Infrastructure August-October 2016

AsiaPacific

INFRASTRUCTURE

August-October 2016 • Volume 6 No 4

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Contracting changes • Waste to energy www.infrastructurebuild.com www.propertyandbuild.com

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INfrASTrUCTUre Of The fUTUre

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FIRST WORD

If you can’t stand the heat, redesign the kitchen The New Zealand construction sector is entering unknown territory as the boom which started with the Christchurch recovery rolls on and threatens to gain momentum

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he latest National Construction Pipeline report is projecting a smoother, longer peak than previously assumed with current activity levels, unprecedented by value, being sustained through the next three years. Normally in these circumstances governments and the Reserve Bank would lean against the curve, but these are not normal times.

Instead the government is intent on increasing housing supply while strong inward migration, the Canterbury earthquakes, the evolution of the ‘super-city’ and a legacy of systemic under-expenditure are propelling large volumes of infrastructure investment. Even genteel Wellington has eight major projects signed off and ready to go.

In an article for this magazine in 2013, we said: “Contractors are hungry at present as they have geared up for the Christchurch rebuild and that work is not yet flowing.

Soon, however, these dynamics will be reversed and they will be inundated with work, which will shift the bargaining power of the parties”.

That effect is now very definitely with us and looks like being with us for some time to come. The evidence is everywhere of a market already stretched to capacity: • jobs are being turned away • skills shortages are endemic with construction-related occupations dominating Immigration New Zealand’s Immediate Skill Shortage List • increasingly materials are having to be sourced overseas • Auckland City Council and other councils in high population growth areas are struggling to get enough staff to August-October 2016

process consents, inspect sites and sign off buildings.

Players in a market this hot have two choices – they can either stand the heat, or they can redesign the kitchen. Most are doing a bit of both. Three broad responses are in play: advance planning to circumvent potential supply bottlenecks, innovative contracting and procurement techniques and joint ventures as collaborators with offshore partners.

Pre-purchasing Nick Smith commented recently that builders were telling him a truckload of concrete which used to be available at 24 hours’ notice now needed to be ordered three to four weeks in advance. This chimes with our experience.

There is a definite trend toward procuring long lead items early and requiring the main contractor to use that supplier, even if they have never worked with them before and have established relationships with other suppliers.

Catch-them-when-you-can contracting Early Contractor Involvement or ECI has become a popular contracting option in post-earthquake Christchurch so there is now significant familiarity with this technique, and people are beginning to experiment with variations on it.

It suits a highly competitive contracting market because, as the name suggests, it brings the contractors in at the design stage and seeks to embed them for the life of the contract.

One variation – used on the Christchurch Metro Sports Facility – was to appoint two ECI contractors rather than just one as a way of maintaining price

contestability. Obviously this involves an additional upfront cost, but the owner clearly considered that to be justified for the protection it offered against price creep or becoming captured by one contractor.

Another variation – used for the new outpatients building at Christchurch Hospital – was a two-stage construction contract. Following a competitive tender process, a contractor is awarded Stage One of the works and may be awarded the larger second stage should its price for Stage Two be accepted. That price for Stage Two, which it must work up during Stage One, will typically include a locked in P&G sum and a margin percentage.

This achieves the objective of securing a contractor early and cuts out the need for a separate ECI contract.

Construction contracts also tend to lock in key personnel.

Some will go one step further and require that key personnel be bonded to the project, so that if they leave before the completion of their role the contractor is liable to make a payment to the owner.

JVs The New Zealand building industry is dominated by very small enterprises – the boss, the

boy, the ute and the dog. Since the collapse into insolvency of Mainzeal in 2013, many consider that we now have only two top-tier construction companies followed by a larger number on the rung below.

However, local firms were never going to be able to bulk up sufficiently to handle the wall of work now available, and excess capacity created by flattening demand elsewhere, particularly in Australia and China, made it inevitable that there would be high overseas engagement – often as head contractor but almost always in consortia, JVs or other forms of tie-up with New Zealand interests.

Australian contractors have featured prominently: for instance, CPB Contractors (formerly Leightons) on the Christchurch Bus Interchange with local firm Southbase and on the acute services unit at Christchurch Hospital, and Cockram with Leighs to redevelop Burwood Hospital.

There is significant Chinese interest in Auckland – notably from China Construction New Zealand Ltd, a subsidiary of the megalithic CCEED (China Construction Eighth Engineering Division). It is in JV with Hawkins for the St James Theatre and Park Hyatt projects and is also looking to tender for a 52-storey residential tower on Customs St in the CBD. We expect all of these trends to continue over the next few years and to fundamentally change the New Zealand construction industry in ways which will endure when the current boom has run its course.

Brian Clayton is a partner at Chapman Tripp and Hamish Bolland is a senior associate. Both have significant international experience and both specialise in construction law and major projects www.infrastructurebuild.com – 3

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August-October 2016

COVER STORY – CREATING AN ICON FOR AUCKLAND 12-14 The multi awarded Nelson St cycleway is a great example of how its possible to reuse infrastructure to improve transport connections while retaining its backup use as an emergency off ramp. It called for a fast and innovative thinking by NZTA appointed GHD, Novare Design and Monk McKenzie .

WATER A water crisis in the US provides a timely warning about maintaining high quality water infrastructure and being honest with the public says Water NZ CEO John Pfahlert 10

MANAGEMENT Key questions if you want to hold on to key staff by Dr Andrea Polzer-Debruyne of PeopleCentric 15 Leveraging cross border THE UNITARY PLAN collabertaion in tendering by Everyone has an opinion on the Rebecca Skagestad for Plan A 7000 page Unitary Plan for New 18 Zealand’s biggest city.

Hamish Glenn from NZCID calls TRANSPORT Singapore International it a housing capacity success Transport Congress tackles the and a recipe for transport daunting challenge of getting it chaos. 6-7 right 16-17 Local Government Commissioner Leigh Auton sympathises SECURITY with Auckland councillors facing Protecting IT infrastructure in an environment in which a “phony war” being played out by the media, a local body cybercrime reaches epidemic proportions 20-21 election while noting the plan gives space and opportunity for ENERGY market efficiency 8 Millenials (18-34 year olds) drive The Auckland Council signs the interest in new products off on a “very finely balanced and services value for energy plan” 30 utilities, says Faye Griffiths of Accenture 22-23 CONSTRUCTION New Zealand not jumping on Early Contractor involvement helps ease the pressure on a NZ the Energy from Waste bandconstruction sector stretched to wagon common in Europe say CEO of Waste Management capacity and the Chinese see Institute Paul Evans 24 an opportunity. A report from Chapman Tripp 3 Is an innovative waste to energy

SUPPORTERS Accenture Australia/NZ Auckland Build 2016 Cancer Society Chapman Tripp Iplex Pipelines NZCID Building Nations

22-23 39 19 48 28 2

facility in Australia the face of the future? 25

tightest it has been for 20 years – report on office, industrial and retail property sectors 40 ENVIRONMENT Climate change is “by far” the The demand for office space in the capital boosts the fortunes most serious environmental of Precinct Properties 36-37 issue facing New Zealand 26 Sylvia Park Office Development LOCAL GOVERNMENT secures IAG as anchor tenant Essential for future focused re41 source management to concenRefurbished Aurora centre weltrate on early decision making and placing a greater value on comes historic 1970s artwork 43 REGIONAL RESEARCH natural ecosystems 27 Council projects show the effec- The growth in regional econtiveness of Iplex pipeline innova- omies is working its way into tion backed by ISO 9002 quality commercial and industrial property markets 38 assurance programmes 28

THE UNITARY PLAN The Auckland Council signs off on a “very finely balanced” Unitary Plan to meet the needs of one million more people by 2041 30 CEO of Property Council NZ Connal Townsend says the Auckland Unitary Plan signifies the economic, environmental and social prosperity for the whole of New Zealand 32-33 PROPERTY PFI lifts operating revenues in Auckland industrial property market where vacancies approach record lows of 1.5 per cent 31 Office space in Auckland CBD

DESIGN Southern Landmarx cleans up at the 2016 Landscapes of Distinction awards 35 COMPLIANCE & LEGAL Multi million dollar fund to support the retention of Mew Zealand built heritage 43 Sub Surface Detection leads the way in safe underground locating techniques 43 CONSTRUCTION New retentions regime is likely to cost the sector says PwC’s Lara Bennett 44-45 High tech monitoring watches over CBD while City Rail pushes through below 46

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COMMENT >> Cities

Recommended Unitary Plan a housing capacity success – and a recipe for transport chaos The Independent Hearings Panel appointed to receive public feedback on the Auckland Council’s landmark Unitary Plan has delivered its recommendations to the council – and the results are mixed

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ising to the housing crisis, the panel have unleashed a vast amount of capacity for new housing within the region. This additional capacity is sorely needed and is most welcome, but the panel’s recommended plan, like the Proposed Unitary Plan it was given three years ago, fails to integrate land use and transport and will permanently exacerbate already chronic congestion problems in our largest city.

The council now has just a few weeks to review thousands of pages of content and either agree with or reject the panel’s proposals. The prospects for a land use plan which supports, instead of undermines, transport objectives are highly unlikely.

Just why the Unitary Plan, in any of its current forms, is so much a part of Auckland’s congestion problem, and not part of the solution, is documented in a very important parallel process currently underway.

The Auckland Transport Alignment Project (ATAP) is a joint initiative between the government and an Auckland Council group to improve transport outcomes for the region. It was launched in response to successive analyses indicating Auckland was heading for a congestion meltdown in around a decade.

ATAP has completed two reports with a third and final report due in August. The final report will obviously be the most important, but information included in the first two papers says something very significant about Auckland’s long-term strategic direction.

Far from addressing Auckland’s long-standing and vexing transport problems, the Auckland Plan framework sees them

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get much worse. The figure below identifies the key problem: congestion. As can be seen, Auckland’s “unacceptable” congestion of today, becomes rapidly worse by 2026 and by 2046 congestion throughout the day will be comparable to congestion during the morning peak today.

The image visually illustrates volume to capacity ratios (a technical measure which measures congestion: black = gridlock; red = very heavy congestion; yellow = congestion) on the road network for the commercially critical 9am-4pm interpeak period.

ly be a lot worse. ATAP modelling assumes an additional $12 billion of transport investment takes place, which currently is unfunded.

These results are unacceptable for the Auckland economy and for liveability. Luckily, the ATAP group is aware of the issue and is working hard to address the problem.

However, even by reprioritising projects, increasing public transport, increasing road investment and spending even more, ATAP has been unable to significantly improve either congestion or public transport patronage.

extremely high relative to international comparators and unacceptable to the public.

What on earth is going on?

Yes, the city is growing, but it has always grown. Yes, its centre is concentrated on a peculiarly shaped isthmus, but it has always been located here.

Yes, the city has underinvested in transport in the past, but transport spending has quadrupled in the past decade and is expected to remain at this level indefinitely. Furthermore, and as noted above, throwing even more money at the problem, public transport, roading or both, does not deliver a benefit

ATAP modelled interpeak congestion It’s important to underscore just how poor these findings are. Within a decade – probably sooner – Auckland traffic speeds on State Highway 1 between Otahuhu and Albany will barely exceed 30km per hour at any point in time between 7am in the morning and 6pm at night, five days a week. Saturdays will almost certainly be as bad, but are not modelled, and weekday peaks will begin before the 7am and finish after the 6pm modelled timeframes.

By 2046, the entire motorway network is planned to be in gridlock all day, every day.

Alarmingly, results could actual-

The one initiative which analysis shows will have an impact is road pricing. This is something of a breakthrough because decision makers have avoided direct charging of roads by time of day for many years, despite the obvious efficiency and equity benefits which come from user pays.

The problem is that, in order to achieve the mode shift required to mitigate congestion and increase public transport, prices have to be set at an extremely high level. Even then, the projections are that congestion levels will simply remain at around today’s levels, which are

consistent with cost.

How can this all be? Results appear counterintuitive, if not contradictory. Why is new investment not having an impact?

How can we have worsening congestion without a net public transport mode shift? How can improvements not stack up if traffic is gridlocked?

Problem plan Something is obviously very wrong with Auckland’s transport situation. That problem is the Unitary Plan.

The need for and desire to travel is determined, above all, by land use. Where jobs are loAugust-October 2016

cated in relation to housing and where schools are situated are primary determinants of travel demand. Where roads and public transport go and how much land is committed to transport corridors determines the capacity of transport systems to serve that demand.

The more workers have to travel to get to employment, the more pressure there is on transport services – particularly in mornings and evenings.

Roads which are four lanes wide carry twice as much traffic as roads which are two lanes wide.

Dense commercial development around public transport nodes facilitates public transport use, industrial employment on the periphery will necessitate road investment.

These are basic precepts of integrated land use and transport planning and investment.

Unfortunately, the process by which the Auckland Plan, the Long Term Plan, the Regional Land Transport Plan and now the Unitary Plan have been developed has disaggregated the single land use transport system and the result is predictable.

The Unitary Plan (both the council’s proposed and the panel’s recommended) intensifies parts of Auckland where there is not the transport capacity to intensify, while areas with transport and access to employment and services incur development restrictions. Homes are permitted miles from jobs, while commercial development is prevented closer to homes.

And our transport system cannot cope.

Limited, if improving, public transport services do not take people all the places they want to go. Services are largely focused on getting workers to and from the central city, but what about commercial trips, school trips, recreational trips and the 75 per cent of jobs outside the CBD and fringe?

Those trips overwhelmingly need private vehicles because August-October 2016

their distributed nature undermines the efficiency advantages of public transport. Yet our road system remains hopelessly inadequate to meet this demand.

Far from Auckland being the sprawling, motorway-centric, private vehicle paradise once claimed, we now know that Auckland has an unusually low and grossly insufficient road system spread over a comparatively dense urban area.

The following figure contrasts Auckland’s provision of land

less land across the inner core.

Broadly comparable cities like Melbourne and Toronto, meanwhile, have reserved as much as one and a half times more land to footpaths, roads, cycleways and busways across the urban area as Auckland.

This fundamental under-provision of space for movement combined with more people is the reason why Auckland is clogging up. The city simply does not have the core infrastructure network in place to

“The city simply does not have the core infrastructure network in place to accommodate the additional trips generated by more people and more businesses within the existing urban area” for movement inside the central city and wider urban area.

Auckland has reserved the second-least amount of space for movement of all cities evaluated. Only the infamously congested Moscow has provided

Land allocated to streets in cities

accommodate the additional trips generated by more people and more businesses within the existing urban area. While reducing private vehicle trips per person, density is increasing private vehicle trips in aggre-

Concentrating high density, mixed use intensification in greenfield locations adjacent to transport corridors would help create a truly liveable city, says NZCID Senior Policy Advisor Hamish Glenn gate, and the network is failing under the pressure.

This is clearly not sustainable, yet from a transport perspective it is presently very difficult to see a way out. This is no doubt why a good proportion of transport experts have thrown their lot in with higher road charges, while others have taken a more “fingers crossed future technology can save us” approach.

However, by shifting focus away from transport, we might actually have a better chance of resolving transport’s toughest problems. It is too late to change the development provisions in what will be by the time this article is published an operational Unitary Plan, but policies and investments which channel development away from the city’s congested urban area may provide some relief.

Distributed density is at the core of the problem. But if we were to concentrate high density, mixed use intensification in greenfield locations adjacent to existing and potential new transport corridors, this would create an opportunity to design a city that offers high amenity and live, walk, work and play options for future generations.

I’ll canvas some of these options in a future article.

Hamish Glenn is Senior Policy Advisor at the New Zealand Council for Infrastructure Development (NZCID)

www.infrastructurebuild.com – 7

LOCAL GOVERNMENT

Reflections on the Auckland Unitary Plan Prior to the Auckland Council deliberations and decisions on their response to the Independent Hearings Panel (IHP), there is a sort of phony war being played out in the media

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few journalists, including those working for the NZ Herald, have been taking a few jabs to stir up the pressure on the Auckland councillors.

I need to say that I have represented a few clients in the process, and have taken part in mediation and hearing processes. I have previously recorded my view that the administration of the hearings process, led by Judge David Kirkpatrick, has been first class.

There have been the odd grumbles, but in the context of the scale of the exercise and the importance of the documents, I believe the panel and the officials supporting the hearing commissioners deserve big congratulations.

The IHP had a clear date to complete the hearings process and recommend their findings to the Auckland Council. This was delivered on time, giving the Auckland Council a month to respond. We await the council’s response. From a political perspective, the timing of their deliberations comes at a time of heightened tension based on the local body elections in October. Woe to be an Auckland councillor at this time.

The Independent Hearings Panel recommendations mark a very large milestone in Auckland’s history. The Proposed Unitary Plan for the entire Auckland region is one part of the jigsaw that follows from the creation of the ‘SuperCity’ in November 2010. Its context was the inability of the former eight councils in the region to agree on the future growth pattern and development of Auckland.

