Impact of Re-Zoning Area 6, Papakura District

Prepared for

Takanini Structure Plan Area 6 Ltd

with

Phil McDermott Consultants Ltd

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November 2007

Covec is an applied economics practice that provides rigorous and independent analysis and advice. We have a reputation for producing high quality work that includes quantitative analysis and strategic insight. Our consultants solve problems arising from policy, legal, strategic, regulatory, market and environmental issues, and we provide advice to a broad range of companies and government agencies.

Covec develops strategies, designs policy, and produces forecasts, reports, expert testimony and training courses. Our commitment to high-quality, objective advice has provided confidence to some of the largest industrial and governmental organisations in Australasia.

Authorship This document was written by Reuben Irvine, Nikhil Atreya and John Small of Covec Ltd, in association with Phil McDermott Consultants Ltd. For further information email john@covec.co.nz or phone (09) 916-1966.

Disclaimer Although every effort has been made to ensure the accuracy of the material and the integrity of the analysis presented herein, neither Covec Ltd nor its agents accept liability for any actions taken on the basis of its contents.

©Copyright 2007 Covec Ltd. All rights reserved.

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Covec limited Level I 1 Gen-i tower 66 Wyndham Street PO Box 3224 Shortland Street Auckland New Zealand t: (09) 916-1970 f: (09) 916-1971 w: WINW.covec.co.nz

Contents

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-------------------Executive Summary ................................................................................................................ I

1. Introduction/Background ............................................................................................. 1

2. The Market for Industrial Land ....................................................................................... 2

2. 1 . The demand for industrial land ................................................................................ 2

2.2. The supply of industrial land ......... ... ... ...................................................................... 4

2.3. Prices ............................................................................................................. ...... .......... 6

2.4. Conclusion ................................................................................................................... 7

3. The Market for Residential Land ................................................................................... 8

3. 1 . The demand and supply of residential land ......................................................... 8

3.2. Conclusion .......................................... ......................................................................... 8

4. Characteristics of Area 6 ............................................................................................... 9

4.1. Desirable characteristics of industrial land .... .. ...................................................... 9

4.2. Businesses' site investment decisions .................................................................... 11

4.3. Desirable characteristics of residential land ............................... ........................ 11

4.4. Characteristics of Area 6 .................... .............................. ............ ........................... 12

5. Impacts of re-zoning Area 6 ....................................................................................... 14

5. 1 . Expected use of Area 6 ........................................................................................... 14

5.2. Impact on investment .............................................. ............................................... 16

5.3. Impact on employment ........................................................ .................................. 1 7

5.4. Impact on production ......................................... ................................... ................. 20

5.5. Impact on transport infrastructure ........................................................................ 20

5.6. Residential Impact .................................................................................................... 20

5.7. Social impact ..... ................................................................... .................................... 21

Appendix .............................................................................................................................. 22

Executive Summary -=-------- -

The market for industrial land in the Papakura District, surrounding South Auckland areas, and Auckland Region, has witnessed strong growth in demand coupled with a fall in availability. This has led to substantial increases in the price of industrial zoned land.

This dwindling supply and the correspondingly high price of industrial land raises the costs to businesses of investing in productive enterprises in these areas. The fall in suitable land available and the increased cost of acquiring premises raise a barrier to investment in the District and the region. This reduction in investment has negative consequences for an area in terms of lower output and fewer jobs. These consequences can in tum have negative social impacts, for instance fewer local job opportunities lead to higher levels of unemployment, especially for lower-skilled individuals, underemployment, and increased commuting. If the capacity to sustain jobs locally does not grow, expectations for increased local population may need to be revised downward. This is especially problematic in Papakura, which is seen as a target for significant population growth over the next 10 to 20 years according to the Auckland Regional Growth Strategy. The Auckland Region Business Land Strategy, a subset of the Growth Strategy, seeks to enable local employment opportunities across the region to support existing and projected population growth to allow residents to live, work, invest and play locally.

One method of addressing this situation is to allow currently non-industrial zoned land to be re-zoned for industrial use. This should occur where such land is most suitable and where re-zoning would Lead to sufficient benefits to the community as a whole.

Rezoning Area 6 in north Takanini provides an opportunity to alleviate the diminishing supply of industrial land in Papakura District and South Auckland. Area 6 is located next to an existing industrial area and has a number of characteristics that make it well suited to industrial use. These include proximity to major transport infrastructure, other industrial facilities and a large, and growing, local population.

Re-zoning much of this land for industrial use would favour increased investment in Papakura and the establishment and expansion of a number of businesses. The largest group of potential businesses are those involved in manufacturing and construction. Other significant users are likely to be warehousing and transportation businesses. Area 6 could also accommodate a range of personal and business service firms, including some retail and office based activities. Because one side of Area 6 borders an existing residential area, this part of Area 6 could be re-zoned to allow for residential use. This would ensure that there is a 'buffer zone' of residential land between existing residences adjacent to Area 6 and should remove the potential for existing residents to suffer from any disamenity from any industrial re-zoning. Those who choose to reside in the new residential segment would do so in the knowledge that the remainder of Area 6 would be zoned for industrial use, so any aversion to this zoning would be fully capitalised into sale prices.

Covec: Rezoning of Area 6. Papakura

Based upon our analysis, we expect that the investment that would result from re­zoning Area 6 would facilitate the creation of nearly 3,000 new jobs in the Papakura District once the land is developed. Development may take two years, occupancy to its full employment capacity is likely to take longer. When it occurs, however, this level of job creation would be equivalent to a 20% increase in current level of full time jobs within the District. This would generate around $250 million of output per year at capacity, and just over $100 million in wages and salaries.

