What's stopping residential development in Christchurch's CBD?
On 31 July, Property Council's South Island Branch hosted an event that explored the barriers, challenges and opportunities facing residential development in the Christchurch CBD. Tom Barclay, JLL's Associate Director of Research and Consulting presented his findings from a recently-commissioned piece of research, Jane Budge, Senior Advocacy Advisor at Property Council New Zealand presented some potential Property Council endorsed solutions to the barriers and challenges relevant to our South Island members, while Anna Elphick of ChristchurchNZ outlined the importance of a vibrant, liveable CBD and how ChristchurchNZ in partnership with others, is profiling, activating, attracting activity and people to the CBD.
With over 160 registered attendees, the event was very well received and has sparked a conversation into potential solutions with the primary stakeholders, particularly those under the Christchurch City Council umbrella. A further meeting was held on 1 August with both local and central government officers, to discuss initiatives to encourage residential development and ensure that momentum would continue. Property Council will continue to drive this issue forward with both local and central government elected officials to ensure your voice is heard.
In this article we explore the findings of the research report that formed that basis for this event.
What is the Christchurch Central Residential Research project?
In early 2018, Property Council's South Island Branch Executive commissioned JLL to carry out an independent piece of research to review the future of the Christchurch Central Residential property market. 22 interviews were conducted, with a focus on the developer segment of the market - those at the 'coal face' during all phases of the development process. This included representatives from the property development community, banking, public sector, architecture, engineering, academic, construction and real estate sectors.
This research aimed to answer two key questions:
- Why has there been limited residential development in Christchurch's Central City post-quakes?
- What can the Property Council do to promote and facilitate Christchurch Central's residential development?
Barriers to residential development
Barriers to Central Christchurch residential development were broken into three categories; major barriers, moderate barriers and minor barriers.
- Construction costs - cost does not equal value
- Land value - no compulsion to develop or sell
- Consenting and compliance - cost and timeframes
- Delays to Anchor Projects - doubt and uncertainty
- East Frame residential development - the "wait and see" approach
- Suburban university - a missed opportunity
- Funding restrictions - feasibility tight
- Presale requirements - 100% debt the norm
- Competition from Christchurch suburban residential
- Competition from the Waimakariri and Selwyn districts
- Urban design requirements
- Car parking - it's in our DNA
- Lack of community - it will come with time
- Public transport - not an issue for CBD dwellers
- Lack of retail and amenities - on the improve
- Lack of schooling options - families not the target market
- Planning restrictions - it's the application that matters
- New neighbourhood residential zoning - a non-issue
Key drivers to residential development
During the research, some key drivers for CBD living were identified, many of which are currently deficient in the Christchurch market, resulting in limited post-quake development.
Key drivers included:
- A limited 'apartment culture' in Christchurch
- Lack of certainty makes residential development riskier for developers
- Construction costs - particularly in Christchurch where additional land remediation or specialised foundations are often required
- Price to buy - in Christchurch, there is limited price differential between houses in a number of fringe CBD suburbs and new stock in the CBD
- In other cities, people live in the CBD due to two factors - price and convenience - but in Christchurch it is possible to buy a relatively affordable house close to the CBD with a limited commute time, making the CBD purchase less attractive (particularly during the regeneration phase of the CBD, where the amenities are still to come).
- Lack of customers - while the Christchurch Central office market is now re-established, it is relatively small (~340,000 square metres) compared with Auckland and Wellington, which both exceed 1,200,000 square metres. The scope for growing the number of professionals living in the CBD is therefore limited.
- Critical mass - What drives successful apartment markets is a critical mass of end users, which is another area where Christchurch is deficient.
Property Council's position
It is our view that there are a number of opportunities to entice residents and visitors back into the central city. The immediate 'low hanging fruit' includes:
- Free car parking
- A focused and cohesive marketing campaign
- Improved public transport
- Completion of the anchor projects
- A clear strategic vision for the central city
- Incentives such as rates relief, exemptions, etc.
In the medium-term, increasing options for tourist accommodation and improving consenting processes with a dedicated CBD consenting team are both viable options.
When it comes to the big picture, incentives that encourage businesses and people to move to Central Christchurch, increasing student accommodation in the CBD, welcoming new immigrants and even thinking laterally to create staff accommodation for organisations such as the Defence Force could all be considered.
While several potential solutions were unearthed, the report argues that ultimately most of these are tweaking at the fringes and won't structurally change the current market dynamics - they are correct, there is no silver bullet.
The report suggests that the key focus should be on growing the end user base (demand) for CBD residential property by promoting Christchurch as the South Island's lifestyles, business, events and education hub. We need:
- More people moving to Christchurch for its affordable housing and better lifestyle (relative to the other two main centres) and then choosing to live in the CBD rather than the suburbs
- More businesses opting to have an outpost or their HQ in Christchurch Central
- More international events coming to Christchurch, driving demand for short-stay residential accommodation and creating housing demand from the employees who host and run these events
- More students living in the CBD. Growing the number of students attending both Canterbury and Ara with a greater presence from Canterbury University in the CBD.
The aim of having 20,000 residents in Christchurch Central is unrealistic within the purported timeframes. That number is more than Wellington's CBD which only has 16,300 residents - despite having 1.2 million square metres of office stock and the university in town with over 17,000 EFTS. Christchurch Central by comparison only has around 340,000 square metres of office stock and a smaller university (12,500 EFTS) which is located in the suburbs and unlikely to move in our lifetime.
There were only 8,200 residents in the CBD pre-quakes. Reaching 20,000 is a 142% increase on this number. From today's figure of 5,860 that increase is 241%. Given the city's entire population only surpassed pre-quake levels in 2017, reaching 20,000 CBD residents is admittedly ambitious.
The key question raised is:
What reasons are there to live in the CBD in 2018 that didn't already exist in 2010?
If any substantial increase to CBD population is to be achieved, the report suggests there should be a shift in focus to supporting solutions that promote residential demand generators (CBD businesses, education providers and events), assist in the feasibility of CBD development and improve the desirability of the CBD as a place to live.
We all want an accessible, vibrant, thriving central city, a centre that welcomes visitors and embraces residents - let's create a place where people want to live, play and explore.