Coronavirus: $7.5b NZ building sector could suffer further constraints

Commercial construction could be delayed. Photo / Dean Purcell

New Zealand's already stretched $7.5 billion commercial construction sector could be hit by coronavirus, with one industry leader warning of knock-on effects in this country.

Chris Haines, a director of quantity surveyors Rider Levett Bucknall in Auckland, says: "Absolutely there's a risk to the sector. We would expect some impact but we're not seeing anything specific."

Chinese factory shutdowns could tighten the supply of many types of materials imported from China and crucial to building sites, he says.

Those materials could include facades, steel, aluminium, glass curtain walls, tiles, plumbing and electrical equipment, lighting and bathroom supplies, he says.

"If there are factory shutdowns, it will have an effect," says Haines, although news indicated that some factories in China were re-opening.

"We are starting to hear programme risk being flagged on supply of components on a couple of projects," Haines says, although the delays had not actually happened yet.

"It's also people from the New Zealand building supply chain stuck in either China or New Zealand and not being able to go to China. That may be as disruptive as the materials themselves," he says, adding that he knew of this situation with a facade contractor who worked in the commercial field.

In an article headlined "Construction supply chains at risk from coronavirus", the Australian Financial Review this week reported that building contractors across the Tasman were warning clients of potential delays on projects because of Chinese factories being shut.

China is the source of many building materials used in both Australian and New Zealand projects.

Haines says imported materials, particularly for the finishing trades, "could take a hit. So our concern is what happens to planned construction work and whether it's deferred to future years."

Sectors planning for new buildings could include tertiary education and tourism, Haines says. But whether new construction projects will be delayed remains unknown at this point.

Haines said big commercial jobs might be delayed. Photo / Jason Oxenham

"You're going to get a lot of noise from subcontractors," Haines says, citing the long delays that have already occurred at the $703m NZ International Convention Centre and Precinct Properties' $1b Commercial Bay development in downtown Auckland.

Fletcher Building will release its December 2019 half-year result next week. A spokesperson says: "Our business is not currently impacted, but we are monitoring the situation closely. We have resilience and contingency plans in place to manage any supply chain disruptions."

In Auckland, one real estate chief says her firm could not progress a house sale "because one of the parties is in isolation" at Whangaparāoa.

A person-to-person meeting was needed, she says.

"It's just the way it is. We're just waiting till they come out of quarantine. We have no choice."

Neal Taylor of RLB in Australia says the construction industry there relies heavily on the supply of materials from China. Delays and disruptions to manufacturing and logistics are an "absolute certainty", with workers limited in their ability to return to work and factories in some areas of China expected to stay shut.

StatsNZ says the annual value of non-residential building work consented in the year to December 2019 was $7.5b, up 5.2 per cent from the December 2018 year. The highest value of buildings consented were: $1.1b of education buildings, up 3.1 per cent; $1.1b of shops, restaurants and bars, down 4.4 per cent; and $1b of offices, administration and public transport buildings, up 17 per cent annually.