Developers are racing to bring big apartment projects delayed by lockdown to fruition.
Workers have returned to almost all the projects contacted by Stuff, despite a shake up in the labour market this week by Fletcher Building.
Those expected to open this year include the first of the Alexandra Park apartments, Commercial Bay and the 57-level Pacifica tower building.
According to Colliers International, Auckland has 65 apartment projects (of 10 units or more) currently in play, and any that are underway are expected to finish the job.
But apartments, or hotels, still on the drawing board are likely stay there.
”We will get a washing up of some projects over the next three months where people say because of Covid we’re not proceeding, but I think it’ll be a small number and the rest will deliver three months late,” Pete Evans, national director of residential projects at Colliers International, said.
Covid-19 poses some distinct features from other construction crises.
Fletcher Building, which announced on Wednesday that it was laying off 1000 staff, said productivity on some sites had been affected by social distancing measures.
”We’re working through them. If you take Commercial Bay, before we could have about 1800 people now it’s more like 800 now,” chief executive Ross Taylor said.
Dan Pollard, of Fergus, a software company helping with the industry with contact tracing, said there was also a different economic flavour to this crisis.
“Having run trades businesses throughout previous recessions, this one has been different as job losses and businesses closing happened very quickly upfront,” he said.
”There has also been some financial assistance available to help keep things afloat, unlike the Global Financial Crash where credit wasn’t available.”
There’s also the prospect that the looming recession could change demand or people’s price points.
While foreign buyers can buy certain new apartments, experts say they only account for a small percentage of sales.
So experts say the question now becomes whether the largely Kiwi buyers will be prepared to pay big bucks.
Luxury prices did not appear to hurt The Pacifica over lockdown, which made $16 million in sales, including two $6 million-plus penthouses and generated plenty of overseas interest.
With a starting price of $800,000 Gavin Lloyd, national director of residential projects at CBRE, said Pacifica apartments weren’t cheap but the downtown location and amenities supported them.
Evans agreed new apartment prices would have little room to move because land price margins were an important part of a developers’ bank finances.
However, he felt there could be great opportunity in the affordable apartment space.
In the meantime, the first wave of apartments are due to be rolled out within months.
Some of the city’s biggest construction work is being done along the waterfront on a string of apartments, office blocks and hotels.
Precinct Properties’ Commercial Bay, a 38-storey retail and office block on the waterfront, has confirmed that the project is now set to finish in June.
However, it has deferred work on its $298m Intercontinental Hotel conversion across the road.
Work has also resumed in the Wynyard Quarter. Developer Willis Bond said contractors were on site at its 30 Madden apartment project and early adoption of safety practices had allowed for a smooth transition.
It was on track to complete at the end of the year, ”assuming no further site closures are enforced”.
Also on the waterfront is the nearby Park Hyatt hotel. Developers Fu Wah said health and safety and contact tracing had not had a major effect on site productivity and it hoped to announce an opening date ”in the near future.” Its original opening date was August last year.
Meanwhile, Union Green, an apartment building which suffered hefty delays when Ebert Construction collapsed in 2018, is hoped to be completely finished by November.
Developer Farhad Moinfar of Myland Partners said it was ”full steam ahead” on the site. All but 15 units, about 10 per cent of the total project, remained unsold.
The $300m Pacifica apartment block is 90 per cent pre-sold, and its 35-room hotel is expected to go ahead, but another downtown apartment project, Seascape in Customs St, appears to be on a different path.
Seascape was meant to be the country’s tallest residential tower at 187m high, but the project ran into difficulty with approval for its complex foundations.
Stuff was unable to contact its developers Shundi Customs or the builder, China Construction New Zealand.
Another problematic project is Alexandra Park, a glamorous $300m apartment complex with 250 units near the Auckland Trotting Club.
Residents were due to start moving in last year but construction has been delayed and contractors were changed.
However, it’s believed the second stage will be finished mid-this year, with the first stage following about three months later.
Several apartment projects are underway or on the planning board in the capital. They include Willis Bond’s planned Victoria Lane apartments in Cuba Mall, a 123 apartment complex, with retail and office on its lower floors.
More than 90 per cent of the project is sold and the agent for the apartments, Nicholas Reeve, said he had not heard of any projects being cancelled in the capital.
”But it’s possible some were on the drawing board and they may or may not come to fruition.”
Reeve said Wellington did not traditionally have problem with apartment gluts.
”With Wellington’s topography, there’s a limited supply of stuff. A lot of developments have sold out or sold really well.”
Other projects announced recently include the Wellington Company’s Aroha, an office building conversion to provide one-bedroom apartments for city workers; and Sunset West, a 28 apartment complex by Nightingale Properties.
Meanwhile, Willis Bond has unveiled improvements on another part of its Cuba Precinct, which Victoria Lane is part of.
Based on the old Farmers site, the building has kept its 1913 facade and will provide offices for a large public organisation upstairs, with a mix of fashion, technology and food businesses below.
Could new hotels turn some of their rooms into apartments?
Dean Humphries, a hotel specialist at Colliers, predicts it could take up to five years for the hotel sector to fully recover, in part because of a sheer number of new hotel rooms under construction.
As a result, he said some hotels could convert rooms into apartments for either short-term rent or sale, and projects which could do so would probably be putting in kitchenettes for that purpose.
There was also ”the strong possibility” that serviced apartments would shift into the long-term rental or owner-occupier market, ”as was evident in past economic downturns.”
Humphries expects most of the 27 hotel projects currently on the boil will be finished, providing 4200 rooms.
But a large number of mooted proposals representing more than 3000 rooms would likely be halted for the short to medium term.
These included the InterContinental Hotel in Auckland and the 146 room Mercure Hotel at Auckland Airport.
Colliers’ Pete Evans said the bigger hotel chains generally had deep pockets and time to wait. ”They often look at these things as 30 year plans,” he said.
While developments may be having challenges, one developing area in the post-lockdown real estate market might be land sales.
During the lockdown a key piece of Remuera land sold, at an undisclosed price. The 3.17ha block was the site of a former resthome owned by the Caughey Preston Trust which closed in 2017. Its capital value was $100m.
It is understood the purchaser intends to develop a master-planned residential project on the site.
PROJECTS ON THE GO
* Union Green – 155 units, terraced housing and a 12-storey tower, due November (Developer: Myland Partners).
* Seascape, 81 Custom St. Progress unknown (Shundi Customs).
* The Pacifica. Due at the end of 2020 (Hengyi).
* Park Hyatt, well progressed (Fu Wah/Hawkins).
* Commercial Bay – Due in June (Precinct Properties)
* Alexandra Park – Four-stage $300m apartment complex, 250 units. Second stage due mid-year, first stage 3 months later (CMP Construction/Genellan)
* Lakewood Plaza, Manukau – 15-level apartment building originally set to be completed in 2019. Progress unkmown (Du Val Group).
* Parkside Residences, 138 units in Mt Wellington, first stage due 2021 (Austino Property).
* The CAB – 121 apartments, the old Auckland civic adminstration building, 67 per cent sold (Love & Co).
* Victoria Lane, 123 apartments with retail and office on first four levels. Due 2022 (Willis Bond).
* The Paddington, Taranaki St, $125m, 152 terraced houses (Thames Pacific and Mark Dunajtschik).
* Te Kainga: Aroha, Willis St office block conversion (The Wellington Company).
* Sunset West, 28 Kiwibuild one-bed apartments (Nightingale Properties)
* OTTo, 80 modular apartments (Chris Parkin)