Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Growing optimism in infrastructure and building

AECOM report finds growing optimism in New Zealand’s infrastructure and building industries, though conditions remain tough

4 February 2013, Auckland: Optimism is growing across several sectors in New Zealand’s building and infrastructure industries according to AECOM’s latest construction Sentiment Report. Outlook has improved significantly in the buildings investment market with 50 percent of industry respondents expecting increased expenditure in 2013, up from 14 percent in May 2012.

However, AECOM’s six-monthly survey of public and private sector decision-makers found a mood of uncertainty remains in many parts of the infrastructure and building industries. 39 percent of those in the infrastructure market saw workloads increase, while 42 percent experienced declining workloads.

The country’s key industry players remain cautious due to concerns about insurance, margin cutting to win work and lack of investment commitment. Those surveyed represent New Zealand’s public and private organisations that invest $15.8 billion and deliver $18.4 billion in buildings and infrastructure annually.

While the findings suggests a more promising outlook heading into 2013 as marginal workload improvements continue in regions outside Canterbury, the industry faces conflicting pressures of rising costs and shrinking margins, said Dean Kimpton, Managing Director of AECOM in New Zealand.

“Compared with the previous six months, the gap between investment and delivery in infrastructure is closing, with increases on the demand side suggesting near-term growth.

“Optimism is being driven by improving demand factors including a more positive outlook for Christchurch following the release of the Christchurch Blueprint, an important step towards delivering the rebuild, and rising numbers of earthquake-related building consents.

“However, despite the continued rise in building consents, our observations of the market suggest that the time required to design, tender and then begin construction is likely to take longer than is currently believed.

“In addition, we are seeing optimism from improved certainty on projects in the amalgamated Auckland super city and reduced negative sentiment resulting from European and US financial conditions.That said, Sentiment Survey respondents believe that improved profitability is unlikely to return until 2015. The key driver being absorption of spare capacity within the industry,” Dean Kimpton said.

Infrastructure key indicators:
- New project expectations from the infrastructure investment market have risen from 35 to 42 percent of respondents
- Delivery market expectations have fallen 18 percent since May 2012, albeit from excessively high expectations and remains at very hopeful levels
- Telecommunications is anticipated to lead growth, with 63 percent of respondents expecting it to be the dominant infrastructure sector of the next twelve months
- 35 percent of respondents said roads should be the number one infrastructure priority for the nation.
Looking ahead, there is a promising shift in outlook for new project funding, with an increase in investment market respondents expecting to introduce new capital, up from 35 to 42 percent since May 2012.

Additionally, the release of the Christchurch Central Recovery Plan (CCRP) has significantly improved local sentiment around land development, with 94 percent of respondents indicating positive workload expectations, up from 66 percent in the previous survey.

From a national context, delivery market conditions are tight. Expectations remain high at 73 percent, but are down 10 percent from May 2012. Concerns associated with further declines in global financial conditions, the flow-on effects of reduced output from China, and the decline in Australian mining are beginning to weigh on expectations.

Regionally, projections across New Zealand’s infrastructure market are for moderate growth, with hotspots in the Upper North Island and Canterbury expected to receive the lion’s share of investment (47 and 66 percent respectively). The Government’s Roads of National Significance will take a considerable slice of funding, while investment in water and wastewater across the nation is also on the rise. The ongoing investment in the Ultra-Fast-Broadband network is also a major source of work.

Buildings market key indicators:
- 74 percent expected increased investment in existing buildings over the next twelve months
- Public sector projects are expected to rise to 28 percent, up from 16 percent in May 2012
- Respondents expecting increased building workloads jumped from 39 percent to 53 percent
- A notable shift has occurred in the investment market, 50 percent expecting an increase in workloads (up from 14 percent), compared with 55 percent anticipating improved workloads in the delivery market.
Since May 2012, the twelve month projection for public sector investment has increased from 16 percent to 28 percent – a proportion of which is likely to be associated with the release of the Christchurch Blueprint.

The AECOM report found existing building work is expected to pick up considerably in the next twelve months, with 74 percent of respondents expecting a rise at a national level. In contrast, there are few signs of any uplift in new office developments, with only 32 percent of respondents anticipating more investment in this area.

Foreign investment
The survey found notable resistance in the New Zealand market to offshore entrants. A significant proportion of respondents (18 percent) believe the level of openness is receding. Conversely, 49 percent see the market becoming more attractive to foreign investors and suppliers.

“The introduction of Public Private Partnerships into the New Zealand market provides, in part a solution to the funding gap and an opportunity for foreign investment. Good examples of how this is working include Wiri Prison and the Hobsonville Point Schools in West Auckland, with more in the pipeline. While syndicated funding can reduce financial risk, PPPs also carry their own risk profile and need to be well thought out,” Dean Kimpton said.

The top drivers for foreign investment include larger transport projects, a decreased spend in Australia, relatively high political and economic stability, easier-to-deal-with authorities and earthquake recovery opportunities.

As the industry faces ongoing cost pressures, the general sentiment is one of tough business conditions. Profitability is not expected to rebound over the next year. More than half of respondents nationwide have seen margins depleted to negligible levels over the past year.

Projections for 2013 offer little improvement despite anticipated workloads. Most anticipate that the industry will have to wait until 2015 before a notable improvement in profitability occurs. Christchurch, not surprisingly, is expected to witness price escalation in the vicinity of 10 percent to 14 percent over the coming year, as professional and trade-based services and materials are stretched to capacity.

Ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Media: Julian Wilcox Leaves Māori TV

Māori Television has confirmed the resignation of Head of News and Production Julian Wilcox. Mr Maxwell acknowledged Mr Wilcox’s significant contribution to Māori Television since joining the organisation in 2004. More>>

ALSO:

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news