Construction activity in Christchurch may well have plateaued, but rumours of the demise of the earthquake-induced construction boom have been greatly exaggerated, says HUGH DE LACY.
YOU CAN’T DROP $40 billion in insurance and government money on a region of fewer than half a million people without creating a construction boom, even if initially most of the money is spent on urgent demolition and repairs. Once those two phases were completed, new construction would continue to drive the regional economy for years to come.
That would seem to be the wisdom derived from Canterbury’s recovery from the earthquakes of 2010-2011, and rumours that the reconstruction phase has run its course and there’s a rapid wind-down in effect simply can’t be substantiated.
The fact is that while most of the demolition of buildings, and the repair and reconstruction of infrastructure are well advanced, and despite Fletcher Earthquake Recovery (EQR) winding up its $4 billion residential repairs programme at the end of this year, construction is still booming in Christchurch and throughout the Canterbury region.
That’s not to say there isn’t a shakedown under way, and that a lot of smaller companies are dropping out of the game, especially in the painting and decorating niches of the building construction sector.
But according to John Ombler, acting chief executive of the Christchurch Earthquake Recovery Authority (CERA), there’s still growth in overall rebuild construction.
“The forecasts tell us that we can expect peak activity in construction through to about 2017, before an easing expected in 2018,” Ombler told Contractor.
There are, however, variations in the level of activity of the various construction sectors.
“For example, EQC’s [the Earthquake Commission’s] Canterbury home repair programme is largely complete [but] at the same time there is still considerable repair and rebuild happening, and a huge amount of public sector work still in the pipeline.”
This includes schools, tertiary institutions, health facilities like Christchurch hospital, the Metro Sports Facility and the East Frame residential neighbourhood.
“We are about to see the opening of Christchurch’s new $53 million Bus Interchange, and work on the Justice and Emergency Precinct is well progressed.”
Ombler said that overall building consent figures are on “a steady upward trend that we have seen every year since 2012”.
He noted that SCIRT, the Stronger Christchurch Infrastructure Rebuild Team of leading contractors charged with the rebuild of the city horizontal infrastructure, is 70 percent of the way through its work programme.
“Indicators such as economic growth and employment continue to show Canterbury leading the performance of major centres in New Zealand,” Ombler says.
That may well be the case overall, but at the lower end of the food chain there are persistent reports of smaller entities falling over or copping out.
Paul Robertson, the principal of mid-sized construction and earthworks company Civil and Land, based in Amberley, North Canterbury, reckons there’s a slump in the work available for companies like his, which has a permanent workforce of about 20.
He cites the case of the Hurunui District Council, the northernmost of the three districts and the city affected by the quakes, tendering out a five- to 10-year road maintenance contract.
“I’ve never seen so many contractors apply for it: you usually only get two or three like your Fulton Hogans and Downers, but 12 main contractors have applied for this one – which just shows there’s no confidence in the rebuild because contractors are now looking for work in the longer term,” Robertson said.
However, he did cite meeting health and safety (H&S) and compliance measures as a major burden for smaller firms.
Fletcher EQR’s arrival on the local residential scene turned it upside down with its insistence on big-company H&S and compliance standards, and its assigning work to only those contractors and subcontractors who had passed through its induction process.
Even in things like traffic management, small companies are struggling to get employees formally qualified to put out traffic cones, just so they’re entitled to tick the appropriate boxes on the paperwork.
“Everything is bits of paper today, and if you don’t pull your bits of paper out you don’t get started,” Robertson says.
But while painters and decorators might be abandoning Christchurch for the fairer fields of Auckland residential construction, they’re not flooding car yards with secondhand ex-leased utes at Christchurch Airport as one rumour has it.
David Crawford, chief executive of the Motor Industry Association of New Zealand, was quite upbeat when contacted by Contractor.
Sales figures of light commercials are still “staggering” nationwide, having gone up 25 percent in 2013, 19 percent in 2014, and 14 percent in the year to date.
Crawford says luxury vehicle sales, the lead indicator of demand changes for new vehicles – which forewarned of the 2008 Global Financial Crisis by slumping 12 months before it, and afterwards began to recover about 10 months before the rest of the market – were still going strong, up “very slightly” this year compared to last.
And Dion Jones, general manager of Turners Auctions, the country’s biggest motor vehicle auction house, said repossessions and arrears in the light commercial sector were “as low as they’ve ever been”.
This was despite companies “discounting the pants” off new vehicles to encourage buyers to ante up the extra couple of thousand dollars for a new vehicle rather than a used one.
So the shape of the Christchurch rebuild may be changing, and there may be challenges for small companies to adapt to the paperwork requirements of H&S and other forms of compliance, but the volume of work remains high.
Brian Warren, chief executive of Christchurch’s Isaac Construction, summed it up by saying there may have been a drop-off in demand, “but it’s not as if it’s come to the top of a steep curve and dropped off the other side in a steep
“That said, we certainly noticed a drop-off at the beginning of this calendar year. It’s come back a little bit now, but certainly it’s less than it was 12 months ago.”
That most telling barometer of economic activity, employment, bears Warren’s assessment out: Canterbury added 11,900 new jobs in the latest March year, though this was down from a peak of 34,000 added in the year to the end of last September, with most of those increases coming in the construction and food services industries.
*This article was first published in the June 2015 issue of Contractor.