Twenty-Sixteen / Twenty-Seventeen

When reviewing the past 12 months, it’s easy to see why the experts have been hailing it as a great success in most sectors. The economy has been stable, unemployment is low, interest rates are low. We have seen an emergence of start-up businesses in many sectors. Foreign investment is pouring in. That’s all good. sure.

However, NZ is an expensive place. Our housing woes have been well documented. We haven’t enough stock, especially Auckland with Wellington now also under pressure, and we are not addressing the problem fast enough. Prices are teetering dangerously high. Something has surely got to give. I feel someone will be losing out soon. Will it be the ones that are in the market? Will it be those currently locked out of the market? It will be interesting to see How the government responds.

About the Government, The Prime Minister resigned a couple weeks back, so It’s Bill English to the Helm. Having met him a few years back I would describe him as Vanilla. Yes, vanilla in a bad tie. Especially when compared to the outgoing John Key:) 2017 will be an interesting year.

Design and build
The number of major infrastructure projects set-up over the past few years seem to all be coming to a head. We are seeing massive Land Development, Civil and Building Projects right across the country. Occupational Health and safety became far more stringent, adding risk to every business owner. Certainly, a step in the right direction, but OHS is creating many issues, but equally opportunities, dependent on how you view it.

MASSIVE Tremors
Kaikoura got Rocked! Seriously reminding us how life can swing in a new direction, so quickly. We were very lucky this happened at midnight and not midday. The clean-up is underway.

Wellington has been shaken into submission. The Government has one option, and that is to invest massively in ensuring its property portfolios are safe. Commercial business and property owners have no choice but to follow suit. OHS dictates!

We have had some spectacular demolitions, more to come, and a host of refurb work commissioned overnight. Busy times.

The North Island
We have seen new developers, contractors and consultants move into the regions. When was the last time that these many tower cranes were seen on NZ soil? We are also on the Aussie radar in a big way. I have heard of many OZ businesses looking to capitalise on NZ prosperity. The Chinese have arrived too. From what I am lead to believe this is just the start of some very exciting investments from our Asian neighbours in the housing, industrial and commercial building markets.

The Capital
It seems no matter where you look every business describes massive gains year on year. Wellington has some sexy projects for the first time in a long time. All four corners of the city limits are changing shape with alterations to the skyline; An international conference centre; movie museum; hotels; buildings and apartment blocks. Add the Transmission Gully to the few motorway upgrades and extension; the transport sector is humming. Wellington construction has not been this buoyant since the eighties.

The Big Smoke
The Auckland market has gone crazy. They are building massive buildings all over the place; by NZ standards. The salaries demanded are equally nuts. It’s a boom. Let’s hope it is sustainable, but I feel that it is moving too quickly. There is a saying “make hay while the sun shines” many businesses are doing just that. 2017 is looking super sunny at this stage.

Ministry of Business and Innovation report:

  • Auckland dominates the national demand for building and construction, accounting for over a third of all building and construction, by value from 2015 to 2021.
  • Total value of activity in Auckland increased 9 per cent in 2015; this increase in value is forecast to continue and peak in 2018 at $17 billion and to remain above $16 billion for the remainder of the forecast period.
  • The report forecasts 94,200 new dwelling consents in Auckland between January 2014 and December 2021. Dwelling consents are forecast to stay at high levels per year throughout the forecast period.
  • The number of multi-unit dwellings consented each year in Auckland is forecast to continue to increase its share of all dwellings consented, and is expected to overtake detached dwellings by 2021.
  • All non-residential construction in Auckland grew 4 per cent over 2014/15 and is expected to steadily increase by 49 per cent to an elevated level of $7.3 billion in 2018.

The South Island
The Christchurch rebuild slowed down, many contractors have moved out of the region as the residential needs have largely been met. The insurance pay-outs were settled; not always without complaint. Regardless that work has mostly played out its course now, 5 years on from that infamous second earthquake.

Commercially 2016 was a slow start for new work in Christchurch. Many contractors secured their first project well past May. The last quarter when several large projects were awarded. 2017 is looking a stable year for the region. Dunedin and Queenstown especially have seen some massive growth too, which will continue well into next year.

