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Crisis hits flagship Christchurch CBD development

Christchurch’s first big flagship central business district retail development is on hold.

Rich Lister Antony Gough announced a “pause” in the Oxford St venture pending revised design options “against market demands and also supply chain costs, options and efficiencies.”

Foundation work has been under way for several weeks. Mr Gough has been funding it from his own resources.

His decision comes as more developers and investors complain the Canterbury Earthquake Recovery Authority has stifled the rebuild with impossibly difficult rules and paying so much to acquire city properties that it makes commercial rents unaffordable.

The crisis in confidence of central business district developers contrasts with the frenzy of commercial construction around the fringe of the city along Durham and Victoria Sts, Papanui Rd, Moorhouse Ave and Lincoln Rd, Addington.

Businesses have signed up on long-term leases in these places and show few signs of beating a path back to the central city.

Even the buildings that lawyers and accountants who have signed up for are on the edge of the old central business district in Durham St.

Crown agencies have reportedly signed up for 24,000sq m of space in four new buildings. Work has yet to begin on any of them. The central city remains largely a rubble wasteland three years after the last major earthquake.

CERA has issued numerous calls for expressions of interest in various Crown projects but none of them have got beyond initial design stages.

Mr Gough dropped the bombshell on the same day Prime Minister John Key was officially opening a recentlycompleted building in lower High Street.

Only one media outlet attended the Prime Minister’s ribbon-cutting, suggesting weariness at his weekly photo opportunities.

NBR understands CERA approached the developers of the High St property last week about the photo opportunity

c.hutch@clear.net.nz

More by Chris Hutching

Comments and questions
8

Bob Jones wrote an article on these issues prior to the CBD blue print being released. From memory I think he said rents would have to increase around 400%.

Another example of the result when the productive must ask permission of the unproductive to produce.

The human cost to residents, contractors, and owners of this stop/start indecision, must be overwhelming.

Christchurch Central is DOOMED until the Government/Council review their options for start-ups and being an election year I would have thought greater emphasis from the Government/Council would be more obvious.Nearly 4 years now and LOOK AT US.The recent Article in the PRESS from the Australian expert spelt it all out for us. And Now Gough is appearing somewhat concerned.Where is all this going to lead us to.Lets turn whole INNER CITY INTO A GREEN PARK ?? and build around it ??

or again wasn't it Bob Jones who recommended that the centre should be dug out and turned into a lake?
CERA are just a bunch of muppets and I wouldn't go near anything they dream up with a barge pole.

When you have a Govt that ignores the law and barges over peoples property rights It is no wonder that investors will not sit down with them.
The stain would last a long time.

No amount of PR spin can hide the regrettable commercial reality that after starting his $150 million Terrace project, Gough’s colourful personality and effervescent enthusiasm simply hasn't attracted a critical level of hospitality tenants and with costs blow outs he’s now forced to put the brakes on the project while he works out the changes required for allowing it to be completed.

Gough has apparently fronted the initial project costs to date from his own cash reserves and it is understood further funding is being sourced through one of several lending institutions.

The Terrace development is being promoted as the, “shining light of the Central Christchurch Development Unit's (CCDU) recovery plans”. That being said, given that the project has now been stalled, was Gough commercially unwise to have ever taken on such a high risk project in the first place! One can only assume those lending institutions that he requires funding for the next critical stages, are understandably feeling a little nervous without tenancy agreements being confirmed.

Not helping Gough's position is the fact that on several occasions he has admitted the project will not make him any money and that the earthquakes forced him to switch from being a property investor to the role of developer. While the buck must ultimately stop with Gough, to his credit he engaged Arrow International as project managers, which is the same company behind the controversial Southern Response.

In Saturday’s Press article, Canterbury Employers Chamber of Commerce chief executive Peter Townsend is reported to have said that he believes the project being paused will have no impact on other businesses wanting to come into the central city. However, perhaps if Mr Townsend was made aware of the negative impact that followed the January decision, when the developer behind the high-profile Triangle Centre site announced that he was abandoning his plans, perhaps Mr Townsend might not be so optimistic.

I am sure I join most people in wishing Gough every success in hoping that he can recover from this unfortunate early set back. However, in my view, there is no denying the commercial realities and the potential serious wider implications that clearly could follow Gough’s announcement by adversely impacting on business confidence that is desperately required for underpinning the CBD’s recovery. To believe otherwise is simply foolhardy!

Gough needs finance. Financiers need to see tenancies signed up. Tenants need rents they afford. If they have to charge $15 for a beer, in order to cover the rent, they won't last very long.