As a chief executive of one of those eight councils, and as a town planner of many years, I note that the previous governance arrangements could not

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and would not have delivered the coherent picture that the recommended unitary plan now delivers for Auckland.

I am very excited, and full of commendation, as to the recommendations of the IHP. They deliver for Auckland a clear picture of our city’s growth for the next 30 years or more.

Lots of other elements need to complement the plan, such as the investment of council and crown in infrastructure, but the planning framework is now being put into place.

The IHP has delivered a much simpler document than originally proposed by the Auckland Council. From my experience of delivering three District Plan Reviews for the former Manukau City Council, readily understandable, non-complex documents are important to the community. Certainty as to policies and rules attracts business and community confidence.

Auckland will be well-served by this document as recommended.

The plan retains a Rural Urban

Boundary (RUB) with in-built flexibility to change it as circumstances arise. I have previously written in support of RUBs and MULs, subject to flexibility.

The plan allows for private plan changes to move the RUB, an important step.

Moreover, the plan has provided a clear set of rules to allow the residential market to build up and build out. Often my planning profession tries to over-direct the market, but this plan gives space and opportunities for the market to operate efficiently.

There is no doubt the density provisions are fairly permissive, but necessary to allow Auckland to grow into a truly international city. Likewise the recommended plan allows for growth in industry and commerce, although this would appear to be more constrained over the longer term than the residential growth provisions.

In a wider context, the rest of New Zealand needs to recognise that Auckland is rapidly putting in structures and plans

that will greatly enhance its economic scale and importance in this country. The Unitary Plan will enhance its attraction for investment, and a place to live.

From my experience, similar conditions apply in the Bay of Plenty and increasingly the Waikato. Growth is significant now, but increasingly much of New Zealand’s growth will occur in this ‘Golden Triangle’.

The challenge for the rest of New Zealand is whether it can react to the changes occurring in Auckland, Waikato and the Bay of Plenty such that it can compete to attract people and investment. But more on that some other time. Congratulations to the Independent Hearings Panel.

Leigh Auton is a Local Government Commissioner and a Director of Auton & Associates with 35 years’ local government experience, a chairman/director/trustee on several boards and provides consulting advice to public and private sector companies August-October 2016

WATER

Learning the sharp lessons of Flint A recent US water crisis highlights the importance of maintaining high-quality water infrastructure – and being honest with the public

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he city of Flint in Michigan in the northeast US is close to Lake Huron and sits on the Flint River. Once in the heartland of the US auto industry, it is now part of the ‘rust belt’ and severely economically depressed.

This has had an inevitable impact on many public services.

Many water service lines in Flint were installed between 1901 and 1920. Common practice back then was to supply drinking water through cast-iron water mains, then use lead piping to end users’ homes.

Commencing in 1967, Flint’s water was sourced from the Detroit Water and Sewerage Department, which used water from Lake Huron. This water was chemically treated to limit leaching of lead from the domestic pipe works. There are an estimated 43,000 service lines in the city, including 3,500 known lead lines, 9,000 known galvanised lines and 9,000 unknown service lines.

The city of around 100,000 people terminated the 50-year arrangement to purchase Lake Huron water from Detroit Water in late 2014 as a budget-saving exercise and began supplying water from the Flint River.

Shortly after the switch took

place residents began to complain about the water’s colour, taste and odour. Coliform bacteria was subsequently detected and boil water notices were issued.

The first evidence of corrosion was reported in October 2014, when a General Motors plant in Flint stopped using the supplied water after observing corrosion of car parts.

Concerns around the quality of the water continued to be voiced and in early 2015 serious questions began to be asked around the presence of lead in the water. A Flint physician reported highly elevated blood lead levels in children.

Despite this, city and state officials insisted the water was safe to drink, going so far as to file papers with state regulators claiming testing at Flint’s water treatment plant had detected no lead.

They also allegedly falsely claimed they had tested tap water at homes with lead service lines, while later acknowledging they did not in fact know the locations of lead service lines.

Public concern continued to grow and in March 2015 the Flint City Council voted to return to purchasing water from Detroit Water. This move was, however,

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blocked by the state-appointed emergency manager who controlled the city’s finances.

This official went so far as to issue a statement asserting the safety of the Flint River water.

Despite this, opposition to this water source mounted through 2015.

Corrosive contamination Scientific and medical studies began to emerge proving that the Flint River-sourced water was highly corrosive and causing elevated lead exposure in homes. It had been determined that the detected lead levels resulted from orthophosphate being omitted from the Flint water treatment process, and the colourisation of the water was due to the high concentration of chloride in the Flint River water causing excessive corrosion. Finally, in October 2015 the water supply was switched back to Lake Huron water (from the newly created Great Lakes Water Authority).

The Michigan governor declared Genesee County to be in a public health state of emergency on January 5 2016, and shortly afterwards police began delivering cases of boiled water, water filters, lead testing kits and replacement cartridges to affected residents.

The Flint situation had now reached the national stage with congressional hearings and presidential attention. President Obama visited Flint in May of this year and described the situation as ‘inexplicable and inexcusable’.

In response, Flint City said it would remove and replace all the now-identified 15,000 water service lines containing lead piping. Needless to say these moves have not stopped a number of lawsuits being filed

against state and city officials.

In sum, there was water contamination from coliform bacteria, lead and suggestions of a possible legionnaires’ disease outbreak. Between 6,000 and 12,000 children in Flint have been exposed to lead, several lawsuits and investigations are underway, there have been four resignations, one dismissal, one suspension and three criminal indictments.

The Flint crisis highlighted the issue of aging and seriously neglected water infrastructure nationwide. The New York Times has previously observed: “Although Congress banned lead water pipes 30 years ago, between 3.3 million and 10 million older ones remain, primed to leach lead into tap water by forces as simple as jostling during repairs or a change in water chemistry.”

The paper also reports that, “The annual budget of the EPA’s drinking water office declined 15 per cent from 2006 to 2015, with the office losing over 10 per cent of its employees. The Association of State Drinking Water Administrators reported in 2015 that federal officials had slashed drinking water grants, 17 states had cut drinking water budgets by more than 20 per cent, and 27 had cut spending on full-time employees.”

Perhaps the best lesson from Flint is that provision of water supply usually goes unnoticed by the public. However technical failure is always a possibility and compounding the problem by intentionally misleading the public about health risks was always going to end in tears.

John Pfahlert is Chief Executive of Water New Zealand, a national not-forprofit sector organisation comprising approximately 1500 corporate and individual members in New Zealand and overseas that focuses on the sustainable management and promotion of the water environment encompassing the 3 waters – fresh, waste and storm water August-October 2016

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TRANSPORT

Cycling to success An Auckland off-ramp that stood unused for 10 years has been transformed into a colourful, striking and award-winning urban space

The Canada St Bridge created by Novare Design and Monk Mackenzie sweeps majestically across one of the busiest sections of the New Zealand road network (photo courtesy Novare)

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he Nelson Street Cycleway project with its distinctive magenta-coloured surface is winning recognition both in New Zealand and globally.

Prestigious awards from the likes of the New Zealand Planning Institute, the Institute of Public Works Engineering Australasia, NZ Architecture, NZTA Bike to the Future and the Chicago Athenaeum showcase the significance of this addition to Auckland’s transport network.

The NZ Transport Agency’s Auckland Project Delivery Manager Mieszko Iwaskow says the Nelson Street project is a great example of how it’s possible to reuse infrastructure to improve transport connections.

“Converting the unused Nelson Street off-ramp into a walking path and cycleway was an

ambitious project – and one that has proved to be a hit with the public and has already become an iconic piece of Auckland infrastructure,” he enthuses.

The cycleway was the result of a multi-disciplined collaborative effort delivered by the hard work, dedication and commitment of the NZ Transport Agency (NZTA), lead designers GHD, Canada Street Bridge designers Novare Design, architects Monk Mackenzie and contractors Hawkins.

The Central Motorway Junction Walking and Cycling Masterplan (2012) had identified that the project could provide good walking and cycling connections and enhance the area through the Central Motorway Junction by utilising the 7m wide, 670m long off-ramp made

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redundant as part of the Central Motorway Junction upgrade.

However, it was not until NZTA got the go ahead to provide a link between Grafton Gully Cycleway and Nelson Street that this idea began to take shape.

NZTA engaged GHD and Novare Design together with Monk Mackenzie to deliver the design, with GHD also providing construction management.

The project focused on a 1km route that travelled over the disused Old Nelson Street offramp, connecting to Canada Street and Upper Queen Street via a bridge over State Highway 1 (Canada St Bridge) before linking into the Grafton Gully Cycleway.

“Timeframes were tight – GHD was challenged with designing and delivering a project that would usually take around

two years in just over a year,” recalls GHD Design Manager and Engineer’s Representative Gansen Govender.

The core team of GHD, Novare and Monk Mackenzie was immediately faced with several design challenges: • delivering a cycleway by summer 2015, including bridging State Highway 1 to provide a new connection – just 14 months • assessing the scheme and design of a new 1km cycleway requiring major infrastructure design • utilising a disused existing offramp to fit new infrastructure • obtaining building and resource consents required within this accelerated time frame • keeping the off-ramp available for use as an emergency August-October 2016

detour for cars and light vehicles.

The initial task was updating the scheme assessment report and selecting the optimum route which best met geometric challenges, safety concerns, structural viability, CPTED (Crime Prevention Through Engineering Design) recommendations, consent ability and security concerns.

The Auckland Motorway Authority (AMA) had completed an options report in 2014 identifying a bridge connection to South Street as the preferred option, but GHD provided six more options – four of which were variations of AMA’s preferred choice.

However, it immediately became apparent that the South Street options had key safety and geometry issues, which did not make them viable.

The remaining options generated by the GHD scheme assessment were: • a shared path on one section of Canada Street leading to an off-road cycleway on NZTA-designated land • a fully off-road cycleway, also on NZTA-designated land.

The latter significantly reduced consenting and consultation risk but increased the engineering complexity, so the former option was selected.

The advantages of this option included reduced cost, liaison and consultation requirements with stakeholders, construction complexity and fundamentally reduced programme duration and risk.

However, the preferred option brought many engineering challenges, in particular the steep topography of the land, while it soon became apparent the embankment was a designated 100-year overland flowpath.

A risk and opportunity review that included feasibility saw the team come up with a workable solution – extend the bridge by doubling its length to traverse the overland flowpath, avoid services and remove consenting programme risk.

This change came within August-October 2016

Suitable for young and old, cyclists and walkers, the Nelson Street cycleway has proved to be a hit with the public and become an iconic piece of Auckland infrastructure weeks of the tender launch and updates needed to be managed in a staged approach during the tender process, with every effort made not to delay the summer 2015 opening date.

Bridge begins Attention then turned to the Canada St Bridge that was created by Novare Design and Monk Mackenzie to connect Canada Street to the old offramp, spanning one of the busiest sections of the New Zealand road network.

The bridge’s form was guided by its transportation function, namely to span a maximum distance of 54m over State Highway 1 while minimising traffic disruption. The engineering solution was to design a steel structure, whose components could be prefabricated offsite and then safely lifted into place in overnight road closures, minimising disturbance to road users whilst spanning the required distances. In total, the bridge is made of seven spans and is 160m long.

Following the AUSTROADS Cycleway Guidelines adopted on the adjacent Grafton Gully Cycleway, the bridge features a: • 3.5m width • 2 per cent camber • minimum 24m radius • maximum 4.4 per cent gradient • 1.4m high barrier • bridge landing onto an offramp with a 10 per cent camber.

Due to the complex geometrical requirements of the space available, the bridge has five horizontal curves, with two different radii.

The value engineering applied to the screens for safety and ease of construction meant that the screens could be placed in front of the existing guard rail as opposed to behind, providing several advantages: • greater access for maintenance – the perforated panel height could increase as the ratio was no longer governed by the guard rail height • standardisation – posts and connections could be standardised for maintenance • safety – with the screens now placed in front of the guard rail, this removed any protruding objects such as the guard rail • aesthetics – the screen façade was independent of the guard rail • reduced costs – standard sizes/connection detail and reduced use of Plexiglas.

Screen solutions Key design challenges to retrofitting new screens to the old off-ramp included: • avoiding existing reinforcement in the bridge deck • more than 600 posts on the off-ramp • a 10 per cent camber on the existing off-ramp gradient • unevenly spaced guard rail uprights that varied in dis-

tance from 1.1 to 2.2m apart • variable centre point height ranging from 490mm to 575mm • bolt spacing on the guard rail that varied from 100-120mm and 210-230mm centres • guard rail widths of either 230mm or 245mm.

The team developed standardised posts and connections that could arrive on site prefabricated and then bolted into place, with no welding or corrosion protection or painting required.

Some of the novel design solutions created to address these constraints were: • reinforcement – to avoid reinforcement, each base plate had three options in each corner to make one bolted connection • maintenance – the perforated panels were increased to 1.2m high from 300mm to provide greater access • accessibility – the Plexiglas and perforated panels were designed to be opened independent of each other, allowing the perforated panels to be removed for maintenance while keeping the Plexiglas in place and providing a safer worksite • uneven panel widths – a 200mm clamping plate system placed in front of the column provided sufficient tolerance behind the plate to reduce the variation of panel widths, with 14 standard panwww.infrastructurebuild.com – 13

FOCUS el widths sufficient for more than 600 unevenly spaced posts • optimised connection detail – resulting in 18 post variations capable of covering all guard rail connection variances • standardised product – posts could be prefabricated and corrosion-protected off-site, meaning no welding or corrosion protection on site, thus enabling better quality control • aesthetics and safety – the screens were carefully designed to provide a uniform even façade between Plexiglas and perforated panel, which required staggered coupling nuts and spacer detail to millimetre accuracy.

Ultimately the project team value engineered a new solution from first principles during construction, with no impact to the programme and achieving both construction and wholeof-life cost savings.

Visual value Towards the mid-point of construction, Auckland Council set about investigating potential off-ramp enhancements inspired by the unique location of the cycleway.

Project architects Monk Mackenzie were re-tasked with de-

veloping concepts, resulting in a series of concept workshops where the project team, in particular GHD and Hawkins, reviewed the constructability and advised on what could be achieved within the construction programme Several concepts were taken to detailed design and construction: • Maori artwork – designed by a local Maori artist taking the history of the land and the people into consideration, they consisted of 15 etched steel carvings of humanistic figures along the cycleway, in addition to a 6m-high carved steel post marking the entrance to the off-ramp (Pou) • magenta surfacing on the offramp including a koru design – the magenta surface was chosen due to its reference to the heartwood of the totara tree, a feature that’s not only distinctly New Zealand but also reflects the ‘modern’ public consultation directive • interactive lighting design – 290 LED columns, each 3m high with motion sensor lights capable of mimicking either pedestrians or cyclists’ movements and enhancing their experience.

This substantial design change mid-construction re-

quired complete collaboration from the project team, in particular between the designers and contractor, to handle several complexities: • the 290 LED columns are a completely unique design, bespoke to this project • the necessity of redesigning all the street lighting and CCTV on the off-ramp to be located on the eastern side to facilitate city views • sourcing suppliers for special products such as the magenta surfacing or the outdoor UV protected data and power parallel trunking that provided data protection from power interference • the addition of 17 new columns which were in advance of the off-ramp and guard rail, requiring new post designs.

These changes outside the scope of the original works resulted in an approximate fourweek extension, which brought the works up to the end of spring 2015 – well within time for the summer 2015 opening.

Delivered to the NZTA ready for a December 3rd, 2015 opening with Minister Simon Bridges, the Nelson Street Cycleway evolved a collaborative delivery-focused environment, which required the NZTA, GHD,

Novare, Monk Mackenzie and Hawkins to cooperate in several key areas.

These included: • company culture – each organisation had a culture which fostered a partnering approach, meaning individuals were encouraged to collaborate • empowering decision-makers – each organisation selected individuals to lead the project who had the right expertise to deliver and empowered them to make decisions, facilitating a streamlined delivery and removing the bureaucracy which would have otherwise derailed the programme • attitude – the individuals who formed the project team had a positive ‘can do’ attitude combined with a mature approach to contract management, resulting in a collaborative approach as opposed to adversarial.

This project has set a benchmark for cycling projects in New Zealand and is already proving to be a drawcard for tourism and business.

It’s set to gain further global acclaim as a finalist at the World Architecture Festival in Berlin in November.

The Nelson Street cycleway provides good walking and cycling connections by utilising the 7m wide, 670m long off-ramp made redundant as part of the Central Motorway Junction upgrade

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August-October 2016

MANAGEMENT

To love and to hold until...

If only there would be a way to insure against your best people leaving

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recent survey of almost 1400 employers and employees by recruitment company Hudson found 41 per cent of employees were actively seeking a new job and another 34 per cent were doing so passively.

In addition, there was a 20 per cent increase in the number of people seeking new roles compared to the first half of the year.

