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June-August 2016 | www.propertyandbuild.com
COVER STORY – IT’S ALL ABOUT AUCKLAND Is the time for urban limits over asks Property Council CEO Connal Townsend 6 Scale the key to solve Auckland housing supply says NZCID Senior Policy Advisor Hamish Glenn 8-9 Auckland industrial sector on fire with high tenant demand and low interest rates 22-23 Auckland sales values each new heights 24 Arrivals add 5000 a year to Auckland population with little sign of a slowdown 27 INNOVATION Norwegian zero emission house also provides electricity for the electric car 9 Wireless technology building Brisbane walkway 18-19 PROPERTY DEVELOPMENT $93 million Ponsonby property plays to keen syndications market 10 Queenstown Convention Centre targets 2018 opening after resource consents 16 $3.3 billion Ruakura development projectready for start within a year 21 Alexandra Park urban village gets underway with apartment/supermarket complex 25 Kiwi Property focuses on expansion at Lynmall among buoyant retail centre investments 26-27 INVESTMENT Kiwis take most of commercial proper-
SUPPORTERS Arrow International CBRE
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ty market despite local China hype says CBRE’s Andrew Stringer 12-13 Industrial space 2-3 times more expensive in top 10 cities 17
September conference tackles transport growth and affordability issue 43
LOCAL GOVERNMENT LGNZ president Lawrence Yule searches for funding for the three R’s 38 POLICY Asia Infrastructure Bank set to change the Few surprise with Auckland rail, budgets face of infrastructure investment 14-15 and roads says Evans Young 48 Major changes for infrastructure govern- WATER ance says Local Government Commission- Much of the $45 billion assets in 3 waters er Leigh Auton 20 may need to be replaced says Water NZ 40 ENVIRONMENT Royal Society president Richard Bedford COVER STORY – ELECTRIC CARS LACK says there are many opportunities for NZ to A GOVERNMENT CHARGE reduce greenhouse emissions, the key conGovernment looks for 64,000 electric cars tributor to climate change 42-43 but short on policy to achieve that 52 COMMUNICATION Plenty of economic and environmentally Harnessing internet power earns 90 Secsound advantages for NZ 53 onds Hi-Tech Award award 44 Battery, plug-in and hybrids types and TRAINING & MANAGEMENT styles for electric cars 54 Small spaces are all that’s needed for100 NZ Certificate in infrastructure Procurement a timely flagship says Plan A director charging stations within four years 55 Caroline Boot 45 Norway provides the model but governLiving in the moment brings health, safety ment slow to come aboard 56-58 and fulfilment says People Centric’s Andrea ENERGY Polzer-Debruyne 46 Z programmes help long term fuel security PIPELINE TECHNOLOGY says Chapman Tripp 34 Iplex maintains leading position in pipeline TRANSPORT supply to meet local standards 50-51 Ambitious programme needed for Kiwi Rail and coastal shipping says Green MP 36-37 INVESTMENT Asia Infrastructure Bank set to change the Government warnings about the $1.4 bilface of infrastructure investment regionlion it has stumped up for Kiwi Rail 36 wide 42-43 Auckland urban rail networks earns Kiwi rail a prestigious award 37 Machinetech
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5
C OMMENT
Is the time for urban limits over?
As part of the wider housing unaffordability problem, it is an entirely relevant question – albeit not a new one Do urban limits actually prevent uncontrolled sprawl and help manage growth, or do they exacerbate growth-related problems, such as in Auckland? The Proposed Auckland Unitary Plan will replace Auckland’s Metropolitan Urban Limit (MUL), which defines the boundary of the urban area with the rural part of the region, with the Rural Urban Boundary (RUB). According to Auckland Council, this will achieve positive planning outcomes with efficient urban development while conserving beloved green spaces. It also says the RUB will help with “sequenced provision of infrastructure” to support greenfield developments. Property Council does not believe this will be the case. Imposing superficial restrictions such as urban limits manipulates natural market behaviour, which in turn hampers growth. Such urban limits have had perverse effects on land supply for many years by essentially starving it. Just look at the MUL for hard-hitting history lessons.
According to Grimes and Liang (2009), the MUL’s imposition significantly impacted land prices, with the difference between land inside the boundary valued at 10 times more than land outside it. The Productivity Commission’s own findings in 2012 put land prices at nine times more expensive inside the MUL compared to outside it. Urban limits constrain land supply, as the MUL has been doing since the late 90s. This has significant adverse effects on land and house prices. Market matters To determine where to build houses and deliver infrastructure, the market is the best place for answers because it reacts only to its own forces. The market is a sound and reliable indicator of where people want to live. The market knows everything necessary about demand. That is why when considering supply, developers must be able to freely determine where demand is likely to occur. But
this is currently (and historically) restrained by an artificial boundary. If housing demand lies outside the current MUL or the future RUB, we can say with certainty that such highly interventionist policies will act to restrain land supply even further. The RUB will simply recreate what the MUL has been doing for so many years, which is produce an artificial scarcity of land, ramping up house prices even further. This will continue to distort market behaviour in Auckland’s housing market. Artificial boundaries that choke land supply are counter productive to any growing city. Some good examples were examined at the American Planning Association national conference where urban growth boundaries in the metropolitan regions of Portland, Oregon; King County, Washington; and Denver, Colorado were scrutinised. For all of them, it was found that these urban boundaries are in a constant state of renegotiation and have proven to be flexible. The success of urban boundaries is widely attributed to political support for capping growth and redirecting it to urban centres. This is where redevelopment and intensification are used to alleviate pressure on the boundary borders. Some places even offer incentives for those placed outside the boundary to limit development work. Apartment angst While this may work in some cities, it cannot work for Auckland. Scaremongering campaigns by “Nimbies” has people believing in 25-storey apartments propping up in their backyards overnight. The Auckland Plan outlines the need for 400,000 houses.
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If we want to be realistic about how we house our exploding population, we need to build at least 280,000 within the current boundary. But the solution is not one way or the other; only up, or only out. The solution is both ways: more density, and moderate sprawl. Both will be expensive, and both will include trade-offs. But frankly, we have no choice left. Auckland is still paying for the decades of indecision its legacy councils put it through. It doesn’t have a masterplan and is left with disparate suburbs lacking appropriate infrastructure, wrong housing solutions (mostly too big and expensive for average working professionals) and an existing shortfall of 50,000 dwellings. Housing is now one of our most significant and risky national threats. The market is in a shambles. Young families and professionals have been locked out. This will force our skilled workforce out of Auckland, and is already producing a multiplier effect in other cities with house prices escalating. Everyone must be ready to come to the negotiating table with the mindset to sacrifice for the greater good. That means politicians may lose their seats, baby boomers may lose their views, leafy suburbs may lose their quiet neighbourhoods, but in the end we have a chance of achieving an Auckland that is as close as we can get it to being the “most liveable city in the world.” Connal Townsend is chief executive of the Property Council NZ, which represents the interests of the commercial property investment industry – including commercial, industrial, retail and property funds
CITIES
A plan to solve Auckland’s housing supply problem There’s no hotter topic in New Zealand today than Auckland housing
Auckland needs 13,000 new homes a year to meet population growth of around 40,000 new residents but only 6000 were added last year
What may first appear a local issue is actually in such a state that it’s not only a national problem, it’s arguably the biggest challenge the country has faced since the 1980s. Increasing homelessness, falling home ownership, climbing indebtedness and widening inequality are nightly news bulletins. Whether or not one blames supply or demand, at the end of the day we have more households wanting to live in Auckland than we have houses. Latest Statistics NZ data indicates that over 9000 new homes were consented in the last year. That’s up 15 per cent year on year and from less than 4000 earlier in the decade. That’s good growth, but the consensus is that Auckland needs 13,000 new homes a year to meet population growth of around 40,000 new residents. So we’re still a way off from consenting the number of homes we need, even if we can maintain growth at current levels. 8
But the problem is actually larger than that. Latest data from the Auckland Council shows just 6000 homes were added to the housing stock in the last year – six thousand. In other words, five years after the government launched a Productivity Commission inquiry into housing affordability and four years after it found that supply was the issue, we are producing less than half of what we need in our biggest city (one-third of the entire national market) just to meet present demand. Delivering a surplus to catch up on years of undersupply is not even a pipe dream. Radical steps are required across government and the private sector if Auckland is to avoid housing unaffordability escalating even higher, with all the social and financial risks that such inflation brings. Scale key The prescription is quite simple: scale. We must find ways of getting scale into the Auckland
June-August 2016 | www.propertyandbuild.com
residential construction sector. Scale brings production efficiencies, which lower per unit construction costs. Scale increases competition, both to the materials market supplying houses and to the real estate market delivering houses. And scale is what we need to roll out thousands of new homes per year. How do we get scale? Some notable foreign developers with the kind of large balance sheets needed to deliver thousands of homes over two or so decades have been put off New Zealand by previous experience here, which is not helpful. Mixed messages, lack of scale, absence of pipeline and hesitation at bringing projects to market have soured some global providers. If we want to attract global resources away from their home markets, we have to make doing business in New Zealand easier. We can attract them back and help foster our domestic industry
with a visible pipeline of large development opportunities. Oneoffs are not going to cut it, and neither will our history of 30 or even 300-unit developments. We need multiple billiondollar-plus opportunities which incentivise industry to invest in housing production and scale up to meet need. The only way this can happen is if the government and Auckland Council team up with private partners. Land must be aggregated and zoned to provide major developers with the confidence, certainty and flexibility to deliver multi-thousand home programmes. Small land parcels with fixed zoning permissions inhibit scale and the ability of developers to meet the market. The council cannot take on more debt without compromising its credit rating, so someone else’s balance sheet will be required to fund the infrastructure needed to support growth. Developers are used to covering the cost of local roads and
pipes, but the council is not in a position to fund out-of-sequence core infrastructure. Private parties Unless the government is willing to step into the breach to get some traction on housing construction, and so far it has said it is not, private development parties are going to need to debt-fund core infrastructure as well. If aggregated land has been acquired at the raw, uninflated value of land outside existing metropolitan limits, the increased value which comes with rezoning could be captured by the developer and used to offset core infrastructure costs. The tender process used to
select a preferred development partner could then be based around the right to develop land valued at below current market rates. The risk with this approach is that it may not result in substantially more or cheaper housing because in order to cover additional infrastructure costs the developer will need to manage the flow of new properties to keep prices high. An alternative, therefore, could be for the council to levy a targeted rate for a period of, say, 30 years on the development area. The rate would be a direct payment to the private partner, who would raise the capital required to fund development on financial markets, and debt would sit off
the council’s balance sheet. Rights to develop land and receive the targeted rate income would be contingent on minimum supply agreements, for example, 2000 homes per year. The council and government could write as many contracts like this as required to deliver 13,000 homes per year indefinitely, and give the development market confidence that New Zealand has a housing pipeline worth investing in. Pockets of large aggregated land holdings could be gradually opened up to the market at 2-5 year intervals along the rail corridor between Papakura and Pukekohe, for example. Construction of rail stations could be tied to the development
contract and used to facilitate dense development close to public transport. Single level-dwellings could be delivered further from the rail line, providing the range of housing typologies people want, while not consuming excessive agricultural land. With a clear pipeline, access to sizeable land holdings and cooperation across different parts of the development sector, the issues across Auckland’s housing sector can be resolved. But we must act today and we must be willing to do things differently. Hamish Glenn is senior policy advisor at the New Zealand Council for Infrastructure Development
Zero house provides plenty of pluses A Norwegian architecture firm has created a zero emission house that produces pluses – not the least excess energy. The ZEB Pilot House created by Snøhetta in conjunction with the Research Center on Zero Emission Buildings produces enough energy to drive an electric car for 12,500 miles. Most of this energy is generated through the solar panel roof, which is tilted at a 19-degree angle towards the southeast to capture as much light as possible. A 45-degree angle would have actually been the optimum position, but the architects felt that would have made the house “cartoonish” in scale and difficult to build. However, the tilted roof can be modified and applied to other buildings in new orientations – southern hemisphere homes, for example, would need to tilt north. Buildings with different functions might want to capitalise on certain times of day – for example, an office building would need to harvest more electricity during the day when the computers are running. The ZEB house also makes maximum use of connected home gadgets as solar energy is most efficient when used in real time – when panels are harvesting electricity. Turning on the washing machine using a smartphone while at work, for example, means the house can power itself off available daylight, rather than stored energy. Similarly, smart thermostats can conserve electricity to optimise heating when families are home – especially when used with a heat exchange system connected to the home’s grey water recycling system. Internally, the ZEB Pilot House includes a series of organic, energy-saving touches such as beeswax-laminated aspen wood in the bedrooms, the wax reacting with natural moisture in the air to help keep the room temperature steady. The concrete and bricks supporting the solar roof came from the
Internet and can naturally trap heat and cool air, conserving some energy from the house’s heating and cooling system. The house employs several passive design strategies, renewable energy sources and reclaim technologies, and is very well insulated with an extremely airtight building envelope that provides maximum comfort in cold, wet climates. It employs a single geothermal well at 100m depth coupled to a heat pump, providing around 80 per cent of the waterborne heating requirements; the remainder made up of solar collectors and heat energy reclaim. There is also an alternate 150-metre earth circuit at one metre depth, providing similar efficiency. All this innovation comes at a cost, however. The ZEB Pilot House costs about 25 per cent more than ordinary houses, but the excess is recoupled relatively quickly given the longer life cycle and associated fuel savings. June-August 2016 | www.propertyandbuild.com
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PROPERT Y SYNDICATION
Landmark Ponsonby building up for syndication Colliers International’s syndications division is marketing the Cider building in Ponsonby for proportional ownership. Investors now have the opportunity to own an interest in the Cider building in Ponsonby, Auckland, which is anchored by a 20-year lease to General Distributors, with additional tenanted commercial space and street level retail. A total of 50 interests of $1 million each are available to wholesale investors for the 13,200sqm mixed-use retail and office development on the corner of Williamson Ave and Ponsonby Rd through Oyster Property Group in conjunction with Colliers International’s syndications division from mid-April. The building has been developed by Progressive Enterprises and was purchased by Oyster Property Group for approximately $93 million. “This property’s key point of difference is the tenant mix, which consists of bulk retail, commercial and specialty retail,” says Colliers International’s syndication investments national director, Tim Lichtenstein. “This provides a diversified income, further strengthened by the tenant covenant, long weighted average lease term, structured rental growth and a projected pretax return of 7.5 per cent per annum - making it a
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suitable candidate for a proportionate ownership scheme.” The property comprises a new 4,000sqm supermarket, 8,000sqm of office space across three floors, 11 specialty retail tenancies over 900sqm along both Williamson Ave and Ponsonby Rd, as well as around 520 carparks. The ownership scheme is structured to provide investors with monthly cash returns without the burden of private property ownership. As manager of the scheme, Oyster Property Group takes care of and accounts for all of the day to day management aspects of the scheme on behalf of investors. “All the boxes are ticked, including national brand-name tenants, a brand new building and an outstanding Ponsonby location surrounded by a variety of strong commercial operators and a sought-after residential catchment,” says Lichtenstein. Cider is leased to General Distributors (Countdown) on a new 20-year lease, Fairfax NZ on a 12-year lease and additional convenience retail tenants. Some of the commercial office component is not yet leased; however if the building is not 100 per cent leased on settlement, the vendor will underwrite the rent payable for any remaining space. “Countdown is the largest single supermarket chain in New
June-August 2016 | www.propertyandbuild.com
Zealand in terms of number of stores, with 183 stores nationwide serving 2.5 million customers every week, and a subsidiary of Progressive Enterprises. “Supermarkets alone are considered an exceptionally resilient asset class due to their very nature in providing food necessities – as well as their strategic location in key residential catchments such as Ponsonby,” says Lichtenstein. Unique aspects about the opportunity include the fact a relatively limited pool of investors will be purchasing interests in a new build property featuring prominent tenant profiles in a location that cannot be repeated, Lichtenstein says. “The Cider building is part of a wider $200 million project, which also includes the Vinegar Lane precinct of architecturally-designed residential and commercial lots.” According to Charlie Oscroft, Colliers International’s sales and syndications director, properties on Ponsonby Rd generally are highly sought after and hold ‘prize’ value. Ponsonby Rd itself is a huge hub - approximately 1.7km in length that intersects with 31 side streets – and is used by pedestrians, cyclists, motor vehicles and buses, with an average 28,000 passing vehicles. “The population of Ponsonby and its surrounding suburbs is also expected to boom over the next two decades (from 12,636 residents to 18,650), furthering strengthening investment in commercial property in the area.” Mark Schiele, Oyster’s CEO, says the multi-investor ownership structure will ultimately be the largest which Oyster has created to date. “Cider is an outstanding mixeduse development which has been extremely well executed by Progressive Enterprises in terms
Mark Schiele of its design fit in the Ponsonby area. As a ground-breaking development project in Auckland, it made good commercial sense for Oyster to acquire the property and to create an investment structure for it.” Schiele says property ownership structured for wholesale investors continues to be an important part of Oyster’s property and funds management business, alongside public syndication offers, the company’s recently announced Oyster Direct Property Fund and management mandates from institutional and private property owners. “Oyster has significant experience in sourcing quality commercial property and structuring appropriate ownership vehicles for investors. Through tailoring unique investment structures, we are able to optimise investor returns and wealth whilst remaining highly tuned to the inherent risk profile of each investment.” Oscroft says the syndication space in New Zealand generally is experiencing high demand for quality investment products which this offer meets in all respects. “Demand for syndicated properties is exceeding the number of offers coming to market,” says Oscroft. “With syndications offering competitive returns compared to alternative asset classes, it’s an attractive time for investment in this area.”
