Construction boom goes on - and on

Construction in the tourism, office and industrial sectors looks set to push the value of non-residential building towards the $4 billion barrier next year, an analysis of the outlook for key infrastructure projects shows.

A round-up of the country's largest capital works projects shows the $3.6 billion spend-up on non-residential building in the June year is set to increase this year.

Fluctuating oil prices, the rising cost of building materials and wages and a labour shortage are the only dark clouds for the sector.

The New Zealand Institute of Economic Research prepared the Rider Hunt Forecast, examining trends in property and construction and projecting future workloads.

The $3.6 billion spent in the June year was a 12.9 per cent increase on the previous year and will rise again this year.

"This growth rate is approaching those witnessed in the mid-1990s' construction boom," the report said.

The report predicts Auckland and Wellington will see most of the work in the next few months with building activity levels of between 25 per cent and 35 per cent.

The largest infrastructure job planned is Shell's $900 million Pohokura offshore gas project in Taranaki, followed by Genesis Energy's $520 million gas-fired power station at Huntly, expected to be in action by 2008 to 2009.

Wanaka-based Infinity Investments' plans for a new town, Pegasus, 25km north of Christchurch was the third largest project, followed by Kiwi Income Property Trust's $300 million Sylvia Park shopping centre being built in Auckland.

Hotel and motel building was the fastest growing sector for construction and worth $238 million. Driven by 2.1 million guest nights in hotels and motels in the July year, consents for that sector rose 62 per cent in the year to August compared with the previous year.

The institute picked "very robust" activity to continue throughout early 2005, citing new projects which included $45 million redevelopment plans for the historic Spa Hotel in Taupo, Infinity Investments' plans to build a 200-bedroom hotel in Wanaka, a new $20 million Mecure Grand Hotel in central Christchurch due to start in 2006 and the $65 million Holiday Inn in Wellington, due to open in mid-2006.

The next hottest sector was commercial construction ($545 million), up 57 per cent on the previous year.

The biggest deals in this sector include Kiwi's Sylvia Park centre, Capital Properties' $58.5 million project for new a Ministry of Defence headquarters in Wellington and the $54 million refurbishment of the Beehive, due to be finished this year.

Growth in the value of consents for social, cultural and religious buildings ($279 million) rose 35 per cent, followed by factories and industrial buildings ($440 million) up 30 per cent and storage facilities ($339 million), also up 30 per cent.

Most sluggish was the new hostels and boarding houses sector ($64 million), down 52 per cent and the hospitals and nursing homes sector ($183 million), down 18 per cent.

The institute predicted the pattern of growth would continue.

"Consent growth has been particularly strong [and hence construction activity in the next six to nine months is also likely to be strong] in the hotels and motels, offices and administration, factories, storage and the social, cultural and religious buildings sector," it said.

"Annual growth in non-residential building costs will stay at high rates for the next 18 months at least, although we do not forecast quarterly movements to be as strong as those seen at the start of 2004."

Further out, it projected a lull in two years' time.

"Growth will remain relatively high in 2005 before gradually returning to more normal levels by March 2007 as the construction boom eases and the economy grows less rapidly."

Big and expensive

The largest infrastructure jobs planned are:

* Shell's $900 million Pohokura offshore gas project in Taranaki.

* Genesis Energy's $520 million gas-fired power station at Huntly.

* Wanaka-based Infinity Investments' plans for a new town, Pegasus, 25km north of Christchurch.

* Kiwi Income Property Trust's $300 million Sylvia Park shopping centre being built in Auckland.