Christchurch rebuild set to accelerate

ALAN WOOD AND MARTA STEEMAN
Last updated 05:00 19/01/2013

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Rebuilding Christchurch

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The rebuilders of Christchurch are getting back to business after a Christmas break with expectations that growth will increase significantly in coming quarters perhaps even to double-digit levels.

A report for The Press shows the South Island economy is growing at a relatively fast pace compared with recent years - 3.1 per cent.

In terms of a regional figure for Christchurch the economy was growing at more than 5 per cent in the year to September. That figure, based on ANZ regional activity index, could grow significantly, Christchurch economist Robin Clements says.

"It's not that difficult to come up with numbers that could show, for Canterbury at least double-digit growth . . .

"[Upcoming projects] are certainly sufficient to generate those sort of growth rates. What the actual peak growth rate is, depends on not so much the size, but over what period."

Growth would peak much higher in a three-to-five-year timeframe, than over a 10-year period, depending on how quickly construction progressed.

One thing that could hamper activity, however, was getting enough skilled people to match the expectations of employers, he warned.

Clements said employers in Christchurch had not quite got to the point where they realised the only way to bring in more people from outside the city, was to "pay more".

"You'll always have more demand than supply . . . [in terms] of the difficulty in getting this unemployment rate down, they're talking a lot now about this mismatch in the labour market. You've got a skills mismatch, you haven't got the right people for the right jobs."

Canterbury Employers' Chamber of Commerce chief executive Peter Townsend said the big issues in the coming year would be those around shortages in both workers and material resources.

"We don't necessarily have the right people, with the right skills in the right places to do the work."

However, the rebuild was taking off, he added.

THE REBUILD BOOM

The rebuilding of Canterbury will fire up this year. MARTA STEEMAN talks to the construction industry about what they expect.

Home builder Brent Mettrick is being almost overwhelmed with requests to build new homes.

The work is tempting all right. But part of a good business operation is not to take on more than you can chew.

Not that this industry practises moderation. Booms and busts have been the norm.

Stonewood Homes, the company he owns, is receiving requests daily, mainly from insurance companies, for 100 homes here and another 250 for someone else.

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"We've got to be realistic on what we can accept and what we can deliver on," he says.

He's been adding staff for 18 months and all the talk of the rebuild is no longer just talk. The rubber's about to meet the road. "We are certainly seeing a residential sector under huge pressure."

He reckons this year could see more houses built than in 2007, the best year in the property boom, when just over 4400 new dwellings were consented in the region. The alterations sector was busy and there was good activity also in commercial building.

"The fact that all of that is pumping at once is going to put a huge strain on resources and a huge strain on anyone trying to perform, really."

Stonewood Homes doesn't employ builders, it subcontracts building companies. Its staff do much of the work at the front end - engineering, house plans and consenting issues with councils.

Wages and salaries in the building sector are rising, just as feared.

Mettrick says that just the other day gib-fixing went up 10 per cent to $4.10 a square metre. That would add about $300 to the average house, not a lot on its own, but other tradesmen are in demand as well.

Painters are in shortest supply and many in the "wet trades" are in strong demand - tilers, plasterers, gibstoppers.

He's not too worried about pricing of materials. "To me the biggest pressure we are going to see is on labour rates."

Stonewood has building teams from the North Island here already.

It had contracts in front of them from all the main insurance players. Southern Response want 1500 homes built quickly and wants six to seven builders for that.

The big question is will the building companies be able to deliver? Are there enough subbies in Canterbury to do the work?

In his view the only companies that can do the bid insurance jobs are the larger companies.

But too much work is a hell of a good problem to have, though, compared to the previous five years.

"One thing about this industry is that it is incredibly adaptive. It's had booms and busts for years.

"It's probably going to be the year as far as the construction goes. That's certainly what we are getting a feel of right now."