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INVESTMENT
Chinese property purchases According to CBRE, Chinese investors are more interested in the US, Australia and the UK while Kiwi investors are the most active in the local commercial property market. “While some are fixated on Chinese investment, our research shows that of a total US$15 billion of Chinese external global property investment in 2015, New Zealand saw one per cent of that total. That compares to 30 per cent going into the US, 24 per cent into Australia and 12 per cent into the UK,” says Andrew Stringer, CBRE NZ’s national director of Capital Markets. But, led by active Kiwi investors, the boom in commercial property investment (2015 saw more commercial properties in New Zealand bought and sold than even before the GFC) is set to continue, says Stringer. CBRE’s global research shows international investors intend to spend more than US$1 trillion worldwide on property in 2016, of which New Zealand will get “more than its fair share”. CBRE NZ research shows the second half of 2015 provided a strong increase in the number and value of commercial transactions in New Zealand, with 136 properties changing owners at a total value of $2.8 billion - a record number of properties sold in a six-month period. Auckland led the way with 99 sales over $5 million each in value, totalling just over $1.7 billion. Wellington had 17 transactions totalling $682 million and Christchurch 14 sales totalling $212 million. “Kiwi investors are flexing their muscles,” says Stringer. “Private New Zealand buyers were the most active group over the past six months, 12
June-August 2016 | www.propertyandbuild.com
making up 44 per cent of transaction volume. They also showed a strong presence on the vendor side, with 54 per cent of total transactions attributed to them.” Offshore players were net sellers over the six months, selling NZ$1.15 billion worth of property in the second half of 2015. Australia was the most active offshore purchaser and vendor, selling $595 million worth of property, although purchasing NZ$844 million in the second half of 2015. The UK, USA and China were next most active in the offshore investment market. On China, Stringer says: “China is to a degree playing catch-up in recognising commercial property as a vital component of investment portfolios because of its relatively stable nature, lack of volatility and relatively low risk returns. “It has a massively increasing middle class with a strong appetite for retirement and insurance products that in turn require annuity-type income streams property can provide. Chinese demand is expected to continue to grow, short of any local policy changes.” Stringer adds that although economic and political stability are attractive attributes, investors are attracted to New Zealand markets by strong property fundamentals. New Zealand’s market is in step with global trends and, in a globalised economy, investors are more than ever focused on gateway cities. “They are cities of international standing. Places with a growing
There has been a significant increase in interest from Chinese investors (from Beijing predominantly and then Shanghai, Guangzhou, Shenzhen and Tainjin). According to Sam Yin, CEO of Hougarden.com, traffic increased 22 per cent in March and 13.7 per cent in February. Auckland is their favoured destination, followed by Christchurch, Hamilton, Wellington, Tauranga, Dunedin, Lower Hutt, Palmerston North, Queenstown and Rotorua, the Hougarden analysis shows. The majority, or 75.24 per cent of the Chinese, are searching under the residential category, followed by rental (10.64 per cent), rural (7.96 per cent), business for sale (2.74 per cent) and commercial (3.42 per cent).
population and increased investment in infrastructure and where it is efficient and transparent to do business, translating into solid investment performance,” says Stringer. Auckland is more than ever viewed in that context and, as an investment destination, is now fairly seen as equivalent to any city in the world, albeit it a small marketplace. “The city’s growing population and maturing critical mass means the CBD has already been recognised as a destination by international luxury and fast fashion retailers - one example of the confidence being shown. Also, a record three million visitors came to New Zealand last year, 70 per cent arriving into Auckland,” points out Stringer. With local government’s drive to create the world’s most liveable city and money going not only into public transport development but also many development nodes around the city, Auckland’s status is only set to grow, he says. “The high volume of investment sales over the past two years shows interest is now sustained. This is not driven by easy credit or lax investment rules, but sound long-term population growth expectations, stable economic outlook and genuine liquidity,” says Stringer. “New Zealand remains attractive to global investors, thanks to a blend of ongoing economic expansion and a relatively moderate new supply pipeline, plus comparatively high yields in a global context. Real estate’s combination of defensive ‘inflation-linked asset-backed bond’ characteristics and upside potential due to rental growth continues to look attractive.” Looking ahead, Stringer says likely drivers of investor sentiment will be external though still focused on property fundamentals: “China’s economic performance, US elections and European and UK referenda may all come into play. Our market feedback is that current noise around US elections is largely at social levels, not business levels, so no dramatic shift is expected in investment sentiment in offshore markets. “Essentially, we see the current level of investment activity and interest in New Zealand is here to stay, subject to normal cyclical shifts. “New Zealand has world-class investment stock and is firmly on the radar of sophisticated international investors. With US$1 trillion seeking opportunities globally, New Zealand delivers the fundamentals to capture more than its fair share.”
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ASIAPACIFIC
Asia’s coming infrastructure boom
A slew of current and planned projects could transform the face of the region beyond recognition
Progress is well underway on the Jakarta Mass Rapid Transit (MRT) project, which will cost in excess of $3 billion and be fully completed by 2030
Asia is set for a huge infrastructure boost that has the potential to revolutionise the continent, a leading international observer believes. “It could catapult some of the poorest economies in the region to the top of the list in terms of business investment,” says Jeremy Sheldon, Managing Director for Markets, JLL Asia Pacific. The region has the advantage of developing modern infrastructure first time around rather than having to adapt old, outdated systems and facilities. For example, cities such as Bangkok that were buckling under snarled road traffic have added modern mass-transit rail systems to ease the pressure and other capitals such as Jakarta are about to follow suit. Traffic congestion costs Jakarta at least US$3 billion per year, Indonesia’s transportation ministry estimates. “So long as Jakarta doesn’t have a decent rail-based mass transportation system, we will always be congested,” admits Jakarta’s Governor Basuki “Ahok” Tjahaja Purnama. It is needed desperately: between 2000 and 2010, the city’s population rose by 19 per cent to some 10 million but the city’s area increased by 30 per cent. Only 35 per cent of Jakarta’s 14
working population actually live in the city itself – some 1.4 million commute daily into the city. All of that is set to change under new infrastructure plans for new toll roads, a railway line linking the airport and the city, and a light rail. “The net effect will transform Jakarta into a liveable city on par with Tokyo,
west corridor. Phase one of the north-south line is already under construction and is expected to be operational by 2018. Meanwhile, phase two of the construction is expected to start just before the completion of phase one and is targeted for completion by 2020. The feasibility study for the east-west line is in progress, with construction expected to take place between 2024 and 2027 at the latest. An airport connection, planned to open in 2020, would cut travel time to 30 minutes and allow travellers to check in downtown. Separately, six new toll roads are also due to open by 2020,
Singapore and Hong Kong,” JLL Indonesia Managing Director Todd Lauchlan predicts. “From an underperformer, the city can lift itself well and truly into the 21st century.” The Jakarta Mass Rapid Transit (MRT) project, which will cost in excess of $3 billion and be fully completed by 2030, aims to reduce congestion, improve quality of life and boost economic growth; not only in Jakarta but also across Indonesia. The complete MRT Jakarta project will stretch more than 110km and consist of two main lines: one north-south stretching 23.8km and an 87km east-
covering 72 kilometres, crossing the city like veins and pumping lifeblood into downtown. The benefits of these infrastructure improvements should be significant for Jakarta and Indonesia as a whole. “Indonesia is behind neighbours such as Thailand and Malaysia in its urbanisation, which commentators say holds back growth,” says Laughlin. Indeed, a recent Goldman Sachs report calculated that Indonesia’s GDP would be 40 per cent higher if it had matched the development of its neighbours such as Malaysia, the Philippines and Singapore.
“The Asian Infrastructure Investment Bank will lend to projects involved in everything from energy and power, transport and telecoms to rural infrastructure, water supply, environment protection and logistics”
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Malaysian authorities have been praised for their foresight in mapping out an extensive long-term development plan that includes a high-speed rail link to Singapore, heavy investment in road, rail and ports, and an upgrade to Kuala Lumpur International Airport. The Philippines has surged to the top as the world’s leading nation in terms of voice and data business process outsourcing, partly because of the development of Bonifacio as a central business district, the prospect of improved communications infrastructure, and initiatives such as the Clark Freeport Zone. A redevelopment of the old US Clark Air Force Base, the zone is being converted into an airport-driven trade and high-tech business hub. Singapore leads the world in terms of infrastructure attractiveness, its US$156,000 per person the highest value per capita of built assets on the planet. It’s doubling the length of the Mass Rapid Transit system to 360 kilometres to boost its population from 5.5 million to 6.9 million by 2030. The city state is also adding a third runway and new airport terminals to Changi Airport and is changing the configuration of its port to double container capacity. As Sheldon notes, these Asian nations are clearly anxious about how to provide employment and economic stability. “Infrastructure is one way of addressing that, and enhancing all people’s futures.”
Strings attached?
The complete MRT Jakarta project will stretch more than 110km and consist of two main lines: one northsouth stretching 23.8km and an 87km east-west corridor
Much of the Asian infrastructure financing comes from China, which appears to be using infrastructure as one of its most forceful foreign-policy tools. The mainland has put up the bulk of the US$50 billion used to seed the Asian Infrastructure Investment Bank (AIIB), a US$100 billion lender that will make its first loan by the middle of 2016. The AIIB will lend to projects involved in everything from energy and power, transport and telecoms, to rural infrastructure, water supply, environment protection and logistics, but is still pondering whether to finance coal-powered or nuclear plants. Launched in October 2014, the bank has attracted 57 founding members, including New Zealand, which joined last December. China’s coffers are funding two other significant initiatives. President Xi Jinping announced in November CRITICAL LOACTAION _ that China would invest US$40 billion to create the Silk Road Fund, an infrastructure and trade-finance initiative to extend its centuries-old trade route into central Asia. The country has also helped set up the Shanghai-based New Development Bank, which was founded by the BRICS nations (Brazil, Russia, India, China and South Africa). They contributed US$100 billion to finance infrastructure projects in emerging nations and to improve the BRICS’ ability to withstand financial crises. China also works directly with other emerging Asian nations. For instance, it is funding large-scale land reclamation in Colombo, Sri Lanka’s capital, and is also heavily involved in the creation of a massive port and the airport rebuild.
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15
DEVELOPMENTS
New Queenstown Convention Centre location at Remarkables Park Plans for a redesigned Queenstown Convention Centre at Remarkables Park have been released
North-east elevation of the proposed Queenstown Convention Centre at Remarkables Park Town Centre
South-east elevation of the proposed Queenstown Convention Centre at Remarkables Park Town Centre
Remarkables Park Limited revised their 2014 Queenstown Convention Centre resource consent application to significantly improve its location so that it could be positioned immediately across from the proposed Queenstown Gondola, and to enhance the design of the centre. The location in a new precinct at Remarkables Park, to be known as Remarkables Place, is on prime land with stunning water and Remarkables mountain views. It is also adjacent to the expansion of the Remarkables Park Town Centre and will share a generous public oval with the Base Station of the Queenstown Gondola. The company announced plans in late 2015 to develop a $50m, 9.8km scenic gondola operating year-round, linking Remarkables Park to The Remarkables ski field, alpine recreation area and the high country Queenstown Park Station. “The revised Convention Centre design by architects Mason & Wales is contemporary and striking,” says Remarkables Park Limited CEO Alastair Porter. 16
“It draws The Remarkables mountains into the facility through tall floor-to-ceiling glass panels, and from the outside the glass will provide a dramatic reflection of the mountains.” The facility is designed so it can be built in stages to match demand. Stage I, with a total area of 2,560m², can accommodate various configurations. It will be large enough to accommodate 700 plenary delegates and 500 banqueting in adjacent areas of the main hall, without the need to break down and reset between day and night functions. When used for conferencing alone the main hall will have capacity for up to 1,400 delegates. The facility includes a separate foyer and exhibition spaces, both of which would be ideal for cocktail receptions or smaller functions. Stage II will increase all capacities by more than 60 per cent, plus more break-out spaces, still leaving room on the site for further expansion in the future. The appeal and functionality of the Queenstown Convention Centre will be further enhanced by two adjacent ovals that will be
June-August 2016 | www.propertyandbuild.com
wired for outside activities and could be covered for very large events or performances. Porter says in terms of delegate accommodation Remarkables Park was the largest greenfield area zoned for new hotels in Queenstown. The first of those hotels, the Ramada Hotel & Suites Remarkables Park, will open in June and there are more hotels to come. “The centre is designed to be cost-effective to build, with the first stage estimated to cost $25m - $35m, excluding Remarkables Park Ltd’s land contribution.” The company expects the centre to appeal strongly to conference organisers in terms of its iconic views, convenient location, close proximity to hotels and retail, and for its ability to leverage the Queenstown Gondola to access both Queenstown Park Station and the striking new large NZSki base building on The Remarkables, which will also be able to host conference activities in late spring, summer and autumn. “Now we’ve resolved our location and design, the next stage
is presenting our revised plans to the design review board and going through the resource consent process,” Porter advises. “Since Remarkables Park’s zoning already includes conference facilities we anticipate this will be non-notified.” The company is also working on ownership and operating structures. “This could be a private consortium including Remarkables Park, sponsors and hotels, but we would be open to it being a Public Private Partnership project,” Porter confides, enabling public investment to work together with private enterprise. “We’re actively seeking interest from hotels interested in waterview locations in close proximity to the Queenstown Convention Centre and Gondola as part of the development of the Centre.” Consent will be ready for submission in a matter of weeks, with an answer possible by the third quarter of 2016, meaning a consortium could potentially open the centre in 2018.
GLOBAL PERSPECTIVE
NZ industrial space from global perspective Industrial space two to three times more expensive in top 10 cities compared to New Zealand. New Zealand landlords are enjoying the comparatively good performance of prime industrial rents as well as yields which are among the strongest in the world. The latest survey by Colliers International, which tracks industrial rents in 151 cities across the globe, showed Auckland and Wellington’s average prime
industrial rents ranked 38th and 71st respectively in December, ahead of June rankings of 40th and 84th. The survey showed that from a landlord’s perspective, industrial prime rents performed comparatively well over the past six months. Auckland, Wellington and Christchurch cost about $113,
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$90 and $102 per sqm per year respectively. The top spot globally goes to Hong Kong, which costs $365 per sqm per year. Hong Kong usurped London off the top spot in the June survey. Hong Kong’s rent was flat over the six months to December but up 2.1 per cent for the year. Hong Kong also has the highest prime office rent in Colliers International’s global office survey at $2,911 per sqm per year. On the home front, yields for New Zealand’s industrial investors are among the strongest in the world. The average industrial prime yield for cities with the top 10 rents is 5.5 per cent. This is compared to Auckland on 6.4 per cent, Wellington on eight per cent and Christchurch on 7.4 per cent. “The relative comparability of rates is an indication of the
strong demand and competitive bidding for industrial property in New Zealand when compared globally,” the survey said. “Our large global gap exists due to a strong demand environment.” At the same time, vacancy rates have reduced significantly in New Zealand, with Auckland, Christchurch and Wellington all experiencing declining vacancy rates over the past year to record lows of 2.2 per cent, 2.1 per cent and 3.6 per cent respectively. “Rising rents and firming yields in the three main New Zealand cities have seen capital values increase steadily in recent years,” it said. “Despite the strong performance of the sector, which has now passed the last cyclical peak across many indicators, there is likely to be more supply, demand and investment activity.”
