 
July-early Sept 2016                $236.74m

21 projects — July 2013 to  Sept 9

Amalgamated Builders:  3 projects totalling $18m, including $10m Distinction Hotel fitout.

Naylor Love: 2 totalling $13.7m including $9.2m Commerce Building redevelopment.

Calder Stewart:  2 totalling $9.4m, both for Port Otago.Cook Brothers:  1 at $5m for DCC, botanic garden buildings.

Leighs Cockram JV: 1  $125m Dental School.

SOURCE: DCC

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