Here’s what Govt needs to do to give building sector best shot at survival

1586521329244OPINION: The impact of Covid-19 is incalculable. The immediate impact on physical and psychological health is immense.

Governmental planning has been driven by modelling that predicts mass infections and substantial mortality. Not unreasonably the New Zealand government instituted a countrywide lockdown. The effect has been monumental. Movements stopped, businesses closed, all bets are off.

It is too soon to say whether we are through the worst of it. What can be said is we need to plan for “the morning after”. At some point we need to get back to work, otherwise inevitable recession could metastasise into depression.

Construction is the commercial canary in the economic coal mine. First to tip into decline in a downturn. First to show green shoots of recovery. The reason for this is the industry is driven by cashflow volume rather than percentage earnings. Builders have low reserves and run out of cash quickly in a downturn. But new construction can start relatively quickly with financial resource availability.

“Nice to have” projects, such as Skypath, may have to be put lower on the priority list. Economists and politicians recognise we build our way out of recession. In the decade since the GFC, we have seen continuous sectoral growth. Yet it has taken all those ten years to grow a housing sector that is still yet to match housing demand. Recently we have seen feelers from Government via Mark Binns at Crown Infrastructure Partners (CIP). The request was for “shovel ready” projects Government could potentially invest in as economic stimulus for construction and the wider economy.

However describing projects as “shovel ready” tends to imply a relationship to dirt, clay, excavation and civil engineering type projects – i.e. horizontal infrastructure. Whilst infrastructure investment is generally laudable, this may have relatively limited economic benefit in the current situation.

Infrastructure isn’t synonymous with the entire construction sector. It is one part of an industry comprising three distinct subsectors – horizontal (roads, water etc), vertical (commercial and multi-storey) and residential (housing). The skills and trades in each subsector do not move between them. Residential uses much more labour; horizontal construction much more plant machinery. Vertical construction is somewhere between the two. Horizontal constructors particularly have skills with limited application elsewhere.

If the intention of Government is to restart the economy, focussing only in horizontal construction would be a missed opportunity. Post-pandemic planning for construction should be focussed on maximising employment across the country. In terms of labour utilisation, residential and vertical constructions use vastly more tradies and subcontractors to deliver their outcomes compared to horizontal construction. Typically up to 50 per cent of all expenditures on a vertical or residential project is in the form of direct labour. Materials and other services have further labour costs associated.

Money going into the hands of tradespeople starts immediately at commencement of projects rather than filtering through later. By contrast horizontal construction has typical labour values of 25 per cent to 30 per cent. Stimulus investment in vertical or residential construction can potentially have twice the employment bang per stimulus buck. We need to think beyond “shovel ready” towards “workforce ready”.

Government needs to take balanced investment approach across the three subsectors if employment is a key focus. Identifying and funding vertical and residential projects we can leverage to rapidly mobilise employment opportunities is essential. This implies we may need to defer “nice to have” projects, such as Skypath and light rail, in favour of health, education and social housing investments.

We should be considering the asset condition of health and education infrastructure across New Zealand. All Governments like to make marks by building impressive new buildings. Regrettably they have all neglected prudent asset management as equally essential to the health of the nation. Estimates put the current health capital building programme at $10 billion to $14b. Countrywide backlog maintenance is $4b to $5b.

The well-publicised poor condition of Counties Manukau health facilities is symptomatic. Similarly backlog maintenance for education from preschool to tertiary is likely of comparable magnitude.

Maintenance backlogs could be unleashed immediately when buttons were pressed. Tradies and SMEs would respond without delay. Better yet, most work won’t be tied up with RMA and consenting. “Shovel ready” infrastructure projects are undoubtedly central to post pandemic planning. However they should be seen as part of a wider tapestry of options. Keeping tradies busy now on backlog maintenance of public sector assets would provide a resilient resource that could be transferred to the private sector after recovery.

We’re in the jaws of a systemic crisis. We need to build our way out through targeted investment. Silver bullet infrastructure spends need to be tempered. We need to retain key skills, maximise employment outcomes and enhance resilience in critical assets. Starkly put – Government should decide whether its policy is to maintain construction employment or construction machines.