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17
GLOBAL CITIES
World-first wireless technology building Brisbane walkway Some of the world’s most advanced high precision, high safety hydraulics are being deployed on the new $72 million Brisbane Riverwalk project to lift, shift and position the complex and heavy concrete castings involved
The John Holland project will involve the world’s first application of the new wireless-controlled and diesel powered version of the Enerpac SyncHoist load hoisting and positioning system, which offers precision load manoeuvring vertically and horizontally using one crane instead of needing multiple cranes. This latest version of the PLC-controlled SyncHoist technology was developed for heavy lift and transport specialists Universal Cranes by Enerpac Integrated Solutions to safely control irregularly shaped and uneven loads weighing up to hundreds of tons, while reducing the risk of damage from oscillations of wire rope due to sudden crane starts and stops. 18
The technology is being used at Riverview in conjunction with a series of Enerpac Integrated Solutions lifting, pulling and skidding technologies employed on different parts of the project to manoeuvre the concrete elements weighing up to 385 tons that will make up the 850m Riverwalk link between new Farm and the Howard Smith wharves. Due for completion this year, the new Riverwalk replaces the popular floating walkway that was swept away in the 2011 Brisbane floods. Unlike the previous floating structure, the new Riverwalk will be fixed in place, sitting about 3.4m above mean sea level. It will feature a rotating span to allow access for boats
June-August 2016 | www.propertyandbuild.com
moored with the confines of the Riverwalk, 24-hour lighting, separated pedestrian and cycle areas and shaded rest stops. Mounted on a 280 ton barge with crane and 130 ton piling rig, Universal Cranes’ SyncHoist system employs intelligent hydraulics to monitor and guide compact but powerful 700 bar double-acting push-pull cylinders integrated into four lifting points above loads. The SyncHoist SHS system can also be used for pre-programmed positioning, tilting and aligning of loads and for counterweighting and determining their centre of gravity. “A beauty of its application on the Riverwalk project is that Universal Cranes achieves max-
imum precision through wireless operation, with the crane operator doing the positioning while driving,” says Enerpac Integrated Solutions Manager for Australasia, Richard Verhoeff. “The synchronous lifting controls each of the four lifting points to within minute tolerances, so he can pick up the load evenly with optimum balance and safety. The driver can also see what load is on each point and it enables him to do some point loading to enhance stability. “Wireless control of the latest SyncHoist enables a crane driver to more simply perform complex load lifting, shifting and positioning manoeuvres from his cab, ensuring loads remain evenly poised during the process and
performing point load indications and checks where required.” Available in load capacities customised to individual tasks, with system reach of 1500mm from each of several lifting points, SyncHoist offers very high accuracies (+/- 1.0mm), less dependence on weather conditions and vastly improved operating speed and worker safety. “The independent diesel power built into the Riverview system also means the system can be deployed virtually anywhere – such as this barge – without its hydraulic functionality being dependent on fixed or separate power sources, such as generators.” This independence is also particularly valuable in applications involving remote applications such as oil, gas, mining and energy, and large-scale applications such as bridges, ports, shipbuilding and infrastructure. “The combination of diesel drive and wireless control means the system is totally self-contained,” says Verhoeff. “There is no need to have power cables lying around or hoses connected between a hoisted object and the pump unit, because this pump unit can be positioned on the load itself – or on the spreader frame used to perform the lift.” One of the Riverwalk’s concrete elements is suspended from the SyncHoist’s four yellow hydraulic lifting points controlled by the crane driver, while other concrete elements are slid into position for loading The Riverwalk project also involves a combination of complementary Enerpac Integrated Solutions technologies that are used to lift concrete elements from their mould and deliver then to the point where they are lifted onto the barge by the SyncHoist system. Compact Enerpac RCS 101 low height cylinders (bottom right) designed to fit where most other hydraulic cylinders will not, while offering a maximum power-to-height ratio. A total of 55 10-ton RCS cylinders with 38mm stroke are used to separate cast concrete elements from their mould so they can be lowered onto a series of Enerpac ER 80 heavy duty load skates on which they are pulled nearly 300m for delivery to the barge containing the SyncHoist. The concrete elements are placed on 80-ton capacity ER 80 load skates (left of picture) on which they are pulled first 200m in one direction, and then turned through 90 degrees to progress 90m to a loading point beside the river. The load skates feature low profiles for increased stability and low rolling resistance for easy transportation. Pulling power for the skidding operation is provided by pairs of RR series double-acting Enerpac RR 3014 cylinders with 14in (368mm) strokes (left). The custom-engineered pairs of pulling cylinders integrated into the project’s sliding and guiding system feature integrated clevis eye arrangements for smooth coupling and decoupling (right). Available with manual, extended manual and fully controlled PLC system management and control systems, SyncHoist’s functions and applications span diverse industries including construction, engineering, hydraulics, mining and energy, oil and gas, manufacturing and metal fabrication, shipbuilding and safety.
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Specific applications include: • positioning of roof sections, bridge sections concrete elements, and steel structures • positioning of turbines, transformers and fuel rods • precise machinery loading, mill rod changes, bearing changes • precise positioning of pipelines and blow out valves • positioning and aligning of ship segments prior to assembly. • Manual control options for the four lifting points with 1500mm system reach include: • manual control with manual directional control valves • extended manual control with joystick controls and position display • PLC control with fully closed-loop control system. PLC control options include touch screen, remote wireless control, load and stroke monitoring, load calculations (centre of gravity) and pre-programmable motions and data recording.
19
LO CAL GOVERNMENT
Infrastructure governance
in the midst of revolutionary change A ‘quiet revolution’ is unfolding around infrastructure governance in regional New Zealand that holds immense promise The Far North is a fitting place for the changes to start. Much to their credit, and with some incentivisation from central government, the four councils and NZTA have recently agreed to establish a shared business unit to manage the roading network of Northland. The Northland Transportation Alliance (NTA) was launched at the end of May, and will be formally established on 1 July. It is the first shared service, certainly of scale, for the four councils. It involves shared staffing, based in Whangarei and the Far North. Accountability for NTA rests with the five parties to the agreement. The NTA will manage and oversee asset management, procurement and operations, providing more sealed roads, more upgrade roads and a better cycleway network. The business unit has the opportunity to develop as a governance entity, but this will be a matter for the parties to consider as confidence grows, and results are forthcoming. An immediate win for Northland is the New Zealand Transport Agency (NZTA) assuming responsibility for an alternative State Highway to SH 1 from Whangarei to Kaikohe. Clearly this will have a favourable impact on several councils’ balance sheets, while an estimated $18 million of benefits are forecast in the NTA business case over the next 10 years. Collaboration continues The Northland councils are also looking to collaborate on a range of other identified infrastructure and shared service activities. Significant momentum has already been achieved in the economic development space with active engagement of the central 20
government and councils. The key is strategic leadership from the councils, central government and communities. Genuine collaboration and a framework for prioritised action are also critical elements. I recently visited Gisborne in my Local Government Commission capacity, and subsequently acknowledged the ‘cutting edge’ arrangements established in roading between Gisborne District Council and NZTA (Tairawhiti Roads), and in a shared regulatory management of water between Te Runganganui O Ngati Porou and the council. As with the Northland example, I have little doubt that the innovation being shown in this district will harvest significant benefits for residents, ratepayers and taxpayers alike.
tantly from my local government experience, retaining the ability of communities to ‘shape their place’ through their elected representatives on the councils. Clear consensus Elsewhere, a degree of consensus seemed to have broken out recently amongst three of the political parties on removing Metropolitan Urban Limits (MULs) from the public lexicon. Metropolitan Urban Limits are no more than a public policy line which is drawn, and redrawn from time to reflect the various values of a community. These values are defined and captured ultimately by politicians through analysis and debate. ‘Removing’ an MUL does not, and will not, remove the debate on these community values. Such
“The key to a Metropolitan Urban Limit or a Regional Urban Boundary is to provide opportunities for the market to operate within” There are other examples of good strategic collaboration and shared services happening across New Zealand. The Bay of Plenty has long stood out as the exemplar of strategic planning and collaboration, such as Smart Growth around Tauranga, and with shared services across the bay and Gisborne through BOPLASS. Other regions actively discussing ‘joined up’ thinking and structures include the Waikato, Wellington and the West Coast. The latter two regions are working alongside the Local Government Commission. There is much to be positive about in this ‘quiet revolution’. There is extensive opportunity going forward, the key being active collaboration, and impor-
June-August 2016 | www.propertyandbuild.com
values in the Auckland context may typically be ‘protecting the high quality soils of Pukekohe’, ‘the rural qualities of the Clevedon Valley’, ‘the flora and fauna of the Hunua and Waitakere Ranges’, ‘water quality of the Auckland harbours and rivers, the protection of wonderful beaches, the heritage of Maori and early settlers’. The list goes on. All of these values have a spatial context. Policy makers draw lines around these values which are then translated into a legal framework. The Auckland Council has renamed the MUL as a RUB (Rural Urban Boundary), which has more flexibility from the former MUL but its purpose is the same. It gives certainty to the community and to developers. Huge investment decisions, both public and private,
depend on this certainty. The key to an MUL or a RUB is to provide opportunities for the market to operate. Sufficient land, both greenfield and brownfield, needs to be made available to minimise speculation and land banking. My old City of Manukau, with growth rates of 10,000 people per annum over many years, provided confidence to land developers and house builders as to land availability through the identification of future growth areas, structure planning and timely infrastructure investment. MULs and RUBs are good public policy tools. It is how you utilise the tools that matters. Finally, I am delighted that the central government is about to release a National Policy Statement on Auckland’s urban growth. While I may or may not agree with what is in this statement, it is with some relief that a central government is finally about to release such a statement. Leigh Auton is a local government commissioner and a director of Auton & Associates with 35 years’ local government experience, a chairman/director/trustee on several boards and provides consulting advice to public and private sector companies
BUSINESS DEVELOPMENT
Enormous development project moves a step closer
Work could start within 12 months on the Ruakura logistics and lifestyle hub that is one of the most comprehensively master-planned developments ever in New Zealand
Fast facts
The huge $3.3 billion Ruakura development project is projected to eventually cover some 480 hectares on the east side of Hamilton. Tainui Group Holdings and Chedworth Properties’ 30 to 50-year plan envisages an industrial park, new housing and an “inland port” transport hub to marshal growing freight volumes between the country’s busiest sea port, Tauranga, and its largest city, Auckland. Within 20 years it is expected that upper North Island population and freight volumes will double and that 50 per cent of the country’s GDP will be produced in the golden triangle bounded by Hamilton, Auckland and Tauranga. New Zealand’s largest freight logistics hub and integrated commercial and lifestyle development is designed to take advantage of the rail line connecting Hamilton to the ports of Auckland and Tauranga, which runs through the site and complements the Waikato Expressway on the eastern boundary. The scheme is designed to look like the sprawling Highbrook Business Park in East
Hamilton City Council has approved three key resource consents for the mammoth project, which Chief Executive Chris Joblin says paves the way to start developing the first 13.5 hectare stage of the inland port and surrounding 34.5 hectare logistics zone within a year. “We have always approached Ruakura as part of a bigger picture – a new development larger than the Auckland CBD bringing fresh life and jobs to east Hamilton, and as a key hub in the upper North Island freight system,” Joblin says. “A number of years spent in master planning and talking to customers and the community have helped us future-proof Ruakura with the best connections, such as a dedicated interchange with the new Waikato Expressway.” Tainui Group Holdings (TGH) has already received a number of expressions of interest about hubbing through Ruakura from leading players in the import, export and logistics sector, although it is yet to commence formal marketing. The consistent message from importers and exporters is that they want the freedom to choose between ports and shipping lines, and not necessarily be tied into Auckland or Tauranga, Joblin explains. “This port neutrality is a key part of the Ruakura offer as we configure the rail and road connections north and east.”
The efficient hubbing of freight will get thousands of trucks off the roads each year and make better use of the government’s investment in rail, he claims. “As Ruakura comes on line over the next five years we see it playing a key role in tackling the congestion in the central, upper North Island and helping all three cities be more productive.” TGH will call for expressions of interest from port operators to manage the secure gate-in, gate-out inland port eventually capable of handling up to 1 million twenty-foot-equivalent (TEU) containers per year. The inland port and logistics zone will anchor the entire 480 hectare site, which also features the equivalent of more than 52 rugby fields of green and open space, a light commercial knowledge zone and residential housing. Waikato Chamber of Commerce Chief Executive William Durning says the Ruakura development will “turbo-charge” the contribution of the wider Waikato region to the New Zealand economy. The Waikato region has a number of strong sectors poised to deliver more economic activity and jobs over the next 30 years, Durning claims. “As a cornerstone development, Ruakura will help unleash this,” he insists. “Ruakura stands to benefit not just our towns, city and our region, but also the overall New Zealand Inc. story for decades to come.”
Tamaki, with its wide roads, architecturally designed buildings, extensive landscaping and attractive urban design. When complete, Ruakura will offer: • a 365 hectare commercial zone – over three times larger than Highbrook • a maximum one kilometre distance to the inland port from anywhere on the complex • a catchment area of two million people within 145km • an area larger than Auckland’s CBD • the potential to generate over 10,000 jobs and better utilise rail to take up to 65,000 truck journeys off the road each year • 195 hectare logistics, 262 hectare work, 108 hectare knowledge and 138 hectare housing precincts • 24,000 square metres of retail shopping • over 10 per cent of the entire site set aside as public open space. The 80-hectare inland port and freight hub that forms the first phase of the gigantic project is planned to be completed by 2021.
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21
INDUSTRIAL UPDATE
Auckland industrial update
The Auckland industrial property market is firing on all cylinders, with both occupier and investor demand at unprecedented levels. Spurred on by low interest rates and strong local economic drivers, namely high levels of manufacturing and construction activity, 2016 is continuing to be another record breaking year. This is according to Bayleys Research on Auckland Industrial market.
Highlights Stock shortages are at extreme levels. A surge in both occupier and investor demand since the new year for all grades of industrial space has led to shortages across the board, pushing rents higher and leading to further cap rate compression. • Ultra tight vacancies and unprecedented competition amongst industrial space users has seen rents rise across both prime and secondary grades, with landlords firmly in control. • Unsatisfied investor demand is now flowing through to poorer grades of industrial space where prices have moved higher and are providing owners with an attractive window to sell non-core secondary property for maximum value. New supply is driven in large part by local heavyweights such as Goodman Property Trust (GMT) and Auckland Airport, which have significant landholdings and are taking full advantage of the acute shortage of industrial space by increasing their development pipelines. Unfortunately for many smaller developers, the toxic combination of rising land values and rising construction costs has seen a growing number priced out of the market. Future recycling of inner-city industrial areas to mixed use Over coming years the highest and best use for a growing number of traditional inner-city industrial areas, especially those close to rail-bus links, will be residential usage. As with many cities offshore, more industrial 22
storage and logistics facilities will be based on the outskirts of Auckland close to the major road infrastructure projects currently under way. Cheaper land to the north-west (Hobsonville-Westgate-Riverhead) and south of the city (Takanini-Drury) is likely to draw increasing developer interest going forward. Vacancies at unprecedented lows Reflecting the current tight conditions, the latest Bayleys Research annual Auckland vacancy survey shows a further reduction in overall vacancies to a historically low three per cent from 3.6 per cent a year earlier. Vacancies showed the steepest declines at the Airport Corridor, Mount Wellington and Albany Basin, and remained relatively static in Penrose and East Tamaki. They increased marginally along Rosebank Road, driven by a few major tenant relocations, the largest being Croxley vacating 12,000sqm at 460 Rosebank Road, of which around 6,000sqm has been subsequently re-let to date. The 50 per cent drop in vacancies at the Airport Corridor to an all-time low of 1.5 per cent has occurred due to high levels of new construction activity and take up. One of the largest recent completions between surveys was 20,000sqm 81 Westney Road leased to Fonterra. An even larger development in the Airport Corridor due for completion later this year is the 50,000sqm state-of-the-art Sistema manufacturing and warehouse facility on Oruarangi Road. The site will be New Zealand’s largest privately-owned manufacturing facility covering
June-August 2016 | www.propertyandbuild.com
25 ha and will operate 24/7. Wiri’s vacancy decreased slightly from 6.1 per cent to 5.7 per cent, with the major movers being Tasman Liquor vacating 11,500sqm at 30 Ash Road and Fruehauf moving into 14,900sm of space at 21 Hobill Avenue. Vacancy movements in Albany, Penrose and Mt Wellington were more the result of many smaller tenancy changes. North Shore – strong demand but all built up The amount of empty space on the North Shore remains at alltime lows. Vacancies for Albany Basin, encompassing the North Harbour, Rosedale and Mairangi Bay industrial precincts, sit at just 2.6 per cent, down from 3.3 per cent a year earlier. Mairangi Bay recorded the largest fall in vacancies, from 3.2 per cent in 2015 to just below one per cent in 2016, driven by a mix of new tenants moving into the area. Little change in vacancies was recorded in both North Harbour and Rosedale over the year at 2.1 per cent and 4.6 per cent respectively. Current tight vacancy conditions coupled with continued strong occupier demand are placing further upward pressure on rents across the board. Competition amongst tenants remains intense, especially those seeking smaller warehouse premises on the North Shore. In many cases agents are receiving multiple offers on properties and securing rents, in some cases, well above expectations. An acute shortage of available land in the more heavily developed industrial precincts of Wairau Valley, Albany/North Harbour and increasingly Silverdale
is constraining new build activity. Add to that a sharp increase in land values, escalating constructions costs and growing Watercare/compliance charges and it is becoming next to impossible for developers to make their numbers stack. Increasingly more development activity is migrating to lower cost areas such as Hobsonville/Westgate and Riverhead to the northwest. Developers such as Neil Group and Jomac Construction are becoming increasingly active in the region. Hobsonville Workspace at 102 Hobsonville Road is a recent 23 lot development by Neil Group (with lot sizes ranging between 2,212sqm to 6,145sqm) which has been successfully sold down to a mix of owner-occupiers, developers and investors. The subdivision is part of nearly 70 ha of land located between Hobsonville and the Upper Harbour Motorway that has been zoned for industrial use in what has become known as the Hobsonville Corridor. Jomac Construction is developing a site at 110 Hobsonville Road (adjacent to Neil Group’s Hobsonville Workspace) with civil works currently under way on around seven ha of the 15 ha landholding. The initial two stages are expected to be completed mid to late-2016 and will also target owner occupiers, developers/investors. The balance of the landholding (circa eight ha) will be retained by Jomac for design-build opportunities. New supply edging up, finally At the corporate end of the market, large property groups with significant landbanks such as Goodman Property Trust
in 2015 to just below 1% in 2016, driven by a mix of new tenants moving into the area. Little change in vacancies was recorded in both North
occupiers,and developers and investors. Thean subdivision is part oftonearly 70 are providing owners with attractive window sell nonhectares ofcore, landsecondary located between Hobsonville andvalue. the Upper Harbour property for maximum
Corridor due for completion later this year is the 50,000m2 state-of-the-art Sistema manufacturing and warehouse facility on Oruarangi Road. The
Motorway that has been zoned for industrial use, in what has become Newassupply edging up, finally - Driven in large part by local heavy know the Hobsonville Corridor.
Harbour and Rosedale over the year at 2.1% and 4.6% respectively.
site will be New Zealand’s largest privately owned manufacturing facility covering 25 hectares and will operate 24/7.
100 of advantage Auckland close the major road infrastructure areoutskirts taking full of thetocurrent shortage of new spaceprojects with a currently underway. pipeline. CheaperThis landistonow the north-west (Hobsonvillegrowing development coming through in industrial
Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016
120 7.0% 100 6.0% 80 5.0%
Jan 2016 Jan 2015
60 4.0% 40 3.0% 30 2.0% 20 1.0% Franklin
Albany Auckland Basin SOURCE: BAYLEYS RESEARCH
A further breakdown of storage consents into Auckland Wards confirms
Current tight vacancy conditions coupled with continued strong occupier
Manurewa Papakura
Howick
Mt Rosebank East Wellington Road Tamaki
Manukau
Orakei
Waiheke Tamaki
Whau
Penrose
Mt Eden Mt Roskill
Wiri
North Shore
Airport Corridor
SOURCE: STATSNZ
Waitemata Gulf
Feb Year End
0%0
Albany
Westgate-Riverhead) andwhich southare of the city (Takanini-Drury) likely to building consent numbers showing an increase inisstorage draw increasing developer interest going forward. consents in particular.
