Beware business impact of infrastructure projects

5:03 PM Friday June 16, 2017 True Commercial

Infrastructure development on the City Rail Link and the Commercial Bay project has impacted severely on downtown Auckland. Photo / Colin Taylor.

Businesses are being warned not to ignore the impact big Auckland infrastructure projects could have on their premises.

Colliers International strategic consulting director Chris Farhi says big upcoming projects like the East West Link and a second harbour crossing will have long-term benefits for commercial property owners and investors.

But large-scale infrastructure projects can also bring significant challenges and risks, as some businesses affected by ongoing work on the City Rail Link (CRL) have found out the hard way.

Farhi says the key is to plan well ahead.

“Occupants who either ignored the CRL or delayed making decisions around its impact have found themselves in the middle of a major construction zone,” he says.

“It’s already too late once the roads are shut and the heavy machinery is rolling in. Your business needs to start its premises’ planning process well ahead of time, particularly if you are considering new-build properties.”

Farhi says there are also risks in underestimating how long it takes to deliver major projects.

“Construction impacts may be temporary, but temporary impacts can drag on for years, which could be quite material for your business.

“The CRL might not be completed until after 2023, so if you’re leasing premises on the CRL route, you could be facing six or more years of disruption — which could be your entire lease term.”

Farhi says one interesting lesson from the CRL is that temporary disruptions aren’t always consistent.

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Auckland’s Albert Street is experiencing major City Rail Link construction disruption.  Photo / Colin Taylor

“The road closures are constantly changing on a daily and weekly basis. Take Wyndham St, for example — sometimes it’s open, and sometimes it’s closed. That makes it quite hard to predict exactly what the impacts will be, so there’s not only disruption to your business — there’s also uncertainty about exactly what that will look like day to day.”

Even projects that initially run to schedule can suffer delays.

“The Waterview Connection was due to open in April, but we’re still waiting.”

Farhi says businesses are learning from experiences like these by planning ahead for upcoming projects.

“Occupants along the proposed East West Link route are already approaching us for strategic advice on how to minimise the impacts,” he says.

The East West link, a priority project of the New Zealand Transport Agency (NZTA), is a four-lane road between State Highway 20 at Onehunga and the SH1 at Mount Wellington.

Resource consent for the project is due to be considered by a Board of Inquiry, and NZTA hopes construction will start next year.

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View from one of the approach ramps to the Waterview Connection tunnel, overlooking the Northwestern Motorway. Photo / Greg Bowker.

“When the project kicks off, there will be an interesting set of dramas along the route and spilling onto some of the main roads,” Farhi says.

“Some businesses are already looking to relocate because the disruption could be quite significant.

“It’s particularly an issue for the numerous logistics and distribution companies in the area, because it’s critical for them to run on time. Disruption and delay have the potential to seriously impact efficiency.”

Knowing if and when your business should relocate is a tough call, Farhi says.

“Are you going to stay during those works and take the hit to your productivity and efficiency? Or do you move somewhere else and take the hit now in terms of relocation costs?”

Farhi says it’s important to remember that it could be years before any physical work starts, especially for projects still in the planning or consent stage. That adds uncertainty around when the disruption will actually kick in.”

The biggest risk is to companies that ignore the issue.

“Take steps to understand what’s going on around you before you make long-term commitments, or seek advice from professionals.”

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Chris Farhi of Colliers International.