In summary, rezoning much of Area 6 for industrial use would meet a regional and district economic need for increased industrial and business capacity and does so at a favourable locality in terms of transport efficiencies. Rezoning would be an important contributor to the Auckland Regional Growth Strategy by providing for employment growth in an area targeted for residential expansion. It would also play an important part in providing a range of employment opportunities to cater for a diverse local workforce that has a mix of blue collar and white collar workers.

Covec: Rezoni119 of Area 6. Popokuro ii

1. Introduction/Background Area 6 comprises 54.24 hectares (134 acres) of land in the northern Takanini area of Papakura District. This land is currently zoned for rural use.

This report considers the effects of changing the zoning of Area 6 to Urban Industriall, Urban Industrial3 and Residential zones, as defined in the Papakura District Plan. This provides for the land to be used for a greater range of uses than is currently the case, including industrial, retail, mixed and residential uses. On a net basis (ie excluding the 8.8 ha of roading, reserves and ponds) approximately 90% of Area 6 (41 ha) would be re­zoned for industrial use, the remaining 10% (4.4 ha) would be used for residential dwellings.

Section Two of this report describes the prevailing conditions in the market for industrial land in the Auckland region in general, and Papakura District specifically. Section Three briefly outlines the conditions in the market for residential land in the south Auckland area. Section Four describes the characteristics of Area 6 and compares these with the characteristics that make land desirable for industrial and residential use. Section Five outlines the major economic impacts that would result from re-zoning, given the market conditions and the characteristics of Area 6.

Covec Rezoning of Areo 6. Popok.uro

2. The Market for Industrial Land The state of the market for industrial land in the Auckland Region and in South Auckland would have the Largest influence on the effects of re-zoning Area 6. This section examines recent demand and supply trends in the Region.

2. 1. The demand for industrial land The demand for industrial land in the Auckland Region has grown in recent years, in keeping with the Region's strong economic growth.

Demand for industrial land in Auckland has grown substantially over recent years. Nearly 800 ha of business land has been absorbed since 2001 (at a rate of 158 ha per year), with much of this used for industrial purposes. Within Manukau City the uptake of industrial land was lower early in the decade but has been between 60 and 75 ha per year over the last four years (see Figure 1).

Figure 1: Uptake of lndustrial Land in Manukau

80

70

60

~ 50

I 40 j 30

20

10

0 2000 2001 2002 2003 2004 2005 2006

Year Endini February

Source: Bayleys Research

In Papakura, an estimated 37 ha of business land has been taken up since 2001, with the majority of this being industrial (Table 1 ). Industrial land has been taken up at around 7 ha per year. Note that this figure refers to 'net' available industrial land, after provision has been made for reserves, utilities and roads, rather than 'gross' vacant land.

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Table 1: Take up of business land in Papakura

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0.49 11 99 1 49

0.25

0.49 13.48

2.82

2.11

Source: Papakura Economic Development Strategy, Final Report, September 2006, Oram & McDermott.'

These figures suggest that demand for industrial land is strong in the Auckland region generally, and within the Papakura District more specifically. Anecdotal evidence suggests that this growth has slowed recently from the high levels of recent years. This slowdown correlates with a slowing of the growth of GOP for Auckland and New Zealand (Figure 2). However, those in the market expect the demand for industrial land to recover, albeit at a lower rate than in recent years, in parallel with a cyclical recovery in GOP.

Figure 2: GOP growth, Auckland City, New Zealand

Real t:conom1c 9row h I • .. J• ,, ,. rt "1 ' t , v~

Source: NZIER

1 Because precise land absorption statistics are not available, land absorbed is estimated using figures detailing floor space developed by businesses and assumed floor area to land area ratios of 0.3 for industry and 0.5 for commercial activity. Note that as the floor space records are not complete, these figures underestimate the likely increase in activity.

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2.2. The supply of industrial land Estimates concerning the supply of vacant industrial land, particularly in Papakura District and surrounding areas, vary to some extent, but all show that the current supply is limited. Evidence of tight supply in the surrounding region can be gleaned from the rental market for industrial land. In the adjoining Manukau City, vacancy rates for industrial land available for lease have been around, or below, 5% over the past four years.2

More specifically, the amount of available land for business use has been decreasing, even as more is developed (Table 2). Within the Papakura District itself, 69 ha of vacant land was reported in November 2005.3

Table 2: Vacant Business Land in the Auckland Region4

76 82 440 249 254 123 404 297 1282 1086 147 102

Of a regional total of 6,801 ha land zoned for business, 1,306 ha was unoccupied and theoretically available for use (Table 3). However, in practice, much of this land may be held in land banks by owners with longer term plans or for speculative purposes, or this land may have characteristics that make it difficult to sell (in terms of size, shape, location , or access, for example). The share of land already occupied is very high (81% according to Table 3).

However, the measure of total vacant land used by the Regional Council (Tables 2 and 3) does not provide an accurate indication of how much land is actually available for development. For instance, a recent, detailed survey by Papakura District Council indicated that there was 80.4 ha of vacant land in Papakura (which contrasts with the earlier ARC estimate of 69ha, Table 3}, but that only a small proportion (13%) is suitable for industrial development. Specifically, 4 ha was already under development, 39 ha was in a possible flood hazard area, and much of the rest is committed to council car parking, roading, park or esplanade provision. Some of these constraints may be eased (at a cost) at some time in the future. However, at present they, together with limits on

2 Bayleys Research. 3 Review of Business Land Capacity in Auckland Region, June 2006, Phil McDermott Consultants Report to Metropolitan Auckland Project. 4 Note that vacant land figures in this table include additional land made available for future business use since 1996. For example, there was no vacant land in Franklin in 1996 or 2001, but at least 72 ha of land was made available prior to 2004.