2016
2015
2014
2013
2012
2011
2010
2009
2008
0
Waitakere
SOURCE: BAYLEYS RESEARCH
will be residential usage. As large with many cities off-shore 200 At links, the corporate end of the market property groups withexpect significant more industrial storage and logistics to beand based on the Airport landbanks such as Goodman Propertyfacilities Trust (GMT) Auckland
Auckland Vacancy RateConsents by Region Auckland Industrial New Storage Building - Annualised
Rodney
Jnauary 2001 - 2016
300
2007
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
0%
2005
0
2004
2%
2003
200
2001
4%
2002
400
over coming years the highest and best use for a growing number of
New supply edging up, finally traditional inner city industrial areas, especially those close to rail-bus
2006
6%
2005
600
2004
8%
2003
800
2001
10%
2002
1,000
2000
12%
Overall Vacancy Rate
Gross Floor Area (000m2)
Vacancy
Metres Square (000m2)
Floor Area
1,200
Auckland Industrial Building Consents
Vacancy Rate Metres Square (000m2)
Albany Basin Total Floor Area vs Overall Vacancy Rate
weights such as Goodman Property Trust (GMT) and Auckland Airport Jomac Construction is developing a site at 110 Hobsonville Road (adjacent who have significant land holdings and are taking full advantage of the to Neil Group’s Hobsonville Workspace) with civil works currently underway acute shortage of industrial space by increasing their development on around 7ha of the 15ha landholding. The initial 2 stages are expected 600 Unfortunately for many smaller developers the toxic pipelines. to be completed mid to late 2016 and will also target owner occupiers, Factory Storage combination of rising land values and rising construction costs has developers/investors. The balance of the landholding (circa 8ha) will be 500 seen a growing number priced out of the market. retained by Jomac for design-build opportunities. 400recycling of inner city industrial areas to mixed use – Future
SOURCE: STATSNZ
01
that much of the activity is occurring in the Howick Ward which includes Auckland Airport, Estate has over the last 6-12Ward months, completed GMT’s Highbrook and Manukau which includes significant Auckland
values coupled with rising construction/compliance costs. Many smaller
developers are exploring cheaper emerging locations on the outer fringes builds and for Hellmann WorldwideLink (12,500m ), Fuji Xerox (6,400m ) Airport GMT’s M20/Savill Estates. (GMT) and Auckland Airport are precincts. In some cases the Logistics rising construction/compliance showing both production and of the city. and Coca-Cola Amatil (12,000m2) at The Landing Business Park. A pipeline Currently Goodman has six new projects underway totalling more than taking full advantage of the curprices being onincluding a dollar rate2 design costs. Many smaller developers finished stock sub-indices at of newpaid projects a 4,750m and build for Agility Logistics at smaller warehouse premises on the North Shore. In many cases agents are Although not yet visible in the consent statistics, new industrial subdivision 46,000m2 and costing $93.3m, the largest projects being warehouse/ rentoffers shortage of new space with per sqmstorage basis areand moving closer areonexploring February 2016 recording The Landing a speculative development Timberly Roadcheaper involving 4 xemerging receiving multiple on properties and securing rents, in some cases, activity is gathering pace in areas such as Hobsonville, further Westgate and facilities for CODA Group (11,450m2) at Savill Link and Orora 2 2,500m industrial units are currently underway. well above expectations. 2 Riverhead north-westwhen and Takanini/Drury in theto south. a growing development pipeline. to residential than industrial locations on the outer fringes of to thegrowth compared theThis will Packaging (11,324m ) at M20 Business Park. become more apparent as development activity commences on these In the more established industrial areas of East Tamaki, Penrose-Mt This is now coming through properties, especially in areas the city. same period last year. greenfield sites especially when much of the critical road infrastructure Wellington and further out in West Auckland development activity at in industrial building consent zoned forthemixed use. Although not yet visible inworks thecurrently underway Capacity utilisation rates also are completed. smaller end of the market is virtually non-existent due to rising land Demand strong across the an board A number of astute invesnumbers which are showing consent statistics, new industrial remain well above long-term A number of astute investors seeking toactivity secure older Agency feedback pointsin to storage an unprecedented surgein in both occupier increase consents tors are proactively seeking toare proactively subdivision is gathering averages. inner city industrial sites whose ultimate highest and best use will and investor demand since the new year for all grades of industrial East West Connections (Shaded Area) particular. secure older inner-city industrial pace in areas such as HobsonThe government’s decision to be future residential under the Proposed Auckland Unitary Plan. space. This is leading to shortages across the board pushing rents A further breakdown of storage sites whose highest are located ville, Westgate and Riverhead to fast track a number of the new Many ultimate of these properties close to key infrastructure higher and leading to further cap rate compression. An increasing roads. Goodman number of consents industrial properties are now selling on sub 7% and yieldsbestsuch into Auckland Wards useaswillrailway/bus be futurelinks and major thearterial north-west and Takanini/Druroad and transport infrastructure recently acquired a 5.8ha site for $30.3m at 127 Pilkington Road and in many cases sub 6.5%. confirms that much of the activity residential under the Proposed ry in the south. This will become initiatives should also act as a Panmure adjacent to the eastern railway line in an area designated Occupiers who previously rented space are competing aggressively is occurring in the Howick Ward, AucklandbyUnitary Plan. Many more apparent as development major growth catalyst for further Auckland Council for high density development. The site currently with investors for stock. This battle is being played out most visibly Highbrook these provides properties are2 located activityand commences on these industrial property develop20,400m in demandwhich for older,includes secondaryGMT’s warehouse properties in theof more of functional warehouse showroom space establishedEstate industrial precincts. In some cases the prices close being to in the infrastructure heart of the Tamaki Regeneration Area. and Manukau Ward, key such greenfield sites especially when ment on the outskirts of the paid on a $ rate per sqm basis are moving closer to residential than which includes Auckland Airport as railway/bus links and major much of the critical road infracity. In total, around $4.2 billion industrial properties, especially in areas zoned for mixed-use. and GMT’s M20/Savill Link arterial roads. Goodman recently structure works currently under is expected to be invested in Estates. acquired a 5.8 ha site for $30.3 way are completed. transport-related activities in and 02 Currently Goodman has six million at 127 Pilkington Road, around Auckland over the next new projects under way totalling Panmure, adjacent to the eastern Outlook few years. The major projects more than 46,000sqm and railway line in an area designated Auckland’s industrial property are the completion of the 48km costing $93.3 million, the largest by Auckland Council for high market looks unstoppable in $2.4 billion Western Ring Route projects being warehouse/stordensity development. The site 2016. With ultra low vacancies which should be operational by age facilities for CODA Group currently provides 20,400sqm of and unprecedented demand 2017/18 and the $1.4 billion (11,450sqm) at Savill Link and functional warehouse and show- from both investors and occupi4.8km Waterview connection Orora Packaging (11,324sqm) at room space in the heart of the ers, another year of solid price due early 2017. The recently M20 Business Park. Tamaki Regeneration Area. appreciation and rental growth announced “East West ConAuckland Airport has, over can be expected. A strengthnections” programme will also Demand strong across the the last six to 12 months, ening economic backdrop, improve freight efficiencies and board completed significant builds for especially in Auckland, with rising travel time between OnehunOutlook Agency feedback points to an Hellmann Worldwide Logislevels of construction activity, low ga-Penrose and State Highways Auckland’s property market unstoppable in 2016. With unprecedented surge in both tics (12,500sqm), Fuji Xerox interest ratesindustrial and historically high looks 1 and 20. This area of Auckland 03 ultra low vacancies and unprecedented demand from both investors and occupier and investor demand (6,400sqm) and Coca-Cola net migration should underpin between Onehunga, East Tamaki occupiers another year of solid price appreciation and rental growth can since the new year for all grades Amatil (12,000sqm) at The Land- this performance. and Auckland Airport employs of industrial space. This is ing Business Park. A pipeline Theexpected. manufacturing sector has 130,000 peopleinand genbe A strengthening economicover backdrop, especially Auckland, leading to shortages across the of new projects, including a also expansion mode for morerates thanand $10historically billion a withbeen risinginlevels of construction activity,erates low interest board, pushing rents higher and 4,750sqm design and build for the past years,should with the latestthis year in GDP, second only to the high net 3.5 migration underpin performance. leading to further cap rate comAgility Logistics, at The Landing BNZ-Business NZ Performance Auckland CBD. The manufacturing sector has also been in expansion mode for the past pression. An increasing number and a speculative development of Manufacturing Index survey 3.5 years with the latest BNZ-Business NZ PMI survey showing both of industrial properties are now on Timberly Road involving four selling on sub-seven per cent 2,500sqm industrial units, are National PMI Indicies yields and in many cases sub 6.5 currently under way. per cent. In the more established Feb 2016 Feb 2015 Feb 2014 Occupiers who previously rentindustrial areas of East Tamaki, BNZ Business NZ PMI 56.0 56.6 56.0 ed space are competing aggresPenrose-Mount Wellington and Production (sa) 56.6 53.8 60.1 sively with investors for stock. further out in West Auckland Employment (sa) 48.5 52.7 54.3 This battle is being played out development activity at the New Orders (sa) 61.0 62.7 56.2 most visibly in demand for older, smaller end of the market is Finished Orders (sa) 57.1 53.2 48.7 Deliveries (sa) 56.8 58.1 56.6 secondary warehouse properties virtually non-existent due to Apollo SOURCE:BNZ (sa) seasonally adjusted in the more established industrial rising land values coupled with 2
2
demand are placing further upward pressure on rents across the board.
Competition amongst tenants remains intense, especially those seeking
SOURCE: NZTA, AT
June-August 2016 | www.propertyandbuild.com
23
production and finished stock sub-indices at February 2016 recording
the com
ACTUAL SALES
Actual sales values
Oteha Valley Road, Albany (office) A 356sqm office complex in The Foundation plus 10 car parks leased to national quantity surveyor company Cuesko for six years to October 2020 was sold at its declared reserve price of $1,500,000, a 7.1 per cent yield, through Quinn Ngo and Matt Lee of Bayleys International.
to the motorway interchange at 59 Carbine Road, Mount Wellington, and marketed by Bayleys’ Tony Chadhary and Sunil Bhana, was knocked down under the hammer for $1,505,000 at a 4.78 per cent yield. Kresta Blinds International, which has been in occupation for 18 years, has recently renewed its lease for six years.
220 Ellis Street, Hamilton (industrial) A 8,300sqm site housing Fletcher Steel at 220 Ellis Street, Hamilton, sold for $3,550,000 by Mark Brunton and Alan Pracy of Colliers International. The property has dual street access, with 3,830sqm of building area.
333 East Tamaki Road (industrial) A 540sqm industrial unit at 333 East Tamaki Road sold prior to auction for $1,000,000 at a 6.5 per cent yield through Katie Wu and John Bolton of Bayleys South Auckland. The unit comes with a five-year lease to Retailquip NZ from April 2016.
47 Rennie Drive in the Airport Oaks (industrial) A 780sqm industrial building with multiple roller door access on a 1,593sqm corner site at 147 Rennie Drive in the Airport Oaks industrial precinct sold through Tony Chaudhary of Bayleys South Auckland for $1,442,500 at a 5.5 per cent yield. It is leased to Endraulic, which recently renewed for two years with one further two-year right of renewal. The current net annual rental of $80,000 will increase to $84,000 in 2017. The property was declared on the market at $1,330,000 and attracted close to 60 bids. Corner of Tawn Place and Maui Street, Te Rapa (industrial) A 797sqm modern warehouse on the corner of Tawn Place and Maui Street, Te Rapa, sold for $2,680,000 million by Alan Pracy, Mark Brunton, John Green and John Hagar of Colliers International. The property has a lease till 2019 to international tenant, Air Liquide. 59 Carbine Road, Mount Wellington (industrial) A 551sqm warehouse and showroom building on a high-profile corner location close 24
38B William Pickering Drive, Albany (industrial) A 212sqm retail showroom/ industrial unit sold for $735,000, providing a yield of 5.44 per cent. The agents were Colliers International’s Janet Marshall and Mike Ryan. Oteha Valley Road (retail) A 58sqm unit centrally positioned in the 22-unit The Foundation retail convenience centre in Oteha Valley Road, Albany, was sold for $700,000 by Matt Lee of Bayleys International Division in conjunction with Terry Kim and Michael Block of Bayleys North Shore Commercial. A nine-year lease was put in place in June 2014 to Bruce Lee Sushi & Roll North Shore, with annual rental increases to Consumer Price Index plus one per cent and to market in mid-2019. The auction on this property was brought forward after the vendor received an offer it was prepared to accept. Bidding was opened at a declared reserve of $600,000 and a further 41 bids added an additional $100,000. BNZ outlet in Lincoln North Shopping Centre (retail) BNZ outlet in the Lincoln North Shopping Centre on the corner
June-August 2016 | www.propertyandbuild.com
of Lincoln Road and Universal Drive in Henderson sold for $3,020,000 at a 4.37 per cent yield. The agents were Bayleys International Division’s Oscar Kuang and James Chan. The 341sqm unit generated very strong bidding from multiple parties, with close to 60 bids being made. The property was declared on the market by auctioneer Richard Valintine at $2,450,000 and a long sequence of mostly $10,000 increases added a further $570,000 to the price before the hammer finally came down. Kuang says investors were attracted by the unit’s central location in the retail complex next door to a Kiwibank/NZ Post outlet and close to two other major banks and the strength of the tenant. The bank has been in occupation since Lincoln North was developed 10 years ago and it recently renewed its lease for three years, with one further three-year right of renewal.
$495,000. The agents were Colliers International’s Janet Marshall and Ellie Martin.
Outlet City, Tawa (retail) Thompson Property Group paid over $10 million for the 5,500sqm (on a 3.36ha site) Outlet City in Tawa on Main Road, Wellington.
West Coast Road and Great North Road (mixed use) An 800sqm mixed-use complex on a high profile 1,490sqm site with 21 car parks on the corner of West Coast Road and Great North Road, sold for $2,335,000 by Mustan Basgra of Bayleys Orewa. Located opposite the Kelston Shopping Centre and adjacent to Kelston Girls College, the property has four ground-level road frontage units and one rear warehouse fully leased to five tenants, producing net annual rental income of $118,000 per annum (there is also 140sqm of vacant upper level office space).
164-174 Khyber Pass Road, Grafton (mixed use) A 668sqm refurbished, two-level office/warehouse sold for $4,800,000, providing a yield of 5.4 per cent. The agents were Kris Ongley, Jono Lynch and Shoneet Chand. 30 Victoria Rd, Devonport (mixed use) An 851sqm three-level mixed use building sold for $3,800,000, providing a yield of 4.7 per cent. The agents were Colliers International’s Matt Prentice, Euan Stratton and Shoneet Chand. B4/210 Dairy Flat 9 (mixed use) A 90sqm vacant unit in a retail/office complex sold for
66-68 Portside Drive, Mount Maunganui (mixed use) A 3,080sqm warehouse/office facility over two titles at 66-68 Portside Drive, Mount Maunganui, sold for $4,000,000 by Rob Schoeser, Jimmy O’Brien and Simon Clarke of Colliers International. The sale represented a yield of 6.7 per cent. 18 Newton Road, Grey Lynn (mixed use) A 344sqm two-level workshop and office building on a 304sqm mixed-use zoned site at 18 Newton Road, Grey Lynn, sold for $1,420,000 at a 4.48 per cent yield to an investor by Bayleys’ Cameron Melhuish and Andrew Wallace. It is occupied by an automotive business on a lease until 2020 with no rights of renewal. The lease has annual three per cent rental increases.
Pumpkin Patch, South Auckland (mixed use) A 718sqm warehouse and office building used by Pumpkin Patch as an outlet store on a 2,000sqm site with 25 onsite car parks sold for $1,850,000 with vacant possession through Marty Roestenburg of Bayleys South Auckland.
DEVELOPMENTS
Canam to construct first building in Alexandra Park urban village The first building in Alexandra Park’s new urban village is being constructed by Canam Construction – a long-time Auckland-owned and operated firm – for completion in 2017. The building is set to have 2,500sqm of ground-floor retail, including a new supermarket and apartments. Wholesale Distributors (WDL) is responsible for building the FreshChoice supermarket. According to Dominique Dowding, CEO of Alexandra Park, FreshChoice is taking 1,800sqm, or about two thirds of the first building’s ground floor area. The supermarket will be owned and operated by Aucklanders Chris Harris and Juliet Monaghan. Managing director of Canam Construction, Loukas Petrou, says his company is looking forward to the challenge of completely transforming what is currently part of the Auckland Trotting Club’s large unsealed car park. “Canam has been in the business of construction for 60 years and we’ve got the right people and systems in place to deliver this much-needed project with absolute confidence. This is a large scale mixed-use development and we’ve had considerable experience in
the residential, retail and commercial sectors. This first building will be a signature one and it will really set the tone of the entire urban village,” he says. The appointment of Canam as the construction company follows the appointment of architectural firm RTA Studio, which is working in conjunction with Sydney-based architectural Daryl Jackson Robin Dyke. Alexandra Park has also engaged Canadian expert Joe Hruda of Civitas Urban Design & Planning to deliver an overall environment for the urban village. And finally the appointment of Alexandra Park’s commercial manager, Byron Waring, reflects the Auckland Trotting Club’s broadening role as a major Auckland property enabler. “Alexandra Park today is a serious commercial business with a lot of diversity within the portfolio that consists of businesses in sports and entertainment, and hospitality. Its extensive property portfolio includes many long established tenants as well as the significant urban village development currently being constructed,” concludes Dowding.
