Construction of new commercial buildings is in decline with new retail premises at a particularly low ebb

By Greg Ninness

There are emerging signs of a downturn in commercial building construction although it is nowhere near as weak as residential construction, according to interest.co.nz's Commercial Building Consent Analysis for the fourth quarter (Q4) of 2023.

There are also considerable differences in the amount of work being consented in different sectors, with construction of new retail and office buildings looking weak, while construction of new warehouse buildings and factories remains more resilient.

The number of consents for new office buildings were particularly low in Q4 last year, with just 46 consents issued nationally for new office buildings.

That was the lowest number of consents issued for new office buildings in any quarter of the year since Q3 1992, marking a 32 year low.

However it was not all bad news for new office builds, with the total floor area and the total estimated build costs of the new building consented remaining relatively healthy.

That pushed the average size of the new office buildings consented in Q4 2023 to 1612 square metres, which was the second largest average floor area since interest.co.nz began collating the figures in 2010.

However while the average size of the new buildings being consented was high, the average consented build cost was low at $3306 per square metre.

A similar trend was evident in the figures for Q2 2023. Taken together they suggest that there are fewer but larger new office buildings in the pipeline, that are generally cheaper to build than in the past.

A cynic might say the trend for new office buildings is tending towards the cheap and nasty but at least there's plenty of it.

The outlook for new retail premises is the grimmest of any commercial sector tracked by interest.co.nz, with just 18,386 square metres of new retail space consented in Q4 2023, while the average size of new retail premises consented dropped to just 400 square metres.

Both of those measures were the lowest they have been in any quarter since interest.co.nz began collating the figures in 2010.

Warehouses have been the stars of the new commercial building sector for some time and although the amount of new space for these types of buildings is down from its recent highs, it remains at respectable levels.

All up, almost 189,000 square metres of new warehouse space was consented in Q4 2023, falling somewhere near the middle of recent quarterly figures.

New factory consents are more noticeably weaker, with both the total amount of new factory space and the average size of the building consents tracking lower last year.

This story was originally published on Interest.co.nz and has been republished here with permission.