Dr John Tookey is professor of construction, director of Centre for Urban Built Environment (CUBE-NZ) at AUT University and Dr Tony Lanigan MNZM is director major projects – estates group at AUT, distinguished fellow of Engineering NZ, former director of Infrastructure Auckland, NZTA and Watercare, director (and former chair) of NZ Housing Foundation and a member of the Ministry of Health’s governance group for Christchurch Hospitals’ redevelopment.

Source: Stuff.co.nz

Timber high-rise tower mooted for Auckland: suggestions on a number of sites

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A building expert wants the Auckland waterfront area to get this country’s first timber high-rise, saying the Wynyard Quarter or Britomart areas would be ideal for a significant wood tower.

Damian Otto, director of design and digital construction at Takapuna-based Tallwood, called for Auckland to go green and build a timber tower of up to 15 levels. That would showcase what could be achieved after technical advancements in timber construction, he said.

“I’ve heard suggestions of wood towers on a number of sites,” he said, naming the Quay Park area as well as the central business district but said nothing was definite and discussions only centred on plans, not finished design.

New Auckland towers are all being built in steel (the 39-level Commercial Bay) and concrete (The Pacifica at 57 levels).

But Otto said that could change.

“Wynyard is the best candidate for a wood building because it’s reclaimed land and above the water. Wood buildings are lighter, so you can build more for less. Timber buildings also perform well in earthquakes. It’s only recently that the timber technology has caught up with materials and availability. There’s going to be a doubling of demand,” Otto said of the type of materials needed to build wood high-rises.

He saw Lendlease’s new wood International House in Sydney during its construction in 2016 and said that had led the way in Australasia. It was now time for us to follow.

“International House is a seven-storey office building manufactured predominantly from engineered timber. It is a great example of the benefits of building tall with timber. There is no reason why we can’t follow in our neighbour’s footsteps and build beautiful, quality, timber buildings such as this one,” Otto said.

Last year, property mogul Sir Bob Jones said he planned to take the timber industry to new heights by erecting the world’s tallest wooden office building in central Wellington on the Leader’s Building on Featherston St: a 12-storey 52m block due to be completed later this year.

Otto said wooden building offered advantages over concrete and steel high-rises because not only were they lighter, making them ideal for reclaimed land, but they could be dismantled and the materials recycled.

Lendlease had designed and built International House with longevity in mind, he said.

“In the words of architect, Alec Tzannes, they reached for a design that would weather well, be long lasting and attractive because ‘buildings that are not considered beautiful tend to be demolished, so beauty is at the essence of our concerns about a lower carbon future’,” Otto said.

International House, although a relatively small project by Lendlease standards, had huge significance in this part of the world, Otto said.

A Tokyo skyscraper is set to become the world’s tallest wooden building. Sumitomo Forestry is planning W350, a 70-storey block made 90 per cent of wooden materials, due to be completed in 2041 and to mark 350 years of that business.

Source:

  • Anne Gibson
  • NZ Herald

 

Competition pushing construction sector into ‘race to the bottom’

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Competition has pushed the construction sector into a “race to the bottom” where companies are taking on projects to win revenue rather than chase profit, says a top industry boss. David Prentice was chief executive for seven years of NZX-listed Opus International Consultants, a multi-disciplinary infrastructure consultancy with 3000 staff that was bought by Canada’s WSP Global in December.

Prentice, who is now leading the integration team at WSP Opus in Wellington, did not wish to comment specifically on issues at Fletcher Building, which last week announced further losses of $660 million at one of its divisions and said it would not be bidding on any new big projects. But speaking about the construction industry generally, Scottish-born Prentice told the Herald earlier this month that the building market was becoming increasingly challenging.

“To design a building 20 years ago you’d need top structural engineers, your top architect, your top mechanical and electrical engineers. Nowadays a lot of this can be done using computer packages and what have you. So what it’s doing is it’s taking the design away from almost an art to a science,” Prentice said. “And what that means is that the margins that can be made on vertical infrastructure such as buildings is far less than it was before, therefore the need to make sure that you’re absolutely on point when you come to do that work is essential because very quickly a very small margin can turn into a very big loss,” he said.

“You always want increased competition but as long as increased competition isn’t a race to the bottom. Unfortunately it has been a race to the bottom so people are going in incredibly tight to actually win revenue, so they’ve been chasing revenue as opposed to chasing profit.” These issues weren’t isolated to New Zealand and around the world people in the building sector were having to work harder “to make an honest buck”, he said.