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development at Ardmore, reduce the unconstrained pool of land to just 10.4ha, or 3% of Papakura District's total business land. Only Takanini North appears to have any signjficant capacity realisable in the near future, and this represents just 9% of total business land in the Papakura area.

Table 3: Business Land Occupied (%) & Total Future Capacity, Auckland Region

c A ·1 bl C

Zoned Occupied Share

Vacant Future Total Occupied

Rodney 348 265 76% 83 238 321 North Shore 813 654 80% 159 159 Waitakere 586 488 83% 98 200 298 Auckland City 1778 1648 93% 130 130 Manukau 2328 1613 69% 715 25 740 Papakura 421 352 84% 69 Takanini - 78 177

Hingaia- 30 Franklin 527 475 90% 52 52 Total 6801 5495 81% 1306 571 1877 Source: Auckland Reg1onal Council, local counc1ls

Additionally, these figures do not account for the possibility that some vacant land may be subject to land banking and, therefore, would not be available for early release. Alternatively, there may be pressure to use some of this land for non-industrial use, such as specialised retail or residential activities.

Table 4: Available Business Land in Papakura

44.9 0.7 1% 26.7 2.4 2% 109.4 15.9 1%

26.3 3.6 5% 117.8 38.3 0%

Source: Papakura District Council,, September 2006, as reported in Oram & McDermott.

Using the recent annual average rate of take-up of industrial land of 7 ha (based upon 34.9 ha of land absorbed since 2001, as indicated in

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Table 1), the fact that only around 10 ha is currently available suggests that the dwindling supply of available land is likely to constitute a serious impediment to continuing investment in Papakura in the near future. The relatively small size of this remaining pool may also create considerable pressure to re-zone the lSha for Hingaia and the 78 ha identified for future development at Takanini (some of which is likely to go to non-business uses).

Further evidence of the small supply of land comes from reports from property valuation and real estate companies. Although it appears that additional industrial land is available in Manukau City, including land near Auckland Airport, this tends to be more expensive and may not provide a suitable substitute to industrial land in Takanini. Similarly, additional land may become available further south in the Franklin district, although a significant proportion of the land that has been made available in Franklin has already been taken up, and there will be a more limited demand for the balance given its greater distance from the Auckland market and labour catchment.

2.3. Prices A crucial indicator of the state of the market for industrial land is the price of land zoned for industrial use. Figures from several sources point to a large increase in the price of industrial land, not just in Papakura but also in surrounding districts and in the Auckland region more generally.

Figure 3: Prime Industrial Property Price Index, Auckland

171

Y-o-Y 1A

15e Alllltlllndu

~V.,_Indu

uo

130

121

111

101

• •

1- Renbl - Capl.al Value l Source: CoUiers International. Index june 1995 = 100.

Sales figures relating to plots of industrial land in a subdivision adjacent to Area 6 indicate that the price of such land is $240 per m2 for sales taking place in 2006.5 Prices for similar sized plots within the same subdivision in 2004 and 2005 were $200 - $210 per m2• This compares with reported prices for similar industrial land within the Papakura District four or five years previously of around $60-$80 per m2.

5 Property VaJuations Ltd.

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The difference equates to a price increase of around 200%. This is mirrored in industrial land prices in nearby Manukau/Wiri, where prices have increased from $75 - $85 in 2001 to $180 -$275 in 2006,6 an increase of roughly 200%. By way of comparison, the Producer Price Index, which measures the costs of inputs to production, has increased by roughly 15% since 2001, suggesting industrial Land costs have become a much heavier burden relative to other productions costs for businesses in the area.

2.4. Conclusion Taken in isolation, the significant increase in the price of industrial land could be considered to be the result of either an increase in demand or a reduction in the supply of available land. Either way, the impact is Likely to be inflationary, to disadvantage new producers, and forestall investment in some activities.

Given the evidence above, the market for industrial land in the Auckland Region, and the Papakura District in particular, can be characterised as having strong demand but a dwindling supply. Both of these effects have combined to place severe upwards pressure on prices. This characterisation of the market is supported by various real estate and property valuation companies?

Table 5 indicates how long it would take for the current estimated supply of vacant business land, and future planned business land, to be completely taken up if annual demand was either 120 ha per year or 150 ha per year. As a comparison, over the past five years, industrial land has been taken up at a rate of 158 ha per year.

If land were to be taken up at the higher rate, all current vacant business land in the Auckland Region, including land that may not in fact be available or suitable for development, would be taken up in less than nine years.8

Table 5: Years of Business Land Remaining, Auckland Region

6 lndustrial Property Research, Second Half 2006, Bayleys Research, Commercial Property Research, August 2006, Bayley's Research, lndustrial Market Update, May 2006, Colliers International. 7 Bayleys Research, Colliers International. 8 This calculation is more for indicative purposes, as take-up of land would be expected to slow as available land disappears because the contraction in supply would lead to price increases which would, in turn, lead to investment to be deferred, go elsewhere or be foregone a ltogether.

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3. The Market for Residential Land As a small proportion of Area 6 may be re-zoned for residential use, it is useful to consider the market for residential land in South Auckland, particularly within the Papakura District.