The main reasons for wanting to leave? Boredom and lack of career progression!

Contrary to popular opinion, boredom is not an expression of having nothing or too little to do. Boredom arises when what you do has no or little meaning for you.

Unfortunately there are still managers who claim no responsibility for employees’ engagement and experiences of boredom. Some supervisors continue to believe that motivation is largely about money, perks and benefits – we know, however, that this doesn’t paint the complete picture.

In addition to fair pay, people expect: • challenging and meaningful work • a chance to learn and grow (professionally and personally) • great co-workers • recognition and respect • a boss who is ‘with’ them and not ‘against’ them.

Managers, supervisors and team leaders can clearly influence these factors. Of course, senior leadership and organisaAugust-October 2016

tional policies matter too – and so does the general life attitude of each employee, who needs to take responsibility for their own satisfaction.

Any way you look at it your most valuable employees (those high potentials as well as your solid performers) will leave (physical or psychologically) if they are not growing and having meaningful experiences.

Because people differ in what they see as ‘meaningful’ and as ‘career’, the best thing a leader can do is ask the right questions – questions that explore, rather than looking for confirmation of established assumptions.

Avoid assumptions Typical assumptions are: • they are happy in their current job - after all, they never said anything else • they can’t really expect to move up the career ladder, they just don’t have the educational background needed • he said that’s all he ever wanted to do - so why change things for him?

• we have a flat organisational structure, and without a degree they can’t move into management anyway

• we can’t all be leaders, you must have doers and that’s what they applied for • I think she is assertive enough to tell me when she wants something, so I will wait for her to speak up • if I support their growth, they will leave and I have to start again.

Leaders that are ‘with’ their people will ask, dig deeper and listen rather than assume and jump to conclusions.

At times it takes creativity and thinking outside the square of ‘what we have always done’ to take the action needed to help create meaning and growth opportunities. Companies that focus on an entire culture of career growth and learning outperform their peers in innovation, long-term growth, and employee retention.

Helping employees reach their goals, find meaning in their work and stay engaged with the organisation can mean helping them consider moves they may not have taken seriously before.

Ask key questions to help them see what they could gain by trying a move that is not simply a vertical step. Together leaders and employees might surface choices that had not previously been considered.

One key aspect of experiencing recognition and great co-workers is having fun at work. However, when looking at previously umconsidered possibilities it is not unusual to fall into the trap of taking myths for reality.

Three common myths that need debunking are:

Try asking your employees these questions: What do you enjoy most about your job?

What could be changed in your job to make it more satisfying?

Which of your current tasks is the most routine?

What other areas of the company are you interested in?

Whose job would you like to learn more about?

It takes material and a budget to have fun at work When asked to remember fun times at work, people tend to remember occasions that cost no or very little money – decorating the workspace of a colleague for his/her birthday, verbal sparring with brainy/funny colleagues etc.

Fun means laughter Often people can have fun at work by working on an intriguing task, collaborating with wonderful team mates or building something new.

Fun time at work will compromise results Research verifies that fun-loving environments are actually more productive than their humourless counterparts. A fun break can reenergise employees and ready them for the next concentrated effort.

Like most relationships, there really is no’ insurance’ that prevents employees from leaving either physically or psychologically. What exists, however, is the knowledge that all employees are human beings looking for meaning in their daily work, for chances to learn and develop, opportunities to relate to others, to be recognised and respected.

Leaders who see their employees as people rather than as ‘resources’ to do a job are more likely to grow and hold on to their valuable employees – and in turn themselves experience challenging and meaningful work with chances to grow, enjoy great co-workers, gain respect, and have fun along the way.

Dr Andrea Polzer-Debruyne is senior consultant at PeopleCentric, a group of psychologists that work with organisations in a variety of industries towards increasing individual and organisational capabilities, employee engagement and leadership development www.infrastructurebuild.com – 15

TRANSPORT

Building healthy cities – invest in public transport!

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gainst the backdrop of the short-term economic development promised by the car and motorbike industry, but as well the individual convenience of those private transport modes, it can be tempting to ignore the longterm picture of an ecological, social and not to mention economically sustainable transport system.

North American cities, and also Australian and European cities that chose an urban development model based on the car, spend around 15 per cent of their GDP to cover all the costs of urban mobility. In cities like Singapore, Hong Kong, Vienna, London and Paris, barely 5-7 per cent of the GDP is spent to offer a transport system that is often so efficient that commuting times are just half compared to their car-based peers. Even though public transport might seem an important direct cost to governments, it is an investment that pays off for a country as a whole and not in the least for its citizens.

From cities with sophisticated and world-class public transport to cities with minimal or non-existent multimodal public transport planning, each city in Asia faces unique, yet common problems. One of the challenges for authorities and public transport operators is the undesirable public perception of public transport in Asia, especially in developing cities.

As disposable income increases, there is a higher tendency to shift from public modes to private motor vehicles. Public transport is perceived as an option for people who cannot afford their own vehicle. In addition, in a bid to encourage economic growth, some governments subsidise their auto-

mobile industries and/or fuel costs, adding barriers for the promotion of public transport.

Beside the economics, there are also of course the social and ecological costs to society.

Road safety figures show that car-based countries, especially in rapidly growing economies, have fatalities up to 10 times higher than countries where public transport is the main transport mode. This makes road fatalities not only the number one cause of mortality in many countries, but it is also inducing huge costs to society due to important losses in the economically active population and the significant healthcare costs as a result of road accidents. The situation is even worse for countries like SouthEast Asia where a major part of mobility is based on motorbikes. Pollution levels and liveability standards of those cities are not at a level for a developed city to wish for all its citizens. As convenient as car and especially motorbike-based mobility might seem in the short run for decision makers, it takes great political leadership and vision to make the right choice and invest in adequate public transport infrastructure to secure overall sustainability in the long run.

Nonetheless, these challenges also present many opportunities for the public transport industry. For example, Asia Development Bank is investing USD$0.6 million in supporting the development of an efficient, integrated and sustainable public transport system for Ho Chi Minh City (HCMC) in Vietnam and recently approved a USD$0.5 million deal to finance policy and technical assistance for an ITS development plan for Magnolia. With a population

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Photo Credit - Land Transport Authority

Getting mobility right is a daunting challenge, as it must take into account and answer existing and future expectations of the individual citizen, while keeping in mind the common good for society

of over 4.7 billion, equivalent to approximately 60 per cent of the world’s population, Asia plays a crucial role in exploring opportunities in planning, implementing and promoting sustainable transport. In the years to come, massive investment in public transport infrastructure is required to make Asian cities better places to live, work and play.

Organised by UITP and the Singapore Land Transport Authority (LTA) with the theme of “Innovating Transport for liveable cities”, The Singapore International Transport Congress and Exhibition (SITCE) to be held in Singapore from 19-21

October 2016, will specifically address the public transport issues and provide innovative solutions needed to achieve the above objectives. The breakneck speed of urbanisation means this is the ideal time for transport professionals to come together to discuss issues relating to connectivity and urban transport, better service levels for commuters, safety, congestion management, green and sustainable transport systems, future mobility and more.

For more information on the event, please visit www.sitce.org

August-October 2016

MANAGEMENT

Leveraging crossborder collaboration in tendering If you’ve ever worked on a tender response you’re likely to have experienced the gruelling hours and stress involved in meeting the deadline

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trategy discussions on the fly, last minute content updates, document editing issues, high anxiety levels and an exhausted team are not uncommon.

Despite planning for a smooth bid process, the reality of tendering is that it is a time-consuming exercise – and sometimes the time available is just not sufficient.

Most of the clients we talk to, particularly in small and medium enterprises, still need to fulfil the commitments of their ‘day job’ while responding to tenders. As much as they try to prioritise this lifeblood activity of their organisation, it can be a challenge to resource sufficiently – without avoiding the late nights or early hours in the days leading up to a due date.

The well-planned process can end up being an adrenalin-filled rush to the finish line.

But developments in collaborative technology, including shared workspaces like SharePoint and DropBox, and video conferencing like Skype for Business, offer an opportunity to reinvent the way we are thinking about the traditional bid team. Long gone are the days where the team needs to be in the same room, or even the same country, to contribute to developing the response document.

Organisations with businesses or branches around the world can rethink the way they work with their offshore colleagues.

Collaborating across borders by using virtual team members to support a local bidding process, especially where there’s a time zone difference that can be capitalised on, buys extra working hours and effectively

stretches the time your local team has available to respond to a tender.

When bidding for an international opportunity, overseas colleagues naturally assist with local customer and market insight, local project management resources, or even pricing or legal support.

Consider the advantages of taking this collaboration one

step further by dedicating an offshore colleague as a member of your local bid team – enabling you to utilise time zone differences and maximise the time you have available to work on a tender.

The often sequential nature of tender work, and the ability to break a tender response into disparate pieces (at least when starting the response) lends itself to the virtual model and cross-border collaboration.

Consider this. After a busy day of discussing bid strategies and pulling initial information together, your New Zealand team walks out of the office at 6pm following a handover phone call with their UK colleague who is designated as their virtual bid team member.

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The UK colleague then commences their working day in the Northern Hemisphere and takes over the bid document – writing, editing and formatting for eight hours. By the time the New Zealand team are back at their desks the following morning, their ideas from the previous day are incorporated in the response and the submission is taking shape. And so continues the tag team effort, optimising resources (and most importantly, time).

One organisation that’s making the most of cross-border collaboration is Plan A, New Zealand’s leading tender writing company.

Plan A tender consultants have worked under a virtual delivery model in New Zealand

since 1998 for clients locally and internationally, particularly Australia and Canada. The team has recently expanded to increase their presence in Australia and added an Australian consultant based in Europe to complement the team – and leverage the time zone differences.

Working under a virtual delivery model from Europe means that Plan A is in a position to make the most of the response time frame available and have consultants working on their customers’ bids for up to 24 hours each day.

Natural fit Kerrie McEwen, a senior Plan A consultant who has prepared hundreds of bids for clients in over 25 countries, sees the ini-

tiative as a natural fit within the fast-paced tendering environment. “Some clients come to us with only a very short timeframe before the tender deadline.

With good intentions at the start of the process, they find that the countdown to the tender deadline goes quicker than expected. So they approach us for last-minute assistance. Although this isn’t an optimal way of working, we do what we can to help them. Using resources in Europe to deliver overnight bid services to New Zealand and Australia makes sense.

“Plan A consultants aren’t strangers to long working days to meet our clients’ needs. With remote support on a different time zone we’re now able to extend the working day even further. We are able to truly offer a 24/7 service to help clients produce the best tendering outcome in a short timeframe.”

McEwen says the key to success in using a virtual bid model for tendering is having a clear process and common collaboration tools from the start. It’s about making communication technologies work for you. And it takes the right resource to be able to work remotely.

It’s important to ensure that your virtual team member stays an active part of the local team, is well informed about the bid strategy for each opportunity and has some knowledge of the local market. If they’ve already been working in your organisation for a while, it is a clear advantage.

With the right team composition, supporting systems and good communication, a virtual bid model utilising multiple time zones presents a great opportunity to maximise the available tender timeframe – and increase your chance of a winning tender. Good luck with your next deadline!

Rebecca Skagestad is an Australian consultant based in Europe, working under a virtual delivery model for tendering specialists Plan A (www.plana.co.nz) August-October 2016

SECURITY

Cybercrime reaching epidemic proportions More than 430 million new unique pieces of malware were discovered by a single Internet security company in 2015 as cybercrime becomes part and parcel of daily life

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his figure was up a massive 36 per cent from that of the year before, illustrating the rapid growth of cybercrime worldwide says leading Internet security company Symantec.

Symantec has established one of the most comprehensive sources of Internet threat data in the world through the Symantec Global Intelligence Network, which comprises more than 63.8 million attack sensors that record thousands of events per second as it monitors threat activity in over 157 countries and territories.

The company’s latest Internet Security Threat Report provides a frightening overview of the state of the Internet today, with constant attacks against businesses and nations leaving users numb to the sheer volume and acceleration of cyber threats.

However, there are six key findings and trends from 2015 that demand the utmost vigilance from all Internet users this year, be they individuals or companies, Symantec warns.

Zero hour A new zero-day vulnerability was discovered on average each week in 2015 as advanced attack groups continue to profit

from previously undiscovered flaws in browsers and website plugins.

The number of zero-day vulnerabilities discovered in 2015 more than doubled to 54, a 125 per cent increase from the year before.

The increase follows a disturbing pattern as the number of zero-day vulnerabilities (23) in 2013 also doubled from the year before.

The number held relatively steady at 24, leading Symantec to conclude that a plateau had been reached. That theory was short-lived as the 2015 explosion in zero-day discoveries reaffirms the critical role they play in lucrative targeted attacks.

Given the value of these vulnerabilities, it’s not surprising that a market has evolved to meet demand. In fact, at the rate that zero-day vulnerabilities are being discovered, they may become a commodity product, Symantec says.

Targeted attack groups exploit the vulnerabilities until they are publicly exposed, then toss them aside for newly discovered vulnerabilities.

When the Milan-based The Hacking Team information technology company that sells offensive intrusion and surveillance capabilities to gov-

ernments, law enforcement agencies and corporations was exposed in 2015 as having at least six zero-days in its portfolio, it confirmed suspicions that the hunt for zero days was being professionalised.

Vulnerabilities can appear in almost any type of software, but the most attractive to targeted attackers is software that is widely used.

Again and again, the majority of these vulnerabilities are discovered in software such as Internet Explorer and Adobe Flash, which are used on a daily basis by a vast number of consumers and professionals.

Four of the five most exploited zero-day vulnerabilities in 2015 were Adobe Flash. Once discovered, the zero days are quickly added to cybercriminal toolkits and exploited.

At this point, millions will be attacked and hundreds of thousands infected if a patch is not available, or if people have not moved quickly enough to apply the patch.

Records stolen More than half a billion personal records were stolen or lost in 2015, with more companies than ever not reporting the full extent of their data breaches.

In fact, the world experienced

the largest data breach ever publicly reported in 2015, the report notes. An astounding 191 million records were exposed. It may have been the largest mega-breach, but it wasn’t alone.

In 2015, a record-setting total of nine mega-breaches were reported. (A mega-breach is defined as a breach of more than 10 million records.)

The total reported number of exposed identities jumped 23 percent to 429 million. But this number hides a bigger story as more and more companies chose not to reveal the full extent of the breaches they experienced last year.

Companies choosing not to report the number of records lost increased by 85 per cent.

A conservative estimate by Symantec of those unreported breaches pushes the real number of records lost to more than half a billion.

The fact that companies are increasingly choosing to hold back critical details after a breach is a disturbing trend.

Transparency is critical to security. While numerous data sharing initiatives are underway in the security industry, helping improve security products and postures, some of this data is getting harder to collect.

Protecting IT infrastructure

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he old advice holds good for any infrastructure services when it comes to protecting IT infrastructure in the face of these threats and many others like them.

Safeguard everything IT-related, including file servers, web servers, and other Internet-connected devices: • stay informed about emerging threats • keep systems up to date with patches and updates • use integrated security soft-

ware, including anti-malware technology • use a strong firewall that only permits known traffic, and review access logs regularly to detect potentially suspicious activity • employ multi-layer protection, so if one layer is compromised there are other layers to protect different areas the system • apply good policies and train staff well • control access

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• deploy network intrusion preaccordingly vention and detection and • enable event logging to keep monitor email services runtrack of who is accessing data ning on the server in the cloud • always keep backups off-site. • read the cloud providers’ Don’t be complacent about service-level agreements to cloud systems either: learn how data in the cloud is • safeguard all credentials used secured to access the cloud-based • include cloud IP addresses administration functions and in vulnerability management ensure access is controlled processes and perform audits on a need-to-know basis on any services that are pro• ensure that you understand vided through the cloud. the settings of your cloud resources and configure them August-October 2016

number, where a “technical support representative” attempts to sell the victim worthless services. Symantec blocked 100 million of these types of attacks in 2015.

Attackers continue to find ways to profit from what can be stolen online. Last year, Netflix expanded into new countries, attracting the attention of attackers. Symantec researchers discovered logins and passwords to legitimate Netflix accounts being sold on the black market. The account access information was stolen via phishing or malware.