Last year for the building industry and its thousands of tradesmen, the big game in town was Fletcher EQR and its many repair jobs. But this year scores of new houses will be built by the private insurers replacing those uneconomic to repair, and the bigger repair jobs over $100,000, managed by the insurers, will get under way in earnest.

For David Peterson, general manager of Fletcher EQR, managing 88,000 repairs under $100,000 for the Earthquake Commission, it's business as usual. The repairs really started to hit their straps from March last year after months of emergency repairs. Just over 22,000 repairs were completed in 2012. About 30,000 repairs have been done, with 58,000 to go.

This year Fletcher EQR expects to complete 2000 repairs a month, about 24,000 for the year, so 2013 should be similar to last year.

It is focusing on the larger damage claims including the 11,000 claims with EQC over $50,000.

"Our brief from our client is more of the same, focusing on better communication with the home owner and the quality of repairs."

In February it is expecting to give an indication of when the next 10,000 repairs will be done, then progressively the balance. Peterson says they are on track to complete the over-$50,000 repairs by the end of this year and the rest by the end of 2015 under its agreement with EQC.

Pressure on skilled building-related labour was beginning to appear. "We are starting to see tradespeople swapping allegiance for $1-$2 an hour."

Peterson expects the peak of residential repairs to be late this year and early 2014. However, he sees commercial building peaking later, with some happening this year but not the big projects.

"You are going to see a gradual ramp-up in commercial stuff. I don't think you are going to see a dramatic ramp-up in the next couple of years. Beyond that it will ramp up. There will be two peaks, in our view."

Anthony Leighs, owner of Leighs Construction, a mid-sized commercial building firm, says there will be "a phenomenal amount of reconstruction going on in the city next year".

"I see 2013 as being the start of the rebuild and I see 2014 as being the year when the rebuild gathers some momentum."

By then there should be more certainty about the Government's land acquisition programme and land availability, land values and foundation fixes, construction costs and when the key city anchor building projects will happen.

"I think 2013 is really going to be the run towards first base to get things moving. I think also 2013 will finally be the year where a reasonable amount of certainty is developed."

He hopes to see the city also shed it "disaster zone" perceptions and enter an exciting phase. "There is just going to be a real buzz on the street and a lot of excitement and I think it is just going to be a wonderful place to be."

Leighs says for his company the demolition phase is now largely over and his company is focusing on building projects. They will be doing some large and medium-sized projects but they are not in the running for something of the scale of the convention centre. While it was still early days for the CBD, private landowners and developers did have projects on the drawing board.

Traditionally, Leighs had subcontracted several of the tradesmen needed for a commercial building but the company was now shifting to employing more tradesman, anticipating a shortage.

"We are entering into such a resource-constrained market we need to have certainty of our labour force and one that we can rely on. The subcontracting market is going to come under so much pressure, it's not funny."

That was already happening in the "wet trades" - plasterers, gibstoppers, painters, tilers.

Some of the structural trades were also under pressure, such as concrete and steel suppliers wanting three weeks' notice rather than a few days.

Although the rebuild was "only just starting at best" the sheer volume of it meant Canterbury's construction sector was not far off its total capacity. He expected to see more new players from other New Zealand cities as well as Australia and even Europe set up here in the next two years. Those companies would have to bring their own people.

And a modest recovery in some other parts of the country meant that some tradesmen would not shift south.

Leighs has brought in 25 migrant carpenters from the Philippines and will be bringing in a similar number in this year. The company had bought the old Eyrewell Forestry Camp to accommodate them.

"The speed at which things are happening in the context of the traditional market is phenomenal. You take February 22 and in the space of a month the entirety of the businesses in the CBD had relocated somewhere else.

"You think about the pace at which the construction sector activity is increasing . . . it is phenomenal.

"When you think about the number of projects EQR are pumping out, if we look at the amount of demolition that has been done, if we think about the number of buildings we are now building, things are actually on a pretty steep curve."

- BusinessDay.co.nz

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