The economic value of the redeveloped Auckland Waterfront
The economic value of the redeveloped Auckland Waterfront November 2010
1 The economic value of the redeveloped Auckland Waterfront
PricewaterhouseCoopers 26 November 2010 188 Quay Street Private Bag 92162 Auckland 1142 New Zealand Telephone +64 9 355 8000 John Dalzell Facsimile +64 9 355 8001 Direct Phone +64 9 355 8600 Chief Executive Direct Fax +64 9 355 8024 Sea+City Projects Ltd www.pwc.com/nz Pier 21, 11 Westhaven Drive AUCKLAND
Dear John
The economic value of the redeveloped Auckland Waterfront
In accordance with the terms of our engagement letter dated 27 August 2010, we attach our report on the economic value of the redeveloped Auckland waterfront. This report should be read in conjunction with the Restrictions in Appendix A.
Our key findings and recommendations are contained in the Executive Summary in Section 1 of the Report.
If you require any clarification or further information, please do not hesitate to contact me.
Yours sincerely
PricewaterhouseCoopers
Chris Taylor,
Partner The economic value of the redeveloped Auckland Waterfront
Table of Contents
1 Executive summary...... 1 2 Background ...... 4 2.1 Purpose of the study ...... 4 2.2 Defining the Waterfront ...... 4 2.3 A snapshot of the Waterfront in 2040 ...... 5 2.4 Multiplier analysis and dollar values ...... 8 3 Employment on the Waterfront ...... 9 3.1 Who works on the Waterfront today?...... 10 3.2 Employment profile in 2040 ...... 13 3.3 Net addition to Auckland economy of redeveloped Waterfront employment...... 17 3.4 Agglomeration and congestion ...... 22 3.5 Agglomeration benefits in 2040 ...... 29 3.6 Net agglomeration benefits in 2040 ...... 29 4 The cruise industry...... 30 4.1 What role does the cruise industry play today? ...... 31 4.2 Waterfront cruise industry in 2040 ...... 32 4.3 Net addition to Auckland cruise industry from redeveloped Waterfront...... 36 5 Major Waterfront-linked events ...... 38 5.1 The importance of Waterfront-linked events...... 39 5.2 What role do Waterfront-linked events play today? ...... 42 5.3 Waterfront-linked major events in 2040 ...... 44
3 The economic value of the redeveloped Auckland Waterfront
5.4 Net addition to Auckland events of a redeveloped Waterfront ...... 45 6 Other Waterfront tourism...... 47 6.1 What does Waterfront tourism look like today? ...... 48 6.2 Waterfront tourism in 2040...... 50 6.3 Net addition to Auckland tourism from the redeveloped Waterfront ...... 52 7 Other impacts to 2040...... 54 7.1 Construction ...... 54 7.2 Other economic benefits ...... 56 7.3 Attractiveness / liveability...... 58 7.4 Sense of place and Auckland’s profile...... 59 7.5 Environmental and health benefits...... 60 Appendix A: Restrictions ...... 63 Appendix B: Multiplier analysis...... 64 What are multipliers? ...... 64 Uses and limitations of multipliers ...... 64 Appendix C: Overarching assumptions ...... 66 Dollar figures...... 66 Data sources...... 66 Double-counting and conservatism ...... 66 Bibliography...... 69 The economic value of the redeveloped Auckland Waterfront
1 Executive summary
Sea+City Projects Ltd (Sea+City) commissioned PricewaterhouseCoopers Auckland’s profile, putting it in the minds of potential investors. The (PwC) to complete a study of the economic value to the Auckland Region redevelopment will revitalise Auckland’s tourism industry by becoming a of redeveloping the Auckland Waterfront.1 tourist attraction itself. The Waterfront will support a diverse range of jobs, workplaces and accommodation, creating more lifestyle choices for The redevelopment is expected to have a range of positive impacts on the Auckland residents. These lifestyle choices will be healthier too, as the Auckland economy. Some of these can be quantified, such as an increase Waterfront redevelopment is directly linked to a switch in transport in jobs, GDP and output. These impacts will include the employment and behaviour to public transport and active modes (walking and cycling). GDP created by direct employment on the Waterfront, and by tourism activities facilitated by the Waterfront through the cruise industry, event The report considers the quantifiable economic value of the redevelopment tourism, and through the increased attractiveness of the Waterfront. from two perspectives. First, it examines the overall economic impacts of the redevelopment on the Auckland Region as at 2040 in terms of jobs and Other benefits are harder to measure, but will create further economic and GDP generated. social benefits to the Region. For example, the redevelopment will raise Second, it considers the additional economic impacts of the Waterfront on
1 Note this study is not a cost-benefit analysis. It measures benefits accruing across the Auckland Region, compared with what it would contribute to the Auckland due to the redevelopment, not the benefit-cost ratio for the public cost of the economy in 2040 without redevelopment. This perspective acknowledges redevelopment.
1 The economic value of the redeveloped Auckland Waterfront
that some economic activity that occurs due to the Waterfront being money, and where resupplying cruise ships source their supplies. developed will be displaced from other parts of the Auckland Region. 2,450 employed directly across the Auckland Region as a result of visitors to Auckland staying longer to enjoy the atmosphere and The report also examines the benefit of construction projects on the activities on the redeveloped Waterfront. Waterfront, which create fixed-term jobs and a one-off impact on GDP. 950 employed as a result of major events held or based on the Overall economic impacts on the Auckland Region, 2040 Waterfront, such as triathlons, a New Year’s event, and yacht races.
The Waterfront is expected to directly support the equivalent of around There would be flow on benefits from these jobs as well. Businesses 2 20,500 direct full-time jobs in the Auckland Region in 2040, comprising: operating on the Waterfront or directly servicing visitors will need to purchase goods and services from their suppliers (upstream or indirect Direct employment supported Total employment supported effects). In addition, workers employed on the Waterfront or directly 946 1,682 Waterfront businesses serving visitors attracted by the Waterfront will spend their salaries and 3,442 6,767 Other tourism wages on other goods and services (downstream or induced effects).
2,453 4,149 This spending is expected to support the equivalent of around 19,600 Cruise 13,631 27,475 further jobs across the Auckland Region, for a total of approximately Events 40,100 jobs attributable to the Waterfront.
Total: 20,472 Total: 40,074 The 20,400 direct jobs are expected to produce $2.02 billion in GDP in Source: PwC 13,600 employed directly on the Waterfront across a range of 2040, equivalent to New Zealand’s total annual oil exports in 2010. industries, from high-end business services to the marine sector, Around $218 million of this will be from agglomeration benefits of hospitality, retail and personal services. This is three times as many intensification of employment on the Waterfront. people as work on the Waterfront today. The total impact of the redeveloped Waterfront is expected to reach $4.29 3,440 employed directly across the Auckland Region as a result of the billion in Regional GDP. cruise industry, where cruise passengers and crew spend their Additional economic impacts on the Auckland Region, 2040
2 All employment figures used in this report are full-time equivalents (FTEs) unless otherwise The economic contribution of the Waterfront may grow slightly by 2040 stated.
2 The economic value of the redeveloped Auckland Waterfront
even without the redevelopment. In addition, some of the new jobs increased employment on the Waterfront. The total impact on GDP is created on the Waterfront may be displaced from elsewhere in the expected to reach $2.06 billion. Auckland Region. Even allowing for these possibilities, the Waterfront is There are a number of other benefits of the redevelopment. For instance, expected to be a major driver of the Auckland Region’s economic future. the redevelopment is expected to create the equivalent of 5,700 direct one- The Waterfront is expected to add 8,630 direct jobs to the Auckland year jobs across the construction period. These jobs will generate a one- Region that would not otherwise be created. More than half of these off benefit to GDP of around $276 million, spread across construction. new jobs will be through attracting businesses from outside the Auckland Other benefits, some of which are classed as social or environmental, but Region to the Waterfront, supporting start-ups, or facilitating natural growth all of which have positive economic outcomes include: of Auckland businesses. Increased Waterfront tourism would create 2,040 new jobs across Auckland, while a greater number of Waterfront-linked direct economic benefits such as a revitalised tourism industry; events would grow employment by a further 480 jobs. A further 1,600 jobs development and maintenance of skills in the Auckland Region; will come from the cruise industry that would not be possible without new support for a diversity of employment and visitor attraction cruise infrastructure. The 8,630 net direct jobs are expected to produce opportunities; stimulation of the fishing and water sport industries; and $987 million in GDP in 2040. the generation of private benefits through increased property values in and around the Waterfront. Net direct employment supported Net total employment supported increased liveability and attractiveness by raising quality of life;
483 859 Waterfront improving lifestyle choices; and changing the urban landscape. businesses 1,596 3,137 a sense of place and a raised profile for Auckland through building a Other tourism brand; generation of international business opportunities; renewal of 4,503 Cruise 9,535 3,458 New Zealand’s clean and green image through its main gateway city; 2,044 Events and the establishment of a unique environment for social interaction. Total: 8,627 Total: 16,990 environmental and health benefits through greater use of walking, Source: PwC cycling and public transport; green design; brownfield improvement; Taking into account the upstream and downstream impacts of these direct and greater visual appeal. jobs, a total of 17,000 additional jobs will be generated in the Auckland Region by the redeveloped Waterfront. This includes 9,540 jobs due to
3 The economic value of the redeveloped Auckland Waterfront
2 Background To do this, we undertook two stages of work, each answering a particular question. Stage One considered: What are the direct and total contributions to employment, GDP and output as a result of the
This section introduces the study and defines the Waterfront area we redeveloped Waterfront in 2040? consider in the analysis. The four main areas of focus were employment on the Waterfront, and 2.1 Purpose of the study employment throughout the Auckland Region as a result of the cruise industry, Waterfront-linked events, and general tourism along the Waterfront. Subject matter experts assisted in building projections of these four areas of focus to 2040. In other words, we estimated direct employment in the Auckland Region as a result of the Waterfront out to 2040. Applying appropriate multipliers, we estimated the total impacts of this employment on the Auckland Region economy.
Stage Two considered: What share of the employment, GDP and output added in the scenario for 2040 is a net addition to the Auckland Region economy? We again worked with subject matter experts to develop “do- minimum” scenarios to 2040, which describe what the Waterfront would look like without redevelopment, and to estimate what share of employment captured by a redeveloped Waterfront would be displaced The purpose of the study is to estimate the economic contribution of the from elsewhere in Auckland. Waterfront to the Auckland Region in 2040, and to determine what share of This report is subject to the restrictions in Appendix A. this contribution would not be achieved without a redeveloped Waterfront. This will help Sea+City and other stakeholders better understand what the 2.2 Defining the Waterfront changes to the Waterfront will mean in economic terms: jobs, GDP and output generated; and to take the actions necessary to achieve these The Waterfront as referred to in this report is defined as that area of the gains. Waterfront over which Sea+City (and from 1 November 2010, the
4 The economic value of the redeveloped Auckland Waterfront
Auckland Waterfront Development Agency) has control, or is expected to Pakenham Street and west of Halsey Street. The Viaduct Harbour have control by 2040, as well as small areas adjoining Sea+City-controlled consists of the land area bordering the docks east of Halsey Street and up areas, which for practical reasons we have not been able to exclude. The to and including the Voyager New Zealand Maritime Museum. The Central roles of the Waterfront and the rest of Auckland Harbourside in the greater Wharves include the land east of the Voyager New Zealand Maritime Auckland employment picture are summarised in Figure 1. Museum up to and including Queens Wharf, north of Quay Street. Employment in port operations are excluded from this study.3 Figure 1 Where Auckland Region FTEs are located Figure 3 on p.7 shows the wider Auckland Harbourside area. It is outside Employment (FTEs), 2010 the scope of our analysis, but does provide context when examining the 0.7% 3.3% current role and expected growth of the Waterfront area. This wider area is limited at its south end by the continuation of Westhaven Drive, Waterfront Fanshawe Street, Customs Street East, Beach Road, Ronayne Street, The Strand and Tamaki Drive. It extends from the landing of the Auckland Other Auckland Harbourside Harbour Bridge in the west, to Teal Park on Judges Bay in the east. Auckland Region 2.3 A snapshot of the Waterfront in 2040 96.1%
The Waterfront is expected to be home to more than 3,500 people by Source: PwC The Auckland Region employed 657,000 full-time equivalent (FTE) 2040, compared to almost none today. Almost as many are expected to workers in 2009. The Waterfront employed around 4,350 FTEs. In other live south of Pakenham Street, in the bottom half of the Wynyard Quarter. words, just 0.7% of Auckland FTEs worked on the Waterfront in 2009. The More than 13,600 people are expected to work on the Waterfront in 2040, wider Auckland Harbourside area (excluding the Waterfront) employed across a wide range of industries. The largest growth is expected to be in around 21,550 FTEs, or 3.3% of Auckland employment.
Figure 2 overleaf shows the three areas covered explicitly in the study – 3 Recent comment in the media has suggested that a new cruise terminal may be considered the Wynyard Quarter, Viaduct Harbour and Central Wharves. The portion for Captain Cook Wharf (which falls outside our area of study). In this study, however, we of the Wynyard Quarter considered in this report is that part north of assume the previously proposed site of Queens Wharf is used, which is in our area of study.
5 The economic value of the redeveloped Auckland Waterfront
Figure 2 The Waterfront
Wynyard Viaduct Central Quarter Harbour Wharves
Source: PwC
6 The economic value of the redeveloped Auckland Waterfront
Figure 3 The wider Auckland Harbourside area
Source: PwC
7 The economic value of the redeveloped Auckland Waterfront
high-productivity business services, with a particular focus on scientific Finally, the Waterfront will become a tourist attraction in and of itself, in the research, surveying, engineering consultant, technical, and computer way Cape Town, Sydney and London have developed their working services. harbours. Nearly 1.4 million visitor nights a year are expected to come from the Waterfront in 2040, compared with just 20,500 today. Nevertheless, there will be jobs for people of all skill levels and interests, with a booming Waterfront-linked tourism industry supporting numerous 2.4 Multiplier analysis and dollar values hospitality and retail opportunities. The marine sector will remain a major player on the Waterfront. This report makes extensive use of multiplier analysis. Multipliers estimate the economy-wide impact of a change in production or employment in a Tourism expansion is likely to stem from three sources. First, improved particular industry. It takes into account the indirect (upstream) impacts of infrastructure, profile and sense of place on the Waterfront is expected to the change on suppliers to the industry in question. It also considers support strong growth in the cruise industry. In particular, a better cruise where workers in the particular industry spend their incomes (downstream terminal and easier logistics are expected to bring more visitors to or induced impacts). Throughout, we present direct figures, which refer to Auckland. The cruise industry will accommodate bigger ships, more the employment, GDP and output generated by the industry in which the frequently, and at a higher turnaround (rather than transit) rate, which change occurs; and total figures, which include the impacts on supplier means more visitors will be over-nighting in Auckland. and destination industries. Multipliers are discussed further in Appendix B. Major events are expected to enjoy a boost as Auckland becomes a more Figures in the report are in constant 2010 dollars unless otherwise stated. attractive place for hosting sports and other waterfront-linked events. Auckland would also look to take advantage of its place as the first world city to see in the New Year by developing a New Year’s Event to rival that seen in Sydney or Hong Kong.
8 The economic value of the redeveloped Auckland Waterfront
3 Employment on the Waterfront Figure 4 Employment on the Waterfront
Local industry, FTEs This chapter summarises the economic impacts on the Auckland Region of 14,000 1 changes in employment based at the Waterfront. In other words, it 3 6
10,500 , 3 considers how the planned expansion of employment opportunities 1 s
E 7,000 specifically on the Waterfront will impact the economy of the Auckland T F 0 0
Region. 3
3,500 5 3 0 3 6 5 , , , 4 4 4 Figure 4 summarises the employment directly on the Waterfront in 2010, in 0 2040 with and without redevelopment, and the additional (i.e. non- 2010 2040w/out 2040 with Additional redev redev displaced) employment generated by a redeveloped Waterfront.