However, reselling account access on the black market is not a Dangerous devices: More than half a billion personal records were stolen or lost in 2015, with new phenomenon as Symantec more companies than ever not reporting the full extent of their data breaches and other security companies continue to see stolen hotel loyPopular websites geted for attack once in 2015 critical data hostage as ransom- alty, airline frequent flyer, and Major security vulnerabili- was most likely to be targeted ware continues to evolve. gaming accounts advertised for ties in three quarters of pop- again at least three more times Last year crypto-ransomware sale on the black market. ular websites put everyone at throughout the year. Overall, (encrypting files) pushed the risk, while web administrators large businesses that experi- less damaging locker-style ran- Nothing is immune still struggle to stay current on enced a cyberattack saw an av- somware (locking the computer Symantec has seen threats to patches. erage of 3.6 successful attacks screen) out of the picture, grow- almost every kind of computer, There were over one million each. ing 35 per cent. operating system, and other web attacks against people Symantec has observed a An extremely profitable type essential IT services in the past each and every day in 2015. steady increase in attacks tar- of attack, ransomware will con- year, including: Many people believe that keep- geting businesses with less tinue to ensnare PC users and • Mac OS X – in addition to ing to well-known, legitimate than 250 employees in the last expand to any network-conmore vulnerabilities being websites will keep them safe five years, with 43 per cent of nected device that can be held uncovered in 2015, prooffrom online crime, but this isn’t all attacks targeted at small hostage for a profit. of-concept ransomware and true Symantec warns. businesses in 2015, proving that Ransomware found new tarseveral methods for Trojans Cybercriminals continue to companies of all sizes are at risk. gets and moved beyond its to gain unauthorised access take advantage of vulneraFor example, an organisation focus on PCs to smart phones, to affected computers were bilities in legitimate websites of 35 employees was the victim Mac, and Linux systems in 2015. also discovered to infect users, because web- of a cyberattack by a competi- Symantec even demonstrat- • MySQL – Symantec researchsite administrators fail to se- tor. The competitor hid in their ed proof-of-concept attacks ers discovered malware that cure their websites, the report network for two years stealing against smart watches and telattacks the popular MySQL claims. More than 75 per cent customer and pricing informa- evisions in 2015. database system and uses it of all legitimate websites have tion, giving them a significant to launch denial-of-service atunpatched vulnerabilities. advantage. This serves as a Fake support tacks on other systems Fifteen per cent of legitimate clear warning that all businessWhile ransomware continues • Linux – there was a rapid websites have vulnerabilities es are potentially vulnerable to to grow as a threat, it is not the growth in Linux malware in deemed ‘critical,’ which means targeted attacks. only threat that people face. As 2015, including attack kits it takes trivial effort for cyberAttackers motivated purely by people conduct more of their that hackers can use to infect criminals to gain access and profit can be just as technically lives online, attackers are findunpatched Linux web servers manipulate these sites for their sophisticated and well-organ- ing new ways to lure victims.

• virtualised systems – 16 per own purposes. ized as any nation state-sponFake technical support scams, cent of malware is routinely sored attackers. Take, for ex- first reported by Symantec able to recognise and exploit Spear-phishing ample, the Butterfly gang, who in 2010, have evolved from a virtual machine environAttacks targeting employees steal information to use in stock cold-calling unsuspecting vicment, and vulnerabilities such using email that appears to manipulation. tims to the attacker fooling vicas VENOM could allow an atbe from a trusted individual or tims into calling them directly. tacker to escape an infected business increased 55 per cent Ransomware evolving Attackers trick people with virtual machine and attack in 2015.

Cyber criminals are using en- pop-ups that alert them to a others on the same system, A government organisation cryption as a weapon to hold serious error or problem, thus or even attack the host hyor a financial company tar- companies’ and individuals’ steering the victim to an 0800 pervisor.

August-October 2016

www.infrastructurebuild.com – 21

ENERGY

New energy consumer insight:

Millennials are more engaged and value-driven Millennials’ strong interest in new products and services will drive the most future value for energy utilities, but they are much more demanding consumers. Connected living solutions, solar and other digital products and services are at the top of their list

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onsumer demand for new energy-related products and services is high, especially for millennials (ages 18-34), demonstrating that this group will drive much of the future value for energy providers.

Our seventh annual global survey of energy consumers explores the views of almost 10,000 respondents across 17 countries. The report, The New Energy Consumer: Thriving in the Energy Ecosystem found that a large demographic, millennials, brings a strong influence on key consumer engagement trends amid an increasingly complex set of competitors vying for energy products, services and experiences.

Millennials want to be the first to sign up for new energy products and services – 24 per cent of that demographic are classified as early adopters, compared

with 17 per cent among the 35-54 age range and seven per cent of those over 55. Additionally, 22 per cent of millennials said they wanted to experiment with new technologies, which was higher when compared with other age groups (15 per cent for those aged 35-54 and six per cent for those aged 55 or over).

Millennials, for example, are very receptive and far more likely to consider distributed energy resources (DER) products and services after receiving related information – 87 per cent compared to 60 per cent among those over 55. Almost 80 per cent said they’d be more satisfied if offered an in-home digital assistant and monitoring service that suggested customised new products and services offers, compared to 62 per cent of respondents over 55 years of age.

When it comes to in-home energy management, 61 per

cent are likely to sign up for an application to remotely monitor and control home elements in the next five years versus 36 per cent of those over 55. Notably, 56 per cent of millennials, twice as many as people over 55, are likely to sign up for solar panels in the next five years.

Millennials: a generation more demanding of their energy providers Millennials view energy and engage in a far deeper way with energy providers and from a completely different vantage point. While there’s obvious demand for new products and services in this space from them, they want information, and they want everything to be instantaneous and accessible on their terms.

Millennials’ expectations when it comes to use of digital channels are also higher.

• •

2010

2011

2012

2013

2014

2012

Copyright © 2015 Accenture. All rights reserved. Accenture Confidential Information.

22 – www.infrastructurebuild.com

2013

2014

countries

>2,000 small/medium businesses

Market insights and leading practices from 80+ energy providers and 40+ cross-industry providers

•

>150 utilities executives surveyed

2015

• 2011-Ongoing

>60,000 consumers surveyed in 26

•

•

2009

For example, they attach more importance than older demographics to a personalised experience across digital channels as well as access to the latest digital technologies that enable them to interact with their energy providers. Moreover, 83 per cent would be discouraged from signing up for additional products and services if their provider could not provide a seamless experience.

Energy providers must take these and other insights about these groups to heart, to unlock value, because consumers’ preferences and behaviours are rapidly changing the market landscape. Successful energy providers will place design thinking at the heart of their business and view customer and retail operations as a strategic asset.

2015

across 20 countries Scenario modelling of impact of distributed energy and energy efficiency Ongoing studies working with UN Global Compact, World Economic Forum and World Energy Council

3

3

August-October 2016

Engaging with this growing influential group The survey showed that utilities have substantial opportunities to engage with millennials as they gain in influence over other consumers.

For example, 41 per cent of millennials interact more frequently with their energy provider using social media, and they would also be more satis-

fied if they could log into their provider’s portal via social media credentials.

The survey also showed that new value propositions are of higher interest to millennials.

Seventy-seven per cent would be interested in an online personalised marketplace to select and purchase energy-related products and services. Additionally, just over a third would

be interested in automated home solutions and would be willing to pay for them.

Customer strategies must take a broad view of the trends shaping today’s consumers, and more importantly, the consumers of tomorrow. To thrive, energy providers must move quickly to architect their transformation, build new capabilities to seize new opportunities,

achieve scale and continuously innovate using digitalisation, automation and multi-faceted operations.

Prepared by Faye Griffiths, managing director of Utilities, Accenture Australia and New Zealand www.accenture.co.nz

Consumers are turning to new “over-the-top” (OTT) providers that are more innovative and convenient than incumbent providers

Consumers expect on-demand access to information, digital payments, customer service, enabled by social, mobile and 24/7 access

Consumers see products as increasingly commoditized—today it is end-to-end experiences that differentiate

Consumers are shifting towards downsizing, sharing models of ownership, and services rather than having tangible assets and products

Consumers are now conditioned to expect products and services that guess customer intent, learn, adapt and are constantly upgraded

Time pressured consumers are looking for providers to help make the transactional noise disappear and take care of distractions

Copyright © 2015 Accenture. All rights reserved. Accenture Confidential Information.

4

The future new energy consumer is digital, distributed and diverse 68% are interested in energy

>50% of consumers prefer web and

management solutions from their utility

10:09

mobile for majority or interactions and 60% want a mobile app from their utility

June 2, 2015

47% say they would pay a

premium for automated energy management solutions

$

Usage Alert

Above target - $245 bill projected

>1/3 of consumers plan to use

social to interact with their utility in the next 2 years

Car 88% Charged

61% of consumers would allow their

>50% of consumers are

interested in solar and battery storage options

Source: Accenture New Energy Consumer Research

provider to share data with 3rd parties to get presonalized offerings

68% of consumers are interested in

bundled products and services from their energy provider

Copyright © 2015 Accenture. All rights reserved. Accenture Confidential Information.

August-October 2016

5

www.infrastructurebuild.com – 23

ENERGY

What about energy from waste?

It’s a question Waste Management Institute New Zealand Chief Executive Paul Evans is often asked when discussing waste management in New Zealand

O

verseas Energy from Waste (EfW) is often touted as a progressive solution to a myriad of waste problems.

Not just in Europe, where it has been a deeply embedded and common practice for many years, but also throughout Asia, America and even closer to home in Australia.

Like most subjects there isn’t one simple reason why Aotearoa isn’t jumping aboard the EfW bandwagon, but rather a combination of four key factors that mean it is hard to make EfW stack up locally.

Community perception Many in the community take EfW as simply meaning burning or incinerating waste. This perception comes from practices which were actually relatively common in the not too-distant past, where waste was burnt at low temperatures simply to reduce its volume. There was no attempt at all to recover energy from this process; it was simply about disposing of the waste as cheaply as possible.

The problem with many of these low temperature and inefficient processes was that gases were often produced and discharged, and these discharges had the very real potential to cause harm to both the environment and human health.

Realistically, with today’s modern and efficient technologies these health and environmental concerns can be largely avoided through treatment and mitigation of emissions. So whilst there would certainly need to be significant engagement and consultation with affected communities, I believe these perceptual issues can be largely overcome.

Cannibalising recycling programmes This is another perceptual issue which stems from poor performance of EfW plants elsewhere in the world.

In the 1990s it became relatively common in parts of Europe to build large EfW plants.

These plants were expensive to build and so needed to run at maximum capacity in order to deliver an appropriate return for investors.

Consequently plant owners

Auckland it would be incredibly difficult to get the consistent volumes of waste required to keep a plant running.

In an area such as Auckland, there’s certainly no shortage of waste. Auckland Council’s Waste Assessment (2011) states that in 2009 some 1.4 million tonnes of waste went to landfill, around half of which was paper, plastic, timber and the like. All this material ‘could’ be potential fuel for an EfW plant, Waste wanted: Outside of but there are many and varied a major population centre such as Auckland it would “New Zealand has a very well-embedded be incredibly difficult to get the consistent volumes of recycling culture, as well as excellent waste required to keep an programmes and infrastructure in place” EfW plant running, says Waste Management Institute New needed more and more feed disposal options already in exZealand Chief Executive Paul stock, which in many cases istence competing for this same Evans meant readily recyclable mate- waste, many of which are likely rials were sent to plants. This to be a far cheaper solution. was a highly undesirable outcome, as it undermined estab- Existing alternatives lished recycling programmes, When it comes to the crunch, which, from a waste hierarchy I firmly believe that simple ecoperspective are a much better nomics are the key reason for of-life tyres EfW theoretically outcome.

New Zealand’s current avoid- presents an excellent solution New Zealand has a very ance of EfW. to the problem of waste. Howwell-embedded recycling culLandfilling remains New Zea- ever without regulatory interture, as well as excellent pro- land’s predominant mechanism vention to guarantee a congrammes and infrastructure in for waste disposal and it is a sistent supply of feedstock or place, so there would be sig- relatively cost-effective means economic incentives to make nificant resistance to any such of doing so. In the absence of it a financially viable choice for change. significant waste disposal levies waste disposers, business will through regulatory intervention, simply not have the confidence Consistency of feedstock it simply becomes impossible to invest in EfW as a solution for EfW plants of any great scale to make an EfW plant stack up New Zealand. typically require significant cap- whereas in many other jurisital investment and therefore dictions large waste disposal Paul Evans is Chief Executive need a consistent supply of levies are common for a range of the Waste Management feedstock to keep them run- of reasons. Why would a waste Institute New Zealand ning in a financially sustainable disposer send their waste to an (WasteMINZ), the largest manner.

EfW plant at say $200 or $300/ representative body of the When compared to many tonne when they could respon- waste and resource recovery countries which favour EfW as sibly dispose of it in a well-man- sector that was formed in a solution, New Zealand is ge- aged landfill for half that price? 1989 and is a membershipographically large and relatively based organisation with over underpopulated. In reality this The future 1,000 members ranging from means that outside of a maI firmly believe that for some small operators to councils jor population centre such as material streams such as end- and large companies

24 – www.infrastructurebuild.com

August-October 2016

ENERGY

Waste not, want not

Is an innovative waste-to-energy facility in Western Australia the face of the future of waste management and energy generation in Australasia?

N

ew Energy Corporation Pty Ltd (New Energy) clearly thinks so, having invested heavily in processing a sizeable amount of the 54 million tonnes of garbage Australians create each year.

This massive total includes: • 14.4 million tonnes of commercial and industrial waste – 44 per cent of which ended up in landfill • 3.9 billion plastic bags used in 2007 alone – 3.3. billion ending up in landfill New Energy aims to use an innovative, home-grown low temperature gasification technology to turn a significant proportion of Western Australia’s contribution to this waste mountain into energy.

The Entech low temperature gasification energy recovery process converts solid waste into a synthetic gas which will provide enough energy to power 23,000 homes in the south west of the state each year.

The technology will be utilised at a 10ha site in East Rockingham near Perth that will house the A$180 million New Energy Waste to Energy and Materials Recovery Facility (MRF), which is set to begin construction in October this year and is scheduled to be operational by the fourth quarter of 2017.

Consisting of four operational gasification chambers and one set aside for maintenance, the plant is expected to produce up to 18.5MW of electricity, of which 2.5MW would be used to power the plant and 16MW would feed into Western Australia’s South West Interconnected System.

“We are incorporating frontend materials recovery processing ahead of energy recovery, demonstrating our technology satisfies the state’s stringent environmental regulations,” New Energy CEO Jason Pugh says.

“Our technologically adAugust-October 2016

vanced, on-site, front-end Materials Recovery Facility MRF will accept commercial and industrial, construction and demolition and municipal solid waste, inspect it and remove recyclables before using the remainder for energy recovery.”

The MRF will have the capacity to handle 225,000 tonnes of waste per year, which equates to 13 per cent of the waste that would otherwise be sent to landfill, turning 130,000 tonnes into energy after recyclables are removed.

Recyclable items such as concrete, bricks and metals will be recovered before the remaining municipal solid waste, plastic bags and wrapping, contaminated cardboard and timber packaging from construction and demolition projects is sent to generate energy instead of going to landfill.

Entech’s unique gasification technology sees the waste slowly “cooked” over 16 to 24 hours, reaching temperatures between 600°C and 875°C during which small quantities of air and steam are introduced.

This breaks up the molecules in the waste, which are converted into a synthetic gas or ‘syngas’ that is transferred to a burner to heat water-producing steam used directly for heating, industry processes or to generate electricity for the grid.

This two-stage approach

means the carbon is thoroughly removed and combusted, releasing the maximum energy from the waste and delivering superior environmental performance for organic pollutants like dioxins and PAHs. The new generation energy recovery system offers numerous environmentally friendly advantages: • the syngas is fired to generate heat and this secondary oxidation stage converts the syngas to carbon dioxide and water vapour, which is then cleaned and filtered to neutralise acidic gases like sulphur dioxide and to remove any trace particulates and heavy metals before the carbon dioxide and water vapour is safely released to the atmosphere • the plant will only process Class I, II and II waste and not hazardous wastes using an extremely flexible gasification system that has been proven on many waste streams • all waste will be handled inside an enclosed, ventilated building, preventing the escape of odours, while ventilation air will be treated in the energy recovery process to destroy odour • all operations occur indoors, the materials recovery facility and energy recovery processes are relatively quiet and the power generation equipment

is housed in special acoustic enclosures to reduce noise • the process keeps dust to a minimum as major plant activities occur indoors where the dust is contained, the waste is handled in bulk for inspection and recyclables removal • the only stream emitted to air is from the stack and consists of carbon dioxide and water vapour with trace amounts of other compounds which meet the stringent European Union air emissions standards that have been adopted in WA. Stack emissions are tested continuously and displayed in real time in the plant control room as an additional safeguard • the small volumes of ash, lime and activated carbon that are generated in the energy recovery process are inert and stable and suitable for disposal in landfill as it is similar to the ash from a slow combustion stove and has no energy content.

The Rockingham project will divert approximately 150,000 tonnes of waste from landfill and create energy to power 23,000 homes The Rockingham plant is the second of New Energy’s waste-to-energy projects to receive approval from the West Australian Environmental Protection Authority following the Boodarie Industrial Estate installation at Port Hedland in the north of the state, which was greenlit two years ago to provide electricity for 21,000 homes and export 15.5MW to the grid.

