“In fact, we didn’t choose apartments; apartments chose us.”
According to RCG data, architectural practice Paul Brown & Architects ranks second by the total number of apartments designed.
Its director, Paul Brown, told YIJU New Zealand that the practice does not specifically target the apartment market. As development professionals, they simply happened to have many clients involved in apartment development in the 1990s.
In 2017, Auckland received building consents for 2442 new apartments, accounting for three-quarters of New Zealand’s total apartment consents. This might appear to be the peak of Auckland apartment development, but it is not. More apartment consents were issued in the early 2000s than are being issued now.
What is beyond doubt, however, is that after a four-year lull in apartment development from 2008 to 2012, Auckland’s apartment market has entered a vibrant period of growth. A new context, new market demands and new participants have brought apartment construction and development in Auckland into a more mature phase.
Concerns beyond the CBD: can apartment prices absorb rising costs?
The 2016 Auckland Unitary Plan changed zoning definitions and increased permitted development density in some areas, offering more location options for apartment development.
Having witnessed the ups and downs of Auckland’s apartment market, Paul Brown has also seen market demand change established practices. Most apartment development used to be concentrated within the traditional CBD. Now, many projects are located beyond it.
Industry participants say that providing parking for apartments outside prime locations would force developers to raise prices beyond buyers’ budgets. The Auckland Unitary Plan has responded by removing the requirement for apartments to provide parking.
Recently, a 33-unit apartment building drew complaints from neighbouring businesses because it provided no residents’ parking. Daisy Apartments is in Kingsland. Its developer, Ockham Residential, describes it as its best attempt at sustainable, low-carbon urban living.
Some commentators say apartments without parking are an inevitable change for the industry.
However, investors no longer dominate the apartment market. “The apartment market is now moving somewhat towards owner-occupiers.
” Paul Brown says these apartments tend to be quite different. People leaving large houses for apartments first have to face a reduction in living space. But they still need at least two or three bedrooms to maintain their existing living arrangements. They also need features such as parking.
Paul Brown believes developers will continue to provide parking. Owner-occupiers want it, and that demand allows developers to charge buyers for parking spaces to cover the cost.
Apartment prices in areas such as Newmarket, Ponsonby and Parnell are high enough to cover development costs, including parking. In some other neighbourhoods, however, prices cannot support parking costs, prompting the development of small apartments without parking.
Where density is limited, parking costs are an important consideration. “It may only be possible to afford parking on high-value land. Alternatively, parking can go in a basement, but that limits the number of spaces available.”
Paul Brown recalls a period when Auckland Council stopped charging high development contribution fees for residential developments.
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After that policy changed, substantial fees began to be charged through organisations such as Watercare. It took the market a long time to adjust to the higher costs.
“Apartment prices need to rise enough to absorb the costs.” Those price adjustments must also stay within what buyers will accept.
Paul Brown says that in New Zealand, or at least in Auckland, apartments cannot be sold for more than houses in the same neighbourhood.
The market reality is that, at the same price, people will choose a house over an apartment. People still tend to see standalone houses as better than apartments.
Many apartment projects are cancelled because of feasibility problems. Presales and rising costs are among the factors that can affect apartment developers. Paul Brown says forty to fifty per cent of construction costs go on engineering.
From an architectural perspective, specific adjustments can be made to costs. Apartment fit-outs, for example, can focus on features people are willing to pay for. Once substantial spending on structural engineering begins, it is difficult to stop, and buyers may struggle to recognise its value.
“So we keep the engineering as simple as possible to control costs.”
Paul Brown sometimes participates in early contractor involvement arrangements and finds that main contractors do not really know how much construction will cost, but simply combine subcontractors’ prices.
“They generally cannot advise on how to make a design cheaper, and they do not understand work such as plumbing and electrical installation either. The main contractor simply organises these people to work on site. That makes it difficult for us to obtain useful information for controlling costs.
To control costs, Paul Brown’s practice mainly works with independent third-party quantity surveyors, who understand market costs and quantify the costs at each stage.
The practice also draws on past experience to balance design and cost.
Stronger regulatory standards offer greater assurance of apartment quality
The gradual shift from an investor-led apartment market to owner-occupiers also means the focus of development is on “high-quality apartment buildings, rather than primarily on yields, as in an investor-led market”.
“If you want good design quality, you need to follow the rules, and that takes a lot of work.”
On regulation, Paul Brown has also noticed that Auckland Council’s requirements for consent applications are stricter than during the previous apartment boom in the late 1990s and early 2000s.
Specifically, at the resource consent stage, Auckland Council places considerable emphasis on how developers will achieve the objectives and outcomes proposed on paper. At the building consent stage, it focuses on avoiding liability arising from building problems.
Paul Brown says Auckland Council requires comprehensive, detailed documentation to demonstrate that it has fulfilled its responsibilities. If problems arise during construction, it does not want to be drawn into trouble because it issued the building consent.
Changes in regulatory approval processes have affected some architectural practices. “It is becoming more complex and more technical.” Paul Brown says Auckland Council has raised its technical regulatory requirements.
It wants this information in advance, rather than gathering it on site. A more formal set of documents is therefore now required to obtain building consent. “Our timeframes are now longer, and our costs are higher.
Regulatory standards also continue to change. Last year’s catastrophic fire in a London high-rise apartment building prompted the council to change a rule.
The council decided that external cladding must meet non-flammability requirements and undergo testing. Previously, attention focused mainly on the outer surface; now the underlying layers must also be considered.
Although this creates greater challenges for professionals, the benefit is that buyers can obtain apartments with stronger quality assurance.
However, Paul Brown is also concerned that the industry’s capabilities are better suited to building one- or two-storey standalone houses than large, complex projects. The industry needs to improve its capabilities to meet future development trends.
“The process may be uncomfortable, but the final outcome is good.”
Written by Abby Chen
Layout by Jiayu Li