3.1. The demand and supply of residential land [n recent years the market for residential land for the Auckland region in general can be characterised as having strong demand and an increasingly tight supply. This has been reflected in the relatively large residential land price increases. This is also true of the South Auckland area, including the Papkura District. In the two years to September 2006 residential property prices in Papakura rose 36%.9 This has coincided with an increase in Papakura District's population of 11.1% in the five years to 2006.10 Over this time, nearby Manukau City was the fastest growing city in New Zealand, with population growth of 16.2%. Franklin District also experienced substantial population growth (14.1%), with only one other district in the country having a higher population growth rate (Rodney District, also within the Auckland region). This increase has had a substantial impact on the demand for residential land.

In contrast to the large increase in demand for residential land, the increase in the amount of residential land supplied has been limited in comparison. Recent analysis suggests that a Limited supply of land and difficulties in obtaining resource consents have constrained any increase in the supply of residentialland.11

3.2. Conclusion The strong demand for residential land in conjunction with the relatively tight supply has led to a substantial rise in residential land prices both throughout the Auckland region, and within the South Auckland area and Papakura District. Although this provides a positive wealth effect for existing propoerty owners, it has raised affordability for first time home buyers. Allocating a further 4ha of residential space through the rezoning of part of Area 6 will have only a minor impact on the residential property market.

9 Bayleys Research," Auckland Residential Report" December 2006. 10 Statistics New Zealand, Census 2006. 11 Motu Economic and Public Policy Research, "Housing Supply in the Auckland region 2000-2005",

March 2007, for the Centre for Housing Research, Department of Building and Housing and Housing

New Zealand Corporation.

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4. Characteristics of Area 6 [n considering the addition of Area 6 to what is an increasingly limited supply of industrial land, it is useful to consider at the same time the specific characteristics that make a site desirable for industrial use. Because a small proportion of Area 6 could be available for residential use if re-zoned, it is also useful to briefly consider the desirable charateritics of residential land.

4.1. Desirable characteristics of industrial land The main factors influencing the attractiveness of industrial land can be categorised as location and specific site characteristics.

Location The location of industrial property is important for a number of reasons. Specific factors include proximity to:

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• Markets: These may be the market for final consumers accessed through wholesalers, retailers or direct showroom sales; export markets via access to the port or airport; or intermediate markets via access to other producers who require materials, parts, components or services. Proximity to customers may be important to ensure prompt delivery, or close attention to product specification through a close working relationship. As a result of these influences, a business complex or cluster may build up in an area, around an array of local demand and supply linkages. The building materials and concrete products businesses in the south of Papakura District represent one such complex.

• Suppliers. This can help reduce the costs of inputs. Proximity to critical suppliers may also ensure a better understanding of needs and a better capacity to fulfil them. When the items supplied are bulky, time sensitive, or fragile, close proximity can significantly reduce delivery costs and minimise risks associated with a company's supply chain relationships.

• Labour. As with other inputs and suppliers generally, having good access to a ready supply of appropriate labour (with the right mix of skills and experience) is important for businesses. This is especially the case for labour-intensive activities or those that require specific vocational skills or particular types of labour, such as low-skilled or high-skilled.

• Transport. Proximity to markets and suppliers reduces the direct costs of transport and the costs associated with time in transit. However, as businesses grow, markets and sources of supply often become widely dispersed. Under these circumstances, easy access to good transport systems and infrastructure (including road, rail, airports and ports) will reduce costs, increase responsiveness, lower wait times and give greater flexibility of production and inventory management.

• Competitors. This may be important to businesses who are more oriented towards 'final-consumers' for whom a significant proportion of their business comes from walk-in customers. Having a presence near competitors is important to facilitate comparison purchases. It also enhances the competitive information available to companies. [n the face of third party competition or significant

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growth opportunities (e.g., from a shift into exporting), proximity may facilitate collaboration and rationalisation of facilities. Proximity to competitors also ensure proximity to a labour supply with appropriate industry skills and knowledge.

• Owner/s. For smaller businesses, which may have more flexible as to where they can be located, owners may consider it important that the business is close to their personal residence. Indeed, the dynamics of business development are such that new businesses tend to be located close to the owner's residence simply as a matter of course. As a business develops, however, more economically critical location criteria identified above come into play.

A number of these factors contribute to the natural emergence of distinctive clusters of businesses. Firms may be Linked by seeking access to a common pool of labour skills and experience, sharing specialised services, or dependence on common suppliers. Increasingly economic development agencies and business land developers encourage the emergence of such clusters and market particular localities and sites to investors to generate growth by promoting synergies among linked firms. At this stage, there is no sign that the Papakura District has any such distinctive clusters outside a small number of relatively large building materials and structural component manufacturers in the south of the District and close to Drury. However, Papakura does have good proximity to the rapidly expanding residential precincts of South Auckland and the growing industrial complex of the Southern Sector as well as good motorway connections to Auckland's port and airport. These features have given rise to a relatively diverse collection of manufacturers, transport and storage operators, and service businesses.

Site Characteristics For many investors in industrial land, the size of plot and buildable floor area is an important determinant of site selection. If a plot is too large for a particular use, the investor is faced with unnecessarily high purchase or rental costs. These may be offset in due course by subdivision or leasing the surplus area, although these actions may also be a distraction from their principle business. Conversely, if a plot is too small it may not even be considered for a particular uses or, if developed, may limit future expansion.

To the extent that there is the potential for several adjoining lots to be purchased, they may be used as one site by a buyer. However, this is likely to be costly, the original subdivision reflecting a price expectation that would not normally be associated with a larger (consolidated) site. Site size, then, and perhaps the mix of parcels available, is an important determinant of th.e attractiveness of a development, and its cost effectiveness in terms of business requirements.

