Low-value projects point to bleak outlook for commercial construction

A construction research business has raised concern about the low value of new building projects planned for next year.

Pacifecon, which surveys national building jobs worth $5 million-plus, said the commercial construction sector had, so far, ridden the recession without too many problems.

House building has been hard hit but Pacifecon said next year looked bad for the commercial building sector.

"There is concern at the low total dollar value of the work, especially in the private sector, in the pipeline for 2010," the researcher said.

Last month, 23 new projects were announced and many of those were in the gas, oil and mining sectors.

"Eight planned private sector projects in the upper North Island and South Island combined are estimated - due to estimates of cost not being available - at over $100 million between them, which is not a huge injection into the building sector," Pacifecon said.

"Thirteen private projects out to tender will exceed $315 million total expenditure. The 15 public sector developments just contracted amount to a total estimated [because of estimates of cost not being available] cost in excess of $280 million."

Of the newly planned top-end projects in New Zealand, 15 are private and six are in the public sector.

Regionally, four of the 21 projects are north of Taupo.

Zoltan Moricz of property consultancy and agency CB Richard Ellis, said the market for new buildings was difficult. He has released a research paper on rental income.

"The market for new developments is complex, due to the variances in development costs and economic rents between developers," he said.

Last week, Paul Duffy of DNZ Property Fund told investors in Auckland that tenants expected two months' free rent a year and leasing buildings was getting harder.