As of 2010, around 4,350 FTEs were employed on the Waterfront. Were Source: PwC Table 1 Economic impacts of direct employment on the Waterfront the redevelopment not to occur, this would be expected to rise slightly to around 4,630 FTEs in 2040. With the redevelopment, an extra 9,000 FTEs Employment GDP Output are expected to be added over and above what would be the case by Waterfront employment FTEs $m $m Direct 2040. Of these 9,000 new FTEs, we conservatively estimate that 4,500 2010 4,350 $315.4 $680.0 will be a net addition to the Auckland Region economy. 2040 with redev 13,631 $1,621.5 $3,277.1 Additional 4,503 $751.5 $1,439.3 The increase in Waterfront employment due to the redevelopment will Total 2010 7,836 $665.3 $1,378.6 generate direct GDP as well as additional jobs upstream (in supply 2040 with redev 27,475 $3,416.6 $6,809.6 industries) and downstream (where workers spend their incomes). Table 1 Additional 9,535 $1,538.1 $2,953.9 Source: PwC summarises the other economic impacts the direct employment on the In 2010, employment on the Waterfront generated around $315 million in Waterfront generates as of 2010, and is expected to generate in 2040. direct GDP (around 1.0% of Auckland Region GDP). By 2040, this figure is set to rise by 515% given the scenarios discussed in this report, to $1.62 billion, a figure larger than total annual New Zealand fruit exports in 2010.
9 The economic value of the redeveloped Auckland Waterfront
Of this $1.62 billion, $752 million would be a net addition to the Auckland Employment count and geographic units (business “front doors”) data for Region economy. As is shown later on this report, the $752 million in 2000 to 2009 was sourced from Statistics New Zealand for all meshblocks direct additional GDP consists of $537 million from increased employment in the Auckland Harbourside area. Employee count data differs from FTE and a higher-productivity industry profile. A further $215 million (around data in two important ways. 29% of the $752 million added by increased employment) is from First, employee count data does not take account of the split between full agglomeration benefits, which occur when similar businesses are highly and part-time workers. Some industries, such as hospitality, tend to have concentrated within a geographic area. a larger share of part-time workers than others such as manufacturing. To The total impact refers to the effect of this direct employment on the directly compare these industries, employee count data has been Waterfront on overall employment at the Auckland Region level, including converted to FTEs. FTEs count part-time workers as half an FTE, and full- indirect and induced impacts. The total employment supported in time workers as one FTE. Auckland Region by employment on the Waterfront as of 2010 is The 2006 census data for Auckland approximately 7,840 FTEs. By 2040, given the redevelopment scenario, Harbourside was used to estimate the full- this would rise to 27,500 FTEs, generating $3.42 billion in GDP (three time to part-time ratio for all industries at the times New Zealand’s annual wine exports). The net additional 17 Division ANZSIC4 level, and this ratio was employment and GDP generated in Auckland Region would be 9,540 used to convert the most recent Statistics FTEs and $1.54 billion in GDP. New Zealand employee count figures into 3.1 Who works on the Waterfront today? FTEs.
Second, employee count data does not include employers. Given the This section summarises the current employment profile of the Waterfront, relatively small size of the average New Zealand business, excluding the and discusses the role of the marine industry in greater depth. extra one worker (the employer) is likely to have a significant impact on Theory and assumptions: 2010 employment profile total employment figures. The 2006 census data for Auckland Harbourside (at the ANZSIC 17 Division level) was used to estimate the ratio of Data for 2010 employment and businesses are based on information for 2009 supplied by Statistics New Zealand and Sea+City, as well as 4 ANZSIC refers to the Australia New Zealand Standardised Industrial Classification, as used adjustments to that data carried out by PwC. by Statistics New Zealand and the Australian Bureau of Statistics.
10 The economic value of the redeveloped Auckland Waterfront
employers to employees. employment contributed the most, being almost half of the total employment. The Waterfront north of Quay Street is not an area usually The FTE figures calculated earlier were multiplied by this ratio for an associated with business services, but this area includes the ex-St overall employment (in FTEs) figure. Laurence House Building and other business tenants such as the law firm The Statistics New Zealand data for the Wynyard Quarter was not Knight Coldicutt. available at a more detailed level. As a result, we needed to split out Table 2 Waterfront employment, 2010 employment south of Pakenham Street from our analysis. We worked with
Sea+City to identify businesses south of Pakenham Street so they could Employment be removed from the total employment figures for the Waterfront as Category FTEs % defined in this report. Waterfront 4,350 100% Business / Office 2,122 49% Estimates of GDP per FTE (or labour productivity) were based on Cultural / Communal etc 176 4% Fishing Related Business 262 6% Auckland Region input-output tables as produced by Butcher and Food / Beverage 804 18% Associates. These give a Region-wide average labour productivity by Marine Industrial 738 17% Other (incl car parking) 49 1% industry. The assumption is that businesses operating on the Waterfront Retail 201 5% will currently have labour productivities of at least the Regional average, Source: PwC given the value of Waterfront land and resultant labour productivity The Business / Office category includes not only business services such required to be profitable. as finance, legal and accounting, but also includes scientific research, architectural services, surveying services, engineering consultant services, Employment on the Waterfront, 2010 technical services, computer services, and motor vehicle and equipment We estimated that around 4,350 FTEs are employed on the Waterfront as hiring among others. of 2010. We have aggregated employment in the 17 ANZSIC Divisions The Marine Industrial category also accounts for an important share of into the seven categories used by Sea+City in its analysis of the likely employment, with 738 direct FTEs, which represents around 17% of the purpose of new construction on the Waterfront. Table 2 summarises the total employment. We now discuss the marine industry in more detail. direct FTEs employed on Auckland’s Waterfront today.
Of the 4,350 FTEs employed directly on the Waterfront, Business / Office
11 The economic value of the redeveloped Auckland Waterfront
The marine industry Orams Marine Village, an integrated facility of 19,274 m2, also has offices for a number of international and national leaders in marine-related The Waterfront plays a major role in New Zealand’s marine industry, and is businesses, including Fitzroy Yachts; Whiting Power Systems; home to several major businesses within the industry. These include: TransDiesel; R Marine NZ; The Hartford Group; Peters & May (NZ); Reid Southern Spars: Southern Spars specialises in the design and Yacht Services; The Boat Cover; Yacht Lifeline; Auckland Engineering construction of carbon fibre spars and components, rigging, and rig Supplies; Hargrave Group Ltd; Healthy Life Media Ltd; Ovlov Marine Ltd; servicing. It employs more than 250 staff worldwide. Its boats, built Nautical Solutions Ltd; Holton Marine; Seatrak Electronics Ltd; Hired Guns; together with other companies like Alloy Yachts or Fitzroy Yachts, and Orams Marine Sales. have received awards worldwide. It has supplied many of the winners in international races including the America’s Cup and the Volvo Economic contribution of Waterfront employment, 2010 Ocean Race. Table 3 shows the direct and total output, GDP and employment Integrated Marine Group: Integrated Marine Group covers both the contribution of the Waterfront’s current industry profile. operational and maintenance needs of superyachts. Located at the Table 3 Economic impact of direct Waterfront employment, 2010 Wynyard Quarter, it employs more than 70 people. Clients include
boats from international companies like Vitters, Perini Navi, Alloy Impact of employment on the Employment GDP Output Yachts and Fitzroy Yachts. Waterfront, 2010 FTEs $m $m Direct 4,350 $315.4 $680.0 Orams Storage Village: With 310 berths and the capacity to house Total 7,836 $665.3 $1,378.6 Source: PwC boats up to 12m long, Orams Marine Village Boat Park, located in the Direct employment on the Waterfront contributes direct output of $680 Wynyard Quarter, is the largest undercover boat storage facility in the million and a total output of $1.38 billion. It contributes $315 million in Southern Hemisphere. direct GDP and a total of $665 million to Auckland’s GDP. Including
Orams Marine Services: Orams has grown to be the largest indirect and induced impacts takes employment to 7,840 FTEs, or 1.2% of superyacht service facility in the Pacific. Services provided include Auckland Region employment. general servicing, maintenance and installation of masts and rigging to international superyachts.
12 The economic value of the redeveloped Auckland Waterfront
Business size, 2010 excluded are:
Air New Zealand; OPUS International Consultants; and Figure 5 shows the change in the average business size of the Wynyard New Zealand Defence Force. Quarter for the last nine years.5 The average business size in the Wynyard Quarter has fluctuated between Figure 5 Business size in the Wynyard Quarter, 2000 to 2009 eight and 10 FTEs over the last nine years. This number is higher than the 12.0 national average of around four FTEs, which is unsurprising given the larger nature of Auckland businesses in general, and the composition of 10.0 s
s Wynyard Quarter businesses. It is similar to the figure for the whole of the e n i 8.0 s Auckland CBD. u b
/
s 6.0
E 3.2 Employment profile in 2040 T F 4.0 The vision for the Waterfront in 2040 will make it almost unrecognisable
2.0 from what it is today. Large public spaces are expected to be supported 2000 2003 2006 2009 and enjoyed by several mixed use (residential and commercial) and Waterfront Auckland CBD New Zealand dedicated business developments. This will significantly improve Source: PwC employment opportunities on the Waterfront. We have excluded individual large businesses we know of, or that have been added to the area over the last nine years. This is because these Theory and assumptions: 2040 employment profile businesses tend to skew the overall average business size given their In conjunction with Sea+City, estimates of the likely employment on the relative sizes, but small share of businesses. The businesses we have Waterfront in 2040 were developed. The estimates were based on the expected construction over the next 10 years and the estimated gross floor 5 Note that this includes the whole Wynyard Quarter, including the areas north and south of area per FTE by development use, as supplied by Sea+City. This input Pakenham Street. This is because data on the split of businesses south and north of was then used to assess direct and total impacts taking into account the Pakenham Street is not available.
13 The economic value of the redeveloped Auckland Waterfront
different categories of businesses and their future growth potential. Employment on the Waterfront, 2040
The categories of building use provided by Sea+City were relatively broad, Table 4 shows the total expected employment on the Waterfront in 2040 whereas the historical data (for 2000 to 2009) provided by Statistics New by the categories used by Sea+City.
Zealand was at the ANZSIC 53-industry level. Additional employment in Table 4 Total FTEs for the Waterfront, 2040 the seven employment categories used by Sea+City was apportioned on a pro-rata basis across the 53 industries, unless we had strong reason to Employment Category FTEs % believe that a particular industry would have stronger or weaker Waterfront 13,631 100% employment growth. Business / Office 8,293 61% Cultural / Communal etc 470 3% Fishing Related Business 541 4% One key such example was in business services. The Business / Office Food / Beverage 2,119 16% category as described by Sea+City is expected to show the most dramatic Marine Industrial 944 7% growth over the next 10 years, adding around 6,100 FTEs. The profile of Other (incl car parking) 46 0% Retail 1,219 9% industries on the Waterfront in 2010 highlights that most of the business Source: PwC services employment is in “Other business services” ANZSIC industry, Most of the FTEs are likely to be in the Business / Office category with a which includes everything from cleaning staff and temporary workers, to total of around 8,290 FTEs. As mentioned elsewhere, the Business / architectural, legal, accounting services, and consultant engineering Office category includes a wide range of services. Included in these are services. high added value services such as scientific research, surveying, engineering consultant, technical, and computer services. These types of Sea+City’s target sectors for the redevelopment, within business services, businesses are characterised by a diverse mix of skills and highly qualified are high-productivity business services. It was therefore assumed that the people, and are expected to play a leading role in transforming productivity employment profile of business services in 2040 would be closer to the in the Auckland economy. legal and accounting services end of the GDP spectrum than to the cleaning services end. The Food / Beverage category will grow as the area accommodates more restaurants and cafes for visitors and residents alike.
The Marine Industrial category will continue to grow, with around 200 FTEs
14 The economic value of the redeveloped Auckland Waterfront
more than today. This employment growth within the marine industry in Sea+City focusing on attracting more high-productivity businesses. As the part rests on the assumption that the Waterfront will continue to have Waterfront is redeveloped, land values are expected to rise sharply based exposure to international visitors linked to yachting events, and the on the expected production from each redeveloped site. This will Auckland International Boat Show. necessitate improved labour productivity (GDP per FTE) if businesses are to operate successfully on the Waterfront, and will attract higher Labour productivity productivity businesses. It will also encourage higher-end uses of the land As discussed previously, one goal for Sea+City is to attract higher labour at the Waterfront, consistent with Sea+City’s desires for the industry profile productivity industries to the Waterfront, These high-productivity on the Waterfront. businesses drive GDP growth, and are most likely to benefit from the Second, with intensification of industry on the Waterfront, some industries agglomeration benefits that accrue to businesses in the same industry that are expected to have especially high concentrations, resulting in are clustered close together (see sections 3.4 to 3.6). agglomeration benefits, which are estimated in sections 3.4 to 3.6. In other words, productivity on the Waterfront is expected to benefit in two Figure 7 overleaf presents a summary of GDP per FTE as of 2010, and in ways, as illustrated in Figure 6. 2040 with the redevelopment, as well as the average GDP per FTE of the Figure 6 Labour productivity gains, 2010 to 2040 additional workers added, excluding the agglomeration benefits.
GDP per FTE rises from $72,500 in 2010, to $103,000 per FTE in 2040, as Labour a result of the additional FTEs added averaging GDP per FTE of more productivity than $119,000. It is important to note that these results exclude agglomeration benefits, which increase labour productivity even further. The benefits of agglomeration are dealt with in sections 3.4 to 3.6.
Current Future Intensification industry industry of industry profile profile
Source: PwC First, the Waterfront will have a different industry profile in future, with
15 The economic value of the redeveloped Auckland Waterfront
Figure 7 GDP per FTE with redevelopment, excluding agglometation Table 5 shows the average size of businesses on the greater Waterfront in 2040, depending on the average size of new businesses attracted. Productivity of Waterfront workers Table 5 Business size analysis, 2040 150
) 120 Average size of new 0 0 119.1 businesses 20FTEs 10FTEs 5FTEs 0 ( 90 103.0
E Average business size 15.42 10.31 6.20 T
F Number of new businesses 464 928 1,856
r 60 72.5
e Number of 2010 businesses 473 473 473 p Number of total businesses 937 1,401 2,329 $ 30 Source: PwC 0 The Waterfront currently has an average business size of around 10. To 2010 2040withredev Additional maintain this average, the Waterfront would need to attract a further 928 Source: PwC businesses. Should the employment profile of new businesses attracted Business size, 2040 be twice as large as today, the area would need to attract a further 464 The strategy of Sea+City is to attract high productivity businesses to the businesses. To bring down the average business size by 40%, the area Waterfront. The aim is not to displace business from other parts of the would need to attract more than 1,850 new businesses. Region, but to attract new businesses, or offices of businesses with a Economic contribution of Waterfront employment excluding presence elsewhere in New Zealand or overseas to the Region. agglomeration benefits, 2040 We cannot determine with certainty the shape and size of businesses that Table 6 summarises the impact of direct Waterfront employment for 2040 will operate on the Waterfront to the same degree of accuracy that we can in terms of output and GDP contribution, without allowing for for the industry profile. We therefore present scenarios on how attracting agglomeration benefits. businesses of different sizes might influence the average business size on the greater Waterfront area.6 units data does not allow us to exclude businesses located outside the Sea+City area. Table 5 assumes the number of businesses and employment outside the Sea+City portion of the Wynyard Quarter remain constant, so we can focus on the number of businesses Sea+City 6 This area includes the Wynyard Quarter outside the Sea+City area because our business would need to attract to ensure various average business sizes.
16 The economic value of the redeveloped Auckland Waterfront
Table 6 Economic impact of direct Waterfront employment excluding and what share will be displaced. agglomeration, 2040 Theory and assumptions: an alternative 2040 employment profile
Impact of employment on the Employment GDP Output We worked with Sea+City staff to develop a model of Waterfront Waterfront, 2040 FTEs $m $m Direct 13,631 $1,403.6 $2,753.3 employment in 2040 without the redevelopment. Sea+City estimated that Total 27,475 $2,879.1 $5,616.7 without redevelopment, capacity exists for only 280 more FTEs. This is Source: PwC With the redevelopment, $2.75 billion in direct output is expected to because of capacity constraints given current infrastructure in place. The generate $1.40 billion in direct GDP, and employ around 13,600 direct marine industry, for instance, is especially positive about the future FTEs. Taking indirect and induced impacts into account, this will result in development of site 18 given the lack of space it currently has.