Lighter landfills: The innovative concept will divert approximately 150,000 tonnes of waste from landfill each year

www.infrastructurebuild.com – 25

ENVIRONMENT

Climate change key challenge, environment commissioner finds Climate change is “by far” the most serious environmental issue facing New Zealand, according to the Parliamentary Commissioner for the Environment Dr Jan Wright

“W

e are lucky to live in an exceptionally beautiful country, but we have some big issues to face up to,” she admits. “Already temperatures are increasing, the ocean is acidifying, and the sea is rising.”

The commissioner’s commentary on the government’s Environment Aotearoa 2015 report that was the first prepared under the Environmental Reporting Act found that: • while water quality is good in forested areas, it is poor in many lowland places • our native plants and animals are losing the war against pests • we still have huge areas of eroding hill country • our oceans are under pressure from run-off and fishing, although the greatest pressure in the long-term is acidification and warming from climate change • in contrast, the outlook for air quality is good – it looks set to continue improving.

She notes four areas that stand out as needing particular attention: • reducing transport emissions to create low-carbon cities • establishing more marine protected areas to protect precious parts of our oceans • reforesting eroding hills to protect soil and reduce sediment in rivers • figuring out how to win the war against the predators killing native birds and animals.

The causes of environmental damage are many and varied, Wright admits, noting that whatever is done with the land has effects on the environment.

“In urban areas, the steady rise of greenhouse gas emissions from transport stands out for particular attention.”

Agriculture is a huge part of

the New Zealand economy and has a big impact in much of the country. “One of our biggest environmental problems is the legacy of erosion we have inherited across much of the country – caused by bush clearance on unstable soils by long-ago farmers who believed they were doing the right thing,” Wright observes. “In protected conservation lands, we are fighting a war against predators such as possums, rats and stoats.”

One of the biggest challenges for New Zealand is transport emissions. “We need to work towards making our cities low-carbon as well as affordable,” Wright maintains.

Another major challenge is greenhouse gas emissions from agriculture, which will be the subject of the commissioner’s next report. “Tackling climate change will involve bold leadership from the government,” Wright adds.

While the government has made efforts to tackle some of these challenging issues, there is still much more that needs to be done, she insists. “For example, reforesting our eroding hills will keep soil on the land and out of rivers, and help fight climate change.”

Both Environment Aotearoa 2015 and the commissioner’s commentary assessed the environment at a national level, which didn’t include a comparison of the performance of different regional councils.

However, the commissioner has stressed that reports in the future should provide more information on where different issues are significant and where they are not. “Another benefit of the new reporting system is that it will drive more consistent measurement and monitoring of the environment across the country,” Wright observes.

26 – www.infrastructurebuild.com

The commissioner has recommended a formal response from the Secretary for the Environment, detailing how the ministry will deal with the issues raised in her commentary.

The Environmental Reporting Act requires the commissioner to provide commentary on reports prepared by the Ministry for the Environment and Statistics New Zealand, including the ‘synthesis’ state-of-the-environment report every three years.

Between synthesis reports, they must also produce five environmental ‘domains’ at the rate of one every six months covering air, atmosphere and climate, freshwater, land and marine.

Dr Wright commended the Ministry and Statistics New Zealand on what they have achieved in a limited amount of time, but identified several areas for improvement: • the main purpose of state-of-the-environment reporting should be to inform the public and decision-makers of the current state and long-term trends in the environment, identifying and explaining environmental issues, including their causes and location, and containing conclusions about their significance • environmental issues form the basis for structuring domain and synthesis reports, enabling a coherent ‘story’ to be written about each environmental issue, using both explanation and quantitative indicators, and drawing on the logic of the pressure-state-impact framework • relevance to environmental issues should be used as the primary criterion for selecting environmental indicators, with more input from a variety of technical advisors

Could do better: Parliamentary Commissioner for the Environment Dr Jan Wright has identified several areas for improvement in the government’s state of the environment reports

• both domain and synthesis reports should contain outlooks for different environmental issues, as is done with Australia’s state-of-the-environment reports • both domain and synthesis reports should contain conclusions on the relative significance of different environmental issues, with the conclusions made transparently on a reasoned basis • the Secretary for the Environment should prepare a report for the Minister for the Environment, outlining priorities for action in response to the findings of Environment Aotearoa 2015 and this commentary, and make the report publically available.

Statistics New Zealand and the Ministry for the Environment welcomed the commissioner’s commentary, Secretary for the Environment Vicky Robertson saying Dr Wright’s contribution serves as “valuable guidance” at this early stage of the environmental reporting journey.

“The Ministry for the Environment and Statistics NZ want environmental reports to be useful to as many people as possible,” Robertson adds. “Dr Wright’s report is very welcome in helping us achieve that goal.”

August-October 2016

LOCAL GOVERNMENT

Future-focused resource management system essential

A proposed resource management system with an emphasis on early decisionmaking and placing greater value on natural ecosystems was launched at the Local Government New Zealand 2016 Conference in Dunedin in late July

L

GNZ released Planning our future, an eight-point action programme designed to address a range of important issues with New Zealand’s resource management system with the aim of furthering discussion about what would best suit the country’s needs in the coming decades.

LGNZ President Lawrence Yule says New Zealand is facing a period of significant change, including adapting to climate change and managing scarce natural resources, and after

The Advisory Group’s Chair Stephen Woodhead says New Zealand’s current resource management system undervalues natural ecosystems and the importance of resilience in decision-making, and as it stands now will struggle to cope with the big shifts the country faces in the coming 30 years.

“Currently it takes too long to agree plans and it is too costly to gain permissions to use land and develop resources and infrastructure. At the same time some environmental trends

“Our resource management system needs to be able to address challenges into the future” many years of ad-hoc tweaking the system struggles to meet current needs. “Our resource management system needs to be able to address challenges into the future,” Yule believes.

He says LGNZ is “making the case” for comprehensive reform to address pressing issues with the system, such as the lack of integration across key planning statutes, and the need for a stronger strategic connection between central and local government.

“We have also proposed more challenging reform that requires a different way of thinking about and valuing our environment and natural resources, which will mean we are better placed to deal with the big challenges that lie ahead.”

The action plan was developed following a review of the current system by a “blue skies” reference group chaired by Otago Regional Council Chair Stephen Woodhead, who is also Chair of LGNZ’s Regional Sector and its Environmental Policy Advisory Group. LGNZ released the discussion document in December 2015.

August-October 2016

are still declining,” Woodhead says.

The current system isn’t delivering on those two counts, he believes. “There are some good features in the Resource Management Act and we don’t want to throw the baby out with the bathwater, but some of the current amendments need to be reconsidered.”

As a result, LGNZ is advocating for a multi-stakeholder process for developing the future shape of New Zealand’s resource management system.

Decisions need to be made as close as possible to the people they affect, Yule maintains.

“This is an area that demands responsiveness to community values so we need a broad church of stakeholders involved in this work.”

The eight-point plan is grouped by three main objectives • integrate resource management decision-making across domains and enhance the strategic connection between central and local government • enable a vision to be set for

Pristine paradise: The LGNZ’s eight-point plan seeks to balance resource management and development with greater environmental stewardship

a geographic area that provides certainty about the outcomes envisaged for that area, for example in areas of high growth • create opt-in special economic zones that will enable localised resource management solutions • enable councils to work with the government to resolve local issues of national importance, for example water quality or bio-diversity • lay the groundwork necessary to be confident that resource management decisions will be grounded in evidence and be transparent • develop a system to evaluate the performance of the resource management system • introduce standard tools to assess benefits and costs of resource management decision-making

• introduce standard methods to account for use of soil, freshwater, air and biodiversity as we need a comprehensive understanding of what resources are being ‘drawn down’ • put in place a resource management system to deliver better decisions and create economic incentives that encourage greater environmental stewardship • ensure resource management decisions are made with clear environmental bottom lines and identify ‘go’ and ‘no go’ areas • develop a resource charge that recognises the public nature of the resource while ensuring there remains an incentive for private sector investment in resource extraction and use.

www.infrastructurebuild.com – 27

LOCAL GOVERNMENT >> Pipelines

Iplex innovation backed up by quality assurance All Iplex manufacturing plants have ISO 9002 quality assurance programs

Q

uality Assurance Services (QAS) carries out regular audits PVC-O pipes have increased mechanical properties to provide third-party accreditation of Iplex Quality Man- providing a larger inside diameter while delivering up to agement Systems and verify its ongoing compliance with 25 percent more flow or storage in the water main asset. the Standard. Our laboratory is IANZ accredited, Accreditation The main was installed in the road reserve while using Number 61. the same structural trench design as for other buried flexible pipes - the same mechanical fittings were used CERTIFICATION REGISTER to make connections onto the pipe.

Certificate Type

Certification Number

AS/NZS 1260

SMKP20185

AS/NZS 1260

SMKP20184

AS/NZS 1254

SMKP20126

AS/NZS 1254

SMKP20180

AS/NZS 4765

SMK02570

AS/NZS 1477

SMK02569

AS/NZS 4130

SMKP20400

AS/NZS 1477

SMKP20181

AS/NZS 4441

SMKP20682

Waitaki District Council New gravity sewer, Oamaru, Humber to Thames St Installation of 150mm RESTRAIN PVC Pipe, using a Ditch Witch JT4020 Horizontal Directional Drill (HDD) rig. The drill shot was installed beneath two 19th century heritage buildings, at a depth of six metres - open trench methods were not usable due to the historic nature of the surrounding environment. The project was challenging - softer native soil conditions were exApollo flexibility pected - however a layer of rock was struck early in the drill shot which required another HDD rig reduces use of designed for tough rock conditions. pipeline bends “Once the pilot bore was completed, jointing of RESTRAIN became the easiest part of the entire project,” says contractor Marty Costello.

Watercare Auckland Whenuapai sewer syphon A mud return line was required to return the drill mud for recycling and reuse in the installation of a new waste water pipeline through a difficult mangrove salt marsh.

Novafuse Fusible PVCTM pipe was chosen. The pipe was manufactured in seven metre lengths as the fusion staging area had extremely limited space, and hand lifted onto the fusion platform where 43 fusion joints were completed.

The pipeline was pulled out into the mangrove swamp by hand as Novafuse is much lighter than traditional polyethylene pipe. A Bobcat pulled the pipe to its final position in the swamp, where the contractor was able to complete cold solvent cement joint flange connections to join to other pipe work.

Connections to Apollo PVC-O completed using standard mechanical fittings

New Plymouth District Council Sewer rising transfer main, Oakura to DN150 RESTRAIN gravity New Plymouth sewer pipe for trenchless In the past, Oakura’s sewage has been installations treated by septic tanks on each property.

Sub-divisional growth and the transient population during holiday seasons prompted the installation of a community sewage reticulation system. Raw sewage is now transferred through a twin pipeline, 11 Km, DN150 rising sewer main, back to New Plymouth.

Apollo PVC-O was chosen during the design process for its high flow capacity, fatigue performance and durability.

Whakatane District Council Apollo provided flexibility around tight curves and minimized the Water Main, Dawn Parade subdivision, Whakatane quantity of in-line bends required. The Apollo Blueseal locked-inOriginally designed in PVC-U, the next generation in PVC pres- place seal ring joints, were easily hand assembled due to low insure pipes was installed into the water main network – Apollo sertion forces required.

PVC-O ( Oriented PVC pipe).

PVC-O pipes are much stronger, lighter and more environmen- For technical services Iain McNaught 027 243 3000, Frank tally friendly.

O’Callaghan 027 495 4523, Todd Randell 027 211 4838

innovative 0800 800 262 www.iplex.co.nz There is more to Iplex than pipe manufactured and delivered to your project site.

Talk to us about what you need. Iplex Pipelines, manufacturing and supplying PVC, PE and GRP pipeline solutions to the New Zealand market.

28 – www.infrastructurebuild.com

August-October 2016

www.propertyandbuild.com

GOVERNMENT GROWTH

PLEASES PRECINCT

NATIONAL RESEARCH REPORT UNITARY PLAN REVIEW

Compliance & Legal • Construction • Design • Engineering • Finance • Materials • Property • Trades • Training & Management

FIRST WORD

New Zealand’s biggest town planning exercise officially approved The Auckland Council has signed off on the city’s massive Unitary Plan, which has taken some 250 days to bring to fruition and saw days of final discussion by council

Not surprisingly, the decision was warmly welcomed by Auckland Mayor Len Brown, who labelled the approval of the 7,000-page document an “outstanding success”.

“My colleagues are to be applauded for their positive manner, as is the public for allowing us the space to deliberate accordingly.

“We now have a very finely balanced plan which will ultimately deliver for the benefit of Auckland. I also salute the outstanding professionalism of council staff.”

Deputy Mayor and Chair of the Auckland Development Committee Penny Hulse led the bulk of the Unitary Plan process.

“Without a doubt, this is the biggest exercise undertaken

by Auckland Council since its inception and it simply couldn’t have happened without the drive and passion from everyone involved.

“Without them, we would not have the plan we have today – a plan that will help grow and shape our incredible city in decades to come.”

Hulse adds that the decision would enable the building of more affordable homes. “It allows for terraced housing, for apartments, and different kinds of homes, and they’re simply going to be more affordable than the standalone houses that we’ve got now.”

The Unitary Plan was developed to meet a forecast increase of between 700,000 and one million new Auckland residents by 2041, which meant finding or building more than 400,000 new houses over the 30

next 25 to 30 years.

By necessity the plan makes many changes, most significantly to the type of housing that can be built: • up to 70 per cent of future growth will be within the urban area and up to 40 per cent in surrounding rural areas and towns, adding capacity for 422,000 new homes over the next 30 years • only 22 per cent of Auckland’s urban residential area will be restricted to single homes on sections • 39.2 per cent will be zoned Mixed Housing Suburban, generally two-storey townhouses • 19.8 per cent is zoned Mixed Housing Urban - townhouse developments up to three storeys • there is no restriction to the number of dwellings that can be built on a single site in these zones • 6.5 per cent of the residential area is zoned for higher-rise apartments and terrace housing.

The council also decided to: • remove a blanket, temporary check on developments in pre-1944 neighbourhoods in favour of more carefully researched and limited “character” areas • drop proposals to require 10 per cent of housing developments to be “retained affordable homes” as the majority believed that other aspects of the plan better deliver affordable homes • reinstate rural zonings on two heritage volcanic fields in south Auckland, including

August-October 2016 | www.propertyandbuild.com

Crater Hill, which the Auckland Unitary Plan Independent Hearings Panel zoned for housing.

However, the council is required to maintain at least seven years of ready-to-build housing land served by bulk infrastructure for developers to tap.

The Rural Urban Boundary will be expanded by up to 30 per cent over the period to open up more new land for development as the city grows, with flexibility to move the boundary through private plan changes.

The result will be a more compact city with opportunities to build more homes in the existing urban area of two to three stories, and up to six stories close to town centres and transport hubs.

There will also be a focus on high quality urban design, including the requirement for a resource consent for more than three dwellings on a site that complies with urban design rules and a minimum size for apartments.

Historic heritage will be protected with approximately 120 additional historic places scheduled, as well as the retention of protection of 74 volcanic viewshafts, while rural areas will be managed so that rural activities are the primary focus.

The plan has been welcomed

by Building and Housing Minister Dr Nick Smith, who said the plan was a “key component of the long-term solution” to Auckland’s housing challenges.

“This plan eases zoning regulations and the more than 400,000 properties it allows

for is about double that of the plan which was notified by the council in 2013.”

Smith added that the government has “always said” that council rules which have blocked new housing development are at the core of the city’s housing problems, and the new plan is at the heart of the long-term solution to Auckland’s housing problems. “The plan allows the council to move on from the cumbersome and outdated plans it inherited from previous councils.”

The Green Party, meanwhile, sees the passing of the plan as a “big step towards building a better, more affordable Auckland”, but called on the government to make the plan “work properly” by cracking down on property speculators, investing in public transport and “fixing” the Building Code.

“The Unitary Plan will probably, on balance, allow more urban sprawl than it should so there is a need to ensure that new suburbs would be built as communities with good public transport,” Green MP Julie Ann Genter said.

The overall planning document for the Auckland region, the Unitary Plan replaces the district plans of the eight previous Auckland councils, work on it having begun shortly after the super city was created in 2010.

Any appeals or legal challenges to the plan must be lodged by 16 September, when the plan will officially come into force, although any section that is challenged will remain in abeyance until a ruling by the Environment Court.

PROPERT Y

NZX-listed

industrial property landlord

Property for Industry Limited (PFI) has lifted operating revenues 9.7 percent to $35.2 million in the first half of the financial year.

“Strong numbers,” said PFI chairman Peter Masfen, when announcing the interim results.

“Operating revenue is up, profits are good. The market conditions are in our favour currently, so we can reasonably expect full-year distributable profit that is ahead of last year.”

