Building work put in place

Hospital construction remains busiest sector, but there’s a surprising contender

3 Jun 2022

Joel Glynn

Our take on the latest Building work put in place (Fri 3 Jun 2022)

Total construction volumes up 3.2% (sa) in March

Residential construction activity up 23%pa

Hospital construction up 44%pa

The key numbers...

Although the total value of building activity in March increased by 20%pa, large cost increases were a major contributor to the rise, so the volume of activity was only 4.7% higher than in March last year.
Both residential activity and non-residential activity recorded solid growth in the March quarter, with residential volumes up 3.5% (seasonally adjusted), and non-residential volumes up 2.7% (sa).
Growth in activity in provincial areas was focussed on non-residential construction work, with activity in the North Island (excluding Auckland, Waikato, and Wellington) up 42%, and work in the South Island (excluding Canterbury) up 27%.
By contrast, major urban centres tended towards growth in residential activity, with residential building activity up 26%pa in Auckland, 25% in Canterbury, and 20% in Wellington.
The strong increase in non-residential activity in the provincial North Island was underpinned by a mix of hospital, social, and factory building work. Growth in the South Island excluding Canterbury was more broadly based, with factories and retail making the largest contributions.
Hospital building activity was up 44%pa in March, primarily due to work at Taranaki Base Hospital. Other strong build types were offices, factories, and storage, up 39%, 34%, and 24%pa respectively. While the latter two types are readily explainable by border restrictions and supply chain disruptions, the growth in office building activity is surprising given the increase in employees working from home.

Real residential building volumes still rising

Annual total of work put in place, Sep 1999 prices, $m

...and our reaction

The construction sector continues to experience high growth in costs, evident by the large discrepancy in nominal and real growth over the last 12 months. However, real building activity remains positive, up 5.3% and 3.6%pa in the residential and non-residential sectors respectively.
A shortfall in the supply of housing in New Zealand’s largest cities drove growth in building activity in these areas. However, growth in activity in provincial North and South Island areas was more concentrated on non-residential projects.
Office building activity had the strongest quarter since September 2020 in the March quarter, with office work put in place valued at $337m. This growth defied our expectations, as softening demand for in-person workspaces and high vacancy rates seemed to indicate weak demand for office construction.
Health building activity was consistent with expectations in the March quarter, as a total of $255m of work was put in place, the strongest on record. Work will continue in New Plymouth until 2024, while Dunedin Hospital is expected to start showing through in the numbers in the next few quarters. Other large hospital construction projects announced in Budget 2022 for Whangarei and Nelson Hospitals will also contribute to continued growth in provincial health building activity.

Latest updates

Premium

Building work put in place

Hospital construction remains busiest sector, but there’s a surprising contender

The key numbers...

Real residential building volumes still rising

...and our reaction

Latest updates

Construction activity at a 10-year low

Non-residential work hammered as residential softens further

Non-residential activity continues to decline

Lower residential activity leads construction decline