$5.62 billion in total output, $2.88 billion in total GDP (more than New This means that of the almost 9,300 additional FTEs expected to be Zealand’s total annual crude oil exports), and a total of 27,500 FTEs in the working on the Waterfront in 2040, around 9,000 will be additional to what Auckland Region. would be the case anyway.
3.3 Net addition to Auckland economy of redeveloped This raises the question as to where these 9,000 FTEs will come from. Waterfront employment Will they simply be workers moving in from other parts of the Region (displacement), or will they Not all the employment added to the Waterfront will be a net addition to the be new jobs being accommodated (additions)? Auckland Region. A small amount of employment growth is likely to occur In some cases, the share of employment that is on the Waterfront anyway, with or without redevelopment. More likely to be additional is straightforward to importantly, some employment will likely be displaced from elsewhere in estimate. For instance, it is not an unreasonable the Region, meaning that to estimate the net gain to the Region, assumption that marine industry businesses are assumptions must be made about: less likely to be based elsewhere in the Auckland what Waterfront employment would look like in 2040 without CBD. We can thus assume that most redevelopment; and employment growth in this industry will be additional. what share of new employment on the Waterfront will be additional, Other industries are trickier. Market Economics (2006), in a study on the
17 The economic value of the redeveloped Auckland Waterfront
wider economic benefits of a Wynyard Point redevelopment, estimated that loss in employment from other parts of the CBD. In other words, on average, as much as 70% of new employment to be based at the practically all the net growth that has occurred in the Auckland CBD over Wynyard Quarter could be displaced from elsewhere in Auckland. the last nine years has been facilitated by Auckland Harbourside.
Sea+City have some control over the type and scale of businesses that will At a Regional level, 2.0% growth a year, or 110,000 new FTEs over nine be contained in the Waterfront area, and their stated desire is to attract years was achieved. Auckland Harbourside’s share of Auckland new business rather than displacing business from elsewhere. employment rose from 2.7% in 2000 to 3.9% nine years later. This infers that jobs are still being added elsewhere in the Region, but at a slower rate Given this range of perspectives and goals, a number of questions were than in Auckland Harbourside. posed to underpin the analysis on additional employment. Figure 8 Auckland CBD At a Regional level, where have jobs been added historically? An assessment was made of employment on the Waterfront, Auckland Harbourside, the wider Auckland CBD, and the Auckland Region over the last nine years. This provided an indication of where new jobs have been generated historically. Summary figures are presented in Table 7.
Table 7 Change in employment by area, 2000 to 2009
Employment (FTEs) 2000 2009 Change %pa Waterfront 3,057 4,350 1,293 4.0 Auckland Harbourside 14,670 25,843 11,173 6.5 Auckland CBD 82,677 93,566 10,889 1.4 Auckland Region 547,028 656,636 109,608 2.0 Source: PwC Growth in the Auckland Harbourside area (of which the Waterfront is a part) was 6.5% a year over the nine years. The increase in employment in Auckland Harbourside was greater than the change in all of the Auckland CBD, which is defined as the three areas highlighted in Figure 8Error!
Reference source not found.. This means that there was a (slight) net Source: PwC, Statistics New Zealand
18 The economic value of the redeveloped Auckland Waterfront
Within the CBD, where have jobs been added historically? Over the Region is expected to grow by 1.5% a year to 2021, given medium fertility, last nine years, employment in Auckland CBD West has in fact declined, death and migration rates. The four urban areas of Auckland central, the while it has grown at under 1.0% a year in Auckland CBD East. In North Shore, Waitakere and Manukau are expected to grow at a similar contrast, growth on Auckland Harbourside, as discussed, was 6.5% a year. rate (1.4%). This is similar to the rate we expect in employment growth, It appears then that employment in the CBD over the last several years and therefore supports the employment projections. has been driven primarily by what has happened on the Auckland However, there is further reason to believe employment will grow by at Harbourside, rather than what happens in Auckland CBD West or East. least 13,800 FTEs in the Auckland CBD over the next 10 years. The How many jobs are expected to be added to the CBD in the next 10 LFPR, which measures the share of the working age population active in years? A projection was developed of how Auckland CBD employment the workforce, is expected to rise. This means that not only is the can be expected to grow over the next 10 years, given the capacity to do population growing, but the share of that growing population in the so. This 10-year period coincides with the period during which most of the workforce is growing. A higher LFPR means more people will be available construction on the Waterfront is expected to be completed. Assuming the for work and will be earning incomes to support economic growth. same 1.4% per year growth in employment experienced over the last nine The first reason the LFPR is expected to rise is because people’s years, the CBD is expected to add 13,800 FTEs to 2020.7 These are net behaviour and choices have changed over the last 20 years, and are new jobs, not a net displacement of jobs from elsewhere in the Region, as expected to continue to do so. The change in the Auckland Region LFPR strong growth in employment is expected in other parts of the Region too. since 1990 is highlighted in Figure 9 overleaf. Is this projection of Auckland CBD job growth realistic? These extra Although increases in the LFPR have been subject to the business cycle, 13,800 FTEs to be added to the Auckland CBD economy will be the result the trend has been clearly upward, from around 65.5% 20 years ago, to of two stimuli: first, population growth in the Auckland Region, and second, 67.6% today. This means more people choose to be in the workforce. strong labour force participation rates (LFPR).
According to Statistics New Zealand, the population of the Auckland
7 It is worth noting that the economic slowdown seen since 2007 has been particularly severe. Relying on average annual growth rates over the last nine years produces future growth rates that are conservative.
19 The economic value of the redeveloped Auckland Waterfront
Figure 9 Auckland labour force participation rates, 1990 to 2010 workers will be housed where capacity exists, and where demand can be met by supply. 69 2 e
t According to Colliers International, around 150,000 m of office capacity is a r
68 n
o available in the Auckland CBD, capable of accommodating around 9,300 i t
a 67 p i workers. Most of this capacity is B grade or lower. c i t r
a 66 p With capacity for almost 9,300 e c r 65 o f
new FTEs expected to be r u
o 64 b created on the Waterfront, this a L 63 would be a logical place for new 1990 1995 2000 2005 2010 jobs to be accommodated.
Source: PwC Some may therefore argue that A second reason the workforce is expected to grow faster than the the vast majority of new jobs population is that the LFPR figures do not include people in the over-65 added on the Waterfront will be additional. age group. Yet examining the LFPR for this age group at a national level At the same time, it is recognised that the Waterfront is an attractive place shows that the share of people aged over 65 still in the workforce has for new and existing businesses. The ASB headquarters being built on the increased by 143% since 1990. In 1990, only 6.7% of people aged over Waterfront is an example of displacement, where jobs will move from one 65 worked. Today the figure is 16.3%. This age group will continue to part of the Region to another because of the attractiveness of the drive the size of the workforce up. Waterfront as a base of operations. In summary, with strong population growth expected and the number of What should we assume about additionality? It is therefore unclear people in the workforce growing even faster, the 13,800 FTEs expected to that all, or even most, of the new jobs on the Waterfront will be additional. be added to the Auckland CBD economy by 2020 does not appear to be We assume 50% of new FTEs on the Waterfront will be additional, with the an unreasonable assumption. other half displaced from elsewhere in the Auckland Region. In other Where will these 13,800 FTEs be housed? If the CBD is to grow, it will words, around 4,650 FTEs are assumed to be additional, with an equal need to accommodate these 13,800 new workers somewhere. New number displaced. This suggests that just one third of new FTEs added to
20 The economic value of the redeveloped Auckland Waterfront
the Auckland CBD will be accommodated on the Waterfront over the next tenants such as ASB or multinationals. These larger organisations can 10 years (with more than 9,000 being accommodated elsewhere in the provide the critical mass needed to attract the hospitality and small retail CBD given the conservative growth scenario of 13,800 new CBD jobs).8 businesses to the area that will then support even more natural growth and the attraction of start-ups. Where will these new workers come from? The additional 9,300 FTEs added to the Waterfront will come from four sources. Some, as We have allowed for a 30% increase in employment at existing businesses mentioned, will be moving into the area from elsewhere in the Region over the 10 years. Three to six new anchor tenants are assumed to be (displacement). While we have assumed that half of the new workers will attracted to the Waterfront, bringing around 1,500 new FTEs to the Region. be from elsewhere in the Region, the figure may well be far lower. New businesses, many within the technical, IT, creative, and R&D areas, are assumed to account for a further 20% of the new employment, or The remainder of the additional Waterfront employment will come from 1,840 new FTEs. three sources: Additional economic impact of Waterfront employment on Auckland Natural growth: existing businesses in the Auckland Region needing Region, 2040 more space Anchor tenants: businesses that already have a presence in other Table 8 presents the net addition to the Auckland Region economy as a parts of New Zealand or overseas establishing a local presence result of the intensification of employment on the Waterfront, excluding Start-ups. displacement from other parts of the Region.
Sea+City wishes to target high-productivity, fast-growing businesses. Table 8 Addition to Auckland Region from Waterfront employment These may be start-ups, but could just as likely be established anchor excluding agglomeration, 2040
8 Given that the estimate of 13,800 new FTEs being added to the CBD is based on growth Impact of ADDITIONAL Employment GDP Output rates over the last nine years, which included the largest economic slowdown since the Great employment FTEs $m $m Depression, it is quite possible that the share of total new CBD jobs accommodated by the Direct 4,503 $536.6 $1,013.8 Waterfront will be even lower than the one third suggested here. On the other hand, given Total 9,535 $1,086.4 $2,066.1 Source: PwC that employment has remained remarkably resilient through the current downturn An estimated further 4,500 FTEs will be added to the Auckland Region (unemployment reached a high of 8.7% in Auckland in the June 2010 quarter compared with 13% in the early 1990s), one would not want to overestimate employment growth rates out to economy (and would be based at the Waterfront) that would not otherwise 2020. be employed in the Region. These FTEs will generate $537 million in
21 The economic value of the redeveloped Auckland Waterfront
direct GDP. Taking into account the supply industries, and where these Figure 10 Agglomeration benefits on the Waterfront workers spend their incomes, a total of 9,540 FTEs would be added to the Auckland economy, generating $1.09 billion in GDP. Local GDP including agglomeration $1,750 3.4 Agglomeration and congestion Agglomeration $1,400 Base )
One important benefit of higher concentrations of employment in a certain m $1,050 $ (
geographic location is agglomeration or clustering effects. In the case of P
D $700 the Waterfront redevelopment, intensification of industries is likely to result G $350 in higher increases in production than would be expected purely as a result of increased employment. This additional growth in production (GDP) is $0 2010 2040w/out 2040 with Additional due to agglomeration impacts. redev redev
Employment density on the Waterfront is expected to triple over the 30 Source: PwC With redevelopment increasing the number of workers on the Waterfront years to 2040. Figure 10 overleaf highlights the addition to GDP made by three-fold, a further $218 million in GDP would be added that would not agglomeration benefits as employment on the Waterfront intensifies. otherwise be the case (or a 16% increase in labour productivity). Most of The slight increase in employment that would occur even without this increase in production would be additional ($215 million). The $215 redevelopment (as estimated by Sea+City) would have agglomeration million in additional production due to agglomeration adds a further 40% to benefits equal to a $3.0 million increase in total GDP produced by workers additional production from the increase in employment and changing on the Waterfront. This is a 0.9% increase in average productivity, which industry profile on the Waterfront. is barely visible on Figure 10. Theory and assumptions: agglomeration benefits
Graham (2005, cited in Williamson, Paling and Waite, 2007) highlights three levels of externalities captured by agglomeration theory:
Firm level: efficiencies gained as production is ramped up within a firm, leading to higher GDP (value added) per business. In the case of
22 The economic value of the redeveloped Auckland Waterfront
the Waterfront, this would mean as the area develops, a larger local modes (walking and cycling), with only 30% of people travelling to the area market is created, meaning individual organisations will likely have to by car. This would improve the transport system in such a way as to increase production. support agglomeration by reducing the risk that congestion will impede agglomeration benefits from being realised. Industry level: benefits from the co-location of several businesses in a similar industry, such as the marine industry on the Auckland The Waterfront redevelopment could Waterfront. This is a major impact to be examined in this report. be classified as a Global/Central Activities District, in line with City level: benefits from firms being located in large urban areas using classifications used in the Williamson common infrastructure, with access to a diverse labour force. report.9 This type of area has the Another way of viewing the benefits of agglomeration at the firm, industry greatest variety of uses and functions and city levels (Williamson et al, 2007) are that: including as the main focus for
intermediate inputs can be provided at lower cost and in greater national and international business, variety, meaning more efficient outputs; and professional services, specialised health and education precincts, specialised shops and tourism. It is also a recreation and entertainment larger labour markets mean greater specialisation and maintenance of destination and has national and international significance. As this area is human capital even if some firms fail. the key driver of wealth in the metropolitan region, it should be accessible Technology and knowledge can be shared across firms as businesses are with an extensive and concentrated catchment. Of all centres, given the co-located, or as labour and associated skills move between firms. nature of the economic activities being practiced, the greatest
Other factors to consider when estimating the benefits of agglomeration agglomeration benefits are likely to accrue here. include a range of constraints to agglomeration, such as congestion, pollution and loss of urban amenity; and the strong link between 9 agglomeration benefits and efficient transport systems (Williamson et al). Other types of centre classified include the Specialised Activity Centre (SAC) and a Neighbourhood Activity Centre (NAC). SACs have high employment densities and require As discussed elsewhere in this report, the target for the redeveloped significant space (such as for the marine industry), and develop new and emerging Waterfront is for it to be far more accessible by public transport and active applications. Firms in SACs benefit greatly from co-location. NACs are dominated by small businesses and shops and are highly accessible by public transport and active modes.
23 The economic value of the redeveloped Auckland Waterfront
Figure 11 The agglomeration benefits flowchart
Labour productivity Transport accessibility Employment density (agglomeration benefits)
Amenity
A premise for realising agglomeration benefits businesses to interact more effectively between themselves, again improving efficiency and allowing the generation of agglomeration benefits. The basic premises for achieving agglomeration benefits are that an area must be accessible, and have amenity, as summarised in Figure 11. Theory and evidence support the presence of strong, positive relationships between accessibility and employment density, and employment density Accessibility and amenity are widely recognised as two of the major factors and productivity in cities, including Auckland. underpinning agglomeration. Used proactively, they can enable a To achieve the employment densities the redevelopment is aiming for city or urban area to reap the benefits of growth and intensification. (nearly 300 FTEs per hectare), the Waterfront would need to enjoy an Transport accessibility: This refers to the number of residents and accessibility index above 0.60 (Williamson et al, 2007).10 workers accessible to a location by car and public transport. An increase in accessibility in an area that already has high employment Transport shapes urban form and leads economic development in cities. densities (currently 97 per hectare on the Waterfront) is expected to Graham (2005) goes so far as to say that “ultimately transport investment stimulate increased density (as required to reach capacity on the is crucial in sustaining cities and supporting urban agglomeration”. Waterfront) and generate higher levels of productivity (agglomeration Increased accessibility increases the number of workers potentially benefits). available to employers and brings a greater range of employment According to Williamson et al (2007), the Waterfront already enjoys an opportunities within reach of households. Both of these improve the match between potential workers and employment opportunities and allow firms 10 Accessibility indices were estimated by Williamson et al, and lie between 0.0 and 1.0, with a to operate more efficiently. The reduced travel times also allow firms and higher ratio indicating better accessibility.