Operating revenues for the six months increased by $3.1 million or 9.7 per cent over the prior period to $35.2 million, as increases due to acquisitions ($1.7 million), completed developments ($0.4 million) and positive leasing activity ($1.2 million) were partially offset by decreases due to disposals ($0.2 million).

The first half of 2016 has delivered strong leasing outcomes, Masfen said. “The company’s results have also been assisted by the low interest rate environment. These conditions are

expected to continue for the remainder of 2016.”

Operating expenses for the six months of $14.1 million were down $1.3 million or 8.3 per cent, in part due to a decrease in management performance fees (decrease of $0.7 million).

After allowing for non-operating income and expenses and deferred tax, PFI recorded a reduction in profit after tax from $36.4 million in the prior period to $22.5 million.

The main driver of the decrease in profit after tax was a return by the company to its usual approach for the valuation of investment properties at the end of each half year, when only eight properties were revalued for a fair value gain of $10.6 million compared to a fair value gain of $25.6 million previously when all investment properties were revalued.

_ We create value for investors by owning the right industrial properties in the right locations & leasing those properties to the right tenants on the right terms.

SCALE, DIVERSITY, EXPERTISE.

Looking ahead, PFI expects results: vacancy is just 0.5 per the industrial property sector to cent and only 1.4 per cent of continue to perform well during contract rent is due to expire the first half of 2016 as investor during the second half of 2016. demand for industrial property PFI will remain focused on its remains strong. Colliers Interstrategy of investing in quality national’s Commercial Property industrial property in New ZeaInvestor Confidence Survey land’s main urban centres. The reached a new high at the end company will continue to drive of Q2 2016. Tauranga/Mount shareholder returns by actively Maunganui and Auckland, home managing vacancy and upcomto more than 90 per cent of ing lease expiries, opportunisPFI’s properties, recorded the tically pursuing both core and second and third-highest levels CRITICAL value-add industrial acquisitions, LOACTAION _ of investor confidence, with maximising utilisation of the industrial property scoring the portfolio by the development highest level of investor confiof surplus Auckland land over dence in Auckland. the medium term and divesting According to CBRE, Auckof non-core assets when value land’s industrial vacancy could has been maximised and an opfall further during 2016 to as low portunity to recycle capital into as 1.5 per cent. CBRE’s findings industrial property arises. are consistent with PFI’s own

CRITICAL LOCATION _

LONG TERM LEASE _

PURPOSE BUILT FOR VEHICLE ACCESS _

www.pfi.co.nz

August-October 2016 | www.propertyandbuild.com

31

C OMMENT

The Unitary Plan

balancing act

At no other time in Auckland’s history has the city found itself at such a significant and defining crossroads Auckland’s councillors have now accepted the recommendations of the Independent Hearings Panel (IHP) on the Auckland Unitary Plan (AUP).

Once finalised and adopted, the AUP is going to be the next big step in bringing Auckland together and delivering the vision of the Auckland Plan, which is to become the world’s most liveable city by 2040.

To say that the journey to getting the AUP operative has been arduous is an understatement.

It has involved Auckland’s most extensive public consultation.

When the AUP was first released for public consultation, it received over 13,000 submissions, containing over 1.4 million submission points.

The subsequent IHP hearings lasted nearly two years, with members of the panel wading through over 10,000 pieces of evidence across 60 different topics. I would like acknowledge the mammoth task the IHP was charged with and recognise the ability and expertise of the panel in developing a set of dynamic, objective and robust recommendations.

I am not being overly dramatic when I say the economic, environmental and social prosperity of not only Auckland, but also of the whole of New Zealand is at stake.

So why has the AUP process been so controversial? The AUP will replace the existing Regional Policy Statement as well as 13 existing district and regional plans. Essentially the AUP will be the blueprint and rulebook that will determine where and how future commercial, industrial and residential development can take place. However, at its heart, the AUP is more than this. It is the tool to enable the accommoda32

tion of up to an additional million residents and will drive Auckland’s future form and shape.

Arguably, it is the most contentious developmental issue that Auckland has ever faced. The AUP conversation has gone well beyond the proverbial debate around the summer barbeque.

It’s a debate that has pervaded wider economic, environmental and social issues facing a rapidly growing city.

New Zealand’s largest city is facing greater wealth inequity and inequality; there is an ever-widening gulf between those who can afford to own their own home and those who cannot. The effects of this equality gap are substantial and affects the deliv-

What are the implications of the proposed new housing density zoning and rules for people living in Ponsonby villas? Or for people with their post-World War Two, quarter-acre section in Henderson? Or the state housing tenants in Glen Innes?

It is important to remember that despite the naysaying of the vocal NIMBYs, development does not spring up overnight. It is an organic process that can take several years. People are not going to open their curtains one morning and see bulldozers tearing down their neighbours’ homes, leaving them bereft in a sea of density.

I do not blame the NIMBYs for their fears of the future. Auckland

“There needs to be a robust and unified relationship between central and local government in providing necessary transport infrastructure and services for Auckland” ery of local and central government economic and social policy.

We need an Auckland in which people can afford to live and own their own homes in healthy, sustainable and well-functioning communities.

The IHP has recommended greater intensification of existing urban areas with a strong focus on the existing centres. It has also identified areas at the periphery of the city suitable for development. We all want our communities to be economically, environmentally and socially prosperous and to provide opportunities for people of all walks of life.

Growing up So if we are this benevolent, then why the rigmarole? The issue for most people is not the growing out, but the growing up.

August-October 2016 | www.propertyandbuild.com

will inevitably experience change.

The field of urban planning is riddled with technical jargon that urban planners and lawyers thrive on. We don’t have textbooks on planning for those not skilled in the murky world of resource management.

To be told that the community and the suburb in which you have lived, developed close friendships with neighbours, raised your children or possibly worked is likely to transform radically in the near future will naturally lead to a negative emotional reaction.

Humans after all are creatures of habit who enjoy predictability and stability. Cities, on the other hand, are in a constant state of flux, development and change.

Our relationship with cities is a tenuous and, in the life of a city, a short-lived one.

Will the Unitary Plan deliver the Auckland we need? We support a focus on urban growth in the inner city and along key transport routes such as arterial roads and the rail network. With our current congestion problems, it makes sense to create high-quality, high and medium-density housing along these key routes. This is currently happening in New Lynn, but we desperately need to expand this to other centres along these routes.

It is also exciting to see roads like Sandringham, Dominion and Mount Eden up-zoned for density, especially as Auckland Transport has identified these as possible light rail routes. With such a substantial investment proposed, it is important to maximise the potential patronage. Furthermore, this focus on urban growth on centres, transport nodes and corridors will go towards achieving a quality urban form.

We see it as a positive that the recommended AUP places an obligation on Auckland Council to provide sufficient land for development for the next seven years. The recommended AUP would enable development of over 400,000 dwellings across a range of housing types.

I am especially pleased that the Independent Hearings Panel based this decision on the Auckland Council Development Capacity Model, a joint venture model developed by Auckland Council and Property Council.

Enabling development of over 400,000 dwellings is a substantial increase on the 296,000 dwellings that Auckland Council enabled under the original Proposed Auckland Unitary Plan.

This increase better reflects the housing needs of the forecasted population growth over the next 30 years.

We support retention of a flexible and responsive Rural Urban Boundary. In particular, we support the recommended expansion to include 30 per cent more land as well as the ability to change the boundary by private plan variation of a district plan.

Implementing the Rural Urban

C OMMENT

Boundary in a regional policy statement would prevent potential changes and adjustment.

The failure of the old Auckland Regional Council to expand the old urban growth boundary is a key cause of skyrocketing land prices in Auckland.

Economics is simple: creating a scarcity of resources such as land means that demand and prices will increase. These recommended changes to the Rural Urban Boundary free up more greenfield land and allow for outof-sequence development, which should reduce opportunities for landbanking.

Quality counts We are pleased to see the IHP recommendation of promoting good quality residential development through assessment methods, rather than through compulsion. Auckland Council needs to work with developers of residential, industrial and commercial property in a collaborative, constructive manner.

Rules such as requiring new dwellings to achieve a minimum 6-star rating from the New Zealand Green Building Council Homestar Tool or requiring compliance with sustainable building standards are noble. However, these requirements would add further cost to the already expensive exercise of building new dwellings. These costs are then simply passed onto the purchas-

34

er, doing nothing for housing affordability. These building standard matters are better dealt with under the Building Act. It is also important to remember that the relationship between land use planning and infrastructure, particularly that relating to transport, is inextricably linked. We cannot create economically and socially prosperous communities without well-connected, reliable and safe transport networks.

With this in mind, I am pleased to see the IHP emphasise the importance of infrastructure provision in catering for growth.

I am also encouraged by the IHP’s position that infrastructure funding should not be allowed to dictate land use planning in Auckland. There needs to be a robust and unified relationship between central and local government in providing necessary transport infrastructure and services for Auckland. This partnership approach will go a long way towards achieving the positive transport outcomes for Auckland that are reflected in, and which underpin, the AUP. Other cities?

The question remains, can we replicate the AUP in other cities?

Are there lessons that other cities can learn from the AUP development process? Different cities have differing needs and aspirations that reflect their individual economic, environmental and

August-October 2016 | www.propertyandbuild.com

social drivers. A cookie cutter approach to urban planning is not going to achieve desired outcomes or best practice.

For example, heritage buildings form a substantial part of Dunedin’s urban fabric, a reflection of the city’s former status as New Zealand’s largest city. Yet a city such as Tauranga has little or no heritage buildings. This highlights the fact that the heritage rules contained in the AUP cannot be imposed effectively on either city.

However, we can learn from the AUP development process and create best practice guidance for public consultation on a city’s district plan. Auckland Council’s single biggest failure was its inability to articulate both the macro and micro policy and strategy outcomes they wanted the AUP to achieve for the wider community.

Councils must be engaging in constant dialogue with all sectors of the community when it comes to district plans. In particular, they need to be selling the story about the proposed development and evolution of their urban centres. This approach is inclusive and is more likely to bring people with expertise, ideas and information into the development fold.

It is important to reiterate that this is the first time the IHP process has been used in New Zealand. While there have been speed bumps along the way, the process has driven by an

evidence-based, objective and robust approach to planning.

It is time to throw away the neo-urbanist ideology and embrace pragmatic planning principles. We are seeing the positive flow-on effects of the IHP process already, with a similar IHP process being used in reviewing Christchurch City Council’s District Plan.

Auckland, like other rapidly growing cities, faces numerous difficulties across a range of economic, environmental, political and social issues. The success of our largest city has been spectacular. It is undergoing a transformation and is becoming a truly international city.

Yet, with this success comes inevitable downsides, which have and will continue to be a drag on the city. Make no mistake, the AUP is no silver bullet. We need a multi-pronged policy approach in order to achieve greater prosperity for all Aucklanders.

Yet I am optimistic that the AUP provides a line in the sand and a clear opportunity to start thinking about how we can truly create the world’s most liveable city.

Connal Townsend is Chief Executive of the Property Council NZ, which represents the interests of the commercial property investment industry – including commercial, industrial, retail and property funds

DESIGN

Sweeping the board at the national landscaping awards

Queenstown-based landscaping company Southern Landmarx has struck gold, silver and bronze at the 2016 Landscaping New Zealand’s (LNZ) Landscapes of Distinction Awards The award-winning company, which works throughout the Wakatipu and Central Otago region, came up trumps with six medals in all six categories in which it was a finalist.

Southern Landmarx won three gold, two silver and one bronze award in the overall Large Residential Projects division.

The company’s ‘Shotover Delta Views’ landscape project racked up an impressive three gold awards in Landscape Design, Landscape Construction and Landscape Horticulture.

Meanwhile, the Southern Landmarx ‘Japanese-influenced’ Lakeside Estate property, originally designed by LAND of Queenstown, romped home with silver in Landscape Construction and Landscape Horticulture, and took bronze for Garden Management.

“The awards are a credit to everyone in our team and the level of quality they’re committed to producing,” said Southern Landmarx Managing Director Joe Nutting.

“It’s great to work with clients who have such passion and desire to enhance the outdoor areas of their property, and maximise the beauty of the surrounds they live in.

“We wouldn’t be in a position to complete these very special projects or enter the awards without strong support from clients and staff, so both are key to us and our business.”

Held every two years, the LNZ awards are recognised as one of the industry’s most prestigious events.

Southern Landmarx Director Jaye Nutting said the team was “over the moon” with their success. “We work extremely hard and it’s testament to that hard work that our properties have been recognised as being

up there with some of the best in New Zealand!” she said.

Landscape Consultant and Chief Judge Penny Cliffin said she “absolutely loved” the Shotover Delta property. “The way that the landscape design was welding into the wider landscape was exemplary”.

The company faced the challenge of landscaping the Shotover Delta project from scratch, as the owners had bought a bare section overlooking the river. Looking to build a dream residence in this idyllic setting, the brief was to create a garden that blended native New Zealand planting with a more formal garden in the living areas close to the house.

The clients wanted to be able to grow their own produce and have a dramatic water feature included in a garden that nestled seamlessly into the stunning natural surroundings.

Challenges for Southern Landmarx included working with a natural gully area which the local authority demanded had to cater for a one-in-100-year-flood.

The installation of an aesthetically-pleasing dry river bed met all criteria and linked to a circulating water feature.

Sustainability was achieved right from the time of construction, with the use of local river stone, schist rock and boulders, sourcing plants locally, the design of the reticulating water feature and roof rainwater collection.

The Japanese-influenced lakeside property needed to provide for clients who’d moved to New Zealand after years of living in a small apartment with a vegetable garden in pots on their balcony as their main garden.

With green thumbs and a passion for ‘growing their own’, the brief was for extensive vegetable and herb gardens within easy

Golden glow: The Shotover Delta home took home gold at Landscaping New Zealand’s (LNZ) Landscapes of Distinction Awards reach of the kitchen, an orchard of fruit trees in a sunny position and a private Zen garden which could be viewed from the tatami mat room and bathroom.

A native theme in the outer property was on the wish list, with a Japanese ‘twist’ through

rock placement, gravel and pockets of planting. Challenges included the site’s exposure to a strong southerly wind and poor soil structure, and the clients requested uninterrupted views down the south arm of the lake.

It’s like the morning paper targeted at your business Arrive at work, get a brew Sign on to www.isn.co.nz Get the latest news – get up to date with projects and case studies, events – take feet off desk Start your day

August-October 2016 | www.propertyandbuild.com

35

PROPERTY

Government growth pleases Precinct The government’s ongoing office space requirements in the capital are boosting the fortunes of leading property company Precinct Properties New Zealand Limited

The crown has taken 68,000 sq. m on a weighted average lease term of 14.6 years at Bowen Campus, Pastoral House, Mayfair House and 3 The Terrace, while also extending its existing lease at 1 The Terrace.

The $203 Bowen Campus in Wellington strategically situated next to the Beehive is home to the 10-storey Bowen State and 15-storey Charles Fergusson buildings and is expected to generate a 7.5 per cent yield on anticipated completion in early 2019.

Precinct’s most significant development opportunity in Wellington, Bowen Campus is about to undergo a significant redevelopment beginning in November 36

which will see the existing area, excluding the annex building, increase from 26,100 sq. m to 38,400 sq. m.

This increase in floor area is primarily due to an expansion of the Bowen State building from 14,100 sq. m to 23,000 sq. m as well as additional floor area gained from a new facade installed at Charles Ferguson Tower and additional retail amenity.

The scope of works for the Bowen Campus buildings include: • demolition of existing facade, removal of all plant/equipment and demolition of existing fit out • strip back to existing concrete structure and completion of

August-October 2016 | www.propertyandbuild.com

seismic strengthening to 100 per cent NBS • extension of the floor plate over levels 1-6 at Bowen State building • installation of new curtain wall glass facade • installation of new mechanical services including chilled beam and fan coil unit systems • installation of new lifting systems throughout each building • installation of new ‘on floor’ base building fit out including floor coverings, bathrooms, ceiling grid and tiles, kitchen facilities and wall finishes.

Precinct has today agreed a construction contract with LT McGuinness who will be completing the construction of the works at

Bowen Campus. The contract is a fixed price lump sum contract providing suitable certainty to Precinct regarding cost for the project.

The crown has committed to 32,400 sq. m of office space (87 per cent office pre-commitment) at Bowen Campus and has an option to take the remaining three floors at Bowen State representing around 4,700 sq. m.

Future development potential is retained over the balance of the Bowen Campus site with 4,000 sq. m of land remaining available for future development, which could support up to a further 25,000 sq. m of additional office development in the future.

Unfortunately, the deal was

signed post balance date and therefore wasn’t reflected in the recently released annual results but Precinct Property CEO Scott Pritchard was delighted nevertheless.

“This was arguably the key achievement of the year as it will transform the quality of our Wellington government portfolio,” he maintains.

“Including the government leasing, our team have leased an impressive 135,000 sq. m of office space in the year, which is equivalent to over four PwC Towers.