Prentice believed that the way in which contracts were procured needed to change as right now the client or customer was pushing all the risk to a consultant or contractor. “The best contracts without a shadow of a doubt are those contracts where risks are explicitly shared between all three parties, consultant, contractor and client … I think the client and the customers, particularly central and local government, have got a long way to go in respect of maturity in how they procure projects.”

Prentice’s comments were echoed by Registered Master Builders Association boss David Kelly. “We need to work with government to improve the way we manage pricing and risk in our sector,” Kelly said. “Government procurement should not be an exercise in one party minimising all their risk. At the end of the day, all parties need to commit to working collaboratively and equitably to deliver on a project. Anyone building or renovating a home, let alone a multi million dollar construction project, appreciates that there needs to be some flexibility in adjusting for costs”, he said.

“We need to move away from focusing on cheapest initial price — this never gets the best result, limits innovation and stifles research and development,” he said. In the wake of Fletcher Building saying it would not bid for any more big construction work, Auckland Airport chief executive Adrian Littlewood said any company with big projects would consider using overseas firms, including from China. “We like many others in New Zealand would like to see a proper and well-functioning construction industry [here].

There are also a bunch of European operators who have acquired New Zealand businesses and operate in New Zealand,” Littlewood said on Friday. Overseas firms would have to draw on New Zealand sub-trades if they were involved in big projects as it was difficult to import all the skills. Auckland Airport is spending $1.8 billion over five years on building infrastructure and Fletcher Building is involved in one phase of the Airport’s big build — the international departures terminal. Littlewood said Fletcher’s focus on completing projects was important for his company.

Source:

  • Hamish Fletcher
  • NZ Herald
  • Photo: Getty Images

$200m hotel ready for 2018

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Prime Minister John Key says a million Chinese tourists will soon be visiting here annually.

Making his prediction at a ground-breaking ceremony for Auckland’s new $200 million Park Hyatt, Key told more than 100 dignitaries in a waterfront marquee how he expected massive growth.

Quipping how he expected to be at the new five-star hotel regularly because he is often at events in hotels, Key said China was New Zealand’s second biggest market for tourists after Australia.

About 371,000 Chinese tourists now visit New Zealand annually.

“The question is ‘how long will it take before there’s one million?” he asked of annual Chinese visitor arrivals. “I would have thought within about three to four years there will be one million tourists from China alone,” he said.

Tourism New Zealand says China is New Zealand’s second largest visitor market.

“Its growing middle-class has seen sustained growth in Chinese visitor arrivals to New Zealand over the last five years. Increased air capacity from the two direct carriers, China Southern Airlines and Air New Zealand – with new players Air China and China Eastern also establishing year-round services in 2015 – has helped this trend,” Tourism NZ says.

Key was with a businesswoman said to be China’s wealthiest to turn the first sod at the site of the new hotel.

Madam Chan Laiwa, founder of Chinese real estate business Fu Wah, visited the Halsey St site in the Wynyard Quarter/Viaduct Harbour area, opposite ASB North Wharf.
She accompanied Key into the marquee to the call of a kaikaranga.

Source:

  • Anne Gibson
  • NZ Herald

 

Billion dollar bonanza

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Artists impression of new build for Auckland CBD

New Zealand’s largest private property developer is planning projects worth more than $1 billion.

Culum Manson, a director of Parnell-headquartered Mansons TCLM, said the business was the busiest it had been in its 40 year history.

“We’ve got over $1 billion of work planned and not yet announced, including a $120 million asset and a $210 million asset, both in the CBD,” Manson said.

The $1 billion-plus of new work was the result of the need for tenants to upgrade their office space.

“We’re thinking about who might need upgrading in the next few years,” he said of the new projects.

The family firm’s biggest scheme is the $675 million 30-level office tower and 125-room hotel tower at 46 Albert St on the site where the Herald has been published for 152 years.

“The biggest project we have on is Albert St,” he said of the site spanning Mills Lane, Albert St, Wyndham St and Swanson St. Buildings there are now being progressively vacated by about 850 staff for NZME Central, Mansons’ 151 Victoria St premises.