24 The economic value of the redeveloped Auckland Waterfront
accessibility index above 0.50 (among the highest in Auckland) but this agglomeration. would need to rise further to realise the benefits discussed in this chapter. Increased transport accessibility and amenity drive employment density Amenity: The economic success of cities is substantially dependent on up. This increase in employment density is what will drive agglomeration the skill levels of workers. To attract skilled workers, cities and locations benefits. within cities must be attractive places to live and work with a range of What has to happen on the Waterfront? social, cultural and environmental features (high amenity values). The target is for around 7,000 residents to be living on the Wynyard The Brookings Institute (2005) notes that skilled people are attracted to Quarter (both north and south of Pakenham Street) by 2040. We estimate compact centres as living and working spaces, due to their vibrancy, the that of these 7,000 residents, around 4,740 will be in the workforce, given protection of green spaces, labour market thickness and a generally projections of the population age structure and the labour force tolerant social environment. The contention is that high quality urban participation rate. A large share of these working residents is expected to areas will be more successful in attracting well-educated and highly work on the Waterfront or in the Auckland CBD. There will be several productive workers, the types of workers who will underpin the productivity thousand more workers who live elsewhere and come into the Waterfront gains within a more agglomerated, knowledge-based economy. to work as well, given the employment projections presented in this report. It is also increasingly apparent that amenity is a significant factor in the This increase in workers coming to the Waterfront means congestion will location choices made by firms. This is principally because an attractive become more of a concern unless actions are taken to reduce congestion location: as employment rises. Congestion will stifle employment growth, and the adds to the prestige of the firm; and agglomeration benefits that come from denser employment. makes it easier to attract skilled workers who are more productive and If the Waterfront is to achieve the employment and agglomeration therefore more profitable. benefits it seeks, there will need to be significant modal shifts The Waterfront has the potential to develop into a particularly attractive throughout Auckland and specifically the Waterfront. CBD location and the evidence suggests that this will greatly enhance the Inversely stated, if these mode share targets are not met, this is likely to area’s ability to attract skilled workers and firms that rely on skilled constrain development, employment growth and agglomeration benefits. workers. This is one of the core foundations for realising the benefits of The Auckland City Centre Waterfront Masterplan calls for passenger
25 The economic value of the redeveloped Auckland Waterfront
transport use of around 49% for all trips to the city centre by 2016. These Table 10 Shift away from private cars required to overcome figures will need to be even higher for the Wynyard Quarter to achieve the congestion barrier employment growth desired, as highlighted by the Auckland City Council Private cars entering & exiting AM In AM Out PM In PM Out Integrated Transport Assessment (ITA, 2007) figures presented in Table 9. Wynyard Quarter vph vph vph vph Current mode patterns 1,078 549 575 1,223 Table 9 Current and target mode split Future mode patterns 530 411 431 601 Reduction in cars 548 137 144 621 Workers Residents *vph = vehicles per hour Source: PwC, Auckland City Council Mode Current Targeted Current Targeted Drive to work 61.0% 30.0% 40.0% 30.0% Passenger in Private Vehicle 6.5% 15.0% 3.0% 6.0% Up to 620 fewer vehicles will need to pass in or out of the Wynyard Quarter Passenger Transport 20.5% 33.5% 9.0% 13.0% per hour during peak periods than would do given current modal splits, to Walk 5.5% 14.0% 36.0% 40.0% Taxi 0.8% 1.0% 1.1% 0.5% ensure that congestion does not increase in the Auckland CBD. Cycle 1.2% 3.0% 1.2% 1.5% Other 3.0% 2.0% 1.7% 1.0% Instead, access to the Waterfront is expected to be by a range of modes Work at home 1.5% 1.5% 8.0% 8.0% under this scenario. The ITA estimates that by 2016, almost 3,400 people Source: Auckland City Council In order to achieve the gains in employment and agglomeration desired on will arrive on the Waterfront by ferry during the morning peak, with around the Waterfront, the share of people driving to work in the Wynyard Quarter 6,400 arriving by train at Britomart Station just south of the Waterfront would need to fall to 30%. The share walking to work would need to grow area, and a further 9,000 travelling down Hobson and Albert Streets to 14% from the current 5.5%. toward the Waterfront by bus.
The number of residents of the Wynyard Quarter (assumed to grow On the other hand, even if the Waterfront does not achieve its mode share strongly as residential and mixed-use buildings are constructed there) will targets, it is possible that the amenity benefits of the area may mitigate also need to make far greater use of public transport or active modes against potential accessibility constraints. Work undertaken by Williamson (walking and cycling) or will need to work from home, for congestion not to et al suggests that some parts of Auckland, such as Takapuna, achieve worsen from what it is today. Table 10 summarises the reduction in the high employment densities despite poor accessibility. number of private passenger vehicles that will be able to enter and exit the If the Waterfront can achieve modal shifts toward public transport and Wynyard Quarter to keep congestion levels no higher than they are today. active modes greater than the changes set out in Table 9, there will be further gains to the Auckland Region in the form of time savings and
26 The economic value of the redeveloped Auckland Waterfront
associated economic benefits. labour productivity increases by 6.5% per worker.
For instance, if more than 64% of Waterfront residents travel to work by Table 11 Agglomeration elasticities as used by the NZTA public transport or active modes, this would likely reduce congestion, Agglomeration Agglomeration resulting in time savings. This is possible if a large proportion of residents Industry elasticity (ε) Industry elasticity (ε) K Finance and insurance J Information media and of the Wynyard Quarter work within the Auckland CBD. Similarly, the ITA 0.087 0.068 services telecommunications suggests that up to 45% of Wynyard Quarter workers may still travel to M Professional, scientific 0.087 C Manufacturing 0.061 work by car in 2016. If this ratio can be reduced due to the higher number and technical services N Administrative and I Transport, postal and 0.087 0.057 of people living and working in the Wynyard Quarter, there may once again support services warehousing O Public administration and 0.087 E Construction 0.056 be reduced congestion, with time savings as a result. safety H Accommodation and food F Wholesale trade 0.086 0.056 The scale of agglomeration elasticities services R Arts and recreation G Retail trade 0.086 0.053 services Williamson et al (2007) cite studies completed by Ciccone and Hall (1996) Q Health care and social 0.083 B Mining 0.035 assistance and Ciccone (2002) that considered agglomeration benefits in the US and L Rental, hiring and real D Electricity, gas, water and 0.079 0.035 the EU respectively, based on employment densities. These studies estate services waste services A Agriculture, forestry and P Education and training 0.076 0.032 concluded that doubling employment density increased productivity by 5% fishing Source: NZTA to 6%. Rice and Venables (2004) completed a similar study for the UK, Williamson et al (2007), looking at the Auckland economy overall, suggest finding an elasticity of 0.035 (a 100% increase in employment density a smaller elasticity. The report examined the census area units that make increases productivity by 3.5%). up Auckland City, finding that an increase in employment density from 10 Table 11 summarises the elasticities used by the New Zealand Transport per hectare to 100 per hectare increases average earnings (as a proxy for Agency (NZTA) for its evaluations of how proposed road projects will GDP per worker) by 27%. In other words, the agglomeration elasticity support agglomeration. appears to be a little under 3.0%.
The elasticities for all industries on the table are above 3.0%. The average Later work by Williamson et al extended this analysis (2008) by adjusting across all industries listed by the NZTA is 6.5%. That is to say, the NZTA for differences in industry and qualification composition of different areas, estimates that as the density of employment in an area doubles, average with a resulting elasticity estimate of 9.0%.
27 The economic value of the redeveloped Auckland Waterfront
Estimating agglomeration by industry Table 12 Agglomeration benefits by industry, 2040
Having already estimated the expected employment on the Waterfront by Employ Labour Agglomeration Industry ment productivity benefit ($m) industry out to 2040, it is possible to calculate the expected increase in Q95PersonalServices 650 23.6 $1.9 G52PersonalandHouseholdGoodRetailing 553 22.0 $10.8 labour productivity per worker, given an agglomeration elasticity like those F47PersonalandHouseholdGoodWholesaling 430 19.6 $4.9 discussed above. G51FoodRetailing 426 19.5 $8.3 L78BusinessServices 351 17.7 $155.3 C21Food,BeverageandTobacco 335 17.2 $11.4 An important theoretical consideration is the fact that some of the new K73Finance 268 15.3 $2.0 workers on the Waterfront would be drawn from elsewhere in the Auckland E42ConstructionTradeServices 204 13.0 $0.9 L77PropertyServices 181 12.1 $10.9 Region, possibly creating agglomeration disbenefits there. Therefore, a Q96OtherServices 178 12.0 $1.1 N84Education 138 10.2 $0.2 particularly conservative elasticity was adopted, to account for any G53MotorVehicleRetailingandServices 128 9.6 $0.0 H57Accommodation,CafesandRestaurants 112 8.8 $4.9 disbenefits accruing to other parts of the Region that are not explicitly K75ServicestoFinanceandInsurance 102 8.2 $0.9 C22Textile,Clothing,FootwearandLeatherManufacturing 68 6.1 $0.5 included in the estimates here. P93SportandRecreation 67 6.0 $0.8 F46MachineryandMotorVehicleWholesaling 63 5.7 $1.0 Applying the average agglomeration elasticity for Auckland City of just I63WaterTransport 43 4.2 $2.3 I64AirandSpaceTransport 40 3.9 $0.1 under 3% estimated by Williamson et al (2007) yields the following Source: PwC equation: The largest percentage change in productivity is in personal services, with GDP per FTE rising 24%. In dollar terms, the greatest benefit accrues to the business services industry, which is expected to have 7,440 FTEs on ூௗ௨௦௧௬௦௧௬మబరబ ଶସ మబభబ ଶଵ the Waterfront by 2040, compared with 1,650 FTEs today. Agglomeration ݀ݎܲ.calculation ݎݑܾܽܮ݀ ൌ theͲǤʹ resultsቀூ ofௗ the௨௦௧ agglomeration௬௦௧௬ ቁ benefitsݎsummarisesܲ ݎ 12ݑܾܽܮTable will lead to a further $155 million being added by the business services Employment density on the Waterfront is expected to triple over the 30 industry, over and above the $879 million it will generate in 2040 at current years to 2040. Certain industries are expected to see an even stronger labour productivities. surge in employment intensification. Nineteen industries benefit to some extent from intensification on the Waterfront.
28 The economic value of the redeveloped Auckland Waterfront
3.5 Agglomeration benefits in 2040 3.6 Net agglomeration benefits in 2040
We thus estimate that the intensification of employment on the Waterfront Some agglomeration benefits will occur on the Waterfront regardless of the will have the impacts on GDP and output summarised in Table 13. There redevelopment, as there is some (small) potential for employment growth is debate as to whether agglomeration benefits lead to higher employment, even without the redevelopment. We thus estimate the likely rise in labour and if so, how much. One outcome of higher labour productivities may be productivity per worker even without the redevelopment, and subtract that that firms choose to employ more workers, as the marginal product of from the total figures presented in Table 13. labour increases. In our analysis, we ignore any potential increases in The net agglomeration benefits of the redevelopment in 2040 compared employment agglomeration benefits may cause. with 2010 labour productivity levels is summarised in Table 14 overleaf. Table 13 Total economic impacts of agglomeration, 2040 Table 14 Net economic impacts of agglomeration, 2040
Total impacts from GDP Output GDP Output agglomeration $m $m NET impacts from agglomeration $m $m Direct $217.9 $434.7 Direct $214.9 $425.4 Total $459.8 $908.8 Total $451.7 $887.9 Source: PwC The $218 million in direct agglomeration benefits in 2040 as a result of Source: PwC Because the opportunities for expansion of employment on the Waterfront employment densities higher than in 2010 are associated with a $435 without redevelopment are so limited, the net figures are not significantly million increase in direct output. Total GDP rises $460 million on higher lower than the total agglomeration benefit figures. Direct GDP rises $215 output of $909 million. million due to agglomeration, with total GDP rising $452 million more than if the redevelopment did not occur.
29 The economic value of the redeveloped Auckland Waterfront
4 The cruise industry cruise terminal facilities, improved logistics, and the raised profile Auckland will enjoy as a result of the redevelopment), even more growth is expected. A net addition of 1,600 FTEs is expected with the redevelopment.
The cruise industry represents a substantial income source for New Table 15 summarises the impacts this employment will generate. Zealand, and Auckland in particular. This chapter discusses how a Figure 12 Employment generated by the cruise industry Waterfront redevelopment may impact the number of cruise ships visiting Auckland. These ships bring passengers and crew to the Region, who Cruise industry, FTEs spend on a range of goods and services. In addition, some ships are 4,000 replenished in Auckland, creating an even wider range of employment opportunities across the manufacturing, wholesale and retail industries. 3,000 2 4 4 , s 3 E 2,000 Because some cruise passengers will spend time on the Waterfront (thus T F 6 2 4 6 7 8
spending money and creating employment there), we must consider the 9
1,000 , 4 5 1 , impact of double-counting. Section 5 (Events) will capture some of the 1 0 employment generated by these visitors as well, meaning some of their 2010 2040w/out 2040 with Additional spending will be double-counted in the employment profile on the redev redev Waterfront. However, given that these visitors also spend in other parts of Source: PwC Auckland, and the conservatism we have applied to overall figures (see Table 15 Economic impacts of cruise industry Appendix C), we believe we have more than offset any double-counting. Employment GDP Output Figure 12 highlights the direct employment generated by cruise ship visits Impact of cruise industry FTEs $m $m Direct to Auckland in 2010, expected in 2040 without and with the 2010 472 $29.3 $66.5 redevelopment, and the expected additional (i.e non-displaced) direct 2040 with redev 3,442 $213.6 $485.0 Additional 1,596 $98.6 $223.9 employment created in Auckland. Today, cruise ships support around 470 Total direct FTEs in Auckland. Without redevelopment, this is expected to see 2010 928 $63.9 $139.5 2040 with redev 6,767 $465.7 $1,017.2 some growth. However, with redevelopment (the construction of improved Additional 3,137 $215.1 $469.7 Source: PwC 30 The economic value of the redeveloped Auckland Waterfront
The approximately 472 FTEs employed in Auckland as a direct result of cruise packages the cruise industry generated approximately $29.3 million in GDP in 2010. cruise passenger-related spending in port With the redevelopment, this is expected to rise to $214 million in 2040. cruise crew-related spending in port. The direct net GDP added as a result of the redevelopment is $98.6 million. Excluding the expenditure on airfares and ship fuel, most of which are direct imports into New Zealand, the study estimated that $65.6 million in Taking into account upstream and downstream effects, the cruise industry direct expenditure accrued to Auckland in 2009/10 as a direct result of the is estimated to employ 928 FTEs across Auckland today, producing $63.9 cruise industry. million in GDP. With redevelopment, these figures will rise to 6,770 FTEs, and $466 million in GDP, or seven times as many jobs. The additional An Auckland employment generated by the cruise industry due to the redevelopment is Regional Council expected to reach 3,140 FTEs, equating to $215 million in GDP. report (2009) 4.1 What role does the cruise industry play today? showed that the vast majority of visitors New Zealand in general, and Auckland in particular, has a rapidly growing were from the United cruise industry. Auckland hosts 91,000 cruise passengers a year, and is Kingdom, the United expected to see 60% more passengers by the 2011/12 season. States or Australia, and were mostly older people (over 80 per cent were over 55, and over 50 per cent were over 65). On average, cruise Previous research passengers spent just under three days in Auckland, or two days if outliers Market Economics (2010) estimates that the cruise industry resulted in are excluded. direct expenditure of $271 million in New Zealand, of which around $163 Because of their age and origin profile, cruise ship passengers typically million (60%) was captured by Auckland. The areas of spending included: have significant disposable incomes, meaning they tend to spend more cruise vessel-related spending such as port costs, bunkering, than other visitors. Revisiting the data from the Market Economics report provisioning and maintenance, as well as costs incurred by suggests that the average visitor (crew or passenger) spends around $506 passengers and crew getting to and from the cruise ship and pre/post- in Auckland per visit. This is realistic given the high incomes that
31 The economic value of the redeveloped Auckland Waterfront
characterise these visitors. A booming industry
Economic impact of the cruise industry, 2010 The cruise industry has enjoyed spectacular growth over the last several years despite the economic slowdown. Growth in passengers travelling to The estimated spending by cruise ship passengers of $66.5 million in 2010 or through New Zealand has been even higher than the strong growth results in the impacts summarised in Table 16.11 seen globally. Between 1997 and 2009 (the latest year for which data is available), members of the Cruise Lines International Association (CLIA) Table 16 Economic impact of Waterfront-based cruise industry, 2010 saw an average annual passenger growth rate of around 8.2%. New Employment GDP Output Zealand saw a 15% annual average rise over the same period. Impact of Cruise industry, 2010 FTEs $m $m Direct 472 $29.3 $66.5 Carnival Corporation and PLC (with more than 50% of the global market Total 928 $63.9 $139.5 share), saw passenger numbers rise in both 2008 and 2009. The listed Source: PwC company operates 97 vessels around the world across numerous brands The cruise industry created an estimated 472 direct FTEs in Auckland in including P&O Cruises Australia and Holland America (both of which 2010, generating $29.3 million in direct GDP. Taking into account indirect operate through Auckland). and induced effects raised the total impact to $140 million in output, $63.9 million in GDP and more than 900 FTEs. Growth over the last few years has barely slowed. Between 2005 and 2009, passenger numbers have risen 24% at Carnival Corporation and 4.2 Waterfront cruise industry in 2040 PLC, vessel numbers by 18%, capacity by 32% (i.e. larger ships are being added) and employment by 20% (Carnival Corporation and PLC, 2009). This section projects growth in the Auckland cruise industry centred on the Revenues are up 19% since 2004 despite a dip in 2009. Waterfront as a result of both general changes in the industry, and improvements to the Waterfront. The future for the industry is bright. A Cruise Lines International Association (CLIA) presentation on the outlook for the industry (2009) highlighted that whereas cruising was once a decidedly North American activity, it now has broad appeal. The share of all passengers carried by
11 Direct GDP figures estimated by PwC. Other figures estimated by Market Economics and its 25 member cruise lines that are not from North America more than updated by PwC to 2010 dollars. doubled from 11% in 1995, to 22% in 2008.