June-August 2016 | www.propertyandbuild.com
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DEVELOPMENTS
Kiwi Property abreast of customer orientation
Kiwi Property, which doubled its after-tax profit, ensures its retail centres remain relevant to their catchment areas and further afield as evident in its expansion of LynnMall Shopping Centre (focus for this article), acquisition of Auckland’s Zone 7 retail centre in the Westgate centre, signing in of fashion retailer H&M with its first store in New Zealand at Sylvia Park, and advancing the evaluation of expansion opportunities at Sylvia Park. Founded in 1992, Kiwi Property listed on the New Zealand Stock Exchange in December 1993 as Kiwi Income Property Trust, New Zealand’s first listed property trust. In December 2013 the company internalised its management and in December 2014 it moved from a trust to a company structure, changing its name to Kiwi Property. For the six months to 30 September 2015 Kiwi Property reported a doubling of its after-tax profit. This bodes well for its investors for whom it provides a reliable investment in New Zealand prop26
erty via the targeting of risk-adjusted returns over time through ownership and active management of its diversified portfolio. LynnMall Shopping Centre LynnMall, which Kiwi Property purchased over five years ago, forms an integral part of this portfolio. Recently it invested more than $39 million to expand it and construct The Brickworks. The Brickworks, as the name suggests, has a brick façade that commemorates New Lynn’s heritage and aligns with the historic nature of LynnMall, which was New Zealand’s original shopping
June-August 2016 | www.propertyandbuild.com
centre when it first opened its doors in 1963. The bricks were brought to the centre from the site of one of the oldest bakeries in Hastings, where it is believed the ovens were gas fired. The bakery was converted to a panel beater’s workshop before finally being demolished and its bricks given new life at The Brickworks. And new life shouts out in the Brickworks’ tree-lined dining lane, which now features Goode Brothers, wood-fired BBQ outfit Cleaver & Co, coffee house Shaky Isles, popular contemporary Japanese bistro Wagamama, sushi bar Meso, Vietnamese
restaurant Hansan, and Turkish/ Greek fusion food purveyor Bodrum Kitchen. This dining offering has been complemented by the opening of Auckland’s first Reading Cinemas comprising an eight-screen complex housing a Dolby Atmos surround system in its 400-seat TITAN cinema. “The fixed price cost of a ticket is $10, which goes up to $15 for a gold-class ticket,” says Lauren Riley, centre manager for LynnMall Shopping Centre. “In response Westfield’s WestCity dropped its prices.” She adds that the completion of this project has received
L AST WORD
customer support beyond expectation. This comes as no surprise in view of the fact that it was appropriately timed to meet the growth of the region and its need for superior dining and entertainment options. This is not just hype as the centre’s sales were up 11.9 per cent in the month of December 2015 compared to December 2014. “This growth has continued since then and the centre is definitely attracting customers who spend more as opposed to window shoppers,” says Riley. “The Brickworks has effectively become a leisure hotspot, facilitated by its close proximity to the neighbouring New Lynn transport centre, making for an easy train or bus ride from surrounding suburbs.”
For the six months to 30 September 2015 Kiwi Property delivered an after-tax profit of $36 million, up 51.3 per cent from $23.8 million in the prior corresponding period. Operating profit increased $9.5 million (+22.6 per cent) to $51.6 million, and distributable income grew to $42.4 million, up $2.1 million. This strong result was underpinned by solid rental income performance from existing and recently acquired assets, and lower borrowing costs due to active capital management. Net rental income was $76.3 million, compared with $77 million in the prior period. This stable income performance was maintained despite several properties undergoing development and resulting in temporary loss of income. Positive contributions were provided from Sylvia Park’s lifestyle precinct where a full six months of rental income was received, together with rental income growth from all properties not impacted by development. This offset losses as a result of refurbishments and vacancies due to temporary tenant relocations within Kiwi Property’s portfolio. On a comparable basis, like-for-like rental income was up $2.3 million or 4.3 per cent. At 30 September 2015, the weighted average cost of debt was 5.43 per cent, down from 6.02 per cent at 31 March 2015 and 6.27 per cent at September 2014 due to the favourable interest rate environment, together with the positive impact of the interest rate hedging restructure. In November 2015, all $775 million of Kiwi Property’s bank debt facilities were refinanced on improved terms. The refinancing of these facilities has extended the weighted average term to maturity by 1.3 years and reduced fees and margins by approximately 20 basis points. Kiwi Property owns and manages a $2.1 billion portfolio of real estate spanning some of the country’s best shopping centres and office buildings.
Auckland’s city centre population soars An extra 5,000 people moved into Auckland last year, and generally it is being seen as a great place to live
Auckland’s city centre population grew by five times its target rate last year, with more than 5,000 people moving into the city. At the same time, measures of jobs, growth, retail sales, public transport use, crime reduction and the number of street trees are all performing strongly. However, it has been acknowledged that there must be a focus on ensuring that Auckland has the infrastructure to cope, especially in terms of drainage and sewage systems, and recreation spaces. The results have been highlighted in a new set of measures charting progress in delivering the City Centre Masterplan (CCMP). These provide a simpler, more focused and more meaningful set of measures than the original 36 published in the CCMP in 2012. The report shows that nine of the 17 headline measures are meeting or exceeding targets; two measures are slightly below target, while the rest are awaiting further data. Of the seven supporting measures, the three where data is already available are exceeding target. Auckland City Centre Advisory Board (ACCAB) chair Kate Healy says, “The city centre is going through one of the most exciting periods of change in its history, with over $10 billion of private development anticipated in the coming years as well as transport, streetscape and other major improvements. “We need a solid set of readily reported measures to shape the projects that are being delivered and to chart the impact of this investment. “Where results are already available, they show the city centre is thriving, with an economy that is making an increasingly important contribution to Auckland and New Zealand as a whole.” Analysis of the original measures found some did not adequately measure the outcomes, some data was not available at the city centre level, while others were too vague. For example the cycling target has been changed from “more kilometres of cycleways”, which has already been achieved, to more challenging and specific six-monthly targets on the numbers of people cycling. The targets take into account the potential impact over the next five years of major private developments and infrastructure investment. In line with the drive to see the city centre continue to grow and thrive during this period of change, some of the targets are to maintain current levels or rates of growth for five years, to be followed by accelerated improvements later on. The report can be found on the Auckland Development Committee agenda. Council is also studying residents’ perception of the city centre as “a great place to live”.
June-August 2016 | www.propertyandbuild.com
27
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FIRST WORD >> Energy
Z-Chevron merger a boost for security of fuel supply Z Energy Ltd had capital expenditure of $314 million in its first four years of operation from 2011 to 2015
W
ould Shell have spent that much? No. Is that the reason the Commerce Commission approved the Z-Chevron merger? No. Does it augur well for the long-term security of New Zealand’s fuel supply? In our view, yes. We should explain at this point that Chapman Tripp advised Z on the clearance proposal but we have worked with them for several years now and these comments reflect our broader experience of what makes them tick and of their aspirations as a company. The commission’s task was to establish whether the $785 million acquisition would substantially lessen competition. It required as a condition of approval that Z divest itself of 19 retail sites and one diesel truck stop. Subject to these divestments, it considered that the merged entity would face sufficient competitive pressure from remaining BP, Mobil, Gull and independent service stations. Pivotal to its decision was that Chevron (owner of the Caltex and Challenge brands) was a “passive” competitor which followed price movements rather than trying to lead them and that this was not likely to change under any scenario. Much of Z’s argument focused on the dynamics operating among the “Big Four” (Z, BP, Mobil and Chevron). They jointly own the legacy infrastructure – the refinery and the attached distribution and storage networks – which were deemed necessary to achieve viability in New Zealand’s small and geographically fragmented market. Gull sits outside this structure. Established in 1998, it directly imports finished product to a terminal at Mt Maunganui and trucks it to retail outlets reachable in a single driver shift. Its overheads are much lower, enabling it to compete on price, and it can cherry-pick its locations, avoiding sparsely populated areas where the delivery costs per head are higher. June-August 2016
Chevron had been winding down its engagement in New Zealand pre-merger and had already sold its interest in Refining NZ. As for the other jointly-owned or shared assets and arrangements – the allocation of processing capacity at the refinery, access to the Auckland and Wiri pipelines and participation in the scheduling of coastal shipping deliveries –- the conclusion was that a competitive tension would remain. Commission concerns
Big 3 better But issues of future infrastructural investment in the fuel industry hinge not on the Gulls but on the Big 4, now the Big 3. And for ‘NZ Inc’, the absorption by Z of Chevron is a good news story. Why? Because it replaces a “sweater” of assets with an investor in assets and it will end the creeping neglect of the distribution network. The vote in 2012 by Refining NZ shareholders to upgrade the refinery, for example, was supported by Z and BP but opposed by Chevron and Mobil. That expansion has enabled an extra three million barrels of crude (an 8 per cent increase) to be processed on average each year, with improved energy efficiency. Z was unique among the Big 4 and is unique among the Big 3 in that it is a downstream only business having no exploration/prospecting arm, and it operates solely within New Zealand. These features have led it to pursue a competitive strategy which puts it in a position to charge a price premium for a superior offering – e.g. a willingness to invest in security of supply and extras like a forecourt concierge, “pay at the pump” facilities and a pleasant consumer experience.
The commission’s primary concerns were around whether the loss of Chevron would increase the likelihood of coordination among the remaining Big 3. Such coordination is not illegal under the Commerce Act, but involves firms in a market recognising that they can increase profits by accommodating each other’s price increases rather than competing on volume. This behaviour is more likely to occur in markets with only a few players facing similar cost structures and with a high visibility of what each other is up to. On the face of it, the retail fuel market manifests all of these characteristics so the commission’s caution – the clearance process took 10 months – is understandable. And, indeed, one of the three commissioners remained unconvinced so delivered a minority report. Merger clearances are provided if the commission is satisfied that the effects on competition will not be substantial. The commission can also authorise anti-competitive mergers if it is satisfied that the benefits to the public outweigh any harm resulting from a lessening of competition. Applications for authorisation require the presentation of public good arguments. That was not necessary in this case. Had it been, a primary public good that might have been offered would have been the stronger investment impulse Z will bring to the sector and the significant public benefit that this will deliver over time.
Neil Anderson is a partner in Chapman Tripp and Lucy Hare is a senior associate. Both specialise in competition law and advised Z on the Chevron merger. www.infrastructurebuild.com –30
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TRANSPORT
New plan to put KiwiRail back on track The government has invested a further 190 million dollars in the nation’s ailing rail network, but an ambitious plan could make the system work more effectively long-term
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here has been insufficient investment in rail and coastal shipping, forcing more and more trucks onto New Zealand roads, Green Party transport spokesperson Julie Anne Genter maintains. “We know that a single train can remove 70 heavy trucks from the road,” she explains. “By investing in rail and shipping, we can make roads safer and the air cleaner, as well as create a safer climate for future generations.” The Green Party’s Safer, Cleaner Freight policy would: • move half of New Zealand’s freight on rail and by sea within 10 years • electrify rail between Auckland, Hamilton and Tauranga • fund rail in the same way as roads; providing investment to move freight “effectively and cleanly” instead of demanding that rail return a profit. The policy offers an alternative to National’s long-term plan to have more than 70 per cent of freight moving by road in the next 30 years, which would see another 1.7 million truck trips each year within 10 years as freight volumes are forecast to grow by 32 per cent by 2027. This can “only make local roads more dangerous” as trucks are already over-rep-
resented in serious crashes, comprising only 2.5 per cent of the vehicles on the road but involved in almost one in five of all fatal crashes in 2014. “Every year, an average of 55 people are killed in crashes involving trucks, and over 850 are seriously injured.” The party claims the transport
The NZ Transport Agency and KiwiRail would work alongside freight operators to get half of freight off the road and moving by rail and ship within 10 years, saving some 1.7 million truck trips every year. Electric idea Electrifying rail in the “Golden Triangle” between Auckland, Hamilton and Tauranga would be an $860 million investment in the low-carbon infrastructure the party believes New Zealand needs to reduce transport pollution and meet the climate commitments made in Paris
“A National Policy for Coastal Shipping will be developed, aimed at improving the linkages between road and rail” spend has been overly concentrated on highways for decades, leading to a very unbalanced transport system with a lack of choice. This imbalance comes at a high cost: more crashes on the roads, expensive maintenance, higher costs for exporters, and higher carbon emissions. Although National has invested “some money” in rail in the past eight years, the party claims it has spent five times as much upgrading a few stretches of highway, and the economic benefits of these projects are low. A Green government would rebalance the transport network by allowing the use of the National Land Transport Fund (NLTF) for investment in rail infrastructure, and to support coastal shipping.
last year. “It would also reduce freight costs and cut emissions in the regions with the fastest-growing freight volumes in the country.” New electric locomotives sufficient to cover the main freight routes in the North Island have been costed at $480 million, and would be much cheaper to maintain and run than the current diesel trains. Longer-term, electrification of the lines between Auckland and Wellington would be completed. The party says opening up the NLTF to rail investment “may mean” it makes economic sense to revive the Wairoa to Gisborne rail line, or extend rail to North Port in Whangarei, rather than further expanding the road network. Rail electrification would likely take place in two phases, prior-
Investing in rail and shipping can make roads safer and the air cleaner and create a safer climate for future generations, Green Party transport spokesperson Julie Anne Genter claims itising lines between Auckland, Hamilton, and Tauranga where freight volumes are forecast to grow the fastest. “Long-term, we will complete the electrification of rail between Auckland and Wellington, filling the gap in the electric network between Waikanae and Palmerston North,” Ms Genter explains. “Electrification will be funded through the NLTF at no additional cost to the taxpayer.” Coastal commitment A Green government would commit to “better integrating” coastal shipping into New Zealand’s transport network, with transport funding made available for coastal shipping infrastructure where there is a national benefit. “A National Policy for Coastal Shipping will be developed, aimed at improving the linkages between road and rail,
Government growing impatient with rail speed
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he government’s two-year $190.2 million funding package for KiwiRail has come with a warning, with Transport Minister Simon Bridges saying ongoing subsidies at that level are “unsustainable”. The new budget spending takes total investment in the company since 2010 to $1.4 billion. “KiwiRail has made good progress in increasing customer numbers, becoming more reliable and upgrading assets,” Bridges observes. “However, the government expects it to continue to improve its productivity and efficiency.” The government is “committed” to a national rail network, he
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insists, but ongoing subsidies at this level are unsustainable. “The funding is a two-year package to help KiwiRail make further gains so future government support can be reduced.” The KiwiRail investment is the largest infrastructure slice of the budget, although up to $115 million of new capital funding over four years will miss out Auckland and go to previously announced roading projects in Gisborne, Marlborough and Taranaki – the Motu Bridge replacement, Opawa Bridge replacement, Awakino Tunnel bypass and Mt Messenger bypass.
June-August 2016
and ensuring there is sufficient skilled labour to cope with an ageing workforce in the sector,” Ms Genter promises. “We’ll also investigate the role government should play in enabling ports to work more collaboratively in support of the coastal shipping sector.”
Climate control The Green Party believes transport system needs to be carbon neutral by 2050 in order to meet the country’s commitment to stop climate change. “Electrifying rail will enable us to move freight using renewable, local energy,” Ms Genter
insists. “It’s a smart investment in the low-carbon future.” Sea freight also offers huge climate benefits, she adds. “Moving a tonne of freight by truck produces six times more pollution compared to moving that freight by ship.” The party estimates that shift-
ing 50 per cent of freight by rail and sea would cut projected climate pollution from transport freight by 15 per cent by 2027. “This is the equivalent of replacing over 300,000 petrol and diesel cars with electric vehicles.”
KiwiRail wins top Australasian award The successful electrification and re-signalling of the Auckland urban rail network which has helped transform public transport in New Zealand’s largest city has won a prestigious Australasian award. KiwiRail’s Professional Head of Signals and Telecommunications John Skilton accepted the Railway Technical Society of Australasia’s joint 2016 Biennial Rail Project Award in Melbourne on behalf of KiwiRail, Siemens and Hilor. The electrification involved installing 80km of electrified rail,
3500 masts and portals, six substations, 154 new signals huts, 382 new signals and 235 new point machines on the Auckland network. “It was one of a series of projects in which KiwiRail has been involved which has helped transform Auckland’s urban rail network, and allowed the purchase and use of modern electric units to replace ageing diesel-hauled trains,” KiwiRail CEO Peter Reidy says. “Without it, it is likely that thousands more car trips would be being made every week in an already
congested city.” Passenger trips in Auckland were barely averaging 1 million a year on the city’s trains in the early 1990s, and there were still fewer than 3 million trips a year before Britomart opened downtown in 2003. Some 11 million train trips were being taken before electrification was completed in late 2014 and there are now more than 16 million passenger journeys a year, with Auckland Transport predicting 20 million a year in 2017. RTSA judges said the Auck-
land electrification project “stood out to the RTSA award judging panel because of its role in transforming public transport in New Zealand’s largest city, and its use of innovative technology including the first operational use in the Southern Hemisphere of European Train Control System automatic train protection technology”. The RTSA award was shared jointly with Australian miner Roy Hill for its hi-tech 334km railway that shifts iron ore to the coast from the company’s Western Australia mine.
