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Construction costs up, but competitive

LIZ MCDONALD
Last updated 09:27 11/12/2013
Neil O'Donnell
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Rider Levett Bucknall director Neil O'Donnell

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Construction prices in Christchurch have risen 5 per cent this year but are still competitive for commercial building, according to a new report.

Global construction analyst Rider Levett Bucknall's fourth quarter report for the Oceania region noted the momentum in plans for commercial building in the city.

"Christchurch's non- residential market conditions remain relatively competitive with main contractors still looking to secure projects for the next 12 months and beyond," the report said. "Profitability in the construction sector is beginning to recover, but margins remain low. As the economy recovers, construction firms' profitability will improve on higher turnover, fattening margins and increased leverage."

Director Neil O'Donnell said a number of commercial projects in the medium (NZ$10 million to $50m) bracket were under way and expected to be finished in late 2014 or early 2015.

Larger projects in the $50m plus bracket, plus major government work including Burwood Hospital, the Justice Precinct and government department offices, were also gearing up to start in the first quarter of 2014.

The report also pointed to the upcoming Christchurch City Council early 2014 construction contract for the repair of the Christchurch Town Hall, to be closely followed by the Metro Sports, Bus Interchange and the Convention Centre anchor projects.

"Combined with large private developments, we estimate that there could be in excess of $3 billion worth of non-residential construction work over the next four to five years," it said.

O'Donnell said the volume or work would create "challenges" in the local market, especially supply of materials, staff and sub- contractors.

The report said that nationally, the Canterbury rebuild, the heated Auckland housing market, and rising business and household spending were also boosted the economy.

Led by the rebuild, non- residential construction across the country was "coming out of hibernation".

Auckland had few major commercial projects under way but some in the design stage, while Wellington had major roading projects in progress and planned, including the Basin Reserve tunnel, Transmission Gully, and the Kapiti Expressway.

Rider Levett Bucknall forecast annual growth in construction costs, by the end of this year, of 1 per cent in Auckland, 5.1 per cent in Christchurch and 2 per cent in Wellington.

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For 2014, the firm is forecasting cost growth of 4.6 per cent in Auckland, 6.6 per cent in Christchurch, and 4.1 per cent in Wellington.

- The Press

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