32 The economic value of the redeveloped Auckland Waterfront
Despite the global slowdown, capacity grew and occupancy remained with an average number of passengers of approximately 3,770. strong on CLIA member lines, which include P&O Cruises, and Holland Table 18 Planned cruise liners America Line, which both operate in New Zealand. Thirteen new ships were added to the CLIA member fleet in 2009, together worth an estimated Vesselname Cruiseline Tonnage Launch LengthPassengers US$4.7 billion. A further 22 ocean-going ships were on order for delivery Future Allure of the Seas Royal Caribbean International 225,282 GT 2010 362m 5,400 through 2012, worth around US$14 billion. Disney Dream Disney Cruise Line 128,000 GT 2011 335m 4,000 Disney Fantasy Disney Cruise Line 128,000 GT 2012 335m 4,000 MSC Favolosa MSC Cruises 139,000 GT 2012 333m 3,900 The average size of cruise ships is growing. Some of the most recently- Celebrity Silhouette Celebrity Cruises 122,000 GT 2011 315m 2,850 Celebrity TBA Celebrity Cruises 122,000 GT 2012 315m 2,850 launched ships are presented in Table 17. Carnival Magic Carnival Cruise Lines 130,000 GT 2011 306m 3,652 Carnival Breeze Carnival Cruise Lines 130,000 GT 2012 306m 3,652 Table 17 Recently commissioned cruise liners Costa Favolosa Costa Cruises 114,500 GT 2011 290m 3,700 Costa Fascinosa Costa Cruises 114,500 GT 2012 290m 3,700 TBA Princess Princess Cruises 141,000 GT 2013 NA NA TBA Princess Princess Cruises 141,000 GT 2014 NA NA Vesselname Cruiseline Tonnage Launch LengthPassengers Source: PwC Current Oasis of the Seas Royal Caribbean International 225,282 GT 2009 362m 5,400 The challenge for Auckland and New Zealand Queen Mary 2 Cunard Line 148,528 GT 2003 345m 3,056 Liberty of the Seas Royal Caribbean International 154,407 GT 2007 339m 4,370 Independence of the Seas Royal Caribbean International 154,407 GT 2008 339m 4,370 With the average size of vessels and the expectations of passengers and Freedom of the Seas Royal Caribbean International 154,407 GT 2006 339m 4,370 operators rising, Auckland in particular and New Zealand in general stand MSC Fantasia MSC Cruises 133,000 GT 2008 333m 3,900 MSC Splendida MSC Cruises 133,000 GT 2009 333m 3,900 to lose if Auckland does not continue to develop as a cruise destination. Norwegian Epic Norwegian Cruise Line 153,000 GT 2010 329m 4,200 Celebrity Solstice Celebrity Cruises 122,000 GT 2008 315m 2,850 To remain attractive, the Waterfront must have the infrastructure and Celebrity Equinox Celebrity Cruises 122,000 GT 2009 315m 2,850 Celebrity Eclipse Celebrity Cruises 122,000 GT 2010 315m 2,850 activities in place to make Auckland not just attractive for tourists, but also Navigator of the Seas Royal Caribbean International 138,279 GT 2002 311m 3,114 Mariner of the Seas Royal Caribbean International 138,279 GT 2003 311m 3,114 for cruise operators. Operators will be looking for infrastructure that allows Explorer of the Seas Royal Caribbean International 137,308 GT 2000 311m 3,114 Voyager of the Seas Royal Caribbean International 137,276 GT 1999 311m 3,138 the efficient embarkation and disembarkation of passengers and crew. Adventure of the Seas Royal Caribbean International 137,276 GT 2001 311m 3,114 Carnival Dream Carnival Cruise Lines 130,000 GT 2009 306m 3,652 In addition to the benefits gained from cruise passengers, there are the Source: PwC Ships planned for commissioning over the next few years are even larger, benefits to local suppliers of having cruise liners based in Auckland (such as highlighted in Table 18. as the Pacific Pearl, to be based in Auckland for the 2010/2011 season). Replenishment of vessels is a major source of income, accounting for The average length of the planned cruise ships in Table 18 is 319 metres, around 27% of all direct spending in Auckland by the cruise industry in
33 The economic value of the redeveloped Auckland Waterfront
2009/10 (Market Economics, 2010). Operators will look for ports that allow by extension) may miss out on the opportunity to host cruise ships of this for logistically uncomplicated resupply. size, or to play a role in resupplying such vessels.
Resupplying a modern cruise ship is no mean feat, as highlighted in Figure A scenario for cruise industry growth in Auckland to 2040 13 overleaf, which compares the number of people carried by modern Tourism New Zealand and Cruise New Zealand assisted in developing a cruise ships of various sizes with the populations of towns or suburbs in scenario of how the cruise industry in Auckland could be expected to grow New Zealand. out to 2040, given the redevelopment. The growth in direct GDP expected Figure 13 Cruise ship capacity and New Zealand towns to be generated in Auckland under this scenario is presented in Figure 14.
Figure 14 Scenario of cruise GDP growth in Auckland, 2010 to 2040 The size of modern cruise liners Pacific Sun 2,156 250 Featherston,NZ 2,300 )
m new cruise $
( infrastructure Rhapsodyof the Seas 3,200 200 P D
Turangi, NZ 3,200 G 150
d
Voyagerof the Seas 4,319 n a l 100 k
Waihi, NZ 4,500 c u A
50 t
0 2,000 4,000 c e
Pax & crew / population r i 0 Source: PwC D 2010 2015 2020 2025 2030 2035 2040 If Auckland were to capture the replenishment of a Voyager class ship for an eight-day leg of its journey, for instance, it would be the same as Source: PwC supplying all the needs of the town of Waihi for a week. Direct GDP generated in Auckland from the cruise industry is expected to
The Pacific Sun and Rhapsody of the Seas both already visit Auckland. grow from $29.3 million in 2010, to $214 million in 2040. There is talk of a Voyager class ship visiting Auckland in the next few The strong GDP growth projected to 2012 is based on capacity and years, if the Waterfront has appropriate infrastructure in place. Stated bookings already made to that date. The growth rate then plateaus toward inversely, without appropriate infrastructure, Auckland (and New Zealand 2017. With a new cruise terminal assumed to be completed by 2017, there
34 The economic value of the redeveloped Auckland Waterfront
is a surge in growth in 2018, slowing again across the 22 years to 2040. o Spending by embarking passengers who similarly often fly in a Over the 28 years from 2012 to 2040, GDP growth averages 5.3% per day or two before the cruise departs. annum. This growth rate is not overly optimistic, given growth rates of over o Provedoring of the cruise ship, with currently accounts for 7.0% per annum worldwide over the last 20 years. around 27% of the economic benefits of the cruise industry in Auckland. What will drive this growth? A redeveloped Waterfront with improved cruise infrastructure and A key question is what will drive this strong growth in the contribution of the more attractions for visitors is expected to capture more cruise industry to Auckland GDP. There are several ways that improved turnarounds, meaning more nights in Auckland for visitors as well cruise infrastructure and a more attractive Auckland Waterfront will as more replenishment of ships. The result will be a far higher stimulate the growth in the industry: cruise GDP growth path than if the proportion of turnarounds is Larger ships: Table 18 has already highlighted the move toward similar to that seen today. larger ships. One major drawback of the Auckland Waterfront at New itineraries: With the growth in the cruise industry in Australia, present is its inability to cater for larger ships, both from a berthing and many repeat passengers a logistics point of view. By 2040, the average size of cruise ships are looking for other visiting a redeveloped Auckland Waterfront are expected to be at least destinations to visit. 50% larger than today. Many of the current fleet More turnarounds: The main economic benefit of the cruise industry of ships serving the lies in turnarounds. Turnarounds are when a ship ends and starts a Australian market do not cruise in a particular port, rather than just transiting through it. These go as far afield as the are economically attractive because of the spending incurred around more outlying Pacific islands such as Tonga and Samoa. This is the cruise arrival and departure. Economic benefits include: likely to see increasing numbers of fly-and-cruise packages, where o Spending by disembarking passengers, who often spend at passengers fly into Auckland, undertake a seven to 10-day cruise, least one night in the port at which they disembark before and fly back to Australia. This increase in demand will have two flying home. The average for disembarking passengers is impacts: three nights spent in country before departure. o Larger ships will need to be based in Auckland, such as
35 The economic value of the redeveloped Auckland Waterfront
the Pacific Pearl to be based in Auckland in the 2010/11 4.3 Net addition to Auckland cruise industry from season. redeveloped Waterfront o The season will be extended, to allow more turnarounds of ships. To determine what the net additional impact of the Waterfront
Both these impacts will require improved infrastructure, to meet redevelopment would be on the cruise industry and Auckland, we consider the logistics and passenger needs of the surge in passengers how the cruise industry would fare without the redevelopment. The expected from this expansion of cruise options. primary aspects of the redevelopment being considered here are a new two-berth cruise terminal and logistics improvements that allow easier Economic impact of the cruise industry, 2040 movement of passengers and supplies in and out of the Waterfront area. Taking into account the rapid growth, new cruise infrastructure specifically, However, other parts of the redevelopment, which will make the Waterfront and a redeveloped Waterfront in general, is expected to facilitate the a better place to be, are also expected to play a role in bringing larger economic impacts in 2040 summarised in Table 19. ships, more turnarounds, and new itineraries to Auckland. We compare a scenario without this new infrastructure to the scenario of a redeveloped Table 19 Economic impact of Waterfront-based cruise industry, 2040 Waterfront already set out in section 4.2.
Employment GDP Output A scenario without the redevelopment Impact of Cruise industry, 2040 FTEs $m $m Direct 3,442 $213.6 $485.0 Total 6,767 $465.7 $1,017.2 Tourism New Zealand and Cruise New Zealand assisted in developing a Source: PwC scenario of how a lack of new facilities might impact growth in passenger The Auckland Region will see direct employment due to the cruise industry and ship numbers. The scenario without the redevelopment is plotted reach 3,440 FTEs in 2040 under the growth scenario, producing $214 alongside the scenario with the redevelopment in Figure 15. million in direct GDP. Taking upstream and downstream impacts into account, employment will reach 6,770 FTEs across the Auckland Region, generating $466 million in GDP, slightly less than New Zealand’s total monthly trade (exports and imports) with Japan.
36 The economic value of the redeveloped Auckland Waterfront
Figure 15 Scenarios of passenger growth in Auckland, 2010 to 2040 infrastructure.
Net economic impacts of the redevelopment 250 )
m new cruise
$ The economic benefits to Auckland Region from the cruise industry taking ( infrastructure
200 P advantage of a redeveloped Waterfront are summarised in Table 20. D
G 150
d Table 20 Net additonal benefit of redevelopment on cruise industry n a l 100 k c
u Impact of ADDITIONAL cruise Employment GDP Output A
50 industry growth FTEs $m $m t c
e Direct 1,596 $98.6 $223.9 r i 0 Total 3,137 $215.1 $469.7 D 2010 2015 2020 2025 2030 2035 2040 Source: PwC The redevelopment will result in nearly 1,600 direct new FTEs being
Source: PwC generated by the cruise industry in 2040 that would not otherwise be The two scenarios have the same growth path until completion of the new created. These additional workers will add a further $98.6 million directly cruise terminal and related infrastructure in 2017, as would be expected. to GDP. Including indirect and induced impacts takes total additional Over the remaining 23 years, however, growth without the cruise employment to 3,140 FTEs and GDP to $215 million. To put this in infrastructure investment is more modest as New Zealand fails to attract perspective, the additional $215 million generated is as large as New larger ships, and as smaller ships are retired. Overall growth rates Zealand’s average monthly merchandise trade (exports and imports) with between 2017 and 2040 average 4.8% per annum with the new cruise the United Kingdom. infrastructure, and 2.0% per annum without the new cruise infrastructure.
Some suggest that even the scenario presented here for growth without new cruise infrastructure is optimistic. Reducing growth in that scenario would result in a net additional impact of the redevelopment larger than that presented in this study. However, a conservative estimate of the additional benefit of the redevelopment on the cruise industry is maintained by allowing relatively strong growth in the industry even without the new
37 The economic value of the redeveloped Auckland Waterfront
5 Major Waterfront-linked events Figure 16 Employment generated by major Waterfront-linked events
Events, FTEs This section discusses how the Waterfront redevelopment would likely play 1,000 6 a role in Auckland capturing events it may not otherwise capture, or in 800 4 9 hosting events more regularly. While we discuss smaller or domestically- s 600 E targeted events briefly, the focus is on major international-scale events. T F 3
400 3 8 6 4 4 4 This is because the tourism impact of smaller events is assumed to be 0
200 4 captured in the overall tourism projections for Auckland, discussed in 0 section 6. In this way, we avoid double-counting. Base 2040w/out 2040 with Additional redev redev Figure 16 highlights the direct employment generated by events at the
Waterfront in the Base scenario, as well as scenarios for 2040 without and Source: PwC with the redevelopment. Finally, it shows the additional direct Table 21 Economic impacts of major Waterfront-linked events, 2010 employment created in Auckland. and 2040
In the Base scenario, the major events profile of the Waterfront generates Employment GDP Output around 400 direct FTEs. This is expected to rise to around 460 through Impact of Events FTEs $m $m Direct natural growth by 2040. However, the redevelopment is expected to add a Base 404 $18.5 $41.2 further 480 direct FTEs, taking the total for events to nearly 950. 2040 with redev 946 $43.2 $96.5 Additional 483 $22.1 $49.3 Table 21 summarises the economic impacts this direct employment will Total Base 718 $41.4 $89.3 generate. 2040 with redev 1,682 $97.0 $209.2 Additional 859 $49.6 $106.9
Source: PwC
38 The economic value of the redeveloped Auckland Waterfront
As of 2010, major Waterfront events are estimated to generate $18.5 World Masters Games (WMG). This is a level down from the million in direct GDP, and $41 million including indirect and induced Commonwealth Games, but is still very large and international in nature. impacts. The redevelopment is expected to increase direct GDP due to An event of this scale would bring an estimated 15,650 international events hosted at the Waterfront to $43.2 million in 2040, more than double visitors, and a further 12,000 visitors from other parts of New Zealand to today’s estimate. Taking into account upstream and downstream impacts, Auckland (Simpson, 2009). this would increase the GDP contribution to $97 million. While not all the component activities within the WMG would be water- The additional economic benefits of the redevelopment would include related, capturing the games does rely on having a suitable facility for $22.1 million in direct GDP, and $49.6 million in total GDP. water-based events such as the triathlon, meaning a Waterfront is all but 5.1 The importance of Waterfront-linked events essential.