No naming rights have been announced for that new five-star block but that is expected soon when the top floor tenancy lease is announced.

Law firm Meredith Connell has also leased space in the building.

Early last month, Prime Minister John Key officially opened NZME Central, acknowledging the rapidly changing nature of media and the importance of the shift into the new premises.

Manson said planning work for the new buildings on the Herald site was under way.

“We could start demolition of 46 Albert St [at the] end of the first quarter next year, although I’ve got to say it’s not a priority at the moment because we’re still focused on finishing off 151 [Victoria St West] and getting started with all these other jobs,” he said.

“Also, we’re still working with Auckland Transport and Auckland Council on finalising the resource consent for the old Herald site and that’s taken longer than we anticipated, mainly around transport implications of the City Rail Link and a whole lot of moving parts that need to be considered.

“It’s frustrating but we’re all living in the same city and we’re all got to deal with it.”

A Colliers International’s Auckland office vacancy survey showed strong demand and the lowest overall vacancy rate recorded since the studies started. Colliers said it was not just the CBD and fringes which displayed strong demand, but office vacancies had also dropped on the North Shore, Mt Wellington, Penrose and throughout east Auckland.

Source:

  • Anne Gibson
  • NZ Herald

Luxury apartments for Christchurch

getimage (15)Christchurch’s tallest post-quake apartment complex is about to take shape opposite Cranmer Square. To be called West Kilmore Precinct, a $40 million plus complex will be erected 11 storeys tall with apartments priced between $450,000 and at least $1.2 million. The site is the corner of Kilmore St and Cranmer Square where Ernst and Young House stood before the quakes.

Christchurch property developer Grant MacKinnon is behind the project. His previous projects include the now-demolished Gallery Apartments in Gloucester St. MacKinnon has an investor he does not wish to name, but confirmed it was a local now living overseas. Although building height restrictions in the area were lowered to 11 metres in the Christchurch Central Recovery Plan, MacKinnon has existing use rights to build more than twice as high.

West Kilmore Precinct will consist of four buildings with different heights. Stage one will have 15 one and two bedroom apartments priced from $450,000 to $950,000, and is due to be finished in winter. Stage two will be two-connected buildings finished in mid-2017. They will be 11-storeys high with 35 apartments of up to three bedrooms and priced from $500,000 to $1.2 million. The third stage had not been finalised but would have six ‘‘higher end’’ apartments.

getimage (16)The complex will be full height facing north, with roof heights stepped down towards the south. MacKinnon bought the property in 2012 with the apartment plan in mind. He believes it is one of the best sites in the city, with views over both Cranmer Square and Hagley Park. About 20 of the apartments are pre-sold or under option. However he described the highend apartment market in the central city as difficult. ‘‘It’s a hard market to work in. Lots of people are looking and some are buying, but they’re careful”. ‘‘But we are appealing to some people. It’s a small number and there is still some nervousness about coming back into the central city but that’s rapidly falling away.’’

MacKinnon said he was pleased to see other apartment developments in the area. These include developer New-Urban Group’s Chinese-backed low-rise 30-apartment plan for the old Cranmer Courts site across the road, and the eight-storey Verve Precinct apartments going up to replace The Est@blishment on Peterborough St. ‘‘It’s encouraging that other people are doing it as well, as long as they do it right,’’ MacKinnon said.

Other apartment developments have failed to get traction, including the Miro complex planned for Colombo St and the Crown-run Breathe urban village project opposite Latimer Square. Real estate agent Mark O’Loughlin of Harcourts, who is marketing West Kilmore and specialises in central city apartment developments, said demand was coming from younger owners or investors wanting ‘‘affordable’’ apartments, and ‘‘younger baby boomers’’ looking for a lifestyle.

There was very little demand for family apartments in the central city, he said. O’Loughlin said there seemed to be a recent groundswell of buyers looking at inner city apartments, and he had sold more in the past six months than at any time since the quakes.

Source:

  • The Press
  • Liz McDonald

Innovation Precinct draws them in!

getimage55It’s considered the star performer of Christchurch’s anchor projects. And it has taken the gravity effect – of larger bodies attracting smaller ones around them – to make it work. The Innovation Precinct has several buildings taking shape around the corner of Tuam and High streets. While anchor tenants gear up to shift in, smaller operators are rushing to book space alongside them. As a result, an estimated 1500 office workers will be in the precinct by next year.

