When the government finally announced they would support the CRL – but starting in 2020 – they listed two targets that would need to be on track to being met to bring construction forward.

  1. Rail Patronage to double to 20 million
  2. CBD employment to increase by 25%

We’ve written about both of these a number of times before. I personally think it’s quite possible that we will reach the 20 million patronage target early, especially if we can continue the current growth of over 12% per annum. The harder target – and dodgier one – is to increase CBD employment by 25%. It’s more dodgy as it appears to be being used as an indicator of travel demand but there are many other factors that might increase demand for rail e.g. increases in parking prices and the number of students.

An article in the Herald on Tuesday highlights just how hard the employment growth number will be.

Auckland businesses are squeezed for office space, and the central city is experiencing its most critical shortages of commercial real estate on record.

So rents could be about to shoot up fast.

Chris Dibble, Colliers International’s national research manager, said latest analysis of vacancy rates surprised him because it showed that an area less than the size of a soccer field was available to lease.

“We knew it was going to be low, but not this low. The prime sector for premium and A-grade vacancy rates in Auckland CBD is just 1.4 per cent, beating our expectations of 2 per cent. It was 4.7 per cent six months ago and the 20-year average is 8.2 per cent,” he found.

“The vacant space aggregates to just 6116sq m, less than a soccer field and unprecedented in our records which began 20 years ago,” Dibble said.

“Auckland CBD property houses some of the most productive businesses in New Zealand and with little space available for expansion, we are stalling the potential growth of the country at a critical time in the cycle.

“In a market that needs to attract quality staff through quality environments, the lack of available space and developments nearing completion means we will stumble just as we were making headwinds in what has been a tough slog for many. There are only 11 prime buildings with vacant space available. Only eight buildings can accommodate more than 20 staff (currently 11 per cent of the overall CBD market).

“Only seven are able to accommodate less than 20 staff. Tenants who haven’t found suitable accommodation will have to forgo quality or wait until early 2016 for a slight reprieve from spec builds such as Mansons TCLM’s development or Goodman Group.

In effect CBD job growth – which has been strong in the last few years – is going to dry up simply because there’s not much office space left and there’s not a huge amount to come on stream any time soon. Office space will get a bit of a bump from the Precinct Properties redevelopment of the Downtown Mall site but that won’t come on stream till 2019. That development though will see at least the first part of the CRL constructed as it absolutely has to happen at the same time as the redevelopment seeing as it passes through the basement.

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22 comments

    1. Remember it was only recently that the owners of a property in Fort Street decided to build a car park rather than an office building. If the shortage was real, a developer would have had no problem financing an office tower on such a prime site.

      1. The Fort Street owners did not “Decide to build a car park”. They got a resource consent for a car park – unless it is actually built, there’s a massive difference. Working in the development industry, I know that there’s tons and tons of both good and bad consents that never get used, or were never intended to be used, but only to push the boundary / increase the land value by creating a baseline approval.

        1. True, but it does point to the problems in launching a new office development, even though there is a reputed dire shortage.

          1. How so?

            As Loraxus points out, intermediate consents e.g. for car-parks are simply used to ramp up the value of the site, so that they can get the banks and other lenders to give them funding for the actual development. Nothing new here, been going on for years.

            As for office space shortages, I’m sure that the Fort St “car park” site will turn into a monster office building sooner than later thanks to its location and proximity to the waterfront.
            And a properly built, modern but only half tenanted (new) building on that site will return more money to the owners than a fully utilised car-park building ever will.

            And the trend is without a doubt to move towards the waterfront – thanks to, in no small part, Britomart providing a catalyst.

          2. Main problem is inflation in the construction sector. Which is now in total boil-over; in part inflamed by the gasoline being hurled onto it by the crazy haste of the RoNS programme….

            New builds very hard to make work at the moment.

  1. The lunacy of the situation where a country with a surplus in space endeavours to create situations more applicable to constrained places, like Hong Kong, London or Singapore is bemusing to say the least.

    On the day a straight road to Warkworth is announced, the lack of ambition in failing to run this to Whangarei, slap rail alongside it and move the port speaks volumes.

    Option A : Pick a place, build a business case and plumb it in.
    Option B : Engage in the plumbing equivalent of dot to dot painting. If it exists, build a highway and when you have sufficiently choked a place with tarmac, call in the cranes.

    1. Why on earth would you lay rail there? already a perfectly good route for 90% of the distance, just needing minor improvement.

      1. so this 15km will cost $750 million. Using the same cost estimates we could expect extending to Whangarei to cost $5 Billion. If that is lack of ambition, then I’m glad we lack ambition!

  2. At the current annual growth in rail of 12%, with a starting base of 1 July of 11.4 m trips per annum (as per July AT board reports we got a whisker under that figure i nthe year to end of June 2014) , we can and exceed 20m rail trips by July 2019.

    And that assumes no sudden external “shocks” to the staus quo – changes, like petrol going up to record (real) prices in the next 5 years (either through exchange rate drops or oil prices rises due to wars or major external events overseas beyond our control or both), or as you say student numbers increasing or parking price hikes in parking buildings (both council owned and privately owned.

    History would suggest that at least 2 of those 3 things will change in the next 5 years, which ones and when is harder to predict.
    Not important though as all that means is that the CRL will be needed sooner than it ever was – and as it has a 3+ year lead time, even once the Lower Albert St to Aotea/Downtown mall part is done and dusted, we can’t wait until the 2019 or later time frames to decide, well we need it now, and then suffer 3+ more years of disruption and poor PT system as a result.