“The operational and financial results for the year as well as the commitments to Commercial Bay and Wynyard Quarter Stage One were significant highlights.”

Precinct Property’s net profit after tax increased 12.9 per cent to $138.2 million (2015: $122.4 million) and net operating income climbed to $72.8 million (2015: $68.3 million), while there was a property portfolio revaluation gain of $81.2 million (2015: $64.8 million).

Also post balance date, law firm MinterEllisonRuddWatts committed to the new PwC Tower at Commercial Bay, taking pre-leasing at the new tower to 60 per cent. “We welcome MinterEllisonRuddWatts into the portfolio and are delighted with our leasing progress given we are three years from the completion date,” Pritchard says.

The $681 million Commercial Bay complex aims to “com-

pletely reshape the waterfront area bounded by Britomart, the Viaduct and the CBD” to create a linked environment for a working population of 10,000 people.

The heart of Commercial Bay will be a new 39-level, 39,000 sq. m office tower that will be anchored by PwC and known as the PwC Tower when it is completed in 2019. It will sit atop a three-level, 18,000 sq. m retail precinct that is slated to open in 2018, anchored by major international fashion retailer H&M’s New Zealand flagship store.

The Commercial Bay development is Precinct’s most significant project following commitment in December 2015, after which the existing centre was closed down and demolition began. “Works to date remain on programme with Fletcher Construction overseeing the deconstruction of the site by Ward Demolition.”

Leasing of the office tower was 52 per cent on commitment in December, there has been strong leasing interest post-commitment and the tower is now 60 per cent leased following the recent leasing with MinterEllisonRuddWatts.

Commercial Bay aside, Precinct’s Auckland leasing continues to be “very strong”, with HSBC Bank extending their current lease in 1 Queen Street and committing to relocate in 2019 to 188 Quay Street taking naming rights over the building.

Real estate agency firm Colliers International have also committed

to relocate to 188 Quay Street, which largely removes the vacancy risk from PwC’s relocation to Commercial Bay. “Including the government leasing, our team have leased an impressive 135,000 sq. m of office space in the year, which is equivalent to over four PwC Towers,” Pritchard notes. “Following this success leasing risk has substantially reduced, enabling us to have greater confidence in our ability to deliver our long term strategy and earnings growth.”

Precinct Properties ended the year with 98 per cent occupancy, the same as the previous year, with an overall WALT of 6.3 years (2015: 5.0 years) extending out to 8.2 years when the three developments are included.

Other major points include: • the Auckland city centre office market overall remains “extremely strong” with a continuation of historically low vacancy levels • the Auckland city centre retail environment continues to strengthen driven by strong demand from a unique blend of international and local retailers, improvement in dining and entertainment precincts and strong growth in tourist numbers.

Delivering developments Precinct committed to $765 million of development projects during the reporting period and currently has $968 million of

development in progress with a forecast value on completion of $1.14 billion that will “transform the portfolio quality”, increase the weighting to Auckland and improve the long-term earnings outlook.

Some 74 per cent of the 89,500 sq. m of office space under development is pre-leased (excluding retail) on a weighted average lease term of 13.1 years.

“The next 12 months is expected to result in further retail and office leasing with strong enquiry levels for both aspects of this mixed use development.”

During the period Auckland Council publicly notified the decision of the independent commissioners to approve the rezone of Queen Elizabeth Square, which is required in order for Precinct’s acquisition to go unconditional.

This decision was appealed to the Environment Court, a hearing was held in July 2016 and a decision is expected soon which will determine whether or not this acquisition and the incorporation of the Square into the Commercial Bay development proceeds.

Leasing success at Wynyard Quarter Stage 1 has led to the development being 86 per cent leased by income (December 2015: 70 per cent). The forecast project cost remains $84 million with an estimated yield on cost of 8.0 per cent on completion based on net contract income of $6.7 million and a weighted average lease term of 11.2 years.

August-October 2016 | www.propertyandbuild.com

37

Regions on a roll

RESEARCH

Growth in regional economies is working its way through into commercial and industrial property markets, according to Bayleys research team

This was reflected in an increase in the value of commercial and industrial sales outside of Auckland to $3.587 billion in 2015, up 47 per cent on the $2.441 billion worth of transactions in 2014, on the back of a 20 per cent increase in transaction numbers as well.

“More properties are selling at higher values right across New Zealand and anecdotal evidence would suggest that momentum has continued on into 2016,” Bayleys Research National Manager Ian Little told a Total Property Live Regional Property Expo held recently in Auckland by Bayleys Realty Group.

“If anything, we would expect it to pick up further as many regional markets are at an earlier stage in the current upward property market cycle than Auckland is.

“Clearly there’s a lot more confidence in investment property markets up and down the country and it is also being mirrored in the development market, with the fundamentals now right for a return to new commercial building activity.”

Little says the value of commercial consents was up 73 per cent across the country in the 12 months to April 2016 compared with the year to April 2010, when new development activity was at an all-time low.

A big contributor was the 193 per cent increase in Canterbury as a result of the continuing post-earthquake rebuild in Christchurch, but it was well exceeded by a 301 per cent increase in the Bay of Plenty, reflecting a phenomenal increase in development in that province, particularly around fast-growing Tauranga/Mt Maunganui.

Other regions in which the value of com38

mercial consents was up by around a third compared with 2010 were Waikato (34 per cent), Hawkes Bay (36 per cent), Wellington (32 per cent), and Otago (36 per cent). “As with the property investment market, many of these markets are at the early stages of their current commercial development cycle and can be expected to ramp up more.

“The increase in commercial construction activity is in response to vacancy rates moving down for the first time in a number of years, as our occupancy surveys around the country indicate. That is also igniting some rental growth as supply in those markets tightens up, although different regions are at different stages.”

Substantial spillover Little says there has been a tremendous amount of yield compression in Auckland and that has spilled over into other regions as well as a result of strong competition for investment properties and a continuing lowering of interest rates.

“However, a strongly located and tenanted industrial property outside of Auckland is likely to sell for at least a one percentage point higher income yield than a similar property in Auckland. So if income yield is what you are looking for then there are plenty of good opportunities in the provinces to secure that.”

Little adds that the dairy downturn in many provincial regions around New Zealand was being offset to a “certain extent” by strong performance by non-dairy agriculture sectors, with horticulture being the standout and viticulture also benefiting from record interna-

August-October 2016 | www.propertyandbuild.com

tional sales of New Zealand wine. “Also helping is a big infrastructure spend, led by the Roads of National Significance programme.”

New Zealand Institute of Economic Research (NZIER) Senior Economist Christina Leung pointed to multiple factors producing “decent economic momentum” around the country, explaining the chief propellers of broadening regional economic activity are strong population growth fuelled by record net migration numbers, a substantial increase in construction activity and a big pick up in tourism.

“While a slowdown in net migration is expected, the big build-up in immigrants that has already occurred will have a continuing positive impact on the economy for a number of years to come,” Leung says.

This strong population growth has led not only to a ramping up of residential construction in Auckland but also in the regions as well. “Commercial development, which tends to lag residential construction activity, was also just starting to pick up in the regions,” she says. It was most noticeable in new office building, reflecting increased growth in the service sector, and in guest accommodation to provide for growing numbers of tourists.

NZIER expects tourism to be a key driver of economic growth over the coming years, injecting income into the regions, creating a lot of jobs and encouraging people to move to where those employment opportunities are.

“This in turn will create further demand for housing and commercial premises which will fuel more construction activity.”

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PROPERT Y

It’s all about timing

Office space in Auckland’s CBD is the tightest it has been for more than 20 years, Colliers International’s latest New Zealand Research Report notes Auckland CBD’s office vacancy reached 5.5 per cent in June this year - another record low. Developers that had the foresight and ability to absorb higher levels of risk and plan for this a few years ago, are now receiving strong enquiry for their premises: the majority of which are at near or full capacity.

There is some hope for tenants though, with increasing levels of supply an ongoing feature of the Auckland CBD market.

More than 112,000 sq. m of new space (adding 8 per cent to existing supply) is expected to be completed over the next five years – significantly more than the past five years.

As tenants move to new premises, the space left behind needs to be absorbed. Also, all new space is unlikely to reach full commitment on delivery date. A significant pipeline in the city fringe will also assist those looking for new workplaces that do not mind opting out of a CBD address.

From this viewpoint, Colliers expects vacancy rates have bottomed out this cycle. From now until late 2019, the company forecasts CBD vacant space to increase by 48 per cent from 80,000 sq.m to 118,500 sq.m.

Although we are on the cusp of change (as supply will outpace demand in the short-term), it needs to be kept in context.

The increase in space from such low availability will insulate the market from a significant shift from a landlord to a tenant favourable market. Colliers projects overall vacancy to increase from 5.5 per cent to 7.5 per cent by mid-2020, before slowly reducing again.

Unfortunately for tenants, this new cycle we are heading into is more about keeping pace with 40

the pent-up demand of old rather than servicing future growth. Tenants decanting from high-quality premises to new state-of-the-art premises may not release the right opportunities for all other tenants. Neither will all new-build opportunities.

There needs to be a readiness from tenants for the new cycle ahead as landlords are unlikely to have to reduce their rates markedly over the next few years. However, a reaction to the injection of new supply will likely face rental growth stalling in 2019 and incentives increasing. It is likely that well-known, large, longlease-taking tenants will be able to negotiate the best deals in a slightly bullish landlord sector.

Cold comfort For small to medium-sized businesses in Auckland, this news will be of little comfort. While some abatement in rents in 2019 may assist in the short-term, competition amongst all other tenants eyeing opportunities at the same time is not ideal from a bargaining viewpoint.

It provides only a short window of opportunity in a highly competitive situation. This new cycle we are heading into will not be the answer for those looking to maximise on rental costs, especially those that take too long to decide on their future.

In order to save on rental costs, picking the market turn in a highly competitive market can be a complex strategy. An increasingly common approach by tenants currently experiencing net rental increases of 6 per cent per annum is to focus on maximising their current workspace ratios.

It’s better to ‘sweat the asset’ rather than staff. Recent examples are Meredith Connell and

August-October 2016 | www.propertyandbuild.com

BDO who reduced space and the number of floors while moving into new, higher-rent-per-squaremetre office space.

This has been a strategy employed overseas for a number of years, but only by a few here. The ability to maximise on density – while still providing tenants with an authentic, agile and flexible workspace – is the key to unlocking a better bottom line and a happier and more productive business.

Office property market The difficulty at the moment for prospective purchasers is locating properties to purchase. Investors, owner-occupiers and syndicators are all very active. This has seen competitive pricing when stock does become available.

While some view the new price levels as ‘untenable’, the fear of missing out (FOMO) is promoting greater levels of acceptance, facilitating a new wave of asset appreciation.

Colliers is also seeing purchaser enquiry for lower quality premises increasing, especially for properties that could benefit from some capital expenditure.

Investors are also facing the ‘there is no alternative’ (TINA) conundrum. Recent expectations of interest rates to stay low – and potential to move lower depending on how bank margins react – will see further pressure on purchasers to step up their pricing levels.

Industrial property market Colliers recently updated its Auckland industrial development table, which shows a healthily pipeline of construction activity.

With vacancy at record lows, this will alleviate pressure, but only fractionally.

The company estimates an additional 600,000 sq. m of space will be constructed over the next five years. It has already seen a strong increase in the number of building consents issued over the past 12 months. The majority of the new builds over the next two years will be in the former Territorial Authority area of Manukau City.

Despite the increase in space,

Colliers forecasts vacancy rates to remain low. This is a result of positive employment forecasts in a sector that is in expansion mode. According to the June 2016 BNZ-Business NZ Performance of Manufacturing Index a rate of 57.7 was recorded (above 50.0 indicates that manufacturing is generally expanding). The survey indicates that the sector has been in expansion in almost all months since October 2012, which correlates with Colliers’ demand surveys.

Retail property market Auckland and Wellington CBD retail vacancy rates increased over the past year despite high levels of leasing activity. But not all is as it seems.

Auckland’s 2.7 per cent CBD vacancy rate is up from 2.5 per cent last year. However, the amount of vacant retail space available is the lowest recorded since late 2007, with less than 3,030 sq.m.

The key reason to this anomaly is the demolition of the Downtown Shopping Centre to make way for 100 new shops by October 2018.

Total CBD supply has reduced by approximately 10 per cent while construction work takes place.

This has seen pressure on other pockets of vacant space in the CBD, as many of the tenants have moved out of the centre and into the streets.

Wellington’s 8.9 per cent CBD vacancy rate is up from 8.3 per cent a year ago. However, less than 150 sq.m of additional vacant space is available. Similar to Auckland, the supply of space has reduced to make way for new tenants. Approximately 6,400 sq.m of retail space (at the time of the June survey) was being prepared for David Jones (opened on the 28th of July).

The outlook for both the Auckland and Wellington CBD retail sectors is positive (from a landlord perspective). Demand will continue to outpace current availability leading to further potential for rental gains. Over the medium-term, new supply will assist in alleviating some demand pressures.

PROPERT Y

Sylvia Park office development secures anchor tenant

Kiwi Property has secured IAG New Zealand (IAG) as an anchor tenant for a new $80 million office tower to be constructed at Sylvia Park Shopping Centre

Awesome office: An artist’s impression of the $80 million office building to be constructed at Sylvia Park Shopping Centre The new 10-level building will be constructed in the airspace above the shopping centre, seamlessly integrating with a ground level extension to the existing dining lane, in keeping with Sylvia Park’s evolution as a town centre.

Nine levels of office accommodation, totalling approximately 11,370 sq. m, will be situated over a new 800 sq. m ground floor alfresco dining precinct adjacent to a new landscaped town square.

IAG has agreed a 12-year lease of 3,324 sq. m of space within the office complex, representing approximately 29 per cent of total office floor space.

Kiwi Property Chief Executive Chris Gudgeon says the office solution at Sylvia Park will offer businesses a “truly unique and high-quality” working environment in an easily accessible location with excellent rail and bus transport links. “Staff will benefit from the extensive range of amenities and services present at Sylvia Park.”

Enabling works for the new office complex will begin this month, with construction due to complete in May 2018 in time for IAG’s lease commencement in June 2018.

Key features of the project include: • efficient floorplates of approximately 1,250 sq. m • ‘vertical villages’ or inter-floor atria connections between blocks of selected floors • the ability to introduce fresh air to enclosed internal ‘balconies’ through opening windows • 5-star Greenstar design rating and NABERSNZ base building 4-star energy rating • bike parks and end-of-trip facilities • three metre floor-to-ceiling height on typical office floors • a lobby level café and casual meeting spaces.

The expected incremental net income yield on total project cost is 6.7 per cent and a 10-year internal rate of return of circa 8.8-9.0 per cent is projected. The value on completion is anticipat-

ed to be approximately $87.5 million.

“Kiwi Property also continues to progress plans for its retail expansion of Sylvia Park to create a world-class retail offer,” Gudgeon adds. “The first stage, comprising the first-ever New Zealand stores for retail fashion giants H&M and Zara, is now well-advanced and on programme to open this spring.”

Future stages of retail expansion, still in the planning phase, include up to 20,000 sq. m of new space in a second-level fashion galleria that is expected to feature: • new international brands and concept stores, including selected retailers from Sylvia Park’s current waiting list of specialty tenants • a next-generation, relaxed, sophisticated and welcoming ‘café court’ with eight experiential dining offers • potentially one or more department stores • new multi-deck carparks with seamless transition from the

surrounding road network • car parking assistance provided by a new user-friendly digital wayfinding system, similar to that currently being rolled out in the existing centre.

A total project cost for the retail expansion stage of approximately $180 million is projected, with construction potentially starting in 2017 with staged completion between 2019 and 2021, depending on progress with pre-leasing activities now underway.

Combined, the total estimated cost of the company’s current retail expansion and office development plans is approximately $280 million.

New Zealand’s largest shopping centre, Sylvia Park is located at the heart of Auckland and attracts annual sales of more than $455 million.

Developed and built by Kiwi Property, the award-winning centre offers retail space anchored

by The Warehouse, Hoyts Cinemas, PAK’nSAVE and Countdown, along with an extensive range of specialty tenancies.

August-October 2016 | www.propertyandbuild.com

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C OMPLIANCE & LEGAL

Multi-million dollar fund to support quake-prone heritage A new multi-million dollar fund to help support the retention of New Zealand’s built heritage has been announced by Arts, Culture and Heritage Minister Maggie Barry The Heritage Earthquake Upgrade Incentive Programme fund (Heritage EQUIP) will put $12 million over the next four years towards the cost of strengthening privately-owned heritage buildings.

“Heritage buildings are an important part of the character of towns like Feilding, but the cost of strengthening can be prohibitive and unsustainable for their owners, particularly in provincial areas like Manawatu,” Ms Barry says.

“We don’t want to see valued buildings empty and deteriorating, or even demolished, because it isn’t economical to strengthen them. This new fund

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will support owners preserve our built heritage for future generations.”