Events play a major role in showcasing a region’s areas of competitive This type of event would generate around $132 million in direct spending advantage. In the case of a Waterfront, such as the one in Auckland, this in Auckland, generating nearly $60 million in direct GDP and 1,300 one- means showing off the Region’s ability to host major events related to the year equivalent FTEs (Simpson, 2009). Including upstream and water, such as yachting or triathlons. downstream impacts raises this to $286 million in output, $133 million in GDP, and 2,300 FTEs. The difficulty is that capturing Waterfront-related events is often a chicken and egg issue. A Waterfront is more likely to capture an event if it has an Major yachting events: The America’s Cup and the Volvo Ocean Race established reputation as a marine events centre. On the other hand, capturing a world-class marine event provides a stimulus to the local The America’s Cup: The iconic example of a marine marine and water-sports industry that propels it further up the value chain. event in the Auckland context We summarise the types of events the Auckland Waterfront has captured would be the America’s Cup. or could be expected to capture over the next few years. The Cup is the oldest active Super events: The World Masters Games trophy in international sport, and is typically challenged every three to five years. Other race series, An example of a super-event that the Waterfront could play host to is the such as the Louis Vuitton Cup, have been used to select a challenger
39 The economic value of the redeveloped Auckland Waterfront
for the America’s Cup. direct spending in Auckland (Covec, 2009). If we apply the same spending to employment ratios used for the America’s Cup, this will A Market Economics (2003) report estimated that the build up to the have a total impact on GDP of around $11.7 million, and create the 2003 hosting (and defence) of the Americas Cup added $88 million in equivalent of around 219 one-year FTEs. direct spending to the Auckland economy, generating $26 million in direct GDP, and the equivalent of 830 one-year FTEs. Including The Volvo Ocean Race: The Volvo Ocean Race (formerly the indirect and induced effects takes this to $57 million in total GDP and Whitbread Round the World Race) is a three-yearly round-the-world the equivalent of 1,320 one-year FTEs. race. The 2011/12 race will have nine legs, totalling 39,000 nautical miles, with the fourth leg finishing in Auckland. The boats are The actual America’s Cup Defence brought as much as $608 million of expected to stop over in Auckland for around 11 days before heading additional direct spending to the Auckland economy in 2001 to 2003 to Brazil. (mostly in 2003, Market Economics). The total contribution to Auckland GDP was $550 million. The event is estimated to have The Horwath report on the generated 8,180 one-year FTEs in Auckland. However, there is no proposed marine events guarantee of winning the America’s Cup and therefore getting to play precinct (2006), citing Market host to another defence. Economics figures, suggests that the Volvo Ocean Race will What is more certain, however, is that if New Zealand continues to bring around $18.4 million (2010 play as major a role in international yachting as it currently does, we dollars) in additional spending to are likely to continue to host a leg of the America's Cup the Auckland economy. A separate Covec report (2009) estimates the Championship regatta series (the “Acts” leading up to the selection figure at around $15.5 million. Taking an average of the two estimates of a challenger for the America’s Cup). results in $7.6 in additional direct GDP, and 750 direct FTEs. Adding These races are smaller in scale than the actual America’s Cup, and upstream and downstream impacts, the Volvo Ocean Race will bring are also likely to be smaller than the Louis Vuitton Cup that ultimately around $17 million in GDP and the equivalent of 295 one-year FTEs to determines the challenger for the America’s Cup. However, they could the Region. be of the scale of the Louis Vuitton Pacific Series, held in Auckland in 2009. The impact of this event was around $16.3 million in additional
40 The economic value of the redeveloped Auckland Waterfront
2012 ITU Triathlon Grand Final Extreme 40s or the World Match-Racing Tour; the Corporate World Team Champs or an annual New Zealand Corporate Triathlon; Ironman or Auckland will host the 2012 ITU World Champs Series Grand Final. The Ironman 70.3 (the fastest-growing triathlon series in the world, and Grand Final is the most prestigious race on the ITU calendar each year, currently without an event in New Zealand). and the Auckland event will be the final race to decide the 2012 ITU World Champions. The four-day event is set to take place from 18-22 October On average, these events are assumed to be around one-third the size of 2012 at Queens Wharf in the heart of Auckland. The sport’s biggest the Volvo Ocean Race, at $6 million in direct spending per event. superstars, including Olympians from over 20 nations, will come to New Other events on the Waterfront Zealand for the event. The Waterfront is also home to Hosting this World Championship Series Grand Final will boost the profile many other events. However, it of Auckland and New Zealand, with an estimated global TV audience in can be argued that many of these excess of 13 million. According to a Sports Impact Ltd report (2009), the events, while important: event would generate around $21 million in direct spending.12 This would could be held elsewhere in Auckland, meaning they are not Waterfront result in $9.4 million in direct GDP and the equivalent of 206 direct one- events per se; year FTEs. mostly attract Auckland residents (meaning the impact on Auckland
Other marine events Region is small); and are of a scale sufficiently small that they are likely to be captured in the The Waterfront is currently able to capture some smaller events that have overall tourism figures estimated in section 6. an international flavour to them each year. These events are likely to be The events discussed in this section are considered as part of the overall additional to other tourism measured in section 6 (Other waterfront tourism impacts measured elsewhere. Events held around the Waterfront tourism). Examples of events include international sailing events such as include: the New Zealand Millennium Cup, the Superyacht Cup regatta, the ISAF Nations Cup (Regional Finals held in Auckland in 2009), a leg of the Auckland International Boat show: The annual Auckland International Boat Show on the Viaduct Harbour brings a selection of 12 Some sources suggest an even higher impact in the region of $30 million, but we assume the conservative estimate here. locally made and imported yachts, launches and trailer boats, and
41 The economic value of the redeveloped Auckland Waterfront
marine electronics and boat equipment to Auckland. Linked activities heritage on land and sea. A fleet of sail boats, classic yachts, vintage include on-water demonstrations. There are typically up to 200 land- tugboats and tall ships, plus the fastest racers on the water, compete based exhibits including electronics, boating and marine information, for line honours in their respective classes. and fishing and safety gear. Numerous other events including Go by Bike Breakfast, Ports of New Zealand Fashion Week: The Viaduct Harbour Marine Village Auckland Boat Tour, St Jerome’s Auckland Laneway Festival, and receives thousands of people including media, buyers, models, Auckland Anniversary Fireworks. designers, international guests and fashion lovers from far and wide.
State Harbour Crossing, Auckland: New Zealand's largest single ocean swim, with 1,400 swimmers crossing Waitemata Harbour. The course starts in Quinton Park, Bayswater and finishes on the northern side of Te Wero Island, Viaduct Harbour.
Auckland International Buskers Festival: Each Auckland Anniversary Weekend, international and national professional street performers, acrobats, jugglers, mimes, magicians, pavement artists, and comedians come together to create an energetic vibe in Auckland.
Auckland Seafood Festival: Taking place every year at Te Wero 5.2 What role do Waterfront-linked events play today? Wharf, Viaduct Harbour, a large number of visitors experience a range of seafood, entertainment, wine and beer options over the three-day This section summarises the current role of Waterfront-linked events in the holiday weekend. In 2010, the festival received over 22,000 visitors, Auckland Region economy. while the 2011 edition is expected to attract around 30,000. Theory and assumptions: events captured by 2010 infrastructure Oceanbridge Auckland Anniversary Regatta: Auckland's Table 22 overleaf presents the types of major events assumed to captured Anniversary Day Regatta celebrates the City’s maritime history and
42 The economic value of the redeveloped Auckland Waterfront
at the Waterfront with the current infrastructure, as well as the return the Waterfront is able to capture one sporting event of a scale similar period (i.e. how often we are likely to capture these events on average). It to the ITU World Champs Grand Finale every seven years. also shows the estimated spend per event. the Waterfront could capture three smaller (but nevertheless
Table 22 Events, likely return period, and spend per event, Base case significant) events a year.
Return period (years) By far the most significant event is the WMG. It is important to note that if New Zealand were to win (and therefore host) the America’s Cup again, Spending / the one-off impact of that event would dwarf even the WMG. However, Event Base event ($m) Volvo Ocean Race 4.50 $17.0 because hosting such an event is dependent on factors over which the America's Cup Championship regatta series 3.00 $16.3 Waterfront redevelopment has no control, we exclude it from this analysis. ITU World Champs Grand Finale or similar 7.00 $21.0 World Masters Games or similar 12.00 $131.9 Economic impact of Waterfront-based events in Auckland, Base case Smaller annual Waterfront-based events* 0.33 $6.0 * such as an annual corporate triathlon, ironman event, smaller (but int'l) sailing event, Given the return period estimated for each of these event types, and an Corporate World Team Champs, Superyacht regatta Source: PwC average of three smaller annual Waterfront-based events per year, the The Base case scenario assumes that: economic impacts are estimated in Table 23.
Table 23 Economic impact of Waterfront events, Base case with the focus on capturing super-events the new Auckland Supercity
is expected to have, Auckland could expect to capture an event like Impacts from Waterfront-based Employment GDP Output the WMG every 12 years. one-off events, 2010 FTEs $m $m Direct 404 $18.5 $41.2 Auckland will be able to attract at least one Act of the America's Cup Total 718 $41.4 $89.3 Championship regatta series every three years. This assumption is Source: PwC Waterfront-based events are estimated to result in direct annual spending not unreasonable provided New Zealand continues to enter a team in of around $41.2 million, generating $18.5 million in direct GDP and just the series. over 400 FTEs. Including indirect and induced impacts, output from events Auckland is able to secure a leg of the Volvo Ocean Race two out of is $89.3 million, GDP is $41.4 million, and employment is nearly 720 FTEs. every three times the event is held (i.e. a return period of 4.5 years on average for the three-yearly event).
43 The economic value of the redeveloped Auckland Waterfront
5.3 Waterfront-linked major events in 2040 Working with the Auckland City Council Events team, we developed a scenario of the likely major events schedule for the Waterfront in 2040, The redeveloped Waterfront is likely to increase the profile of Auckland by given the redevelopment. This is presented with the Base scenario for providing a more attractive venue for events, and is thus expected to lead comparison purposes in Table 24. to an increase in opportunities to host major events. Table 24 Waterfront-based events, Base case and 2040 Theory and assumptions: growth in events to 2040 Return period (years) A report by Horwath (2006) itemises a number of further impacts of holding 2040 with Spending / Waterfront-linked events in Auckland in addition to the events themselves. Event Base redev event ($m) For instance, the report highlights how the raised profile for Auckland’s Volvo Ocean Race 4.50 3.00 $17.0 America's Cup Championship regatta series 3.00 2.00 $16.3 marine industry as a result of yachting events will stimulate demand for ITU World Champs Grand Finale or similar 7.00 5.00 $21.0 superyacht servicing in Auckland. Similarly, the report suggests that other World Masters Games or similar 12.00 8.00 $131.9 Smaller annual Waterfront-based events* 0.33 0.17 $6.0 parts of the marine industry would also benefit as their skills and New Year's Event 0.00 1.00 $26.0 * such as an annual corporate triathlon, ironman event, smaller (but int'l) sailing event, Corporate technologies are showcased to the world. World Team Champs, Superyacht regatta Source: PwC These are valid arguments in the context of the Horwath report, which was The 2040 scenario assumes that: looking at the impact of a marine events precinct. The current work, however, is looking at the broader impacts of the redevelopment of the a New Year’s Eve event like that in Sydney and Hong Kong is created Waterfront area. The impacts on the marine industry are already captured as a direct result of the redevelopment. This event would build on in the assumptions on increased employment there, explained in section 3. Auckland’s status as the first world city (population over one million) to see in the New Year. We have also considered the projections used in another Horwath report given the attractiveness of Auckland as a stop-over venue after (Wynyard Point Redevelopment – Tourism Potential, 2006) so we do not redevelopment, the Waterfront is able to capture a leg of the Volvo double count visitors to the Waterfront in other tourism and event tourism. Ocean Race every three years. It is also able to host an America’s The projections in section 6.2 of this report include natural growth in events Cup Championship regatta series event every second year. in Auckland, but we itemise the iconic events that would be over-and- above the rise in conferences and smaller events captured under tourism. a major sporting code championship is held every fifth year.
44 The economic value of the redeveloped Auckland Waterfront
the Waterfront would help secure a super-event such as the WMG Almost $100 million is expected to be spent in Auckland each year directly every eight years rather than every 12. as a result of Waterfront-linked events. This spending would generate the number of smaller events would rise to six from the current three. $43.2 million in direct GDP, and nearly 950 FTEs. Adding indirect and induced, major events would contribute nearly $210 million a year to Sydney’s New Year’s Eve event brings approximately A$156 million in Auckland output, raising GDP by $97.0 million, and employment by almost additional spending to the city each year (City of Sydney, 2009). This 1,700 FTEs. figure does not include spin-off benefits (particularly to tourism) as the event is broadcast around the world, raising Sydney’s profile. It includes 5.4 Net addition to Auckland events of a redeveloped only direct benefits believed to be captured as a result of tourism due to Waterfront the actual event. This section discusses what share of the impact due to major events We have assumed that Auckland will generate around $26 million extra in associated with the Waterfront is additional to what would occur in the direct spending (around one-sixth of the Sydney figure) with a redeveloped absence of the redevelopment. Waterfront providing a dramatic backdrop for the New Year’s Eve event. Theory and assumptions: how events would change anyway Economic impact of Waterfront-based events in 2040
In section 5.3, we presented a scenario of the likely impacts of events Given the scenario outlined above, Waterfront events are expected to have linked to the redeveloped Waterfront as of 2040. It could be argued that the impacts presented in Table 25. some of this growth would occur regardless of redeveloping the Table 25 Economic impact of Waterfront events, 2040 Waterfront. It could also be argued that unless the Waterfront is
Impacts from Waterfront-based Employment GDP Output rejuvenated, it may have fewer events in future than it does today. For the one-off events, 2040 FTEs $m $m purposes of this analysis, we have taken a middle ground, as highlighted in Direct 946 $43.2 $96.5 Total 1,682 $97.0 $209.2 Table 26, overleaf. Source: PwC
45 The economic value of the redeveloped Auckland Waterfront
Table 26 Waterfront-based events, Base case and 2040 with or Additional economic impact of Waterfront-based events, 2040 without redevelopment When we compare the economic impacts of the 2040 scenarios with and
Return period (years) without redevelopment, we are able to estimate the additionality, or added 2040 without 2040 with Spending / impacts that would occur only if the Waterfront were redeveloped. These Event Base redev redev event ($m) are the result of events that Auckland would not capture without the Volvo Ocean Race 4.50 4.50 3.00 $17.0 America's Cup Championship regatta series 3.00 3.00 2.00 $16.3 redevelopment. The impacts are summarised in Table 27. ITU World Champs Grand Finale or similar 7.00 7.00 5.00 $21.0 World Masters Games or similar 12.00 12.00 8.00 $131.9 Smaller annual Waterfront-based events* 0.33 0.25 0.17 $6.0 Table 27 Additional economic impacts due to Waterfront events, New Year's Event 0.00 0.00 1.00 $26.0 2040 * such as an annual corporate triathlon, ironman event, smaller (but int'l) sailing event, Corporate World Team Champs, Superyacht regatta Source: PwC Impacts from ADDITIONAL Employment GDP Output Waterfront-based one-off events FTEs $m $m The 2040 without redevelopment scenario assumes that even if the Direct 483 $22.1 $49.3 Waterfront is not redeveloped, it may capture an additional smaller event Total 859 $49.6 $106.9 Source: PwC each year. The Waterfront is unlikely to host a New Year’s Eve event to The additional impact of the redeveloped Waterfront due to increased rival Sydney or Hong Kong without redevelopment. numbers of events is estimated to be $49.3 million in direct spending, generating $22.1 million in GDP from around 480 FTEs. Including indirect and induced impacts takes these figures to $107 million in output, $49.6 million in GDP, and nearly 860 extra FTEs.