The National Construction Pipeline Report

  • The National Construction Pipeline Report 2016 provides national and regional forecasts of activity in three categories; residential building, non-residential building, and other construction, such as roads and infrastructure, over a six-year period until December 2021.
  • Is one of few forecasts available that compare its results to the previous forecasts. Forecasts are given for four regions Auckland, Canterbury, Waikato/Bay of Plenty and Wellington, with aggregated data provided for the rest of New Zealand.
  • The report is commissioned by the Ministry of Business, Innovation and Employment, and is jointly prepared by BRANZ and Pacifecon (NZ) Ltd. 
  • Visibility of New Zealand’s forward construction pipeline is intended to improve the productivity of the building and construction sector and could help moderate its boom and bust cycle.

    National picture

  • The National Construction Pipeline forecasts from the third report were a good prediction of what happened in 2015, but were slightly high for residential construction, high for nonresidential building, and close to actual for other construction. There is a slight delay in the previously forecast growth for the next six years, but it retains a similar shape, with a smoother longer peak.
  • National construction value has experienced sustained growth averaging 7 per cent per year since 2011, and is forecast to grow to a peak of $37 billion in 2017. This represents a rate of growth not seen in 40 years. These forecasts indicate a 2017 peak that represents 20 per cent ($6.2 billion) more value than at the end of 2015. This peak is 28 per cent higher than the previous peak in 2007, and 59 per cent higher than the low of 2010.
  • The annual value of all construction nationally is forecast to remain above 2015 levels for the duration of the forecast period to 2021. Residential building growth in Auckland accounts for more than half of the total New Zealand construction growth.
  • The annual value of residential building is expected to increase by 22% to a peak in 2017 ($21 billion) and all non-residential construction forecast to grow by 20% to a peak in 2018 of $16.8 billion.
  • Actual data from 2015 shows our forecasts in previous reports have been reasonably accurate. Non-residential building actual data was however significantly lower than the 2015 report had expected. The 2016 report now expects this growth in non-residential building to be more gradual with a later and longer peak ($8.8 billion) in 2018.
  • The national non-residential building forecast continues to grow, however has become a less distinct peak, spread out over a longer term. Contributing factors are deferred construction in some of the Canterbury anchor projects, a number of new university developments nationally, and the continued increase in Auckland non-residential building (such as schools and retail) as new suburbs are established and existing ones expanded. Notable trends
  • Auckland residential building value grew by $0.7 billion in 2015, accounting for 58 per cent of the total national growth of $1.3 billion. Auckland residential building is projected to increase by another $3.3 billion by 2017, which represents 53 per cent of the total national peak of $6.2 billion in 2017.
  • Waikato and the Bay of Plenty combine to form the third largest region, by value of work and are predicted to become the second largest by the next report.
  • Higher density housing increases its share of national residential construction over the forecast period; multi-unit dwelling consents represented 30 per cent of consented dwellings in 2015, and are projected to be 40 per cent by 2021. Auckland’s construction sector is growing at an amazing rate
  • Auckland dominates the national demand for building and construction, accounting for over a third of all building and construction, by value from 2015 to 2021.
  • Total value of activity in Auckland increased 9 per cent in 2015; this increase in value is forecast to continue and peak in 2018 at $17 billion and to remain above $16 billion for the remainder of the forecast period.
  • The report forecasts 94,200 new dwelling consents in Auckland between January 2014 and December 2021. Dwelling consents are forecast to stay at high levels per year throughout the forecast period.
  • The number of multi-unit dwellings consented each year in Auckland is forecast to continue to increase its share of all dwellings consented, and is expected to overtake detached dwellings by 2021.
  • All non-residential construction in Auckland grew 4 per cent over 2014/15 and is expected to steadily increase by 49 per cent to an elevated level of $7.3 billion in 2018.

 

Risks
Who knows what is around the corner. It feels we are all just one disaster away from, well, disaster. The international political landscape is a bit dubious. The housing market is described as the perfect storm for a massive crash. Elevated prices, building restrictions, banks over lending. There are hundreds of events that could derail the current momentum. Let’s hope 2017 is all smooth sailing.

Recruitment
At this stage, it’s all go!! Call me…. No seriously…. Call
staff
http://jdt.co.nz/career-portal/#/jobs

 

Facing a Candidate Shortage in an Industry Boom

This won’t come as a revelation; New Zealand’s construction industry is facing a striking candidate supply-demand crisis. Yes, there is a shortage of skilled staff employers face when looking for hiring new talent to expand their businesses.