The contestable fund will be available for all privately-owned Category 1 Heritage New Zealand-listed buildings across the country and for Category 2 listed heritage buildings in areas of high-to-medium seismic risk such as Manawatu and Wellington.

“Applicants to the fund will need to look to match Heritage EQUIP funding with local government, philanthropic, community and their own contributions,” Ms Barry says.

“We will be setting up an expert advisory panel to assess applica-

August-October 2016 | www.propertyandbuild.com

tions, which will open in the new year.”

In the next few months a comprehensive information package providing guidance to heritage building owners on how to manage strengthening projects will be developed by the Ministry for Culture & Heritage (MCH) and Ministry of Business, Innovation and Employment (MBIE).

“There are many superb examples of heritage buildings which have been strengthened and restored in a fitting way, retaining their character and historical connection, such as the Public Trust Office building in central Wellington,” Ms Barry says.

“This government has taken a measured and targeted approach to earthquake strengthening through the Building (Earthquake-prone Buildings)

Amendment Act passed earlier this year, and the Heritage EQUIP has been developed along similar lines. I look forward to seeing how building owners respond to the opportunity it presents.”

New Zealand Society for Earthquake Engineering (NZSEE) has welcomed Barry’s announcement, NZSEE President Peter Smith saying Heritage EQUIP should reduce the risk of losing New Zealand’s heritage fabric to damaging earthquakes.

“It will also encourage best practice in the retrofitting of heritage buildings,” he believes.

“NZSEE is pleased to see the programme will be able to provide much-needed assistance to regional areas of the country that have significant issues, particularly on main streets.

“We look forward to working with the Ministry for Culture and Heritage on the implementation of Heritage EQUIP.” NZSEE is a collaborating technical society of the Institution of Professional Engineers New Zealand.

DESIGN

Refurbished Aurora Centre welcomes historic 1970s artwork A $72 million refurbishment of the Aurora Centre at 56 The Terrace, Wellington, has been crowned with the return of an iconic artwork from 40 years ago.

The historic 1970s artwork ‘Flight’ to Wellington has come home as part of the extensive renovations which combine the former Aurora Chambers and Unisys House into a single 24,000 square metre office complex, having rescued the Patrick Leeming commission from a closing retail tenancy in Auckland.

The artwork was originally commissioned in 1970 by the National Airways Corporation (NAC) for what was then its new head office at 80 The Terrace.

Superimposed on a background of New Zealand coastline, ‘Flight’ is a dynamic representation of travel in the present and future.

The artwork depicts towns and cities as seen from the air; flight paths between cities and over

oceans, queues of passengers and space travel to the sun, moon, planets and beyond.

Measuring 6.75 metres by 2.7 metres and weighing approximately three tonnes, the relief style mural was modelled in clay and cast in ten panels of reconstituted marble designed

by Christchurch resident Patrick Leeming.

This is the second time ‘Flight’ has been rehomed; Leeming having overseen the relocation of the sculpture from NAC to the National Mutual Centre in Auckland in 1997.

Nineteen years later, Kiwi Property has saved the sculpture, rescuing and refurbishing it to be returned to The Aurora Centre in Wellington – 1.2km from where it originally lived back in 1970.

Leeming is one of many New Zealand artists whose work is on display in Kiwi Property’s office portfolio, and feels privileged to still be involved with his artwork

46 years later.

“You can imagine my surprise when I found out the news that ’Flight’ is to have another life back in Wellington,” he says.

“It is aptly named.”

The Ministry of Social Development (MSD) will move into its new national office progressively over the coming months – its move coming as part of the Wellington Office Accommodation Project in which the government is seeking to reduce its office footprint in Wellington and save taxpayers’ money. The MSD has an 18-year lease on the building.

Seismic strengthening has been completed on the original Unisys House, increasing it from 70 per cent of the New Building Standard to 90 per cent. The Aurora Chambers was demolished to ground level and rebuilt with a steel frame structure, providing an additional level and floors that integrate with the refurbished tower.

A close-up of part of the Flight artwork, which depicts towns and cities as seen from the air “The Aurora Centre and neighbouring 44 The Terrace, which are both owned by Kiwi Property, offer more than 32,000 square metres of office space in adjacent buildings tenanted by government departments,” Kiwi Property Development Manager Greg Tolley notes. “Following completion of the comprehensive upgrades, these buildings will form a core government office precinct conveniently located close to Parliament at the northern end of The Terrace.”

PO Box 72 095, Papakura 2244 Auckland Tel: 0800 500 330, 021 532 599 Email: justinbell@leakdetection.net.nz Websites www.waterleakdetection.co.nz www.subsurfacedetection.co.nz

We are a well established underground utility surveying company and pride ourselves providing a quality service to both our commercial and residential clients. We locate underground utilities and unknown objects to help you with the information you need prior to excavation and project planning. We map these services using GPS and Drone/UAV technology. Any strike to a buried utility carries serious health and safety risk – hitting a buried power or gas line could be disastrous and expensive. Protect the public, yourself, your employees and your assets; get us to mark-up services before you dig. ​​Sub Surface Detection’s specialist technicians have decades of experience within the underground civil contracting field, where it is a priority to know the underground positions of all network services prior to the commencement of any excavation. We use the latest technologies including Ground Penetrating Radar (GPR)

and Electromagnetic Induction (EMI) Pipe and Cable Locating. This gives us the advantage of potentially identifying metallic and non-metallic underground services and objects such as, Power, Communications, Gas, Water, Drainage, Septic/Fuel Tanks, Manhole Covers and Grave Sites. We provide a high quality service at very competitive price across Greater Auckland, Waikato, Northland, Coromandel and Bay of Plenty. ​​In addition to marking up underground utilities and services, our in-house GIS consultant can produce high quality, to scale drawings, Drone and GPS surveying for data collection of positions, depth indications to aid any project planning, including 3D images, and 360 degree rotational 3D virtual models. We are very comfortable working alongside your existing site contractors. We can, if required, co-ordinate the use of CCTV drain inspections and/or hydro excavation equipment for potholing confirmation of services or the excavation of targets where machine digging is not suitable.

PO Box 72 095, Papakura 2244 Auckland Tel: 0800 500 330, 021 532 599 PO Box 72 095, Tel: 0800 500 Papakura 330, 0212244 532Auckland 599 Email: justinbell@leakdetection.net.nz Tel: 0800 500 330, 021 532 599 Websites www.waterleakdetection.co.nz www.subsurfacedetection.co.nz Email: justinbell@leakdetection.net.nz www.subsurfacedetection.co.nz Websites www.waterleakdetection.co.nz www.subsurfacedetection.co.nz August-October 2016 | www.propertyandbuild.com

43

CONSTRUCTION

New retentions regime is likely to cost the construction sector

The retention provisions of the Construction Contracts Amendment Act 2015 (CCAA) will soon come into full effect. PwC has concerns over the unintended consequences of aspects of the new regime, having managed a number of large and complex insolvencies over the years thanks to its extensive experience across all areas of the property and construction sector. Lara Bennett explains some of the impacts for the construction sector The failure of Mainzeal Property and Construction Limited in February 2013 resulted in unsecured creditor claims of more than $150 million, including $18.3 million in retentions held at the date of the collapse. This major failure led to increased focus and public debate about the issue of payment security in the construction sector.

In October last year, the CCAA was passed into law with the aim of clarifying and expanding the provisions of the original Act. The most material change, which was added following the collapse of Mainzeal, is subpart 2A (CCAA2A) which introduces a statutory trust regime for retentions. The new regime takes effect on 31 March 2017 and the associated regulations are still pending, but nonetheless the practical impacts of this new legislation will be significant - and will ripple across

the entire supply chain.

Retentions are amounts withheld from a contractor or subcontractor to ensure agreed works, including correction of any defects, under a construction contract are completed before final payment is made. Importantly, CCAA-2A requires those

“In the event of a collapse, the “trust” assets would then be ring-fenced to meet retention obligations” holding retentions to also hold sufficient cash or other “liquid assets” (expected to be defined in the pending regulations) on trust to support the amounts owed. In the event of a collapse, the “trust” assets would then be ring-fenced to meet retention obligations. As such, they would not be available to any other type of creditor.

Increased equity levels in the

Salutary lesson: The Mainzeal Property and Construction collapse in 2013 sent shock waves throughout the industry and emphasised the importance of constantly assessing a company’s current and contingent liabilities 44

property and construction sector and further measures to reduce the risk of loss in the event of corporate failure are welcome.

However, CCAA-2A in its current form may not achieve the desired outcomes and could potentially have adverse consequences for the sector, contrary to the intent

August-October 2016 | www.propertyandbuild.com

behind this new regime. We outline some of the key issues below.

Are there sufficient available assets to comply?

Based on 2015 construction activity levels, a minimum of almost $600 million of “liquid assets” will be required when the new regime takes effect on 31 March 2017. These assets cannot be subject to any form of existing security or encumbrance.

Many industry incumbents will be unable to comply with the initial requirements and will therefore be in breach of the legislation.

A transitional approach, such as requiring only new retentions withheld after 31 March 2017 to be supported by liquid assets held in trust, would ease the financial impact of moving into the new regime.

Will trust assets be fully recoverable in the event of a failure?

There has been discussion on the use of accounts receivable

Construction concerns: Knowing your rights and obligations and appreciating the risks that will arise under the new regime is essential for achieving positive outcomes, says PwC Restructuring Team Leader Lara Bennett or upstream retentions for the purposes of CCAA-2A. These assets are not liquid in nature, particularly in a failure scenario where the principal or contractor that has failed will typically be unable to meet its obligations to complete works, settle sales, provide necessary warranties or remedy defects. As a consequence, retention monies will not be released and customers will withhold payment of progress claims, resulting in inadequate recoveries to meet retention obligations. To illustrate this, in the Mainzeal collapse, only 11 per cent of accounts receivable and upstream retentions owing at the date of receivership have been recovered.

What will this really cost and will it exceed the benefit?

Applying a net funding cost of 5 per cent per annum means that $600 million of retention trust assets would cost the industry $30 million each year. It is important to consider these costs with reference to the magnitude of the retention loss risk CCAA-2A seeks to protect against, such as the $18.3 million of retentions in Mainzeal. Compounding this issue, construction is a highly competitive sector, with single digit profit margins prevalent. Any funding cost is likely to be spread across the supply chain through a combination of lower margins for subcontractors, contractors and principals and will inevitably result in higher costs for the ultimate purchaser or end user of the property constructed.

How easy will it be to administer the new regime?

In its current form there are a number of areas in the new regime which may result in legal disputes and practical difficulties, including the risk of conflicting claims on specific assets, the effect of existing registered security interests, impacts on statutory

priorities such as employee entitlements and the cost of realising trust assets in the event of a failure.

Positive steps to bolster the capital base of both principals and contractors across the construction sector are essential for its stability and success, and this is the intended outcome of the new regime. However, these issues with CCAA-2A need to be addressed to avoid further financial strain on the sector at a time when increased capacity is needed to meet market demand and to minimise scope for confusion and cost.

The way forward Irrespective of any potential clarification or amendments to this new legislation, all stakeholders in the sector, including those not specifically party to a construction contract (including materials suppliers, financiers, employees, tenants, purchasers, directors and auditors) need to understand the impacts of CCAA-2A. Knowing your rights and obligations and appreciating the risks that will arise under the new regime is essential for achieving

positive, rather than suffering adverse, outcomes.

Lara Bennett is an executive director in the PwC Restructuring team and has worked in the construction sector prior to joining PwC. Lara has been involved in a number of high

profile property and construction assignments, including lead roles in the Mainzeal and Bridgecorp receiverships, as well as undertaking advisory assignments and assisting with other engagements in the sector

SOLID YIELD – SPECIALISTS IN OUR FIELD INDUSTRIAL PROPERTY INVESTORS

Diversity Diversity provides resilience and resilience ensures stability.

Inevitably, tenants come and go, but when—as we do—you have around 84 properties in your portfolio you still achieve consistent returns.

A unique asset class We achieve those strong returns because industrial property behaves differently to other types of property. PFI provides investors with the opportunity to benefit from investing specifically in industrial property.

Expertise Our expertise is key. Because we specialise in industrial property, we know the market, we are known in the market, and we understand industrial tenants’ needs. As a result, our portfolio is fit and healthy and able to perform at its peak.

Scale There are three reasons investors attracted to industrial property become PFI shareholders. The first is scale. Scale gives us credibility: PFI attracts superior tenants who only partner with a landlord they have confidence will be there for the long haul.

Helping New Zealand enterprise PFI’s scale, diversity and expertise deliver strong stable returns for our investors. We enable them to put their money to work— out where the work gets done—playing an important part in helping New Zealand enterprise succeed.

For general enquiries email: info@propertyforindustry.co.nz P: 09-303 9450 | F: 09-303 9657 | Prince’s Wharf, Shed 24, 147 Quay Street, Auckland PN002

propertyforindustry.co.nz

Dependable returns PFI puts money to work, generating income for our shareholders. We’ve been providing property for industry for over twenty years and over that time our average annual return to shareholders has been around 9%.

August-October 2016 | www.propertyandbuild.com

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CONSTRUCTION

High tech monitoring watches over valuable CBD properties The construction of the City Rail Link (CRL) tunnels underneath Auckland’s city centre is a major challenge requiring a robust and innovative approach to construction monitoring – especially when it comes to the extremely valuable real estate around Queen Street, Albert and Victoria Streets.

Global experts in building monitoring in urban tunnel environments Soldata have been engaged to provide assurance for Albert Street’s property owners, insurers, Auckland Transport and the Connectus project team, a joint venture partnership combining Hawkins Infrastructure and McConnell Dowell.

Soldata’s remotely and robotically controlled laser system installed for CRL has five units and a network of 270 prisms (monitoring prisms, reference prisms and reflectorless measurement points) covering the length of Albert Street, including Swanson, Victoria and Wellesley Streets with sub-millimetre precision at up to 180m from their location.

It also monitors potential settlement of Albert Street using “reflectorless” technology, which does not involve any installation of prisms or other equipment.

Evolving and adjusting to ongoing works, the network will expand to include seven units and over 500 measurement points once cutand-cover trenching works begin on lower Albert Street.

The units measure the prisms’ exact location using an invisible

City Rail Link fast facts CRL will use twin 3.4-kilometre-long tunnels up to 42 metres below the city streets to create an underground rail line linking Britomart and the city centre with the existing western line near Mt Eden.

It is estimated to take five and a half years to build at a cost of $2.5 billion.

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laser beam emitted from the unit and reflected by the prism. From this beam the exact displacement between the unit and the prism is known.

Successive measurements track the displacement of the prisms over time and consequently give advance warning of potential ground and building changes adjacent to construction, as well as performance of construction techniques as movement trends become visible.

The reflectorless technology Marvellous monitors: A sample view of monitoring also allows for ground movement points covering the AA building to be monitored in roadways and footpaths with active traffic. Monitoring data is available 24/7. If the defined threshold of movement is exceeded, an alarm email is issued immediately.

There are other monitors operating as well, including inclinometers (measuring lateral change over the full depth of the installed borehole) and piezometers (measuring variation in ground water pressure within a defined aquifer).

Each piling shaft has these monitoring the movement of the Ground control: A sample ground deformation retaining walls during excavation. monitoring map Once excavation of the cut and cover begins, additional piezominstruments this construction every moment eters and inclinometers will be “In general, building owners and of the day.” installed around the perimeter tenants have been very cooperaThe urban environment is and strain gauges will be installed tive,” Howard-Smith says. “We’ve always presenting construction on struts within the excavation. been busy installing units on their challenges, and Connectus and Connectus Stakeholder Manag- buildings’ rooftops and fixing Auckland Transport are at the er Alan Howard-Smith has been prisms to their canopies from forefront of industry best practice, communicating and coordinating Sky City to the harbour’s edge. employing Soldata’s stringent site visits with Albert Street’s It’s given the owners reassurance monitoring technology to provide building owners to gain permisthat their safety and needs are significant risk management sion and access to buildings for being considered and that Coninnovations for the CRL project the installation of the monitoring nectus is tracking the impact of and its stakeholders.

It will feature two new underground stations at Aotea (11m deep) and Karangahape Rd (33m) and a re-developed Mt Eden Station.

Most of the twin 3.4-kilometre-long tunnels will be built with a tunnel boring machine.

The 7.5 metre diameter tunnel boring machine will be about

August-October 2016 | www.propertyandbuild.com

half the size of the one used at Waterview.

Connectus is delivering Contract 2, which is one of CRL’s first two contracts and involves the construction of 350m of twin cut and cover tunnels along Albert St, between Custom Street and Wyndham Street.

It also involves diverting an existing storm water tunnel that runs under Albert Street.

The diversion will be constructed by pipe jacking a 2.0m diameter pipeline along the eastern side of Albert Street between Swanson Street and Wellesley Street.

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