Auckland Transport Infrastructure FORUM 19-20 September 2016 | Pullman Hotel, Auckland JOIN THE DEBATE AND DISCUSS THE HOTTEST TOPICS FACING AUCKLAND’S FUTURE, INCLUDING:
• Auckland Transport Alignment Project • Port Future Study • Auckland Unitary Plan • National priorities for Auckland’s transport AND PANEL DISCUSSIONS WWW.CONFERENZ.CO.NZ/TRANSPORT June-August 2016
www.infrastructurebuild.com – 33
COMMENT >> Local government
Finding funding vital for tourism infrastructure
Tourism is now the largest industry in New Zealand, having assumed the position dairy occupied for a number of recent years cant increases in international tourism expenditure, with an increase of 17.1 per cent ($1.7 billion) to almost $12 billion – contributing 17.4 per cent to New Zealand’s total exports of goods and services.
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roviding for tourism is a complex and multifaceted affair requiring considerable human and physical infrastructure, many stakeholders, and a myriad of growing businesses. A significant investment is necessary for capital infrastructure, particularly in the vital “three R’s” areas of access to areas (roads), resources (water reticulation) and retail. Local government plays a vital role in the future growth and success of the national tourist industry. It owns and maintains 88 per cent of the roads in New Zealand and 100 per cent of the water reticulation system, which is just a part of the estimated $124 billion in physical infrastructure managed by local government. This amount is roughly equal in value to what central government owns in physical infrastructure. So, it’s critical that local government manages its resources appropriately to ensure a good and consistent visitor experience across the country, whether in large metropolitan areas or rural provincial towns. The question is can rural areas - with fewer human and financial resources - keep pace with urban areas in funding much needed tourist industry resources? The magnitude of tourism growth is large, and we’ve seen dramatic changes in recent years. In 2015, tourism expenditure was almost $30 billion, a 10.3 per cent increase from the previous year. We’re also seeing signifi-
Good growth With 168,012 people directly employed in tourism (6.9 per cent of people employed in New Zealand), this is an increase of 5.0 per cent from the previous year. Growth of this nature is expected to continue. There are a good range of
solutions to address the pressures on infrastructure that will result from this continuing growth, which currently rest with both local and central government to decide which ones should be adopted, and how they should be adopted. Much of this effort has to be cooperative as limited resources serve several purposes. For example, 38 per cent of the county’s GDP is driven by rural production, so roads must meet the demands of logging and farm trucks as well as a burgeoning number of tourist drivers. Solutions will take multiple forms, including financial capital, expertise sharing and pol-
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icy levers. For example, when the National Policy Statement on Freshwater Standards was issued, a fund was created for councils to help meet the new standards that otherwise fell outside of planned renovation or replacement of reticulation equipment. There are multiple agencies working in government with a department or personnel under the auspice of tourism analysis. Sharing human resources and expertise with local councils, perhaps in the form of secondments, would draw lessons and
benefits for both central and local governments. Zoning in Policy tools such as special economic zones (SEZs) have been trialled around the world and equip local government with resources (policy and financial) to allow them to be nimble in response to economic stimulus. An SEZ could be established in a community with a large visitor population, such as Queenstown, with a population of 23,000 and 1.5 million annual visitors, to allow for a visitor levy collected through hotels and residential stay locations. Such a levy could be commen-
surate with the cost of the stay and could fund resources such as iSites and roading - a “user pays” approach to tourism that is fair for the visitor and the community. There are also many stakeholders to coordinate with through any tourist industry endeavour. However, stakeholder engagement should be seen not as a burden but as a resource. Regional Tourism Organisations of New Zealand (RTONZ), Tourism Industry Aotearoa (TIA) and Hospitality New Zealand have a deep level of understanding that can assist in understanding future trends, needed resources and infrastructure. The private sector is not the only resource however. Currently, 30 existing local council-run Regional Tourist Organisations exist, and many are directly associated with council-controlled Economic Development Agencies which spend $70 million on productive development of New Zealand’s economy. Coordination is paramount and communication will be vital to addressing the substantial increase in tourism over the next decade – but a much larger task is managing the critical tourist infrastructure itself. Central and local government will need to work with the private sector to coordinate multiple agencies and membership organisations to manage tourist critical infrastructure. The infrastructure can and will be placed; the question is really when, and how effectively it will be done. Lawrence Yule is president of Local Government New Zealand, which represents the interests of 78 local authorities in New Zealand June-August 2016
WATER
Proper guidance essential for pipeline renewals
The total replacement value of the 3 waters assets in New Zealand was estimated to be about NZ$45.2 billion in 2014 and many need to be replaced soon
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his is probably an underestimate, but adequate for planning purposes. It is estimated that many of these assets will need to be replaced within the next 30 years, which potentially puts the annual renewals bill in the order of NZ$1.5 billion per year. Pipeline assets are the lion’s share of this replacement value – possibly as high as 80 per cent. As these assets are upgraded or replaced, many difficult decisions will need to be made in respect to the trade-offs between levels of service, capital costs, operating costs and management of risk. In addition to this, the ownership and governance structures of the 3 waters are varied across the country, as are the business practices and procurement systems. If even a small percentage of these possible renewal costs can be saved by a better understanding of the renewals process, this would amount to many millions of dollars that may be invested more productively elsewhere. Local Government New Zealand’s 3 Waters Project highlighted that councils are investing significant resources in trying to address this challenge – each operating in independent silos and not necessarily taking advantage of a shared approach. The Ministry of Business, Innovation and Employment (MBIE) and Land Information New Zealand (LINZ) are currently implementing a project to explore the implementation of shared data standards (metadata standards) for water infrastructure. Shared standards The intention of this project is that with shared infrastructure data standards used by all infrastructure providers infrastructure condition and performance would be comparable and
could be benchmarked; data analysis automated and best practice established; and entities could more easily engage in joint procurement initiatives or shared services arrangements. To gain the benefit of this project, work needs to be undertaken to develop tools and guidance to show how this data can be developed into information that can be used for pipeline renewals planning. Whilst there are a number of guidance documents available such as the IPWEA International Infrastructure Management Manual these outline generic management approaches. There is a need for guidance and tools specifically developed for water assets that move the discussion from general process to implementation. At the last two Water New Zealand conferences there have been workshops held where pipeline renewals planning was discussed. Following up on those discussions, the University of Canterbury Quake Centre ran a workshop in February 2016 with a large number of industry participants across the 3 waters sector. That workshop verified the broad scope of the guidance material needed with respect to renewal of 3 water pipelines in the urban environment. A framework was created at this workshop which outlined the overall structure of the
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package of guidance required decision. and identified more than 30 So for clarity and to demonseparate items of work across strate my point, in some asset 10 themes. investment decision environments they have the ability to Estimates expected run decision algorithms which The Quake Centre, Water consider/weight each element New Zealand and IPWEA have subject to what the object is since entered into an MOU to (asset component or compoco-develop guidance materi- nents). al with respect to pipeline reIts context and its environnewals. Opus has since been ment give us a replacement contracted to scope the project recommendation based on all and provide estimates as to these elements (including the project cost – with a report due inclusion of policy settings), in July 2016. based on the score of each of Which brings me to the link them at the time of considerawith the metadata standards tion. project. One thing we need to The pipe renewal guide is make sure is that the elements therefore not about the definiwhich are being used to de- tions of the element (i.e. that’s termine evidenced-based in- the role of the asset metadata vestment decision-making in standards) but very specifically the metadata standards (i.e. the application of the standcondition, utilisation, demand, ards. criticality, risk, resilience, vulOf course all this assumes that nerability, asset performance, councils implement the metaasset financial performance and data standards and we have asset service performance) are money to develop the various aligned with the same elements pipeline renewals guides. No in the pipe renewal guidelines. one said it would be easy! The whole idea of the metadata standards is to ensure John Pfahlert is chief executive when we consider these ele- of Water New Zealand, a ments we have a common suite national not-for-profit sector of definitions to assess and con- organisation comprising sider against when a decision approximately 1500 corporate is made to build or renew an and individual members in asset. New Zealand and overseas The value of the pipe renewal that focuses on the sustainable guidelines will be more about management and promotion how and why, in certain circum- of the water environment stances, we weighted each ele- encompassing the 3 waters – ment and ultimately made the fresh, waste and storm waters June-August 2016
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ENVIRONMENT
Urgent action needed to keep the temperature down
New Zealand must actively contribute immediately to the global effort to avoid dangerous climate change, according to the latest report from the Royal Society of New Zealand
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here are many opportunities to limit climate change by reducing the greenhouse gas emissions that are the main cause of climate change, says Royal Society of New Zealand President Professor Richard Bedford. “I believe New Zealand has a significant opportunity to both prepare and adapt for the future while transitioning to a low-carbon economy,” Bedford says. “The risk of not acting to mitigate the adverse effects of climate change or not protecting ourselves from these effects is vastly greater than the risk of over-investing to protect ourselves and our environment.” The society’s Climate Change Mitigation Panel investigated how New Zealand can reduce the impact of climate change (mitigation options), and assessed the technical and socio-economic options available to reduce New Zealand’s greenhouse gas emissions or remove them from the atmosphere (sequestration). The panel’s key findings include: New Zealand’s GHGs • The climate is changing – average temperatures are increasing due to human activity, particularly the historically high level of greenhouse gas (GHG) emissions. • In order to limit temperature rise, and associated risks of accelerated sea level rise and more frequent extreme weather events for example, the world must reduce GHG emissions and work towards a low-carbon economy. • Stabilising the world’s climate requires net global emissions of GHGs to be reduced to zero before the end of the 21st century, especially emissions of carbon dioxide (CO2)
as it is long-lived in the atmosphere. Global increase
can play a part, including more fuel-efficient vehicles; low-carbon fuels such as renewable electricity and biofuels; using buses, light rail, cycling and walking; and improving urban design to encourage their use. • Journey avoidance and modal shifts for freight, such as greater use of rail and sea, will also assist.
• Our gross GHG emissions per capita are well above average for developed countries. • Our annual gross and net GHG emissions continue to increase. (‘Net’ accounts for CO2 removed by forests.) • The main sources of CO2 emissions are from heat and electricity supply, transport Energy management fuels, cement manufacture • GHG emissions can be reand forest harvesting. duced in the residential and • New Zealand also produces commercial building sector an unusually large portion of through better energy manmethane (CH4) and nitrous agement and improved minoxide (N2O) emissions due to imum performance standards the significant role of agriculfor appliances. ture in our economy. This ac- • Emissions reductions can counts for around half of our also result from improving gross annual GHG emissions. insulation levels; retro-fitting existing building stock; Increasing renewables integrating renewable ener• Increasing the share of regy systems; and supporting newable electricity generainnovative ‘green building’ tion to reach New Zealand’s designs. 90 per cent target by 2025 is technically and economically Industrial energy use possible. • The present dependence • An even higher share is poson burning coal and natural sible but would need a more gas for process heat can be flexible grid, energy storage, displaced by bioenergy, geand back-up generation (posothermal, solar thermal and sibly thermal-plant) to meet electro-thermal technologies. seasonal peaks, especially in • Energy efficiency initiatives dry years when hydroelectric can reduce GHG emissions power is constrained. significantly but may need further incentivising to meet Smart energy the short investment time • Renewable heat systems have frame of businesses. good potential for buildings • Carbon dioxide capture and and industry. Distributed heat storage (CCS) could be an energy systems and a smart option in the long term and, electricity grid incorporating if coupled with bioenergy small-scale, renewable elec(BECCS), would give negative tricity generation systems, GHG emissions. demand-side management, and intelligent appliances Agriculture could play a future role. • Increasing adoption of best practices can help reduce Low-carbon transport the present growth in emis• New technologies and sions, but even if current low-carbon travel choices research into additional mit-
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New Zealand has a significant opportunity to both prepare and adapt for the future while transitioning to a low-carbon economy, says Royal Society of New Zealand President Professor Richard Bedford
igation technologies proves successful, strong reductions in absolute emissions would eventually involve trade-offs with current growth targets for livestock production and would rely on developing alternative low-emitting land-uses. • Some measures to reduce emissions could also support water quality. Forestry • Significantly increasing the land area of plantation forests could offset up to a quarter of our total GHG emissions over the next two to three decades. However, there are only low levels of planting at this time so when current forest stands are harvested our net emissions (gross emissions less CO2 removals) are likely to rise. • Forest sinks can only be an interim solution because there is a limit to the area of available land. Emissions trading • The NZ Emissions Trading Scheme has been ineffective in reducing New Zealand’s emissions. This has reflectJune-August 2016
ed low international carbon credit prices. • Reform is needed to provide clear and stable investment signals. • Emission pricing has an important role but to be most effective it needs to be embedded in a wider package of mitigation policies and actions. Supporting choices • Policies, targets, regulations, infrastructure, and market settings should be developed systematically to support low-carbon choices by businesses, cities and households. • An independent board or entity to provide evidence-based advice to Parliament and the public would be valuable. There is a clear case for immediate action, Bedford insists. “New research and technologies will continue to emerge but many mitigation options are already well-understood and
achievable,” he says. “Delaying actions would result in a greater amount of emissions overall, given that CO2 emissions accumulate in the atmosphere for hundreds to thousands of years.” However, evidence for mitigation pathways for New Zealand is deficient Bedford believes. “Investment in data gathering and deeper analysis will help re-
fine early mitigation actions and support a transparent public debate about longer term desirable and feasible mitigation pathways.” New Zealand’s current target is to reduce emissions to 30 per cent below 2005 levels by 2030, the report notes. “If we want to achieve this target through increased contributions from domestic actions rather than rely-
ing on reductions off-shore and purchasing the related carbon credits, this will require immediate attention,” Bedford urges. “We can start immediately by deploying low-risk mitigation actions whilst planning for and trialling more ambitious emission reductions options and system changes to commence the necessary transition to a low-carbon economy.”
