News | Business
16 Dec 2017 22:14
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Days of Xmas
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • Crime.co.nz
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business

    Capacity constraints raise building costs

    Capacity constraints in Auckland's construction sector have been driving up building costs, eroding margins for companies locked into fixed-price contracts.


    Capacity constraints in Auckland's construction sector have been driving up building costs by more than four times the rate of inflation in recent years, eroding margins for companies locked into fixed-price contracts.

    John Dakin, chief executive of industrial and commercial property investor Goodman Property Trust, says the cost per square metre to build the average warehouse in Auckland is about 50 per cent more expensive today than it was five years ago.

    And his understanding is that construction costs have been rising at an annual 8 per cent a year for the past five years. In that time, the annual consumers price index hasn't risen by more than 2.2 per cent.

    Fletcher Building this week slashed $110 million from its guidance for full-year operating earnings before interest, tax and significant items after taking a deeper look at the building and interiors (B+I) unit of its construction arm, where losses on two major projects have been identified.

    "In the last few years, construction pricing has been the biggest challenge," Mr Dakin says. "We've seen massive construction price escalation."

    That tallies with assessments from other property investors including Precinct Properties, which told analysts including Macquarie's Stephen Hudson last September that since it had signed the construction contract for its Commercial Bay development in Auckland with Fletcher Building in December 2015, construction costs for comparable Auckland CBD office projects had increased by 10 per cent.

    Fletcher said on Monday that Commercial Bay remained profitable although losses at another major project and a provision for expected losses at a second project meant its construction division would post a loss this year.

    Mr Dakin declined to comment specifically about Fletcher but said as a consumer of construction services, Goodman had faced "significant cost escalation" from the half dozen builders the company regularly used.

    "At the moment there's a lot of price escalation around labour. There's some building material cost escalation," Mr Dakin said. "We're probably going to see a bit of rental increase" as a result.


    NZN




    © 2017 NZN, NZCity


     Other Business News
     16 Dec: Blenheim water safe after chemical fears
     16 Dec: Water restrictions for Tauranga
     15 Dec: Rupert Murdoch dismisses Fox News sexual harassment allegations as 'largely political'
     15 Dec: Petrol shortages after fuel line shutdown
     15 Dec: CBA's Vittoria Shortt to take up ASB reins
     15 Dec: NZD gains on euro as stimulus pledged
     15 Dec: China's CITIC offers $211m for Trilogy
     Top Stories

    RUGBY RUGBY
    Australia bidding for 2027 Rugby World Cup More...


    BUSINESS BUSINESS
    Blenheim water safe after chemical fears More...



     Today's News

    Soccer:
    Late penalty gives Jets A-League win 22:06

    Basketball:
    Bullets upset NBL ladder leaders Wildcats 21:56

    Entertainment:
    Camille Grammer is recovering after having cancer cells removed 21:00

    Technology:
    Rocket Lab delays launch until new year 20:36

    Entertainment:
    Nick Jonas was "blown away" by his Golden Globe nomination 20:30

    Entertainment:
    Dax Shepard admits his marriage takes a "tremendous amount" of work and therapy 20:00

    Entertainment:
    Mindy Kaling battled a "feral cat" to make her Christmas tree perfect 19:30

    Cricket:
    Masterful Raval knock undoes West Indies 19:06

    Entertainment:
    Morgan Spurlock has admitted he is "part of the problem" of sexual misconduct 19:00

    Entertainment:
    Jennifer Hudson has accused David Otunga of trying to make her look bad 18:30


     News Search






    Power Search


    © 2017 New Zealand City Ltd