Stats show commercial building on the rise

The volume of non-residential building work has increased for the two most recent quarters.Statistics NZThe commercial building sector is faring better than the house-building business.

Statistics NZ's data out yesterday on building activity for the three months to December showed overall building work fell 6.5 per cent. House-building was worst-hit and down 13.4 per cent but commercial work was faring better, up 1.6 per cent.

Commercial buildings are hospitals and nursing homes, office blocks, factories, industrial, accommodation and education buildings.

The latest rise comes on the back of a 5.2 per cent lift in the amount of commercial building in the previous quarter. "The trend indicates that the volume of non-residential building work has increased for the two most recent quarters," Statistics NZ said.

Last year, $5.2 billion worth of commercial work was put in place, up $188 million or 3.7 per cent on 2007.

Miscellaneous non-residential buildings have been the biggest sector, with that type of construction work up $182 million or 12.7 per cent between the two years. Education and commercial buildings also rose, the data showed.

Accommodation buildings fell the most, down $101 million between 2007 and 2008.

But commercial building's good fortunes might be short term.

Goldman Sachs JBWere investment research director Shamubeel Eaqub said any resilience emerging from the commercial building sector was likely to fade soon, in line with the economic downturn.

He said activity in this sector would worsen in the first half of this year, although the outlook for residential building was much worse.

"While non-residential has been resilient to date, consent data suggests this is likely to fade through the first half of this year. We are optimistic that relatively low vacancy rates across much of the sector will prevent a large-scale collapse, but do not expect any pick-up in activity until demand returns to more normal levels and credit is easier to find," he said.

Activity levels throughout the construction sector was at its lowest in more than five years and that spelled an intensifying risk of big layoffs.

"Job losses are almost certain in the directly exposed construction sector and indirectly exposed sectors such as financial, property and business services, retail and wholesale trade which had benefited from the property boom," Eaqub said.

"Together these segments added 137,000 jobs out of 221,000 total over the past five years and the risk of reversal is high. We expect the unemployment rate to rise from 4.6 per cent to 7 per cent-8 per cent by year end," he said.

ASB economist Jane Turner said the 1.6 per cent quarterly jump in non-residential data was better than expected.

"Following on from the previous quarter's 5.2 per cent increase, the non-residential construction sector has fared comparatively well. Non-residential consent issuance has also remained robust, although given the swift change in the economic climate since October 2008 we expect that some of these consented projects may not proceed."

House building data was less rosy.

The slide in that sector was accelerating, falling 13.4 per cent over last year's final quarter, the fifth consecutive quarter of decline, and now down 31.4 per cent on levels a year ago.

"Given the massive 24 per cent decline in core dwelling-consent issuance over the preceding quarter, we were expecting a very large fall."