Business North March 2015

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March 2015

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Hotel makeover

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Construction sector under pressure Chris Hutching Construction cost growth is forecast to peak by the end of 2015, by 5.6% for Auckland, 6% for Christchurch and 3% for Wellington. By the end of 2016 Rider Levett Bucknall is predicting growth in construction costs of 4.8% for Auckland, 6% for Christchurch and 3% for Wellington. Quantity surveyor and advisory group Rider Levett Bucknall released it 1st quarter 2015 report this month. Director of RLB Auckland, Richard Anderson, notes the current business confidence and optimism in hiring, plus increasing margins and profits. But he highlighted capacity problems in nonresidential construction with long lead times for off-

site prefabricated products and labour shortages in structural trades. Mr Anderson is concerned that while construction activity has increased, the current volume of work is not yet significant in Auckland. The city awaits the promise of a number of large scale construction projects and says the number of projects awaiting building consents has grown strongly. When this work comes on stream, combined with other significant construction projects in Christchurch, the capacity problem is likely to increase and require significant industry investment, he says. Big Auckland projects in the offing include the proposed new International Convention Centre, the Downtown redevelopment, and City Rail Loop. If construction activity continues to grow as expected it will result in a volatile market and tender prices.

Construction cost escalation will be a key risk, Mr Anderson says. The post-earthquake Canterbury rebuild momentum continues as evident by the number of cranes. This is reflected in the latest figures for construction spending in Canterbury for 2014 nearing $4 billion, an increase of 38% from 2013. Residential construction is slower but still strong. Unemployment in Canterbury is the lowest in New Zealand at 3.8% and the number of people employed in Christchurch has grown by nearly 6% since 2013. Most of the cost increases in Canterbury are from labour cost inflation although some subcontract and supplier margins are also increasing and affecting tender prices on major and complex projects. The $200 million Burwood Hospital redevelopment is well under way, while the $400

million central Christchurch Hospital redevelopment is at the earthworks and enabling stage. Several big commercial office and retail projects are also underway in the city centre including a bus interchange. Canterbury and Lincoln Universities also have extensive building programmes. Wellington’s local construction industry remains weak in terms of new developments in the commercial and residential markets, boosted by civil infrastructure projects north of Wellington. Strengthening existing buildings remains high on the priority list without adding value to the cityscape or local economy, RLB says. There are a few larger projects under way including the Gateway project and Rutherford House extensions for Victoria University, and Transmission Gully, while there is potential from a Hilton Hotel and Convention Centre in the city centre.

Taupo Park offer rejected Chris Hutchings Taupo Motorsport Park shareholders have rejected a buyout offer from motor sports aficionado and VIP Pets owner Tony Quinn. The indebted park will now be sold in an international tender, according to director Chris Abbot. The race circuit and drag strip is considered one of New Zealand’s top motorsport venue. It has 133 shareholders including members of the Taupo Car Club which has rights to use the circuit on 14 days a year and receives some income. The club members are wary about any deal with reduces their rights. The shareholders recently rejected a $3.6 million offer from Mr Quinn. He and his wife Christina are also involved in the 88ha Highlands Motorsport Park property development at Cromwell where races are also hosted. It is also a venue for family entertainment and boasts one of the best sports car museums. Mr Quinn has won the New Zealand Targa road race series five times. But his offer was well below the approximate $5 million debt owed by Taupo Motorsport Park to banks and Taupo District Council. The last publicly available accounts for 2012 show a book value of the track and associated assets of $7.4 million. Borrowings were $4.4 million in 2012.

INSIDE

New skifield complex taking shape.... Visitors to Queenstown this winter will be relaxing in style if they head up to the Remarkables Ski Area. Construction is well underway on the new $20 million base building at the southern skifield which will feature a striking 10-metre glass frontage, and 1300sqm of outdoor decking which wraps around the building.

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Extensive restaurant, cafe and bar facilities on the first floor can accommodate up to 700 people inside and 500 outside. NZSki chief executive Paul Anderson says the building will be finished and ready for the 2015 season, which kicks off on Saturday June 20, the same weekend as the Queenstown Winter Festival.

Exploring virtual private networks - PAGE 3

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