Similarly, inappropriate lot shape can be a deterrent to some uses, with residual sites often having access and manoeuvring limitations or constraining building footprint.

A second physical attribute is land form. Flat land is more likely to be desirable for industrial purposes, and allows for more streamlined and therefore efficient on-site layout and design, especially in relation to manufacturing and warehousing activities.

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The environmental condition of the site and the surrounding area is also important. Greenfield sites may be preferred to previously developed, brownfield sites. This is because users are not constrained by existing structures and do not face the costs of alterations or any long-term flow and efficiency constraints associated with existing structures. Brownfield sites may incur costs of demolition and removal of existing structures, and site rehabilitation, including, in some instances, decontamination. The impact is to delay investment in a site as weJJ as increase the direct costs of acquisition. The outcome of this combination is to discourage investment. Access to infrastructure, including water, electricity and ICT is often another important factor.

Finally, site profile and ease of access and egress may be important if the business sells to the public or to a large number of business customers.

4.2. Businesses' site investment decisions Decisions to invest in new capacity, whether in an existing or new site, generally involve first determining the desirable location characteristics, and then within the range of suitable localities, seeking out sites physically suited for the particular investment.

Should such sites not be available in the preferred location or locations, the investor has a number of choices:

1. Relax the location criteria. Such a compromise will generally entail a capital or operating cost penalty, for instance if operating from a different site is more expensive;

2. Seek a resource consent (or, at the extreme, a plan change) to get permission for development of land on which industrial or related uses are not allowed as of right under existing planning rules. Such a course imposes high transaction and delay costs and so is likely to be favoured only by large, well-resourced businesses;

3. Defer or cancel the investment. ln this case, there is likely to be a loss arising from foregone output;

4. Locate production elsewhere in New Zealand. There is some suggestion that has been happening in Auckland with manufacturing activity growing more rapidly outside Auckland, and particularly in Hamilton, over the past five years.

5. Locate production offshore. This occurs when goods are sourced from offshore suppliers, whether or not this involves a physical shift in capacity through investment in premises overseas.

4.3. Desirable characteristics of residential land There are a range of characteristics, specifically location specific, that are desirable for residential land. In relation to locational characteristics important factors tend to include reasonably close proximity to both amenities (schools, shops, parks, etc) and/or transport infrastructure.

Other features, such as views, are also desirable for many potential owners but not considered to be essential. Similarly, some potential owners have preferences to avoid

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being located adjacent to features that may provide disamenity, for example motorways, train Lines, heavy industry, landfills, airports and other similar sites that may create excessive noise, traffic or other disturbances. While some potential owners have preferences against these types of sites, others readily accept residing in dose proximity to such features provided that prices (or rents) reflect any disamenity. Overall, there is merit in providing for a range of residential options.

4.4. Characteristics of Area 6 Area 6 rates highly against many other Auckland industrial sites in Light of the desirable characteristics described above. It is approximately one kilometre from a major intersection with the Southern Motorway (State Highway 1) and 17 km from Auckland International Airport at Mangere, via the South Easte rn Motorway.12

From the Southern Motorway there is straight-forward access to the central North Island to the south and to Auckland's CBD and port to the north. Papakura is around 180 kilometres from the Port of Tauranga (but just 19 km from Port of Tauranga's inland MetroPort at Te Papapa), and less than 100 kilometres from Hamilton's industrial area atTe Rapa.

Area 6 is also in the centre of a developed business infrastructure. It adjoins existing industrial properties and is also dose to a large number of industrial and commercial businesses in the Papakura and Manukau Districts. This increases the Likelihood that business that would set up in Area 6 would be close to other firms that supply necessary goods and services. This is also an advantage to businesses that would supply goods and services to other industrial firms.

Area 6 is also relatively close to several retail areas, including Papakura and Manukau Central. It is reasonably dose to other large scale retail outlets in South Auckland, including Botany Downs and Sylvia Park.

Area 6 is in the centre of a relatively young labour market catchment area, which is expanding both as a result of natural growth and because it is favoured in the Regional Growth Strategy for a combination of residential intensification and greenfield housing, in Papakura and in nearby parts of Manukau. Hence, the Southern Sector Agreement made provision for Papakura's 2001 population of approximately 42,000 to grow to 94,000 by 2050. This growth will consist of 12,000 in existing rural and urban residential areas, 5,000 in the Papakura Central Area and 35,000 in new growth areas, such as 16,000 around Takanini and Hingai by 2021.

Jointly, Manukau City and Papakura District are projected to have 38,800 more households between 2006 and 2021 13 and over 96,000 additional members of the labour

12 It is also around 5 km west of Ardmore airfield although this ai rfield is currently genera lly used only

for general aviation purposes, including recreation, training, charters, aerial work, and maintenance

repair and overhaul. 13 Statistics New Zealand, medium projections.

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force. Re-zoning Area 6 should, therefore, help provide employment for an expanding labour force.

