Auckland, Tāmaki Makaurau, is growing fast. In 25 years’, time, Statistics New Zealand projects that the city’s working-age population - those aged 15 years and over - will grow by 773,000, compared with an additional 647,500 working age people in the rest of New Zealand.
In the face of such rapid growth, evolving property requirements to cater for the changing population are going to be key. Housing is obviously a key area of focus, but it sits equal to the need to create and develop thriving metropolitan centres and functional infrastructure to support tight-knit communities.
Since the amalgamation of Auckland’s legacy councils as part of the “supercity” in 2011, big picture planning views encouraged in Auckland Council’s Unitary Plan have been about strategic areas of growth around urban nodes. With the catchy title of ‘transit-orientated development’, its focus is on developing high density, mixed-use living options in close proximity to local amenities such as restaurants, shops, and schools, as well as reliable and frequent public transport.
This is an approach that offers a glimpse of what Auckland might look like in the future as a polycentric and multi-nodal city with a number of high density urban centres in places such as Manukau, New Lynn, Albany and Westgate.
From a commercial property point of view, the big question is how to deliver all this, turning the aspirational rhetoric into deliverable real estate through the cycle.
Looking beyond cyclical market conditions, and industry constraints, there are many structural pieces to line up before the vision can become reality, according to Senior Managing Director of CBRE New Zealand, Andrew Stringer.
“There is a growing recognition of the overarching framework now for growth through Auckland’s Unitary Plan. The key is how the industry and market behave in response. It will require greater coordination between public and private sectors than in previous cycles, with the public sector signalling its intent to release landholdings, plus the ability for the two to work together to meet development outcomes.
“Auckland’s ability as an economy to navigate some major supply chain constraints and innovate will also be key. Above all will be the need to recognise that over the next few decades change will be happening faster than ever, so it’s a matter of being able to understand the demographics of what Auckland will look like and catering for them, because the ‘live work and play’ mantra of 10 years ago will be different to tomorrow.”
From industry advisory groups at the Government level to the growth of development agencies in the public sector, Auckland’s growth is now a national priority, which is driving an increased need of alignment between development outcomes between the public and private sectors.
Auckland Council’s urban regeneration agency Panuku Development Auckland is already underway with urban redevelopment in major metropolitan centres such as Manukau. Delivered through a partnership approach with iwi, developers, local businesses, and the community, its mandate is clear to leverage surplus council-owned land to attract development investment and to ensure the public realm is revitalised in concert.
Panuku CEO Roger MacDonald says urban regeneration is fundamental to the growth plan for Auckland and will have a major impact on how the property market evolves in the future.
“Quality urban redevelopment in existing town centres is a challenging proposition for Auckland. We see our role as growing neighbourhoods in a way that preserves what people love about them. We work with private sector development partners on a wide range of development opportunities, including residential, retail, hotels and commercial spaces.”
“Understanding community desires and working from existing plans for a town centre Panuku aims to define a clear vision and then ensure that what is built – both private and public realm – is integrated and delivers on that vision.”
“Panuku is working with Crown agencies to bring joint land opportunities to the market. We’ve been heartened to see the response from the private sector to the community and social outcomes we ask them to participate in delivering with us. It requires both sectors taking long-term view, and a total value analysis approach – rather than simply a commercial approach - to creating vibrant and healthy communities.”
Key to all of this is ensuring aligned outcomes between development partners and needs of Council and Crown, whilst stimulating growth and encouraging a range of high quality real estate opportunities.
Head of Research at CBRE New Zealand, Zoltan Moricz, recognises that the public and private sectors are philosophically on the same page when it comes to creating thriving urban communities and long-term sustainable outcomes, but the practical challenges of realising this have been difficult to overcome.
“The twin challenges, which also relate to each other, are the development economics for buildings and infrastructure, and achieving quality urban design that balances changes in existing urban areas with the desire to protect existing amenity, without being hijacked by Nimbyism.
“Aligning stakeholders is one thing, but implementing this approach is another, especially in the current phase of the economic and property cycle, where capacity constraints and increasing developments costs are butting against funding and affordability limitations. The constraints these raise are perhaps the most significant short-term barriers to realising the city’s growth aspirations.”
Moricz points to CBRE’s work within the apartment market, which shows that the private sector development pipeline beyond the current blip of projects under construction is shrinking fast. While much recent commentary has focused on the increase in new dwelling consents over the past two years, the pre-construction pipeline of private sector apartments has actually halved since mid-last year, he says.
“In this context, sustainable implementation solutions will be those that can work with, rather than against, the grain of the market, balancing both private and social costs and returns.
“In these situations, it’s about public intervention that can enhance or alter development economics so that development stacks up as bankable over the short, medium and longer term for private as well as public sector value.”
In this context, Roger MacDonald argues for the need for balancing outcomes in the current market.
“We’re very cognisant of market conditions, softening house prices and increased construction costs. In the context of feasibility analysis, the only component left is the land. If both parties are determined to get the right outcomes, it becomes how we best balance that.
“For our part, we’re open to a more flexible approach and looking at different ways to cut the cake built around long-term aggregated value of land, provided we can still achieve best outcomes for the growth of communities and the region.”
Equally MacDonald says that given there is sufficient scale of opportunities now coming from the public sector through Kiwibuild, Panuku and other agencies, there are other inputs into the feasibility equation that should be explored by private developers.
“My challenge is with the genuine scale that we will soon have through these agencies. How can parties better embrace technology and innovation and think outside the box with off-site manufacturing and ways to warm and dry sustainable product? How can we invest to improve construction techniques that with scale can bring about more normalised market prices?”
Providing housing, commercial property and infrastructure to meet a growing population needs to go beyond the cyclical outlook, according to Andrew Stringer.
“More focus is needed on understanding in depth what our population will look like in the future, along with changing use patterns to understand where the market is heading. Demographic intelligence is the key to this puzzle – how growth is changing and stretching in different demographic groups will be fundamental to our understanding of future property trends and market influences in Auckland.
“We’re already seeing this in the current economy, with the rapid expansion of investment in the retirement and childcare sectors, responding to massive shifts in demand at either end of the age spectrum. It’s about identifying future trends of how people are living, working and spending their leisure time and providing the property solution to meet that.
“Ultimately, the age and stage of the people who live in Auckland affect so many areas of our market, and underpin it over the cyclical nature of the property market. With the focus by agencies like Panuku on community heart and social outcomes, combined with strong market intelligence on demographics in the private sector, we’ve got a real shot at creating resilient places and adding to Auckland’s economic prosperity as the city grows over next 20 years.”ABOUT CBRE GROUP, INC.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
