A raft of large scale construction projects are set for Auckland city, which will likely force building companies to hire foreign labour to finish the projects.
Photo: RNZ / Cole Eastham-Farrelly
Offshore property developers announced plans to add more than 400 rooms to Auckland's accommodation market to meet demand.
On Monday, Australian firm Ninety Four Feet announced it would build a 43-storey hotel, with 225 rooms, on Auckland's Albert Street by 2021. The project will be valued between $200 million and $250m.
Last week, Hong Kong-based Sudima Hotels and Resorts announced it had been granted consent to build a 4.5 star, 200-room hotel opposite SkyCity's International Convention Centre. It set $65m aside for the project.
The construction firms which will build them, and undertake most of the risk, were yet to be announced.
Ninety Four Feet and Sudima executives both said they were in discussions with a number of New Zealand-based construction firms, but would not disclose which ones.
Colliers International hotels national director Dean Humphries said the constrained building sector would determine when the hotels would be completed.
He said most of New Zealand's larger construction companies did not build accommodation, which required a higher level of finishing skills.
Fletcher Building's decision to stop bidding on high-rise building contracts left a hole in the construction market and smaller commercial construction firms were moving to fill it, despite lacking experience, he said.
Building hotels was a risky business. Mr Humphries said many hotel projects ran over budget, and many firms had historically steered clear of building contracts.
Ninety Four Feet investment manager Paul Burnaby said the firm was "very much aware" of Auckland's construction industry issues.
"We knew it was a challenging environment."
Its project managers would monitor spending on the project and some capital would be set aside to absorb risks.
A shortage of tradespeople in Auckland was of concern but the bigger worry was the "astronomical" cost of building supplies.
"There is a clear issue in the market. The way that manifests is in the costing. It's no joke that it costs one-and-a-half to two times more," Mr Burnaby said.
Citing Hong-Kong based construction firm Fu Wah International bringing in about 130 Chinese tradesworkers to complete the interior work on its five-star Park Hyatt hotel in Auckland earlier this year, Mr Burnaby said if it used foreign labour the numbers would be "less dramatic".
Sudima chief executive Sudesh Jhunjhnuwala said he would not mind if the construction company it contracted used foreign labour to complete its build on time.