46 The economic value of the redeveloped Auckland Waterfront
6 Other Waterfront tourism redevelopment, of which more than 2,040 FTEs would be additional. Table 28 summarises the other economic impacts this direct employment generates as of 2010, and is expected to generate as of 2040. This section estimates the impact of visitors to the Viaduct Harbour and Figure 17 Employment generated by Waterfront tourism Wynyard Quarter portion of the Waterfront. The projections of visitors presented here will include some cruise ship passengers who spend time Waterfront tourism, FTEs on the Waterfront, and some visitors to major events who spend time at 3,000 the waterfront, dealt with elsewhere in this report. However, given the 2,500
conservative estimates we use of the number of visitors to the Waterfront, 3
2,000 5 4 s 4 , E 4
the expenditure per visitor, and time spent on the Waterfront, we believe 2
1,500 0 T , F any double-counting of visitors has been more than offset by the lower 1,000 2
estimates of dollars and time spent on the Waterfront. 500 4 4 2 3 0 Inversely stated, this section does not include the cruise industry as a 2010 2040w/out 2040 with Additional whole, event tourism to any great extent, or tourism employment directly redev redev on the Waterfront, as they are dealt with in separate sections. For more Source: PwC information on our sensitivity analysis of double-counting, see Appendix C. Table 28 Economic impacts of Waterfront tourism
It should also be noted that employment at the present hotel on the Employment GDP Output Waterfront is captured under Waterfront employment, not here. Impact of Waterfront tourism FTEs $m $m Direct Figure 17 summarises the employment generated by Waterfront tourism in 2010 24 $1.4 $3.1 2040 with redev 2,453 $137.4 $315.5 2010, in 2040 with and without redevelopment, and the additional (i.e. non- Additional 2,044 $114.5 $262.9 displaced) employment generated by a redeveloped Waterfront. At Total 2010 41 $3.1 $6.5 present, the Waterfront plays a small role in Auckland Region tourism, 2040 with redev 4,149 $311.6 $665.0 generating just 24 FTEs. This would be expected to rise slightly by 2040 Additional 3,458 $259.7 $554.3 without redevelopment, but would surge to 2,450 FTEs with Source: PwC
47 The economic value of the redeveloped Auckland Waterfront
PwC estimates that in 2010, Waterfront tourism generated just $1.4 million nevertheless provides a useful starting point on the way different tourist in direct GDP and $3.1 million in total GDP. With redevelopment, markets are expected to change, and how the share of visitors coming to Waterfront tourism is expected to generate $137 million in direct GDP and the Waterfront is expected to change. almost $311 million in total GDP, from direct spending of $315 million. Of Updated visit figures these figures, $115 million in direct GDP and $260 million in total GDP is expected to be additional to what would be captured by the Auckland By revising the Horwath work with up-to-date tourism data, we estimated Region without the redevelopment. the number of visits to the Waterfront in 2010, as shown in Table 29.
6.1 What does Waterfront tourism look like today? Table 29 Visits to the Waterfront and Auckland, 2010
This section summarises the role of Waterfront tourism today. The Waterfront plays a very small role in Auckland Region tourism today. Visitors 2010 Waterfront 73,727 Previous work Australia 7,739 United Kingdom 1,671 Japan 1,930 Horwath Asia Pacific Limited completed a report in 2006 on the tourism South Korea 1,045 potential of the Wynyard Point redevelopment. The study estimated the China 967 United States of America 1,307 number of visits each year to the Waterfront as of 2004, with projections Germany 733 Other 6,908 out to 2060, based on expected growth in visitor numbers of country of Domestic 51,427 origin. Auckland 5,736,727 Australia 559,843 The report also made use of a survey to determine the amount of time United Kingdom 166,652 Japan 128,240 visitors to Auckland spend in the Viaduct Harbour / Waterfront area. South Korea 54,339 Based on the survey results, it is estimated that the average visitor to the China 49,338 United States of America 94,648 Waterfront spends approximately 3.3 hours there. Germany 51,470 Other 484,077 The world has changed since the 2006 report was completed, particularly Domestic 4,148,120 in terms of propensity to travel by country of origin, but the report Source: PwC
48 The economic value of the redeveloped Auckland Waterfront
As of 2010, approximately 73,700 people visited the Waterfront each year, Estimating visitor spend due to the Waterfront of a total of 5.7 million visitors to Auckland. In other words, just 1.3% of The Ministry of Tourism has estimates of spending by visitors from visitors to Auckland visited the Waterfront. Of those visiting the Waterfront, different parts of the world as well as from New Zealand. These are two-thirds were from other parts of New Zealand. Similar shares of those national averages, so we assume international visitor spending in visiting Auckland were from other parts of New Zealand. Auckland will be 40% higher than the national average, given the profile of Estimating visitor days (nights) due to the Waterfront tourists and relative costs in Auckland, while domestic visitor spending in Auckland will be around 20% higher than nationally (more will stay with 3.33 hours on the It is difficult to argue that people visit Auckland friends and families, thus mitigating the higher accommodation costs in Waterfront specifically to go to the Waterfront only, but we Auckland). Given the composition of visitors to the Waterfront and the can apportion some of the time and / or spending profile provided by the Ministry of Tourism, average domestic Divided by 12-hour spending of Auckland visitors to the Waterfront. visitor spends of $141 a night, and $170 for international visitors have visitor day To do this, we assign a share of visitor days been calculated. (nights) to the Waterfront. Economic impact of Waterfront tourism, 2010 = 0.2775 visitor days As mentioned previously, the Horwath survey per tourist found that the average visitor to the Auckland This spending results in direct output of $3.1 million a year directly due to Waterfront spent 3.3 hours there. the Waterfront, as highlighted in Table 30. Multiplied by 73,727 We assume a tourist day (a proxy for the amount visitors to Waterfront Table 30 Economic impact of Waterfront tourism, 2010 of time they are out and about and incurring expenditure) is 12 hours. In this way we can say Impact of Waterfront tourists, Employment GDP Output = 20,459 visitor 2010 FTEs $m $m just over one quarter of a day is spent on the Direct 24 $1.4 $3.1 nights Waterfront by each visitor to the Waterfront. In Total 41 $3.0 $6.5 Source: PwC total, around 20,460 visitor nights in Auckland are apportioned to the The $3.1 million in direct spending creates $1.4 million in direct GDP and Waterfront (just 0.09% of all Auckland visitor nights) for 2010. 24 direct FTEs. Taking into account indirect and induced impacts, the Waterfront attracts $6.5 million in output and $3.0 million in GDP and
49 The economic value of the redeveloped Auckland Waterfront
supports 41 FTEs. Waterfront of just 2.3%. We have therefore excluded any additional rise in domestic visitors from our estimates due to immateriality. 6.2 Waterfront tourism in 2040 Visit projections This section describes how a redeveloped Waterfront is expected to cause The Horwath report (2006) provided projections of visits and visitor nights a significant increase in Waterfront tourism. to Auckland to 2060 (including 2040, the snapshot year being examined Theory and assumptions: redeveloped Waterfront’s impact on visits here) assuming the Waterfront is redeveloped. These projections were
The Horwath report (2006) and our present work makes the conservative based on real data to 2004. In the intervening six years, growth patterns assumption that the redeveloped Waterfront brings no additional visitors have deviated significantly from those expected in the boom years to 2004. to the Auckland Region. In other words, visitors from outside Auckland, For instance, in the five years from 1999 to 2004, the number of visitors domestic or international, do not decide to visit Auckland simply because from China arriving in New Zealand increased by 24% a year. Thus the there is a redeveloped Waterfront. 7.8% per year increase in visits from North-East Asia between 2004 and 2010 suggested by the Horwath report was relatively conservative. One could easily argue that an overseas visitor’s decision to visit Auckland However, in reality, arrivals from China increased just 5.0% a year will be influenced by the number of activities and attractions in the area, between 2004 and 2009, far below the rate projected for North-East Asia. and that a redeveloped Waterfront is likely to help put a tick in the box. Over the same time, visits from Japan almost halved. However, attempting to quantify the Waterfront’s role in that potential visitor’s decision-making is unrealistic. It thus became important to re-estimate the number of visits and visitor nights expected by 2040 by country of origin. While the ratio of Waterfront It is an easier argument that the redeveloped Waterfront, as an iconic part visits to Auckland visits by visitors from various countries is likely to stay of Auckland, would attract more domestic visits from outside Auckland much as projected by the Horwath report, the expected growth in overall who come specifically to visit the Waterfront. We thus ran some scenarios visits and visitor nights needed to be substantially revised. in which the number of domestic visits to Auckland rises by a further 5%. This results in an overall increase in visitor nights in Auckland of just The Ministry of Tourism assisted in developing projections of expected 0.08%. Given the lower spend by domestic visitors, the result of a 5% tourist numbers by origin, by providing perspectives on where growth is increase in domestic visitors is an increase in total spending on the expected, and what those growth rates are likely to be. This
50 The economic value of the redeveloped Auckland Waterfront
In addition, in estimating the dollar and employment impacts the Waterfront expected to leap by 4.2 million, to 4.28 million visits in total. While just redevelopment might make, it became particularly important to err on the 1.3% of visitors to Auckland in 2010 visited the Waterfront, this would rise side of caution when projecting likely changes in visitor numbers. to 55% by 2040. Most of this growth would be driven by 79% of international visitors visiting the Waterfront by 2040. The new projections are shown in Table 31. Is this realistic? Table 31 Projected visits with redevelopment, 2010 and 2040
The number of visitors assumed to visit the Waterfront by 2040 can be compared to observations from elsewhere. For example, Cape Town’s Visitors 2040 Victoria and Alfred Waterfront, often used as a model for how to rejuvenate Waterfront 4,279,715 Australia 815,084 a Waterfront, receives 20 million visitors per year. Of these, at least 14 United Kingdom 225,124 Japan 230,523 million are estimated to be from outside the Western Cape, including 5.2 South Korea 60,015 million international visitors and 8.8 million from other parts of South Africa China 171,658 United States of America 172,707 (Cape Town Routes Unlimited, 2009). In other words, the number of Germany 77,841 visitors from outside the region is more than four times that projected for Other 673,544 Domestic 1,853,221 Auckland in 2040. Auckland 7,712,948 Australia 1,085,433 Sydney’s Darling Harbour had an even larger number of visitors, at 27.9 United Kingdom 250,340 Japan 269,268 million in 2007. This 27.9 million included 4.5 million people from outside South Korea 75,287 Sydney and a similar number from overseas. Again, this is more than China 215,341 United States of America 217,998 double as many visitors from outside the Region, supporting the view that Germany 86,315 the projections for Auckland are not unrealistic. Other 854,120 Domestic 4,658,845 Estimating visitor days (nights) due to the Waterfront Source: PwC In line with the Horwath work, we expect the number of visits to the We have estimated that the average time the visitor spends at the Waterfront to increase significantly as the Waterfront becomes a key Waterfront will rise by 50% to five hours as a result of the redevelopment. Auckland tourist attraction. The number of visits to the Waterfront is Given the range of food and activity options anticipated to develop, this is
51 The economic value of the redeveloped Auckland Waterfront
likely to be a relatively conservative estimate. Waterfront of $316 million per year. The other impacts of this spending are highlighted in Table 32. Nevertheless, if visitors spend five hours of their 12-hour tourist day, or an equivalent amount of spending, on the Waterfront, this would equate to 1.4 Table 32 Tourist spending due to the Waterfront, 2040 million visitor nights directly attributable to the Waterfront. Impact of Waterfront tourists, Employment GDP Output While this may appear a particularly large number of guest nights (given 2040 FTEs $m $m Direct 2,453 $137.4 $315.5 the figure of 20,459 for 2010), this is only 4.2% of all Auckland visitor Total 4,149 $311.6 $665.0 nights in 2040. Source: PwC The direct expenditure on the Waterfront will bring $137 million in direct Estimating visitor spend due to the Total time on the GDP to the Region, supporting 2,450 direct FTEs. Taking upstream and Waterfront Waterfront: 5.0 hours downstream impacts into account, the Waterfront will generate $665
Given the figure of 1.78 million visitor nights million in output, $312 million in GDP, and 4,150 FTEs. This $312 million Divided by 12-hour spent in Auckland due to the Waterfront in 2040, in GDP is 1.5 times more than New Zealand’s total monthly merchandise visitor day and the expected change in the mix of tourist trade with the United Kingdom. origins, we were able to estimate the likely 6.3 Net addition to Auckland tourism from the = 0.416 visitor days expenditure of visitors in 2010 dollars. per tourist redeveloped Waterfront Given the increase in attractions and activities likely to be in place by 2040, we anticipate a This section examines the net impacts of the redeveloped Waterfront on Multiplied by tourism in Auckland. It removes gains in Waterfront tourism that may be 4,279,715 visitors premium in average spending per visitor. We have kept this premium relatively small, at 10%, displaced from elsewhere in Auckland, or that may have occurred meaning in current dollars, visitors spend regardless of the redevelopment. = 1,781,431 visitor nights between $155 (domestic) and $194 Theory and assumptions: additionality and displacement (international) per night. As discussed in section 6.2, we have conservatively assumed that the Economic impact of Waterfront tourism, 2040 Waterfront does not bring larger numbers of visitors to Auckland, but that This spending results in direct tourist expenditure as a result of the visitors stay longer, spending additional visitor nights in Auckland. Section
52 The economic value of the redeveloped Auckland Waterfront
6.2 suggested that around 1.78 million visitor nights could be attributed to other parts of Auckland, probably the CBD. the Waterfront in 2040. However, this figure includes visitors who: In other words, of the $316 million in direct spending generated by the would have visited the Waterfront even if it were not redeveloped Waterfront, a significant share will be displaced from other parts of would have visited other parts of the Auckland CBD instead. Auckland. We estimate this figure at $48.1 million, based on the spending profile of visitors to Auckland and the expected share of spending Thus, to estimate the additional impact of the Waterfront on the Auckland displaced from the rest of the Auckland CBD area. Region, the spending of these visitors is subtracted from the total spend on the Waterfront. Net additional spending due to the Redevelopment
People who would visit the Waterfront anyway Subtracting the displaced expenditure and spending that would have occurred regardless of the redevelopment yields a net increase in Without the Waterfront redevelopment, it is estimated the number of nights Auckland output of $263 million. The resultant impacts of this spending attributable to the Waterfront would rise slightly from 20,459 in 2010 to are summarised in Table 33. 28,145 in 2040, an increase of 38%, or 1.14% a year. This is in line with the rates of visitors from various countries of origin that visit the Waterfront, Table 33 Addition to Waterfront tourism from redevelopment, 2040 as set out in the Horwath report and updated appropriately with new data. Impact of ADDITIONAL Employment GDP Output The expected expenditure associated with these visitors is around $4.22 Waterfront tourism expenditure FTEs $m $m Direct 2,044 $114.5 $262.9 million. Total 3,458 $259.7 $554.3 Source: PwC Displaced visitors The $263 million in direct additional spending is expected to generate $115 million in direct GDP in 2040, and support 2,040 direct FTEs. Taking In section 6.2, we estimated that as a result of the redevelopment, the indirect and induced impacts into account, this will result in $554 million in average time a visitor spends at the Waterfront rises by 50%, to five hours. total output, $260 million in total GDP, and a total of 3,460 additional FTEs. Not all of this extra time will be additional time spent in Auckland. Some of this additional time will mean that visitors spend less time in other parts of the Region. We assume the additional time will be split equally between additional time spent in the Auckland Region, and time displaced from
53 The economic value of the redeveloped Auckland Waterfront
7 Other impacts to 2040 project when completed, provided by Sea+City; the estimated start and end time for each project, provided by Sea+City; and This section presents other economic benefits of the redevelopment not a real discount rate of 6% for building, and 8% for non-building captured elsewhere. These include the quantifiable one-off benefits of construction, in line with the New Zealand Treasury guidelines. construction, as well as a range of wider, unquantified benefits. Figure 18 presents the expected construction completion times for private 7.1 Construction development as estimated by Sea+City. The figure excludes development on the Viaduct Harbour or the central wharves. A further impact of the redevelopment will be the employment and GDP Figure 18 Construction scenario to 2020 generated by construction. Because this is a one-off, rather than an ongoing impact, it cannot be summed with the ongoing impacts presented Perm/Non perm Accommodation elsewhere in this report. Business/Offices
Marine Industrial A key question will again be what share of this construction may have Fishing Related occurred elsewhere in Auckland if not at the Waterfront. For example, if Business Cultural/Communal the funding provided by Auckland City Council and Auckland Regional Marine EventsCentre Council would otherwise have been used for new / upgraded libraries and * Retail and Food/Beverage businesses are mainly included other community facilities within Auckland, some would argue that the net in the Accommodation and Offices buildings. benefit to Auckland is negligible. However, if funding is attracted that would otherwise not have been spent in Auckland, either by the public or private sectors, this will be a net one-off boost to the Region.
