Infrastructure projects underpin capital’s growth
The value of building and construction activity in Wellington is expected to grow by 38% from 2012 to 2019.
The value of building and construction activity in Wellington is expected to grow by 38% from 2012 to 2019.
Wellington is on the cusp of its biggest construction boom in many decades – with upcoming major infrastructure projects adding fuel to the province’s commercial and industrial property market recovery.
The value of building and construction activity in Wellington is expected to grow by 38% from 2012 to 2019, according to a National Construction Pipeline report compiled by the Building Research Association (BRANZ) and Pacifecon (NZ) Ltd and released at the end of last year.
The 38% Wellington growth – encompassing Wellington central, the Hutt Valley, Porirua, Kapiti Coast, Masterton, Carterton and South Wairarapa districts – is above the forecast national average increase of 32%.
Bayleys Wellington commercial and industrial director Mark Hourigan says that of particular encouragement to the commercial property sector was non-residential Wellington construction activity, which was forecast to surge ahead by 49% in the 2012–2019 period.
“The biggest contributor to this increased activity will be the major transport infrastructure projects and, in particular, the 100km Northern Corridor Highway from Wellington to Levin, and hopefully, eventually, a runway extension at Wellington airport,” Mr Hourigan says.
“These important projects will help drive future business growth in Wellington by improving customer connections – with the lower and central North Island via the Northern Corridor and nationally and internationally via airport improvements, particularly to accommodate long-haul air services.
“In a domino effect, business development drives the commercial property market. It generates more tenants and owner/occupiers for buildings, creates new investment and development opportunities, and attracts investment capital.”
Mr Hourigan says the increase in construction activity comes at an opportune time.
“Wellington has a fairly conservative investment environment, and it generally takes longer for things to turn around than in Auckland. But there has been a noticeable improvement in the mood of the market and pentup demand is now coming to the surface,” he says.
Mr Hourigan says this is reflected in many offers being received on tender properties – such as Bayleys’ sale of the Harbour City Centre building on Lambton Quay for $45.85 million and a revival in the auction market – with 11 out of 14 properties selling under the hammer at Bayleys’ last two Wellington Total Property auctions in 2014.
In the agency’s last Wellington auctions for last year, two substantial Ngauranga industrial properties occupied by Fonterra and Armourguard sold for close to $6 million.
“The more buoyant market conditions that prevailed in the latter part of 2014 are expected to continue in 2015. The economy is performing well, interest rates are forecast to remain at current low levels for most, if not all, of the year and commercial property demand should continue to outstrip supply,” he said.
Commercial and industrial development hotspots identified by Bayleys Wellington
The Northern Corridor
The Northern Corridor will significantly improve travel times between Wellington and the lower North Island and assist businesses with distribution centres in the Wellington region with speed to market, bypassing many existing bottlenecks and more hazardous stretches of SHW 1.
Ambitious airport action plans
Work started in November on a $58 million, 18-month project to extend Wellington Airport’s main terminal by a third to provide extra aircraft gates and more space in gate lounges. The extension is part of a $250 million, five-year airport development plan, with other projects including $30 million worth of airfield engineering work, further car park extensions and a new Rydges Hotel.
Wellington City Council also voted in December to contribute $1.95 million to start the formal consenting process of a proposal to extend Wellington Airport’s runway by 350 metres to the south. The extension to facilitate international long-haul services is considered essential to unlocking the region’s economic potential by exporting and importing businesses, tourism operators, universities and the diplomatic community.
Big box retail expansion
The region’s bulk retail sector is set for growth with a proposed expansion of Wellington Airport’s retail park in Rongotai and new development being encouraged in West Petone as Plan Change 29 has been made operative.
Wellington Airport Retail Park, located at the southwest boundary of the airport, is looking to expand its bulk retail centre with The Warehouse, Kathmandu, Bed Bath and Beyond all renewing their leases, leaving no vacancy in the current centre. The expansion will contain four to five new bulk retail tenancies adding 2395sq m of space on the northern end of the current centre.
West Petone looks set for a significant bulk retail expansion as a result of Plan Change 29, which permits a range of mixed use activities. Briscoes is planning to develop Briscoes and Rebel Sports stores on the ex Colgate site on Nevis St which the company has bought. On the other side of Nevis St, the New Zealand Mail Centre has been sold to local developers Seaview HP, associated with the Hodge family, which has obtained resource consent to convert all but the two-storey front offices to a Bunnings Warehouse store.
CBD rejuvenation
The first stage of development of a 1ha site on the corner of Cuba and Dixon Sts in central Wellington, owned by Willis Bond, is scheduled to start this autumn. It will encompass a new six-storey building, housing 1500m2 of prime retail space and a 9000m2 campus focused on creative and performing arts being developed in conjunction with the Whitireia WelTec Strategic Partnership.
There will also be continuing seismic upgrading across all commercial premises as the result of raised occupant awareness and demands around earthquake ratings.
Ian Little writes for Bayleys Real Estate