    And of course, if some of those record lows in building prices, convince some parking building owners to convert said parking buildings/lots to actual office buildings, then the short term effect will drive even higher PT use before the CRL comes on stream.

    And don’t forget, the old standby of “well everyone can use the buses if the trains are full can’t they”, won’t be an option in 2019 as once the new network is rolled out, the trains have to be able to deliver the bulk of those former bus users both to the CBD and places along the way, and those legions of buses will have now been redeployed into the suburbs as part of the new network model.

    So CRL delays will cause not just the CBD itself to stall, the entire net network model may come to a grinding halt too, and if everyone who would use the PT then jumps into their cars instead then the entire roading network will gridlock.

    1. oops meant to say “record lows in building vacancies” (not prices).

      As for prices, it will never be cheaper to build the CRL (or new office space) than now.

      1. Greg you’re quite right, but also we have yet to have anywhere near the ‘payoff’ from the disruptions of electrification, new bus network, and HOP intro in terms of attractiveness of the system, that growth is already assured. In other words we can reasonably expect double digit growth to continue as all these things finally arrive, so even without any of the additional push factors you mention 20 million trips is as good as banked. Even though of course if ridership grows as a constant say 10% that does represent more actual journeys each year as the growth compounds.

        But AT does need to bang some heads together to sort this mandated ‘slow train’ issue out, and soon.

        Additionally here’s a very good summary of the global liquid fuels supply/demand issue for the rest of this decade, including good points on oil intensity in economies and its relation to GDP:

        http://www.resilience.org/stories/2014-07-25/iea-oil-market-forecast-optimistic-assumptions-and-an-economy-unable-to-grow-out-of-its-problems

        So yes, what a dumb time to be massively doubling down on Motordom.

    2. We will exceed them far faster than that. Seriously, once electrification niggles are ironed out and the fleet deployed, the New Network happening in the south, and integrated fares working, rail pateonage is going to grow far faster than it has been.

      Especially soon rail will be the backbone of the network, so not simply commuter trips but all types. The off peak and counterpeak have huge latent growth potential.

      1. Nick, no argument there.

        Its incumbent on AT and Precinct to get the tunnels under the Downtown site built sooner than later as that then leaves the way clear for the other CRL construction work to begin once the government of the day sees the light.

        It also makes we wonder if they shouldn’t get the Western portal started too, to minimise future disruption to the rail network especially for western line users, so that the works near the western rail are done while the train volumes are lower than they will be in a few years time. So that the TBM can do it job quickly and with less disruption..

        And yes, once the folks are piling onto trains by the bus-load – courtesy of new network and integrated fares, the train journey volumes will rocket up quickly, easily exceeding the 20m target.
        Early evidence at Panmure suggest this is happening now, but we’ll need that seamlessly replicated all over the network to make that come true.

        However, once the new network is in place, as I said above – there is no going back – the buses are not going to be there to replace the trains, they’re now out in the suburbs.
        And once thats happened then the trains (and the power grid it depends on) have to work fast, reliably and without problems, unlike what we have had for many months now.
        And it also means we can’t have major shutdowns over long weekends and summer like we have had since, well, forever.

        Once we get a government with a better handle on the situation, (be it this year, or in 2017) I am sure the CRL can still open on time in 2020, if not sooner.

        However, that needs a lot of “spadework” to be done up front to ensure that can occur so getting that done is essential to minimise the build time of the CRL tunnels.

        If the 20m target is reached way too soon of what the planners have forecast, then yes thats a nice problem to have, but its also a big headache as then Auckland will have a major problem on its hand, as that will mean slowdowns impacting PT everywhere due to congestion at Britomart. And I’m sure some inventive solutions can found to maximise the Britomart bottleneck until CRL opens,
        But its better if we can avoid it completely.

        And at the end of the day, even if we got 40m journeys on the trains tomorrow, the current Government would not consider starting CRL early I’m sure, as they are just to opposed to it.

  3. Rents have not increased in 7 years. That indicates the Herald article is just a PR push by a land agent. It partly depends on their definition of “A-grade” office space. Kiwi Income Property Trust has had great difficulty filling the Phillips Fox building and Precinct similar trouble filling Zurich Tower. With rents still below 2007 who would start a new building?

  4. By the way I’m increasingly baffled by Joel Cayford’s position on Auckland, he keeps whiteanting the CRL, and is now screaming foul on Precinct’s plans for Downtown:

    ‘Planner Joel Cayford has spoken out against Precinct’s plans and asked council for information about the consent lodged by former owner Westfield, allowing the tower to rise.’

    Other than North Shore disease; oppose anything on the mainland, or some kind of ‘people’s prophet’ against evil developers and even more evil Council, what on earth is his motivation? The later of course is Oarsman’s position; he seems to fantacise that he is some kind of butch later-day Jane Jacobs, as do so many of the old grey hairs in Grey Lynn: Determined as they are to turn the place into a second Parnell.

  5. I’m a little confused about the 20 million pax target that National have set. I had understood it was being on track to hit 20 million by 2020 would mean an early start. However, listening to Gerry Brownlee replying to Julie-Anne Genter in Parliament this week he seemed to be saying patronage will need to be at 20 million before they would start. If that’s the case, an “early start” by National would only be in 2019 if that’s the year we end up hitting the 20 million barrier….

    What do you guys understand the position of National to be?

      1. Exactly! That is the goal of most governments. They promise jam tomorrow knowing full well it won’t be their problem to provide it.

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