In terms of the physicaJ attributes affecting site development and uptake, Area 6 is suitably flat and there are no obvious impediments to the development of supporting infrastructure. We understand that, in the event of re-zoning, a range of plot sizes would be available, ranging from around 1,600 m2 to 84,000 m2. This would facilitate establishment of a range of different business. Our understanding of the demand for recently developed industriaJ land in the area is that there is greater demand for smaller plot sizes within this range. This is reflected in the proposed plan change, whereby there would be one plot of 84,000 m2, one of 42,000 m2 and approximately 70 of the remaining 75 plots would be under 5,000 m2. Of these smaller plots, around one third would be less than 3,000 m2•

In relation to suitability for residential land, the transport links (especiaJly the proximity to State Highway 1 and the Southern Train Line) that are advantagous for industrial purposes are also useful for residential purposes. Also relevant is that there are proposaJs to enhance the rail network and facilities to improve links from Papakura through Manukau and on to Auckland City. The Auckland RegionaJ Transport Authority (ARTA) proposes to upgrade Papakura Railway Station at a cost of $7 million. Service frequency is to be increased to six trains per hour at peak times.

There are a range of amenities in relatively close proximity to Area 6, including shops, a range of primary and secondary schools, libraries and recreationaJ facilities, such as parks. Shopping areas in Papkura, Manurewa and Manukau are all within six kilometres of Area 6. The close promixity of a number of retail and industrial zones, including potentially Area 6 itself, would assist in providing employment opportunities for residents that are nearby.

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The major economic impacts of re-zoning of Area 6 include impacts upon employment, transport infrastructure and general economic activity (output). The precise nature of these impacts depends upon the final land use mix in Area 6.

5.1. Expected use of Area 6 Almost half of industrial land in Takanini North is currently used for manufacturing and construction (Figure 4 and Table 6). Other significant uses include wholesale trade, transport and storage (described as warehousing}, which collectively account for just under a third of the land area. There is also retail activity and office space, occupied by businesses providing property, business and some personal services.

Figure 4: Industrial Land Usage(%) Takanini North

Takanlnl North Industrial Land Usage

• Agriculture, Forestry and Fishing

• Manufacturing

I o Construction

I o Wholesale Trade

• Retail Trade

Ill House

• Transport and Storage

o Property and Business Ser.1ces

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• Cultural and Recreational Ser.1ces

\ • Personal and Other Ser.1ces

Source: Derived from Draft Papakura Business Zoned Land Use Survey, 2006

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Table 6: lndustrial Land Usage (m2, %), Takanini North

ANZSIC Classification m2 %

!Agriculture, Forestry and Fishing 2,550 0.6 Manufacturing 142,244 31 .0 Construction 82,000 17.9 Wholesale Trade 41,928 9.1 Retail Trade 38,196 8.3 House 20,507 4.5 Transport and Storage 95,710 20.9 Property and Business Services 915 0.2 Cultural and Recreational Services 362 0 .1 Personal and Other Services 34,529 7.5

Source: Derived from Draft Papakura Business Zoned Land Use Survey, 2006

Activities already located in the area point to the sort of activity that might be expected to locate in Area 6. Manufacturing in the area is currently diverse. It covers, among others things , the production of beds, blinds, aluminium joinery, pet clothing, refrigeration units, steel, truck bodies and trailers, frozen foods, packaging and concrete. Construction businesses located at Takanini North include builders' yards, drain layers, earthmovers, excavators, roofers, plumbing suppliers, kitchen manufacturers, house movers and other contractors. Wholesalers include firms providing animal feed, stock food, catering supplies and retail building supplies. There are some transportation related activities and storage facilities include a complex of storage units. Professional services provided in the area include civil engineering. The Appendix provides a full list of existing activities undertaken on industrial zoned land in north Takanini.

Another pointer towards the potential future use of Area 6 is resource consent data. Over the past 11 years nearly half of all consents issues, measured by floor space, relate to "factories and powerhouses" and similar structures (Table 7). Approximately 30% relate to warehousing, with the remainder to offices and retail (including hospitality).

Table 7: Building Consents by Type (New Floorspace m2), Papakura District

Factones Off1ces and Shops Taverns

Year I Oct· Sepl Powerhouses Warehouses Total etc

Adm1n1strallon and Restaurants

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1995-1996 10,905 1,004 0 4,294 16,203 1996-1997 9,525 634 1,916 12,186 24,261 1997-1998 13,128 112 1,310 10,688 25,238 1998-1999 16,446 3,931 7,400 3,794 31,571 1999-2000 13,083 4,407 1,583 2,649 21,722 2000-2001 7,847 1 '107 512 8,880 18,346 2001-2002 5,263 28 3,953 7,828 17,072 2002-2003 6,755 342 3,503 6,346 16,946 2003-2004 13,967 466 20,108 8,923 43,464 2004-2005 8,799 3,241 3,056 5,798 20,894 2005-2006 17,917 1,287 2,345 5,999 27,548

Total 123,635 16,559 45,686 77,385 263,265

Percentage Share 4 7''1" 6 °1 17°1· 29 100 1

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Source: Derived from Statistics NZ

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Because the resource consent data refers to the entire Papakura District it includes central Papakura, which incorporates the CBD, where there is a much higher proportion of retail activity than is the case in more industrialised areas such as Takanini North.

Based upon the current usage and recent trends in the nearby industrial areas, we estimate the approximately 50% of industrial zoned land in Area 6 would be used for manufacturing and construction activities ('factories and construction'), 30% wholesale trade and transport and distribution ('warehousing'), 10% retail and 10% office space (including some mixed-use). This suggests a substantial contribution to and continuation of industrial activity in the District and is consistent with the range and size of suggested plots set out in the proposed plan change.

However, the ongoing rationalisation of global trend of manufacturing, favouring the movement of labour-intensive activities moving to lower-wage jurisdictions, like China, may mean that there could be a relative decline in this type of activity. Other than those producers meeting short-run or one-off demands for the local market (especially supplying the construction sector, for example), labour intensive activity can be expected to be replaced by more capital-intensive manufacturing.