Transport’s answers to Auckland’s growth and affordability issues
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he media is not shy of reporting the comments on the challenges Auckland faces with housing [affordability] and competitive urban land markets. What is new for this still topical space? Perhaps New Zealand could well do to reflect on overseas models when it comes to supporting urban growth through transport infrastructure. Who is doing this well overseas and just what can Auckland learn from this? Auckland Council’s Chief Economist Chris Parker will be presenting at the upcoming September 2016 Auckland Transport Infrastructure Forum. June-August 2016
He will discuss the strategies to pursue wider economic benefits from the increasing competition in urban land markets – along with overcoming challenges to protect future transportation corridors, pricing and private sector provision of transport. The forum will be discussing the Auckland Transport Alignment Project, Auckland Unitary Plan, Port Future Study, City Rail Link and will incorporate networking-friendly table talks plus multiple panel discussions that include key stakeholders candidates together to discuss and their visions for Auckland’s their views on Auckland’s transtransport infrastructure. port infrastructure. Panel discussions include “Ask your future mayor” bringing the
To see the full line-up of thought leaders offering their knowledge at this event, view the agenda at: www.conferenz. co.nz/transport www.infrastructurebuild.com – 39
COMMUNICATION
Fast-moving firm displays winning ways Harnessing the speed and power of the Internet helped an innovative communications scoop not one but two major honours at the recent NZ Hi-Tech Awards
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he IBM Most Innovative Company Award and the ATEED Best Technology Solution for the Creative Sector Award both fell to 90 Seconds, which bills itself as “the world’s cloud video production company”. The Auckland-based company offers a video production marketplace and workflow platform enabling brands and agencies to work with a global community of creators to get high quality, online video content, shot and produced anywhere in the world. “We have over 5100 freelancers in 70 countries and we have worked with over 1200 brands across 60 countries,” 90 Seconds Head of Global Content Mischa Malane explains. “We offer a truly global experience for our staff, customers and partners.” The company has cleverly tapped an enormous market that includes all businesses currently purchasing videos for online or TV and all businesses moving to purchasing videos. “To size up one segment, most forecasts for online video advertising assume a roughly $2.8 billion market at 2012 growing at nearly 40 per cent per year to over $9 billion by 2016,” Malane reveals. “Our perfect customers are global and national brands that require multi-locational video shoot requirements, a streamlined workflow experience, multiple stakeholder ability and the highest level of delivery response.” This concept has proved so successful that 90 Seconds has produced over 8,000 videos in more than 15 languages for over 1,200 brands across 60 countries, including some of the world’s largest like PayPal, Barclays and Sony. They are attracted using cutting-edge online growth techniques, including standard
online tools such as Google AdWords and Google Analytics augmented by content marketing attraction in the form of video, blog content and landing pages. As a result, 90 Seconds makes video production “fast, affordable and all managed seamlessly in the cloud” from purchase to publish. “This enables brands to shoot video in any location on the planet, receive a final video within hours and at a fraction of the cost of using traditional models.” At the heart of this success is a Web application that integrates with mobile and other services on the internet. “We develop all of our own technology IP in-house and own all rights to the technology,” Malane advises. This has taken much of the hassle and heartache out of a video production process has traditionally been a complex, expensive and time-consuming process that was often inaccessible for brands. 90 Seconds entered the market with a mission to win at price, speed, simplicity and quality, Malane recalls. “To achieve this we knew that we had to use software to simplify the process, provide transparent pricing that cut unnecessary costs, tap into the huge community of global creators and win on speed.” The company offers an iPhone and Android app, and is undertaking product development in line with customer usage and feedback, Malane assures. “All customer usage behaviour is tracked and monitored and this feeds directly into product marketing and product management.” The 90 Seconds platform will be enhanced as it continues to grow, solving more of the video
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production process with software, and placing more control in the hands of brands and creators. This shift will position 90 Seconds as a true market network in the vein of Uber and Airbnb, where brands and creators will work together globally produce any type of video project with “consistently great” customer experience. These capabilities are supported by: • the growth and nurture of a fully global marketplace and inventory • a comprehensive workflow management engine • a highly engaged freelancer community • a ratings system that tracks success across multiple metrics • integration with YouTube, Vimeo and Google Drive • enterprise sale teams in five regions • a 24/7 support team • the ability to assess, design and pivot to address the needs of the market. A number of key strategies ensure it remains at the front of the curve, bringing in tech investors the calibre of Sequoia Capital, celebrated first investor in Apple, Google, Linke-
din and Whatsapp to name but a few. “Our eight-strong development team will expand 10-fold in the next 12 to 14 months as we transition to a full marketplace where brands and creators can interact, buy and produce video online,” Malane predicts. “We’ll also respond to real time supply and demand needs within our marketplace through active monitoring of trends and patterns and meet those needs through software development where possible.” If and when these strategies are implemented, they will continue the impressive growth of a private company that doesn’t reveal financials but is projecting 119 per cent year-on-year growth over the next 18 months from a non-existent base just three years ago. “Our growth in full-time staff tells the story,” Malane maintains. “We started with 12 employees in 2013, nine based in New Zealand and three offshore, but now have 52 staff worldwide – 16 locally and 36 offshore.” 90 Seconds will expand its enterprise sales teams into six new countries this year as it continues its worldwide expansion drive. “The market is virtually limitless and we plan to build and extend our existing leadership position in this challenging field,” Malane promises. June-August 2016
COMMENT>> Management
A new name for a recognised standard
The new NZ Certificate in Infrastructure Procurement is up and running – a new flagship for procurement capability across all of infrastructure
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he timing of its launch is impeccable – an outstanding and practical solution to the deficits in procurement capability that are being widely recognised across many government sectors. The forerunner of this qualification has been the staple of the transport industry for decades. Beefed up with injections that reflect the very best in procurement know-how, this new version widens its applicability to all types of infrastructure procurement and builds in (at least!) a requirement for knowledge of government’s procurement requirements. It’s tailored to the New Zealand procurement environment, especially the aspects where local practices are acclaimed as leading edge (such as the use of Price-Quality Method spreadsheets to trade-off scores for attributes and price components of evaluation). Importantly, there is a strong focus on knowledge and application of the New Zealand government’s five mandatory Principles of Procurement and its Rules of Sourcing, which are now relevant to all government organisations including councils. Formerly known as the CPP
and currently titled ‘National Certificate in Infrastructure Civil Engineering Procurement Procedures’, this diploma has formed the backbone of procurement practice in the roading sector since the early 1990s. Because it’s an essential requirement that a qualified evaluator is involved in evaluating any New Zealand Transport Agency-funded project valued at over $200k, there are real incentives for councils to have people available on their staff or consultant list with this
cesses, tender evaluations and knowledge of tendering case law and ethics. Assessments are carried out via observation, evidence of documents prepared for actual procurement exercises, professional discussions and attestations from senior management. A two-day training course is optionally available to bed down the core skills and knowledge needed for the assessments. ities in their workplaces. This course also can provide For fast track, practical skills some of the evidence needed that will have an immediate imfor assessment. pact on procurement efficiency and effectiveness within an New “It’s an intensely practical qualification, Zealand-based council, this requiring graduates to demonstrate skills NZQA qualification is clearly a cost-efficient, fast and directwithin their workplaces” ly applicable solution to boost qualification. Costs for registration and procurement capability. Many see this NZQA Level 6 assessment fees are modest, Diploma as a fundamental driv- and the typical time needed to For more information see er of the excellent procurement achieve it is between six and 18 www.cleverbuying.com practices that are recognised months. Caroline Boot is the founder on NZ Transport Agency proThis qualification is aimed of tender specialist companies jects. In its revamp last year, this at tender evaluators; procure- Plan A and Clever Buying™. qualification received a major ment strategists, managers and She and her colleagues are facelift. practitioners; and procurement committed to providing planners. expert support for tenderers Demonstration driven In contrast to the alternative through providing bid writing It’s an intensely practical qual- procurement qualification from and management expertise for ification, requiring graduates to the Chartered Institute of Pur- companies preparing must-win demonstrate skills within their chasing and Supply, this is 100 tenders – throughout New workplaces such as developing per cent practical, tailored for Zealand and globally. For procurement plans, managing the New Zealand environment, more information, including development of RFx docu- and aimed for those who actu- useful articles on how to win ments and procurement pro- ally carry out procurement activ- tenders, see www.plana.co.nz
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June-August 2016
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MANAGEMENT
Make the most of life by being mindful The biggest threat to health, safety - and to living a fulfilled life – is the inability to be in the moment within the complex world we live in
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amiliarity and multiple demands are leading contributors to errors and incidents, but why do ‘things happen’ although we ‘know what we are doing’? The problem with creating muscle memory and second nature autopilots through practice is that we no longer operate in the here and now. In principle this is not a problem if the environment is as planned and practiced.
does autopilot get switched on but multitasking is in, enticing us to learn, think about and execute ever-increasing numbers of tasks simultaneously. Performance problems
interruption of one task requires us to remember where we stopped, so that when we return to this task we can resume the activity. The same is true, of course, for the alternate task(s). Now, whereas microprocessors are quite efficient at storing and retrieving these interruption points, human brains are decidedly not.
Research into our brains, however, has shown that while we can hold several chunks of information in our mind at once, we cannot perform more than one Finding focus conscious process at a time. What people tend to do is try That leaves the question of to hold several focuses at once what we can do to be focused and switch rapidly between in what we are doing and doing them. Although it is physically it safely; whether it is riding a possible to do several men- bike, working with a digger, or tal tasks at once, accuracy and looking after the children. There performance drop off quickly is an increasing research body – sometimes with harsh conse- that suggests mindfulness pracHowever, once we are on au- quences. Furthermore, when tice can help us get the best out topilot our ability to respond our focus is continuously split of our day. to changes in the environment diminishes, thus our reaction “Every moment can be an opportunity time increases, and accidents or unwanted events happen when to be mindful, to be present and to we ‘take the eye off the ball’. enjoy the smooth workings of our bodies When we go onto autopilot and minds honed through practice and we begin doing the things we need to do without any aware- experience” ness of what is happening to between two or more things, For some people the idea of us or around us. The danger in we experience intense and con- mindfulness gives rise to menthis is not too dissimilar to what stant mental exhaustion. tal pictures of sitting on a mat, happens when we drive in autoThe sad truth is this – multi- legs twisted into the lotus posimatic mode: our surroundings tasking does not mean that we tion and being surrounded by become blurs, our sensory sys- are performing those tasks bet- soothing noises and smells. On tem becomes unfocused and ter. In fact, the reverse is true. a more practical level, mindfulwe find ourselves less in tune In the article Why the Modern ness is any practice you do to with potential risk on the road World is Bad for Your Brain, remind yourself of the here and as we do in life. neuroscientist Daniel J. Levitin now, of the task at hand in the Just as we can miss the po- explains why we have the con- present environment. tential obstacles, we also miss cept of multitasking all wrong. One of the easiest ways to the beautiful simple things, He quotes Earl Miller, an MIT practice mindfulness at work is the smell of the crisp fall air, neuroscientist and expert on the S-T-O-P method. the sparkling sun penetrating divided attention, who says that While walking to a meeting, through the window, bringing human brains are: “not wired the Portaloo, the car or anywarmth without any need for to multitask well… When peo- where else, make an effort to turning on the heat. We be- ple think they’re multitasking, walk slowly and then at a suitagin missing what’s happening they’re actually just switching ble point you around us – missing what is ulti- from one task to another very 1. Stop – stand still, mately the most important. rapidly. And every time they do, 2. Take three deep breaths, In today’s workplace with its there’s a cognitive cost in doing 3. Observe (and quietly list to increasing load and multiple so.” yourself): performance demands, not only As with a microprocessor, the • three things that you see 42 – www.infrastructurebuild.com
• three things that you hear • three things that you feel (either through touch, like the socks on your legs, or any emotions you can identify) 4. Proceed – continue walking towards your destination. With this two-minute exercise you will have given your brain the chance to reset, and you will have reminded yourself about the here and now of your environment. Two minutes that will refresh your focus and increase your awareness and concentration. Every moment can be an opportunity to be mindful, to be present and to enjoy the smooth workings of our bodies and minds honed through practice and experience. Dr Andrea Polzer-Debruyne is senior consultant at PeopleCentric, a group of psychologists who work with organisations in a variety of industries towards increasing individual and organisational capabilities. PeopleCentric are the exclusive New Zealand distributor of the Saville Suite of psychometric tests, and experts in supporting teams’ and individuals’ development with tailored and bespoke initiatives. June-August 2016
Local government
National standards could easily turn into national nightmares Evans Young Consultancy Services Government and Infrastructure There have been no surprises in any of the news leaders recently, with the exception of the sod turning on Auckland’s City Rail Link
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he only novelty surrounding the start to the rail tunnel was that it’s finally happening – most of us have heard so much hyperbole, threat and puffery we never really believed we would see the day. Elsewhere, the announcement of a Labour/Greens alliance only confirmed everyone’s unspoken belief that both parties are struggling to maintain relevance in the electorate on their own, so will try anything to thwart National come October ’17. The most interesting aspects of the budget were less what was announced, rather what was omitted. For the first time in perhaps 10 years, there was no major spend on Auckland infrastructure (excluding $100mil to release further crown land for housing), and surprisingly this was well-received in the City of Sails (Sales). New roading spend is to go towards opening up access to strategic provincial centres, which is appropriate given the patience shown by rural New Zealand as successive governments have heaped largesse on Auckland and Christchurch like favoured children, only to have Auckland City repeatedly do an Oliver Twist “please sir, we want more”. What is becoming apparent is the growing exodus of concerned and/or frustrated Aucklanders moving away from the burgeoning metropolis to the cheaper, more relaxed lifestyle offered by smaller provincial
towns and villages. This trickle down is now entering a second phase. Pick up a local paper in Hamilton or Tauranga and the main stories could have been uplifted straight from any Auckland suburban paper 12-15 months ago, except instead of immigrants read Aucklanders. New blood This wave of relocation is now triggering a third phase as savvy Hamilton and Tauranga house owners are grabbing the cash and downsizing to smaller centres, breathing new life into local communities and providing much-needed ‘new blood’ essential to maintain the levels of service built up during the 20th century when these communities provided the essential social, commercial and community infrastructures to support surrounding rural populations. It’s ironic that, after decades of bleeding provincial New Zealand of its ‘best and brightest’, our major centres are now suffering a reversal of fortune bought about by an elitist attitude by successive city fathers that living in Auckland is a privilege and new entrants come on our terms, rather than the reality that Auckland is a monster that must attract more and more new residents to feed its rapacious growth demands or it dies (or fades into irrelevance, a worse prospect for many city fathers). After years of the old Auckland Regional Council’s ‘we know best’ attitude in estab-
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lishing and defending artificial ‘Urban Limits’, continued by Auckland Council, government is threatening to introduce new National Standards relating to provision of adequate land for predicted and actual growth. This is a response well overdue. The problems inherent with the Resource Management Act are the lack of consistency in interpretation and application of the fundamental provisions affecting residents and ratepayers (landowners). Introducing National Standards, while a step in the right direction in providing consistency and certainty (two of the major influencers of risk, along with time, the prime drivers in cost), has its dangers. One of the major risks is that the inherent value of land as a means of survival through food production must be recognised and preserved. Aesthetic angst Past experience in Auckland has seen the fertile market-gardens of Mangere and the orchards and vineyards of West Auckland surrendered to Auckland’s ever-expanding waistline, while unproductive marginal farmland has been protected because of nebulous ‘aesthetic’ values. This can’t be allowed to continue; the unique and highly productive Pukekohe soils may offer the easiest of ‘low hanging fruit’ when it comes to developing and servicing new residential or industrial sites, but the long-term cost is far greater than this short-term gain.
I would hope any new National Standards will include adequate protection measures to ensure unique microcosms (be they productive, environmental or aesthetic) are recognised and preserved. A start would be to do away with “future” zoning, whereby councils zone then rate on the basis of “best and highest value” land use valuations regardless of intent or suitability/desirability, thus encouraging/forcing farmers/ market gardeners/agriculturists to sell their land to developers/ land-bankers/speculators as their rates increase disproportionately to the productive value of the land. There is much land around Auckland that has marginal productive potential that can be utilised to cater for our growing demand – to continue to preserve it as a “green belt” is an extravagance we can no longer afford. It doesn’t take long to look around the extremities of the North Shore to see examples of this – Long Bay is a prime example. So on this note I conclude the lesson for today. Please be careful what you wish for – you just might get what you deserve. Evans Young spent 15 years with local government and 25 years with Hopper Developments as a director and project manager. He provides consultancy services relating to interaction with local, regional and central government +64 021 22 999 12 June-August 2016
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www.infrastructurebuild.com – 47
COVER STORY >> Transport
Bolder approach needed to get electric vehicles rolling Did the government’s electric vehicle programme go far enough in addressing New Zealand’s greenhouse gas emissions?
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he man behind the authoritative Electric Vehicle Policy: New Zealand in a Comparative Context report doesn’t think so. “It’s good to see the government taking some action – it’s certainly an area where New Zealand can improve,” says Waikato University Professor of Law Barry Barton, who co-authored the report with Bremen University Law Lecturer Peter Schütte. “They have done many of the things that international literature says are desirable but they haven’t done the things that international evidence shows are essential, so it’s not entirely clear how successful the programme will be.” First and foremost, Barton believes the government should release an analysis of its figures on its target of 64,000 electric vehicles (EVs) and what effect that will have on greenhouse gas emissions. “It would be wonderful to know about the efficacy of the policy actions they’ve taken to achieve that target – are the two actually related at all and will those measures reach that target?” he questions. “They may very well do but it’s unclear.” He says the same about whether the policy actions will produce the change that will reach the target. The government should also have introduced other measures and not necessarily “feebates”, which provide a price benefit or charge on the basis of the entire light motor vehicle fleet’s CO2 emissions upon initial registration. “I’m not a campaigner for fee-
bates but price is an issue and the government hasn’t done much on that,” Barton maintains. “They’ve provided a subsidy in relation to the road user charges but that doesn’t go far enough.” It’s also spread out over time and there’s “plenty of evidence” that shows that approach doesn’t particularly influence people’s choices. “Immediate incentives are much more effective – there’s sound basis for that in the literature,” he explains. “There’s also an equity issue – some people have the capital to deploy to reduce costs over time but others don’t and we have to think of them as well if we want to increase electric vehicle uptake.”
In addition, Barton suspects many EVs will have been bought by organisations such as the power and petrol companies for commercial reasons. “Mighty River, for example, has acquired several electric vehicles; I think mainly to figure out how this might work as a business opportunity.” Greenhouse gases Ultimately, he says the answer to the question of why EVs are important is in relation to greenhouse gas emissions. “Even 64,000 cars against the current fleet of 3.5 million vehicles is a very small step forward,” Barton notes. “A colleague has done a back-of-the-envelope calculation that suggests if we reach
“There are huge possibilities to reduce greenhouse gas emissions without affecting the nature of the vehicle fleet and restricting people’s choices” The other aspect that concerns Barton is the fuel efficiency of the vehicle fleet as a whole. “Again feebates tackle that, but if we’re not going to introduce them you really wonder whether it’s worth putting a lot of effort into electric vehicles at all.” Nor is he certain that the government will reach its target of 64,000 given that the current EV fleet is only about 1,000 vehicles. “Electric vehicles haven’t yet reached a mass market – many of those that have been bought are held by aficionados, but there aren’t many who dedicated enough to spend an extra $10-20,000 dollars on purchasing an electric vehicle.”
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that target then the NZ emissions from transport alone would come down maybe one per cent.” That’s where EVs have to be accompanied by other measures, he insists. “The government’s has to implement similar programmes with relation to biodiesel, hydrogen, active transport like cycling and walking, and public transport.” Much also depends on the overall vehicle market, which sees heavy diesel-powered vehicles producing about 45 per cent of the total greenhouse gas emissions, with little prospect of many of them going electric. “There are huge possibili-
ties to reduce greenhouse gas emissions without affecting the nature of the vehicle fleet and restricting people’s choices,” Barton argues. “For example, the government could put in place mechanisms such as the feebate that will help affect the choices people make.” Another potential stumbling block is the charging infrastructure, though he notes that the private sector is ahead of the market with the power companies and others such as Charge Net providing “reasonable coverage” for what is, after all, a mere 1,000 EVs. Infrastructure is important in encouraging people to switch to electric vehicles, Barton asserts. “For example, Oregon has quite a high uptake of electric vehicles, not because of subsidies but because it has a very good charging infrastructure.” Clearly the government’s measures fall short of those outlined in Barton and Schütte’s paper, which argued that a “bold approach” is needed June-August 2016
Above: The Tesla 3 is a high performance pure electric vehicle, capable of accelerating from zero to 60mph in less than six seconds and running 215 miles on a single charge Left: The Mitsubishi Outlander is a plugin hybrid electric vehicle (PHEV) that can run on petrol or diesel but can also be plugged into a power point to recharge
given the increasing attention electric vehicles (EVs) are attracting worldwide. Big benefits They noted that EVs offer several public benefits when com- The pure electric Nissan Leaf is the most popular pared to internal combustion electric vehicle in New Zealand engines, specifically regarding: • greenhouse gas emissions • energy efficiency • energy security • air pollution and noise. “This is particularly so in New New Zealand is well-positioned to benefit from electric vehicles because: Zealand where approximate• currently around 80 per cent of the country’s electricity is generated from renewable sources ly 80 per cent of electricity is – 70 per cent from wind, geothermal and hydro generated from renewable re• New Zealand has a target for 90 per cent renewable electricity generation by 2025, meaning sources,” they observe, adding the emission reduction benefits of electric vehicles locally are greater than in other countries that transport is a large and • New Zealand’s 230-volt system enables easy charging from existing electricity outlets rapidly-growing contributor to • around 85 per cent of New Zealand homes have off-street parking for easy overnight chargNew Zealand’s greenhouse gas ing (GHG) emissions. • commutes in urban centres average 28 kilometres a day — a distance electric vehicle batterThe main barriers to EV upies can handle easily take are: • 95 per cent of daily travel is less than 120 kilometres – electric vehicles provide approximately • substantially higher capital 120 kilometres per charge cost in comparison with in• approximately 12 per cent of New Zealand’s total annual greenhouse gas emissions come ternal combustion vehicles from light vehicles, with another eight per cent from trucks, buses and trains (ICVs), even allowing for re• there are just over 1,000 EVs out of a total light vehicle fleet of some 3.5 million (including ductions that are likely to motorcycles) occur • New Zealand currently imports around 97 per cent of the oil it needs • the country’s 2.5 million cars each use an average of $2500 worth of fuel each year – around Continued on page 24 $6.5 billion each year.