Broadly designed as part of the city’s 2012 blueprint, the precinct is intended to be a cluster of knowledge, software, electronics and other tech-type businesses. Mixed-use zoning rules mean cultural and educational groups and restaurants and bars can join them. Public spaces and laneways created by the Canterbury Earthquake Recovery Authority (Cera) will intersect the precinct, making space for work and play.

The precinct got off the drawing board when Auckland developers Studio D4 spotted land around the old Lichfield Lanes complex, signed up Kathmandu and Vodafone as tenants, and got approval for two new buildings. It then handed the project onto southern-based developer Calder Stewart. Others have followed. Christchurch developer Peebles Group took on the wrecked McKenzie and Willis building opposite and is putting up two new buildings behind its heritage facade, and renovating another on the site.

The old ANZ Chambers site on the High-Lichfield corner has just been sold for development, and a new project is understood to be proposed for the Excelsior site opposite. Hospitality businesses have also taken the leap of faith. Tenants including Brick Farm and Dux Central have joined existing operator C1 in taking space in repaired buildings, while others such as Joe’s Garage have leased space in those still under construction. CBRE leasing agent Bonnie Stone said the precinct was filling a gap in the market. Rents and operating costs were lower there than in other parts of the rebuild.

Stone said the culture was attracting ‘‘smaller less-corporate businesses, and tech businesses who want to be near the likes of Vodafone and Wynyard’’. ‘‘It’s a slightly different model to what’s being built in other parts of the city centre. With the new and refurbished old buildings and cool spaces, it’s not like where the big accountants and law firms are going. ‘‘We want everyone to come back in, not just the big tenants, to create the lively city everyone wants.’’

Fellow agent Ryan Geddes, of Savills, said the precinct had ‘‘really good legs’’. ‘‘It just took off with the commitment with the bigger firms.’’ First finished will be the Kathmandu headquarters and the carpark building, complete with art display screens, next door. Both have March completion dates. The Vodafone building and the Cera courtyard alongside it will be ready in April, and the Wynyard precinct opposite will be finished about September.

Meanwhile, the Government and Canterbury Development Corporation’s GreenHouse incubator for fledgling information tech businesses has opened, alongside hospitality places. Studio D4 has one last development planned in the block – a new office building three or four storeys high. Also going in are the Information and Communications Technology Graduate School, and government agency Callaghan Innovation.

The opening of the precinct is likely to trigger occupation of upper High St, which has stayed fenced off since the quakes. Paul Naylor, co-owner of Studio D4, said it just took a few bold businesses to encourage others to commit to space in the precinct. ‘‘I don’t think any one wanted to be there all alone in a desert. But now there’s a lot happening and it’s looking great – by next year we are going to have a prime area. ‘‘People have rushed to it, it’s fantastic.’’

Source:

  • Liz McDonald
  • The Press

Crane’s on the up!

b05da9d38926ca2edb40cabe148a38a0ab0f51fd_620x310The Rider Levett Bucknall Crane Index revealed that Auckland is the country’s crane capital with 33 followed by Christchurch with 31.

Auckland director Chris Haines said there were now 79 cranes up nationally and the busiest sectors were commercial followed by multi-level residential buildings.

In the past six months 43 new cranes were installed nationally: 17 in Auckland and 23 in Christchurch.

The crane count provides a good, simple indication of new building activity as well as general economic activity in each of these locations, the business said.

The index tracked activity in the last quarter in Auckland and showed that within the commercial sector, three cranes were erected including on Datacom in Gaunt St and at Britomart. Commercial projects nearing completion include the St Albans development and Mansons in Victoria St West, Rider Levett Bucknall said.

“The Wynyard Quarter currently has three tower cranes. While five cranes have been removed from residential sites , 10 have been erected. New projects include The Pulse, Symonds St, Wakefield St, Augustus Tce, Rosedale Rd, Swanson St, Rangitiri Rd and Windsor Park,” Rider said. “Cranes have been removed from Howe St, Newton Rd, Exmouth Tce, Carlaw Park and Karangahape Rd. In the civil sector, cranes have been removed from Waterview Tunnel, the Lincoln Rd widening project and Te Atatu interchange but three cranes have been sighted on the SH20A roads and bridge works … ”

Source:

  • NZ Herald

$200m hotel to start in 2016

2732d2a065c325feee5f01f2d26371c5175b91fb_620x311Work on a $200 million luxury hotel on Auckland’s waterfront will start next year after the project was granted resource consent this week.

