Overseas firms eye Mainzeal projects
The collapse of Mainzeal Property and Construction has overseas building companies circling to become involved in the reconstruction of Christchurch - just as building consents for commercial projects hit all-time highs.
A scramble to pick up the contracts and staff of the failed builder is expected, but local companies may have to compete with overseas suitors.
Hamish Doig, the managing director of commercial real estate company Colliers International's Christchurch office, said some overseas building firms had been knocking on his door prior to Mainzeal being placed in receivership last week. And the firm's collapse could provide them with the opportunity they had been looking for.
"We've had a number of overseas construction companies coming to meet us, looking to get a foot in the water in the city so they can come and help with major projects.
"I think there's a very good chance of it happening. The first thing they'd do is pick up the work in progress because that needs to be finished off," he said.
Although Mainzeal's collapse could cause delays on some of the projects it had been involved in and financial distress for the firm's suppliers and subcontractors, the projects would eventually be picked up by someone else and would still proceed, Doig said.
"The shell of Mainzeal could then be easily picked up by one of the offshore companies," he said.
The timing for their entry into the New Zealand market could be ideal, with commercial building consents issued nationally breaking all records for a December quarter.
According to Statistics NZ, consents for $1.151 billion of non-residential building work were issued in the final quarter of 2012, higher than any previous
December quarter and the fourth highest value of consents ever issued for any quarter.
The strong fourth-quarter consent figures were driven by a surge of new consents for commercial buildings in Canterbury, including offices, industrial buildings, retail premises, hotels and educational buildings (refer table).
Those consents were for $305.3 million of non-residential building work in Canterbury, up from $193.7m in the same period in 2011 and more than three times the $96.4m worth on non-residential consents issued in the fourth quarter of 2009.
However, that will be small change compared with what could be coming later this year.
Doig said most of the recent consents were likely to have been for building work in Christchurch suburbs such as Addington and Riccarton, where owners of vacant land and redevelopment sites were taking advantage of demand for new space from commercial tenants and building new premises.
However, most of the major projects to reconstruct the Christchurch CBD were yet to get under way.
These projects could be worth $100m each and it was likely to be the fourth quarter of this year or the first quarter of next year before developers started finalising their working drawings, firming up prices and obtaining building consents for them, Doig said.
That process could get kicked along on Wednesday when the Government Property Management Centre of Expertise holds a briefing to outline the Crown's long-term requirements for office space in Christchurch.
Doig said government departments would play a critical role in the redevelopment of the CBD because of the amount of floor space they would require.
Once developers knew what the various government departments' requirements for office space were, they could submit development proposals with a view to signing them up as anchor tenants.
Other tenants would then follow and that would, in turn, give financiers confidence to provide funding, allowing the developments to proceed.
"We desperately need that re-investment from the government into the CBD. They will be a major catalyst for its revitalisation, no question," Doig said.
However, a concerning aspect of the latest building consent figures is that they highlight how dependent the construction sector is on the Christchurch rebuild, with consent figures for the Auckland and Wellington regions remaining subdued.
The value of non-residential consents issued in Auckland in the last three months of last year were the lowest December quarter figures since 2007, with $374m of consents issued compared with $389m in the same period in 2001 and $416m in 2010.
The Wellington market remains firmly in the doldrums, with just $107m of non-residential consents issued in the fourth quarter of last year.
Mainzeal's major Christchurch projects included the demolition of the Clarendon Tower and the Queen Elizabeth II Park sports complex. It was also expanding the $15m Barrington Shopping Centre and a $15.2m complex for St Andrew's College.
- Sunday Star Times
How should the council plug its financial black hole?Related story: Council coffers fall short for rebuild funding