As a nation, we’re currently in the middle of the largest construction boom in 40 years, described as ‘unprecedented’ and tipped to last for at least the next 6 years[1].

As the Christchurch rebuild starts to wind down, the flow back has resulted in increased residential demand throughout the country, particularly in Auckland, Wellington and the Waikato. The 2016 Budget has included approx. $358m for construction; namely social housing. Similarly, other commercial and civil work, such as clusters of multi-million-dollar retirement village developments, are well underway throughout our major cities in anticipation for the aging ‘baby boomer’ population.

All of this growth and development activity should provide the perfect opportunity for our construction industry to flourish and grow, but a shortage of staff – and in particular, a shortage of apprenticeships – has created “cut-throat” competition for talent.

But why is this the case when the BCITO lists their largest career-seeking audience as the 406,000 kiwi ‘millennials’[2], with 186,000 of them actively considering their career options right now?

Recognising this abundance of potential talent, the NZ Government has committed $28.6m towards attracting and training more apprentices for trades over the next four years. There is also a particular focus on developing our female workforce who are largely under-represented within the construction industry[3].

Although these studies are directly relating to carpentry and other blue-collar trade apprenticeships, I would personally like to see more females entering Quantity Surveying, Site Management and Commercial Project Management cadetships.

Time will tell whether the Governments directed focus results in a tangible increase in these areas to provide us with a skilled workforce, that will enable our industry can continue to grow from strength-to-strength.

However for now, I think we can be sure of three things;

  1. Employers can continue to expect fierce competition to attract and retain the best talent within a scarce market; and
  2. Employees with the most sought-after skills and capabilities can expect more interest during their job searching experience and potentially, as well as more opportunity to advance their careers and skillset.
  3. On-the-job training programs and public-private initiatives will help ‘close the gap’, but other recruiting and staffing solutions will be increasingly necessary.

[1] http://www.buildersbase.co.nz/#!NZ-Construction-Boom-Tipped-for-next-Six-Years/c1kod/55c126260cf265ef515e7a54

[2] BCITO Annual Report 2015

[3] http://www.newshub.co.nz/politics/budget-funding-for-trades-training-2016051915#axzz49cVwdC00

 

 

Procurement and logistics best practice – NZ edition

Many countries across world have implemented procurement strategies that frankly leave the NZ market seeming two steps behind them. We are seeing a shift in thinking on the topic, and the largest businesses that control construction programmes and supply chain are doing best. With the overall busyness we are experiencing in the industry, arguably more needs to be done to ensure the cost of construction does not skyrocket out of control.

Now I am no Procurement specialist myself, but having spoken to some seriously knowledgeable people over the past few years I see how this skill is becoming ever more important. I found some info published by the Chartered Institute of Building that really breaks down the entire topic nicely for the layperson; https://www.ciob.org/sites/default/files/CIOB%20research%20-%20Procurement%20in%20the%20Construction%20Industry%202010_1.pdf

Procurement and construction logistics is often viewed as part of the engineering process or project management duties, and seldom a standalone discipline. That will change.

Walter Glass of www.corplogistics.co.nz  is clear that this topic needs to be brought to the limelight. He wrote an article recently outlying some of the key points on the logistics topic are found at: http://www.constructionnews.co.nz/opinion/construction-logistics-an-emerging-perspective-by-walter-ass?A=SearchResult&SearchID=9251074&ObjectID=3339179&ObjectType=35

The businesses that are future proofing are developing strategies to buy the right materials, at the right times and the best price through best practices proven the world over. I look at the frightening scenario in the Wellington region, where the major civil projects alone, once in full swing in 2017-2018, will require more aggregate, asphalt, concrete, crane and transport services than actually exist. Add the building industry as well as the needs of Auckland and Christchurch and I foresee a hugely expensive problem for the entire country. That isn’t even looking at lack of tradesmen, engineers, site and project staff required to complete the work.

Those with the most foresight are building the right strategies to minimise risk and develop new methodologies, new materials and new supply chain relationships in the interest of minimising cost to the developers, and meeting the contractual timelines on future projects. Hopefully time is still on our side.