Auckland Council’s Panuku Development Auckland branch made the announcement this morning. The building will be one of the largest Chinese investments in New Zealand infrastructure.

The hotel – to be referred to as the Park Hyatt Auckland – will be managed by the world-renowned Hyatt Group and will be built with the help of the Fu Wah International Group, which announced its plans for the hotel in November.

The group will invest around $200 million in the project, with $2.5 million going to the development of a new space for the public immediately around the hotel, which will be located at Wynyard Quarter.

The building will bring an element of extravagance to the area, standing at seven storeys high.

It will have 195 rooms, a ballroom, entertainment facilities, health centre and day spa and will have a total floor area of 29,000sq m.

Panuku Development Auckland’s interim chief, John Dalzell, said having a quality hotel in the city would create a new standard of “premium accommodation” in the region.

“This is a landmark site for Wynyard Quarter and is deserving of a building of the standard the developer and its design team have come up with,” he said.

“It’s great to see it pass this latest milestone and we look forward to the positive impact the hotel will have on the waterfront and the region.”

Prime Minister and Minister for Tourism John Key yesterday praised the new hotel, saying that it would provide a huge boost for local tourism.

Auckland Mayor Len Brown, who is in China, said that such a hotel would help not only to attract the very rich to Auckland, but would also create more jobs in the city’s business district.

“This hotel means more jobs and a strong step into the lucrative but largely untapped high-net-worth individuals tourism sector – which will be a huge benefit to Auckland’s economy and future.”

The hotel will open in 2017.

Source:

  • NZ Herald

Canterbury construction $4 billion and rising

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Metro Sports Facility

Construction spending in Christchurch has hit more than $4 billion thanks to large builds like the planned new Metro Sports Facility.

A million dollars is being spent on construction in Canterbury every two hours – and spending is still rising.

While residential building work has decreased for the first time in three years, commercial and public construction is ramping up, according to Statistics New Zealand.

More than $4.3 billion has been spent on building work in the region in the past year. The dollars going into non-residential construction have jumped 14.6  per cent in the last quarter, after increasing steadily over the past year as the rebuild ramps up.

Neil Kelly, building figures manager for Statistics New Zealand, said while many houses had already been replaced or repaired, commercial construction was still gathering speed.

“You only have to count the cranes. There’s a lot of big stuff going on and those big projects are boosting the numbers.”

Its figures translated to $83 million a week going into Canterbury’s construction industry, or nearly $12m a day.

They came from  its work in place survey, which measures the value of new residential and non-residential building, as well as alterations big enough to need consent. It does not include internal refurbishments or minor renovations, or non-building construction such as roads and other infrastructure.

Leighs Construction managing director Anthony Leighs said the commercial market was the busiest it had been in the post-quake environment.

“What we’re seeing in there’s probably the highest level of activity in the market at the moment than there’s ever been… from the total number of buildings being built across the city.”

Leighs believed the momentum would “remain very solid” for two to three more years.

The company’s “top of the pops projects” at the moment were “massive”, including the BNZ and ANZ centres, and the Burwood Hospital rebuild.

Hawkins Construction South Island regional manager Steve Taw agreed, saying the rebuild was “likely to continue at this current rate for at least another 12 months”.

He said the projects the company were working on were likely to be adding to the “ever increasing spend in the Christchurch commercial construction market”, but it was planned and not unexpected.

“It is pleasing to see confidence in our central city increasing with a number of projects in full swing.”

Ian Smith, head of project management company Building Intelligence Group in Christchurch, said while the central city skyline was full of private developers’ cranes, internal work on those buildings and the public sector spend was yet to come.

Rather than peaking , the rebuild would plateau as big projects such as they city’s new central library, Metro sports centre and convention centre got underway.

“There’s going to be quite a lot of money spent on all those buildings.”

Smith said while there were “hot spots” in construction such as the need for structural steel, the market would supply enough materials and labour in most areas.

“By and large the market has responded so far, and met demand.”

Source:

  • The Press
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