Awesome advantages
June-August 2016
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COVER STORY >> Transport Continued from page 23 • shorter driving ranges combined with recharge times – especially in terms of public perception • the need for a better-developed charging infrastructure • the lack of policy measures that properly measure the adverse effects of ICVs to provide fair comparison with EVs. Any programme to encourage EVs in New Zealand needs to be part of an overall mobility strategy that takes an ‘avoid, shift, improve’ approach to transport – for example, in producing improvements in the whole vehicle fleet. Public policy is the main driver for the uptake of EVs, the report’s authors believe, insisting that non-fiscal measures such as parking and lane privileges and the encouragement of charging infrastructure are “likely to be useful”. However, in the face of high EV prices and the absence of fuel efficiency measures the real effect of such non-fiscal measures is doubtful. “On the other hand, the development of a charging infrastructure does not appear to need major government involvement.” Moreover, their international research shows that uptake of EVs is rare in jurisdictions that do not have significant fiscal incentives for the price support of EV purchases. A further handicap is the fact that New Zealand and Australia are distinctive internationally in not regulating vehicle fuel efficiency in any way beyond a labelling requirement.
An effective feebate system would avoid the need to introduce price subsidies for electric vehicles, Waikato University Professor of Law Barry Barton argues signal for using hydrocarbon fuel that is necessary, but not sufficient on its own, to induce significant change. The solution, the authors conclude, is a suite of EV policy measures that have credibility and a proven record of success
Fuel first Very few countries, if any, are trying to promote EVs without fuel efficiency measures, the report observes, and it may not be possible to promote them without fuel efficiency requirements. There is ample evidence that a general price on carbon such as an effective Emissions Trading Scheme (ETS), gives a price 50 – www.infrastructurebuild.com
internationally and are suitable for New Zealand conditions. First and foremost is a “feebate” scheme that would apply to the entire light motor vehicle fleet on initial registration and would provide a price benefit or charge on the basis of the vehi-
cle’s CO2 emissions. The size of benefit or charge per unit of emissions would be such to provide a real influence on vehicle selection and would be re-set regularly to produce revenue neutrality. “An effective feebate system
Electric vehicles in brief
There are three main types of electric vehicles: • Battery electric vehicle (BEV) – pure electric vehicles such as the Nissan Leaf and various Tesla models don’t have a conventional petrol or diesel engine, relying solely on batteries charged from a power point • Plug-in hybrid electric vehicle (PHEV) – the Mitsubishi Outlander PHEV is one of four PHEVs currently available in New Zealand that can run on petrol or diesel in the traditional sense (like a hybrid), but also can be plugged into a power point to recharge. PHEVs can run on battery for a short period (typically less than 100km), then the on-board petrol engine kicks in to charge the battery and keep the car going. • Hybrid vehicles – traditional hybrids such as the Toyota Prius and Honda Civic have batteries and electric motors but their batteries are charged via a traditional engine. Hybrids don’t recharge via a power point and don’t draw off the national power grid. June-August 2016
Charging ahead to a greener future
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would avoid the need to introduce price subsidies for EVs,” the authors maintain. “It would operate as a form of fuel efficiency standard for the benefit of the entire light vehicle fleet.” The feebate scheme would be accompanied by a campaign to improve public awareness, perceptions, and knowledge of EVs as an option; carefully directed at different audiences and based on perception and behaviour research. A public charging infrastructure should also be encouraged, together with standards for charger plugs and communication protocols, and powers for road-controlling authorities to manage street activity. In addition, legislation would be necessary to provide clarity and permanence, improve the investment climate, remove barriers, and clarify uncertain points. These measures should be combined with price pressure on the use of hydrocarbon fuels through the ETS at a level high enough to bring about changes in vehicle use. “Other barriers that have already been identified such as the fringe benefit tax will doubtless be followed by more challenges, not the least of which is the development and implementation of a method for EV users to contribute to the maintenance and development of the road network,” the authors conclude. June-August 2016
n electric vehicle charging infrastructure company that was incorporated just 12 months ago plans to build 100 charging stations within four years. Charge Net NZ began physical installs in October last year and has completed some 18 to date, overcoming several potential problems in the process. “Sites are most attractive where there are public facilities nearby such as toilets, coffee shops or entertainment areas and with available power supply as close as possible,” explains Charge Net NZ COO Nick Smith. “Often the most suitable sites are owned by councils or leased to businesses, and partnerships with line companies and retail chains have made this easier to navigate site agreements.” A single car parking space with an additional space on the verge/footpath/plated area about the size of a phone box is all that is required as a minimum for an electric vehicle (EV) charging station. “Populations of around 80,000 people per station are currently viable,” Smith adds. “For instance, Christchurch will have about four units spread around the city.” The rapid rollout is spurred by the fact that the majority of electric vehicle (EV) charging happens overnight in people’s garages, but a six-hour wait simply isn’t practical when drivers reach the 120km limit of most EV batteries. “We are building a nation-wide network of fast DC chargers that let any EV owner quickly fill their “tank”, typically in 10-25 minutes,” Smith explains. “Free from the constraints imposed by the hazardous nature of traditional fossil-based transport fuels, EV charging stations can be placed in much more convenient locations like shopping malls and supermarkets where drivers would typically park for at least 20-30 minutes anyway.”
As the name suggests, a fast DC charger is a much larger version of the built-in, on board charger that converts the AC power from the grid into DC power for the car’s battery. “Fast chargers convert high power 3-phase AC into very powerful DC current, dramatically reducing the charge time – usually to less than 25 minutes” Smith notes. All Charge Net’s chargers support the CHAdeMO standard used by Japanese vehicles like the Nissan Leaf as well as the American Type 1 CCS charging used on the BMW i3. “The Tesla Model S can be charged from the CHAdeMO outlet using an adapter,” Smith adds. A credit card pre-pay charging system supported by cloudbased technology lets the company’s 300 registered members use a key fob or smart phone app to charge their vehicles using energy supplied by Ecotricity, a zero-carbon certified electricity provider. Generally speaking only population centres and sites on
“An inspiring and enthusiastic project that has excellent potential.” the main highway routes will have fast charging in the medium-term. “Currently we are targeting 80 kilometres between charging stations in order to enable road trips by an entry level electric vehicle,” Smith says. “As electric vehicle uptake increases then the smaller location may become viable in the future. It will take approximately four years for Charge Net to roll out the first 100 units, but more may already be required by the time the initial rollout is complete if electric vehicle uptake is faster than anticipated. “Realistically, we’re looking at least 10 years before mass vehicle uptake will reach the point where they challenge fossil fuel vehicles.” This target would be reached
“We are building a nation-wide network of fast DC chargers that let any EV owner quickly fill their “tank”, typically in 1025 minutes,” Charge Net NZ COO Nick Smith promises
much quicker if the government introduced suitable incentives to spur electric vehicle uptake, Smith feels. “Tax-based incentives directed at fleet and business owners may spur initial uptake and open up the local second hand market shortly thereafter.” Feebates are another solution of zero cost to government, he adds, but these were ruled out in the government’s recent electric vehicle promotion package. “Subsidies such as they enjoy in California or ‘fair taxation’ systems like those in Norway exist in other countries but our government is firmly opposed to subsidies and believes that private enterprise will lead the way, so uptake will inevitably take longer,” Smith admits. Charge Net NZ’s achievements to date were recognised with the recent Z Energy Transport Award, which impressed the judges as “An inspiring and enthusiastic project that has excellent potential. The timing is well pitched and the accessible and innovative technology is very customer-focused. An admirable display of forward thinking and support for low-carbon transport systems.” www.infrastructurebuild.com – 51
COVER STORY >> Transport
Government gradually getting into gear Norway may have unveiled an ambitious plan to ban fossil fuel vehicles by 2025, but the New Zealand government hasn’t been anywhere near as bold
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he New Zealand government’s long-awaited electric vehicle package clearly points to an electric tomorrow – though that tomorrow may well take a long while to arrive. “It’s clear that electric vehicles are the future,” Transport Minister Simon Bridges admits. “A move from petrol and diesel to low emission transport is a natural evolution, and it is our aim to encourage that switch sooner, rather than later.” The benefits of increasing uptake of electric vehicles are far-reaching, he maintains. “They’re cheaper to run than petrol or diesel vehicles, they’re powered by our abundant renewable electricity supply, and they’ll reduce the amount of emissions that come from the country’s vehicle fleet.” The measures are designed to increase the uptake of electric vehicles (EVs) by tackling and removing the various barriers that have prevented house-
holds and business from choosing EVs, including the limited selection of models available; a lack of widespread public charging infrastructure; and lack of awareness about electric vehicles. The government can’t tackle these barriers alone, Bridges insists. “That’s why we’ve been working closely with the private sector and local government over the last year on what measures we can take that will have the greatest impact,” he explains. “What we’ve come up with together is a strong package of measures that is ambitious and has real substance.” The package includes: • a target of doubling the number of electric vehicles in New Zealand every year to reach approximately 64,000 by 2021 • extending the Road User Charges exemption on light electric vehicles until they make up two per cent of the light vehicle fleet • a new Road User Charges ex-
emption for heavy electric vehicles until they make up two per cent of the heavy vehicle fleet • work across government and private sector to investigate the bulk purchase of electric vehicles • government agencies coordinating activities to support the development and roll-out of public charging infrastructure, including providing information and guidance • $1 million annually for a nation-wide electric vehicle information and promotion campaign over five years • a contestable fund of up to $6 million per year to encourage and support innovative low-emission vehicle projects • allowing electric vehicles in bus lanes and high-occupancy vehicle lanes on the State Highway network and local roads • a review of tax depreciation rates and the method for calculating fringe benefit tax to
ensure electric vehicles are not being unfairly disadvantaged • establishing an electric vehicles leadership group across business, local and central government. The initiative also seeks to realise the many benefits that electric vehicles offer. “This includes annual savings of Road User Charges of $600 a year for the average vehicle owner and much cheaper operating costs,” Bridges adds. “On average, charging an electric vehicle at home is equivalent to buying petrol at 30 cents a litre, compared to petrol which is around $2 a litre.” Bridges says the package is an important part of the government’s work to reduce greenhouse gas emissions in the transport sector. “Electric vehicles will maximise New Zealand’s renewable advantage, with more than 80 per cent of the country’s electricity coming from hydro, geothermal and wind,” he maintains. The increased use of electric vehicles will replace petrol and diesel with clean, green, locally produced energy. “If we start to replace New Zealand’s fleet with electric vehicles, we can begin to significantly reduce our greenhouse gas emissions.” Barrier buster The government’s plan is a “much anticipated” move in the right direction, says Drive Electric, New Zealand’s leading not-for-profit organisation to realise the “health, environmental and economic benefits” from the accelerated uptake of electric vehicles. Drive Electric is “very pleased” that the government’s
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June-August 2016
initiatives to promote EV uptake has picked up the organisation’s recommendations made two years ago, says chairman Mark Gilbert. “The government’s EV package will help remove barriers such as the limited supply of EV models, lack of awareness of EVs, and a shortage of widespread public charging infrastructure.” The bottom line is that EVs can and will change NZ’s emission profile over time, by reducing carbon emissions, he insists. “Simply put, every petrol car replaced with an EV forgoes 2,000kg of carbon from the environment – it also helps our balance of payments and reduces our reliance on fossil fuels, making New Zealand energy independent, so EVs are the future.” He is, however, disappointed that there was no mention of feebates in the government proposals. “Whilst there is a commitment to look at other financial aspects only fringe benefit tax and depreciation has been mentioned.” Feebates are, Gilbert admits, a complex topic as a feebate scheme would penalise gas guzzlers and incentivise ultra-low emission vehicles like EVs. “Feebates could be linked to registration of vehicles annually, but I guess the carbon tax in the pump price already does this for high fuel users and no road user charges for EVs are an incentive.” Drive Electric will support the aggregation of orders to help develop the EV fleet car park, which will also help bring the all-important infrastructure developments in number of charging stations. June-August 2016
Minister of Transport Simon Bridges’ electric vehicles package seeks to double the number of electric vehicles in New Zealand every year to approximately 64,000 by 2021
The EV package’s education and promotion elements should hopefully get people thinking in broader terms, Gilbert believes. “This will help move the corporate and motorist mindset from transaction prices of vehicles to total cost of ownership,” he maintains. “EECA has developed a very good model that can help com-
Every petrol car replaced with an EV forgoes 2,000kg of carbon from the environment, Drive Electric Chairman Mark Gilbert notes
numbers. “These also provide built-in price incentives, having been subsidised in their home market before being exported – the UK electric vehicle incentive is around 5,000 pounds at present. “Thirdly, new models will require homologation in New Zealand. The Renault Twizy,
“Feebates could be linked to registration of vehicles annually, but I guess the carbon tax in the pump price already does this for high fuel users and no road user charges for EVs are an incentive.” panies line up their current fleet with new EV models available in the New Zealand market.” Ultimately, he thinks there are three reasons why government could well reach its target of 64,000 electric vehicles by 2021 despite the lack of comprehensive incentives. “Firstly, more and more car manufacturers will bring BEV and PHEV vehicles to market due to the EU carbon emission target regime, which is getting very close. “Secondly, New Zealand is an open market and so used car imports from other righthand-drive markets like the UK, Japan and Singapore will boost
for example, is a very sexy two seater ideal for younger consumers and/or city commuters and car share programmes. “They are relatively cheap compared to other electric vehicle derivatives and could drive the volume along with used electric vehicles,” Gilbert concludes. Charged up Perhaps not surprisingly, the Electricity Networks Association has welcomed the government’s measures to increase the number of electric vehicles on New Zealand’s roads. “We will be watching with interest how the government
supports the development and roll-out of public charging infrastructure,” says Chief Executive Graeme Peters. “Our members are well and truly doing their bit with the installation of charging points from one end of the country to the other.” They have installed 40 public chargers, most in the past year, and there are plans to put in another 100 chargers across the country within the next year as part of a national charging network that will include the fast chargers that can almost fully recharge in 20 minutes. “This will ease range anxiety and hopefully assure people thinking of purchasing an electric vehicle that there is the infrastructure in place to support their decision.” Z Energy, for example, has installed six rapid-charge electric vehicle charging stations at sites in Auckland, Wellington and Christchurch The Tritium fast chargers supplied by Charge Net NZ draw up to 400 volts of electricity and can charge a standard electric vehicle in the time it takes a customer to buy and drink a cup of coffee. It costs approximately $5 - $10
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COVER STORY >> Transport Continued from page 27
for the vast majority of users to fill up, and the charge time from empty will be approximately 1025 minutes, as opposed to up to eight hours for a conventional slow charge. A 25 minute charge will “fill up” an entry level electric vehicle like a Nissan Leaf and allow customers to travel around 120 kilometres. Peters believes the range of measures is “a good start” to providing incentives for the general public and vehicle fleet buyers. “The extension of the road user charges exemption and allowing electric vehicles to use bus and high-occupancy vehicle lanes in the state highway network are a good move,” he maintains. “This will save motorists both time, particularly in often gridlocked cities like Auckland, and money.” However, he adds that the government needs to look at the fringe benefit tax arrangements for electric vehicles. “Sorting that out will definitely encourage company fleet buyers to purchase EVs.”
Consumer confusion New Zealand’s premier motoring organisation has welcomed the Minister of Transport’s package of initiatives to promote the uptake of electric vehicles in New Zealand. “With our high level of renewable electricity, New Zealand is ideally suited to adopt electric vehicles,” says Automobile Association (AA) Principal Advisor Mark Stockdale. “Other countries have led the way in introducing policies to speed the uptake of electric vehicles, and interest is mounting here so it’s good to see the government taking action to stimulate their growth.” But Stockdale notes that there are few electric vehicles for sale in New Zealand and most AA
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members say they know little about them. “Twenty five per cent of AA members don’t even know that an electric car costs less to fuel than a conventional car,” Stockdale says. The government’s publicity campaign will help people understand EV benefits, while government and private sector bulk purchases would increase the supply of new and affordable used electric vehicles. “We need to get more electric vehicles on the road and price is a barrier,” Stockdale concedes. “New Zealand is a very small market, so the idea of coordinating bulk procurement with fleets is one way to bring the unit cost down.” Although the average motorist only commutes 28km a
day, many AA members have said they would be concerned about electric vehicle range, so Stockdale believes it’s important that a co-ordinated nationwide network of charging stations is developed. The AA is also pleased to see the government becoming more involved in coordinating the roll-out of the charging infrastructure and addressing plug compatibility issues. “We don’t think the government needs to get involved in that area, but they do need to ensure that the compatibility issue is addressed and that the infrastructure covers the whole country as the industry might just cherry-pick and install charging stations where there’s demand.”
June-August 2016
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