If this is reflected in a reduction in the space committed to manufacturing, this could well be offset by an increase in construction-related activity. The planned increase in residential development in, and close to, Papakura District over the next decade and beyond is likely to create significant demand for construction focused activities. Similarly, a general trend throughout New Zealand, as with many developed countries, is for an increase in importance and size of service industries, including professional services, reflected in their expansion into business land, including erstwhile industrial precincts. This suggests that the proportion of land used for office and retail space is unlikely to diminish from existing levels.

5.2. Impact on investment The addition of a substantial area of industrial land in this location would provide capacity for potentially diverse additional investment. In the absence of re-zoning, this investment might otherwise be deferred, located elsewhere or even foregone.

Without additional land being made available in the region, the increased cost of acquiring industrial land may mean that some industrial activities are no longer viable. This effectively puts a brake upon some investment and causes a reduction in the level of economic activity and employment growth that would otherwise occur.

To the extent that invesbnent is deferred, the value and benefits that flow from it, for instance employment and output, are lost for the period of any deferral If investment is directed to another locality, it is lost to Papakura District, and potentially also to Manukau City. This would be a negative affect from the perspective the provision of employment opportunities in these Districts given their projected substantial labour force growth and likely future job needs. Similarly, if investment is instead directed to

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another region, or even another country, it could constitute a loss to the Auckland, or New Zealand, economy.

Even if businesses that would prefer to invest in the Papakura District by location at Area 6 location are obliged instead to locate at a less favoured site, there is a cost. Less preferred sites would negatively affect businesses, by, for example, being further from markets or transport infrastructure or further from a supply of suitable labour. The result would be to increase costs and diminish the efficiency or productivity of the affected businesses.

5.3. Impact on employment A direct flow-on effect from facilitating increased investment in the District is employment generation. Using the indicative mix of uses for Area 6 outlined above, the number of jobs that might be provided by businesses locating there can be determined by applying estimates of associated employment densities.

We have used several different density assumptions to estimate the employment that re­zoning Area 6 would facilitate.

5.3. 1. Low estimate

One approach is to calculate the current employment density ratio in Papakura District using existing employment and business land figures.

Papakura district employee count (2006): Papakura district occupied business land (2006):

15,030 352 ha

Density (employees per gross ha): 43 e.p.h Multiplied by the industrial land within Area 6 (on a gross basis): 49 ha Total employees: 2,100

5.3.2. Medium estimate

A further method uses results derived from Business Land Requirements Review- Western Bay of Plenty, October 2006 by Phil McDermott Consultants. The report provides a range of indicative employment densities for planning purposes based on evidence from a number of New Zealand and overseas studies. These estimates are based upon how many square metres of building floor area per employee.

To determine employment figures, the expected land use proportions estimated in Section 5.1 above are used to generate land area by usage. This land area is multiplied by floor-to-land area ratios provided in the Western Bay of Plenty Review. The employment density estimates are then multiplied by the estimated floor area for each activity.

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Manufacturing and construction (factories): Factory land area (50% of Area 6: industrial zone) Factory floor area ratio estimate

Total building floor area Density estimate (average m2 per employee)14

Employees/Ha Factory employees:

Warehousing: Warehousing land area (30% of Area 6: industrial zone) Warehouse floor area ratio estimate

Total building floor area Density estimate (average m2 per employee) 15

Employees/Ha Warehousing employees:

Offices: Office land area (10% of Area 6: industrial zone) Warehouse floor area ratio estirnate16

Total building floor area Density estimate (m2 per employee) Employees!Ha Office employees:

Retail: Retail land area (10% of Area 6: industrial zone) Retail floor area ratio estimate

Total building floor area Density estimate (m2 per employee) 17

Employees/Ha Retail employees:

Total employees: (Total Employees/Ha

24.5 ha 0.3

73,500 m2

60m2 49 1,200

14.7 ha 0.35

51,500 m2 75m2 47 700

4.9 ha 0.3

15,000 rn2

30 rn2

94 500

4.9 ha 0.5

24,500 rn2 50 rn2

103 500

2,900 58)

14 Actual estimates are 50 m2 per employee in central a reas and 70 m2 per employee in decentralized locations. 15 Actual estimates are 90 m2 per employee in distribution and transport activities and 60 m2 per employee in general warehousing activities. 16 A ratio of 0.3 applies to mixed use location, compared with 0.75 for inner-city locations 17 An estimate of 50 m2 per employee as for suburbs/urban fringe is used rather than the estimate for CBD locations of 19m2 per employee.

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5.3.3. High Estimate

Another approach is to use the employment density estimate for Papakura as reported in the Auckland Urban Density Study- Draft Report, August 2006, prepared for the Auckland Regional Transport Authority.

Papakura sample (employees per gross ha) Multiplied by Area 6:

Total employees:

5.3.4. Employment income

80 e.p.h 49 ha

3,900

The increased investment in Area 6 resulting from re-zoning would allow for additional industrial activity, increasing employment and economic output. This section uses the estimates of employment capacity (above) to identify possible employment income. The next section uses employment to valued added ratios to estimate the production impact.

The range of estimated future employment varies from 2,100 to 3,900 (Table 8). For the following analysis, we use the medium estimate of 2,900 jobs, which would amount to a 20% increase in employment for the Papakura District above the current level of approximately 15,000. 18 This estimate is based on a direct assessment of the character and likely mix of uses of the land in question, and reflects densities being achieved (at more or less full development) in similar circumstances.

