Auckland's The Feynman, planned for Great North Rd in Grey Lynn, has been paused due to a lack of pre-sales. Image / Ockham Residential
Auckland's The Feynman, planned for Great North Rd in Grey Lynn, has been paused due to a lack of pre-sales. Image / Ockham Residential
Developer Ockham Residential has had to hand back dozens of deposits to customers after failing to achieve enough pre-sales to get one of its biggest-ever Auckland apartment projects off the ground.
The Feynman 165-unit complex planned for 339-359 Great North Rd in Grey Lynn is the biggest apartment project bygross floor area outside the city centre.
But with Auckland new-build apartment sales at lows not seen in more than a decade, Ockham only achieved about one-fifth of its desired pre-sales, company co-founder Mark Todd said.
The developer has subsequently given deposits back after spending a year trying to hit its target.
“We just want people to be able to move on with their life, and we’ll relaunch it at some point, hopefully in the next six months in 2024, with the market picking up,” Todd said.
The pausing of The Feynman highlights the challenges ahead for the construction industry as well as its boom-bust cycle.
Todd said newbuild apartment sales have “fallen off a cliff” to lows not seen since 10 or 15 years ago.
Zoltan Moricz, executive director of research at commercial real estate company CBRE, said the market boomed in 2021 where there were typically about 400-plus newbuild apartment sales in Auckland each quarter.
Ockham Residential co-founder Mark Todd hopes that with the market picking up, the 165-unit Feynman project will be relaunched within the next six months. Photo / Michael Craig
This year, however, only 41 newbuild apartments were sold in Q1 and 55 in the following three months to the end of June.
But while sales are down, Todd said he’snevertheless rapt at the amount of work his company has done this year.
Ockham is set to deliver its highest number of finished new apartments in a calendar year.
That’s mostly based on sales made in 2020-21 due to construction typically lagging two to three years behind the start of projects.
“We’ve been hellishly busy and we’ve delivered close to 500 apartments - this is a record number,” Todd said.
“I’m feeling a huge sense of relief because in January, I had five unfinished projects and $450 million of outstanding projects.”
The 481 apartments across five developments the company is set to finish in 2023 is double its next best year, when it completed 240 apartments.
The two final projects due in 2023 are the 255-unit Manaaki in Onehunga and The Greenhouse in Ponsonby.
Todd calls The Greenhouse a “flagship” and a “once-in-a-career” project.
Ockham Residential's The Greenhouse apartment building is due to be finished this year.
Its distinctive green-glazed bricks are designed to reflect the green of west Auckland’s Waitākere Ranges, while the style of the building would be at home in classic US neighbourhoods, he said.
“It really is more of a Chicago- or New York-style building with an Aotearoa twist,” he said.
Last week, the construction covers came off giving Aucklanders the first chance to see and judge it for themselves.
The way forward for residential apartment builders is less clear.
However, Todd said there are signs of the green shoots of recovery, with Ockham having just had its best week of sales in 18 months.
The general consensus across the property sector is also that house prices have finished falling, he said.
That should have a positive impact on the newbuild market, as making pre-sales in a falling market is notoriously hard as customers hold out in the hope of lower prices, Todd said.
Todd’s optimism also tallies with new figures out by property analysts OneRoof and Valocity.
New Zealand’s quarterly house prices have just recorded their first rise in 16 months.
The nationwide average property value grew 0.8 per cent to $952,000 in the three months to the end of September, on the back of stronger-than-expected sales activity in the lead-up to spring.
Auckland’s average property value also rose 1.6 per cent over the past three months to $1.3m.
OneRoof editor Owen Vaughan said the lifts are surprising given interest rates are still high and home buyers are being squeezed by cost-of-living pressures.
“Huge demand from Kiwis competing for a small pool of properties and stronger-than-expected immigration are driving growth,” he said.
Vaughan said while the number of homes for sale on the market has grown, they are still below historical levels.
“Auckland new listings in September were up 13 per cent year-on-year, but total listings were down 8.5 per cent over the same period,” he said.
Ockham’s Todd said that because apartment construction lags sales by two to three years, there is likely to be a lull in newbuilds in 2024.
“This year we pulled down five cranes, next year we’re putting up one at this point,” he said.
“There’s lots of projects consented and ready to go, but it will take a few years for the crane count to get back up in the apartment market.”
Ockham has augmented its construction portfolio by taking on a number of smaller and mid-sized projects that are easier to get off the ground because they require fewer pre-sales.
Big projects like The Feynman typically need to be launched in stronger markets so the large pre-sales targets needed to make them financially viable can be met, Todd said.
He said it is “frustrating” to hit pause on the project - which now sits as a large bare block on Great North Rd - but that’s the way the industry cycles go.
“We’re passing north of $20m invested in buying the land and getting a resource and full building consent for the project,” he said.
“But I’ve been in property development for 27 years now and this just happens.”
Nevertheless, Ockham remains confident it can relaunch the project soon, perhaps in 2024.
