Government support not enough to boost construction sector – report

Office, retail, and industrial sectors face new trends

Government support not enough to boost construction sector – report

The COVID-19 crisis has proven to be a difficult challenge for the government and many sectors worldwide – and the alert level 4 lockdown in March seems to have made it worse for the construction sector, with the future of building costs still uncertain despite government support.

Rider Levett Bucknall's latest report expected prices to plummet if demand and supply remain unstable and consumer confidence continues to drop, with a 4% to 6% drop in cost growth for both residential and commercial properties over the next year. However, it clarified that the opposite could also happen due to material cost, quarantine cost, and the lack of skilled immigrant workers.

“The construction capacity has already likely fallen during the lockdown and will likely continue. Skills will be lost and a sharp pickup in demand, particularly in the infrastructure sector, may lead to increases in the medium term,” Rider Levett Bucknall said, as reported by Stuff.co.nz.

Read more: Palmerston North building consents hit record high

Meanwhile, Colliers head of research Chris Dibble noted the developments in the office, retail, and industrial sectors during the lockdown, including the government's decision to consider measures under which parties in a commercial lease should consider rent concessions.

Other factors that could impact the sector over the next few months also include a negative official cash rate (OCR), the prospect of a trans-Tasman bubble, and the rising unemployment rates.

“Record-low vacancy rates in many office markets nationally are seen as a key insulator and will likely assist with future market strength,” Dibble told Stuff.co.nz.

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