To the extent that capital-intensive, higher value added manufacturing is favoured over labour-intensive manufacturing, future employment densities can be expected to be towards the lower end of the range. However, offsetting this is the general trend for increased employment in the service sector, including professional occupations, which suggests higher employment densities, with more workers in office and retail locations.

Table 8: Estimated Future Employment from Area 6

Estim.1te Employment Low 2,100

Medium 2,900

High 3,900

To determine the annual amount of employment income that would be generated if Area 6 were to be re-zoned industrial, the medium employment estimates is used and multiplied by the average earnings for employees from each sector. On this basis, we estimate that approximately $102 million in employment would be generated annually once re-zoning occurred and the land is developed, subdivided and sold (see Table 9 ).

18 The lower estimate may be less reliable because it is based upon occupied business land for the total Papakura District which includes sites which may be used for quarrying and, consequently, are of a relatively low density that is unlikely to be replicated in Area 6. The higher estimate uses a relatively small sample area chosen in a report for the Auckland Regional Transport Authority and so may not provide a sufficiently accurate representation of what could occur in Area 6.

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The expected time before plots would be developed for sale and sold after re-zoning is likely to be around two years.

Table 9: Estimated employment income

Sector Fmplo} ees \\"eekl~ I arnings (,n e.) :\nnu.ll l·.unings

k">t.l

Industry 1,200 $725.92 $45,297,408

Warehousing 700 $782.27 $28,474,628

Offices 500 $696.66 $18,113,160 Retail 500 $387.73 $10,080,980 Total 2,900 $676.17 $101,966,176 Source: Derived from Statistics New Zealand.19

5.4. Impact on production Using the expected employment and wage and sa lary income generated as a result of re-zoning, we have estimated the total value of all production that would be associated with Area 6. Based upon the ratio of employees to output across various industries, we estimate that the total value of this production would be around $250 million per year.

Table 10: Estimate of Annual Output from Industrial Use, Area 6

Sector Employees Ave Ernp:Output (Sm) Output

Industry 1,200 10.03 $119,641,000 Warehousing 700 10.44 $67,050,000

Offices 500 18.30 $27,322,000 Retail 500 20.90 $23,923,000

Total 2,900 $237,936,000

Source: Employee:output ratios, Geoff Butcher.

5.5. Impact on transport infrastructure A change in use of Area 6 would have two notable effects with respect to traffic. One would be an increase in traffic to and from the area. This would comprise largely employees, suppliers, customers and business travel (for example, meetings).

The other effect stems from the possibility that local Papakura residents may fill the jobs created by a re-zoning of Area 6. Given the projected increase in Papakura's population of an additional 10,000 people in the next 10 years,2° employment opportunities created in the Papakura District could mean that there would be less need for residents to commute to other areas.

5.6. Residential Impact Re-zoning 4.42 ha (net) of Area 6 for residential would lead to approximately 66 new dwellings, based upon an average size of 670 rn2 per residential property. Based upon

19 Average weekly earnings for each sector are weighted by filled jobs data across New Zealand. Figures are from quarter ending Sep 2006. 20 http '\n\ w l'lkg~_,\ Ill/ lllq>2Ul~l htm.

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an average household size of three people per dwelling,21 this would increase the residential population by 198.

5.7. Social impact Changes to the market for industrial land in Papakura and the surrounding area has impacts in addition to direct economic and output effects. For instance, as the price of industrial land rises, lower-value productive uses may no longer be able to operate, and only higher-value uses remain viable. To the extent that higher-value uses require fewer low-skilled, or blue collar, workers, these workers may find it difficult to find employment in the area. Business land shortages, therefore, may raise social issues that are likely to be manifest in higher unemployment rates among the less skilled.

Along with the changing nature of businesses that can result from changes in the price of industrial land, the limit on the total available land also places a limit on the total number of jobs available in a local area, regardless of skill levels. There are a number of potential outcomes from this situation. They include higher unemployment, increased under-employment (for example, from people accepting positions below their skill levels, more part-time and casual work relative to full-time and casual employment), displacement of population, a slow down in population growth and increased commuting.

21 Statistics New Zealand, Census 2006, average household size in Papakura District.

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Appendix Table 11: Businesses, Takanini North

Manufacturing Construction Business & other

Aluminium Joinery Bakery Bed Manufacture Blind Manufacture Concrete Engineering Engineering Works Forklift Trucks Frozen Foods Garage Doors Industrial Equipment Industrial Heat Protection Packaging Paper/Cardboard Paving Pet Clothing Plastics Printing Refrigeration Relocatable Building Construction Saddlery Screen Printing Sheet Metal Engineering Specialty Clothing Steel Stock Food Transport Engineering Truck Bodies/Trailers Urethanes/Plastics

Builders Construction Contractors Drainage Drillers Earthmoving Excavators House Movers Insulation Kitchen Manufacture Plumbing Supplies Roofing Spouting Timber Products Window & Doors

services Civil engineering Temple

Wholesale trade Transport & storage Retail trade Animal Feed Building Supplies Cable Services Catering Food Imports Foundry Supplies Poultry Food Retail Building Supplies Stock Food

Bus Charter Depot Cartage Recycling Refrigerated Trucks Scrap Metal Recycling Service Station Storage Storage Units Complex Transport Truck Mechanic Truck Parts Vehicle Testing Station Warehousing

Auto Electrical Car Parts Car Wreckers Car/Boat Sales Fruit Retail Lunch Bar Mechanic Motorcycle Wrecker Panelbeater Truck Sales Tyres Wreckers

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