Theory and assumptions: inclusions and discount rates
The figures presented in this section are based on three assumptions:
the value of each construction project, based on expected use of the
Source: PwC 54 The economic value of the redeveloped Auckland Waterfront
Private development on the Wynyard Quarter is expected to be all but into account indirect and induced effects, Auckland Regional output will be completed by 2020. There will be some ongoing public works carried out stimulated by $2.19 billion as a result of construction occurring on the by Sea+City to 2025 across the area. Waterfront. This will generate $805 million in GDP and the equivalent of almost 13,600 one-year FTEs. Total construction impact It is important to note that this is the total impact of construction expected The estimated undiscounted value of projects expected to be completed to occur on the Waterfront to 2025. It does not take account of the fact between 2007 and 2025 is $1.24 billion. This figure covers: that some of this construction will be displaced from elsewhere in the most construction on the Wynyard Quarter north of Pakenham Street; Auckland Region. The net impacts will thus be smaller, as explained in the the Wynyard Crossing (temporary bridge) and Te Wero Bridge next section. (permanent) in the Viaduct Harbour; Net construction impact “Party Central” and the new Queens Wharf cruise ship terminal on the central wharves; and In estimating the net construction impact, we make the following further spending by Sea+City on Waterfront public works, such as the assumptions:
headland park. all spending by Sea+City is diverted from other uses in the Region Table 34 summarises the current value of the expected impacts of (such as spending on other infrastructure in the Region), and is construction to 2025. therefore excluded; building construction is displaced from other parts of the Regionat Table 34 Economic impact of construction to 2025, discounted rates similar to those used for the estimates of additional employment Total construction benefit to the Employment GDP Output in section 3.3; and Region FTEs $m $m Waterfront-specific construction such as Party Central or the new Direct 5,736 $275.8 $951.0 Total 13,594 $805.3 $2,187.2 cruise terminal are funded from outside of the Region, and are thus Source: PwC 100% additional. In discounted terms, an estimated $951 million in direct construction Table 35 overleaf presents the net additional economic activity generated spending is expected to 2025. This will generate $276 million in direct by the construction at the Waterfront. GDP and the equivalent of more than 5,700 direct one-year FTEs. Taking
55 The economic value of the redeveloped Auckland Waterfront
Table 35 Additional benefits of construction to 2025, discounted and make them stay longer. The revitalisation of attractions, embracing change and staying up to date with the latest trends are the way to keep ADDITIONAL construction benefit Employment GDP Output to the Region FTEs $m $m visitors coming. Direct 2,794 $134.4 $463.3 Total 6,622 $392.3 $1,065.6 Auckland’s Waterfront redevelopment is intended not only to improve Source: PwC infrastructure, but also to create new and more attractive tourist The equivalent of nearly 2,800 direct one-year FTEs will be created, experiences. These benefits will flow on to the rest of Auckland and generating $134 million in direct GDP. Taking into account the structure of beyond as visitors are confronted by a Waterfront experience on arrival in the construction industry in Auckland, the need for supplies and where New Zealand. workers spend their incomes, more than 6,600 one-year FTEs will be Developing and maintaining skills supported across the Auckland Region. The one-off boost to GDP of the construction phase is expected to be $392 million. Attractive cities act as talent magnets. To the extent that the 7.2 Other economic benefits redevelopment adds to the city’s ability to attract skilled residents, this would increase the net economic benefits of the proposed developments. A number of other economic benefits are typical of Waterfront One of the main benefits of the redevelopment is the creation of clusters, redevelopment projects. While not quantified here, it is important to which lead not only to agglomeration benefits, but also to the development consider them in the context of the broader benefits of redevelopment. and maintenance of skills. The Waterfront will act as a hot-bed of Revitalising the tourism industry scientific, R&D, marine industry and technical services. Sea+City aims to stimulate the attraction of high-growth businesses at the high labour Auckland is the gateway to New Zealand for the vast majority of productivity end of the spectrum. international visitors (68% in the June 2010 year for instance). As Auckland is the first part of New Zealand most visitors see, having a According to MacroPlan Australia’s Western Reclamation Marine Industry vibrant tourism industry that “wows” is crucial. Report (2006), clusters help to develop business and stimulate regional growth through competition and collaboration. Key benefits include Like all industries, tourism needs to evolve to survive. Museums, iconic knowledge transfer, skills developments and an overall improvement in infrastructure and geographical characteristics may ensure a continuous competitiveness, through domestic competition, which then helps flow of visitors, but it takes more than that to add value for these visitors
56 The economic value of the redeveloped Auckland Waterfront
companies within the cluster leverage opportunities globally. The water sports and recreational fishing industries employ a significant number of people directly and indirectly. Stimulating greater interest in The Waterfront may play a vital role in stopping the “brain drain” of New recreational fishing and water sports will also affect manufacturers and Zealand’s best and brightest out of the country, and may even play a role retailers of goods and apparel, as well as the in attracting skilled workers to New Zealand. More skilled and qualified payment of license fees to regulatory New Zealanders will choose not to leave, as this new project may offer authorities, printing and publishing, the design them the chance to develop their careers and knowledge locally. and building of recreational boats, and the Supporting diversity provision of accommodation, fishing boats for
Sea+City’ has indicated that “diversity of industry types and diversity in the charter, and guided adventures. These number and size of businesses is a desirable attribute of a sustainable activities are not only locally-focussed, but economy, to reduce the boom and bust cycles” (2009). also attract international visitors.
For residents, visitors and workers, the redevelopment will create new Struthers (2003, cited in ECOTEC 2007) recreational facilities, increase the range of goods and services available states that a review of the impact of Salford locally, enhance amenity, and establish green spaces. New business and Quay between 1983 and 2003 found a major benefit of redevelopment was R&D clusters, enterprise incubators and marine entrepreneurs will provide that it enabled the development of fishing and water sports activities. an interesting range of options to businesses and the consumer. Generating private benefits
To this end, Sea+City has set a target that no single industry should It is very likely that the creation of a new central commercial, residential account for more than 25% of businesses or employment on the and business area will bring private benefits to businesses and residents Waterfront. This will allow for an appropriate mix of small and large located or involved within the Waterfront, not least through the expected businesses, serving residents, visitors and workers of the broader increase in property values. Auckland Region alike. One of the key goals of the project is to make better use of the land. Stimulating the recreational fishing and water sports industries Better land use implicitly leads to better returns on investment, and thus
The redevelopment will support the recreational fishing and water sports better property values. An attractive Waterfront will also affect industries, boosting opportunities across a wider range of industries. neighbouring areas, where proximity to the Waterfront will push up
57 The economic value of the redeveloped Auckland Waterfront
property values. ECOTEC (2007) identified increasing lifestyle choices as a wider impact of waterside regeneration. In this context, the project will be unprecedented 7.3 Attractiveness / liveability in New Zealand. The conjunction between top tier business activities and
The redevelopment will make the Waterfront, and perhaps even more high profile housing located in an iconic location will create a unique place importantly, the Auckland Region as a whole, an even more attractive to live. A conveniently centralised area with a wide range of activities, place to visit, and in which to live, work and play. goods and services will give residents and workers in the wider Auckland Region new options in terms of where to live, how to travel to work and Raising quality of life what to do in their spare time.
The redevelopment will improve the quality for a large number of Auckland Changing the urban landscape residents, given its large public spaces and focus on active modes, allowing access to the Waterfront for everyone. Urban renewal often involves a change in the landscape of a city, and is accompanied by a Quality of life can be summarised as a measure of residents’ perceptions shift of large numbers of people into an area of health and wellbeing, their community, crime and safety, education and previously relatively uninhabited, such as the work, the environment, culture and identity. The redevelopment is likely to Waterfront. bring benefits in most of these areas. It is characterised by adaptation of ECOTEC (2007) identified the improvement of quality of life among other businesses, the refurbishment of historic wider impacts of waterside regeneration. The Waterfront is likely to structures, and a change in residents’ increase outdoor activities; encourage use of active modes of transport; activities. Given the scale of the change, and promote environmentally friendly construction standards, technology and the vision required, urban renewal is and business clusters. All of these impacts will contribute to quality of life often due to local or central government playing a leading role in land in the Auckland Region. planning. This stimulates private capital investment. The benefits from Expanding lifestyle choices this renewal come from the adaptation of new areas, buildings, and facilities in line with new trends, affecting the attractiveness of the area by The redevelopment will create choices for people – where they will live, making it a safer, more inviting place to work and live. work, and play.
58 The economic value of the redeveloped Auckland Waterfront
7.4 Sense of place and Auckland’s profile Generating international opportunities and investment
The redeveloped Waterfront will draw attention to Auckland for all the right A redeveloped Waterfront will boost Auckland’s profile and status reasons, creating potential for more international business. internationally, much as has occurred in Cape Town or Melbourne. International investors are looking to diversify their portfolio by entering Building a brand new markets, balancing risk and profits. From a Regional perspective, A redeveloped Waterfront will soon make its way onto postcards and into attracting these opportunities plays an important role in the development of the memories of visitors, and will help build a brand for Auckland. the Region that can better attract them. Auckland’s harbour setting is one
ECOTEC (2007) identifies the contribution to building on cultural of the Region’s natural assets that can be leveraged to attract new distinctiveness and branding as one of the benefits of waterside business and talented workers. The redevelopment of the Waterfront can regeneration projects. Increasingly, cities and urban regions compete with plausibly be expected to stimulate investment and additional demand from other places for attention, investment, visitors, talent and events. business to locate in the Auckland waterfront and CBD area. Accelerated and intensified globalisation has led to a situation where A redeveloped Waterfront may help attract international opportunities in at competitor cities may not be those in other parts of New Zealand or in least two ways. First, the raised profile of the Region will put it more in the Australia. They could be in South Africa, South America, or possibly in minds of business leaders around the world looking to expand. Second, Europe or North America. the increased attractiveness of Auckland as a vacation destination may
The location for the redevelopment has a rich history as working bring more business leaders here for a visit. When these visitors see what Waterfront, reflecting the wider cultural context of the Māori and Pacific a great place to live Auckland continues to be with the redeveloped Island character. The number of yachts and launches in the area today Waterfront, they may look for opportunities to do business in Auckland, has already helped establish the area’s reputation as the “City of Sails”. whether by setting up a local office, or sourcing suppliers here.
However, a redeveloped Waterfront could propel Auckland into a different Polishing the clean and green image league along with Sydney or Hong Kong. The redeveloped Waterfront will make use of green technologies, and will clean up an area currently used for bulk storage, not an image associated with New Zealand’s 100% pure marketing campaign.
59 The economic value of the redeveloped Auckland Waterfront
In the modern mindset, a good place to live or visit is defined to a large Creating opportunities for social interaction extent by the clean and green image. High performance buildings, better The Waterfront will play a major role in bringing people together, whether it infrastructure, integrated systems and renovated historical areas are some is socially in one of the large public spaces, over a business lunch, or in of the ways the development could achieve a green image. New parks, the office. recreation areas, “Green Building” techniques, and a good balance between development and open space will renew the image of Auckland MacroPlan Australia’s Western Reclamation Marine Industry Report (2006) and New Zealand as a clean place to visit. identified that the redevelopment of the Western Reclamation Area will be likely to increase opportunities for social interaction and increased Establishing a unique environment community participation. Auckland, given its size and geography, has the opportunity to occupy a Through community spaces, green areas and better walkways, the unique place in the mind of overseas residents and New Zealanders. This redevelopment will enable residents, workers and visitors to gather, will in no small part depend on the role of the redevelopment. interact socially and build better and stronger relationships. Public spaces According to Horwath Asia Pacific Limited (2006), the vision driving will enhance the sense of belonging, creating a strong sense of ownership Sydney’s Waterfront development originates from The Sydney Harbour within the community. Foreshore Authority’s strategic intent to make “unique places in Sydney 7.5 Environmental and health benefits that the world talks about”.
Auckland’s Waterfront geography is unique within the New Zealand A number of health and environmental context. The Waitemata and the Hauraki Gulfs are not only New Zealand’s benefits will accrue from the biggest international entrance for commerce but are also excellent sailing redevelopment, including a reduced waters with an important Māori and Pacific Island heritage. This choice of carbon footprint, more environmentally- location for the project, with ample opportunities to access the water, and sustainable job growth, and more the quantity of people affected, will lead to the creation of a new distinctive active residents. environment unlike any other in New Zealand.
60 The economic value of the redeveloped Auckland Waterfront
Walking and cycling to better health United States in 2005. The resulting traffic congestion reduction accounts
for an additional 3.0 million metric tons of CO2 saved. In order to achieve the agglomeration benefits highlighted in this report, the Waterfront will need an active mode / public transport share of total transport to and from the area, triple what it is today.
Walking and cycling has benefits for communities and for individuals. Evidence suggests that increased numbers of walkers and cyclists can increase the perceived environmental and social value of an area by residents, workers, customers and visitors. This value includes safety and Around 7,000 people will live on the Waterfront, allowing them to walk or health, local environmental conditions (cleanliness, noise and air quality), bus to work nearby. The ITA (2007) found that to ensure the changes on the quality of social interactions (community identity and pride), and the Waterfront do not affect Auckland congestion, a significant switch from opportunities for recreation and entertainment, among others. cars to public transport and active modes would be required. This Reducing the carbon footprint: public transport and active modes document forms the basis of Sea+City’s target of 70% of trips to and from the area by active modes and passenger transport. The Waterfront redevelopment will increase the use of public transport and active modes, thus reducing the average carbon footprint per worker. Is this achievable? As a comparison, 42% of people travelled to work by active modes and public transport in Auckland CBD in 2006, compared to In a United States study, a single person commuting alone by car, who Manhattan’s 81% in 2001, and Canary Wharf’s 90% in 2006. Thus, a switches a 32 kilometre round trip commute to existing public transport, target of 70% is high but it has been achieved elsewhere. can reduce annual CO2 emissions by 2,200 kg per year, equal to a 10% reduction in all greenhouse gases produced by a typical two-adult, two-car Reducing the carbon footprint: green design household. By eliminating one car and taking public transport instead of Reducing energy consumption in both the construction and use stages of driving, a saving of up to 30% of CO2 emissions can be realised, according the redevelopment are an important part of the plan for the Waterfront. to the American Public Transportation Association (2008). Davis and Hale (2007) state that using public transport instead of private transport would According to the World Green Building Council Report (2009), “the building sector, which consumes more than one third of the world’s energy and, in have reduced national CO2 emissions by 3.9 million metric tons in the
61 The economic value of the redeveloped Auckland Waterfront
most countries, is the largest source of greenhouse gas emissions, is a useful and suitable for a certain purpose in the past, but new trends and major contributor to this global problem”. changes in the city’s morphology mean the land could be used in a more beneficial and profitable way. However, the IPCC’s (Intergovernmental Panel on Climate Change) Fourth Assessment Report (2007) has also found that, with proven and The redevelopment includes removing the storage tanks currently on the commercially available technologies, energy consumption in both new and Wynyard Quarter, and their replacement with the Headland Public Space, existing buildings could be cut by an estimated 30% to 50% without for instance, will result in a cleaner, more attractive area. significantly increasing investment costs. Visual appeal Sea+City’s energy consumption target is 80 kWh/m2 for commercial/offices The redevelopment will greatly enhance the visual appeal of the Waterfront and 50 kWh/m2 for multi-unit residential buildings per year, rates that are through extensive green spaces and appealing new architecture. considered highly efficient by the New Zealand Green Building Council.13 These buildings’ design will be emissions friendly, meaning the increase in Visual appeal plays an important role in reflecting a community’s efforts total emissions produced in Auckland Region will be minimised by and commitment to an environmentally responsible development. generating new employment on the Waterfront rather than elsewhere, Sustainable design techniques with a mix of integrated character where older buildings or less environmentally-conscious building standards buildings/structures and high-quality contemporary built forms are some of are adopted. the main ways in which the Waterfront development is expected to achieve an improvement in visual appeal. Brownfield improvement
The redevelopment will clean up brownfield land, making the Waterfront cleaner and therefore more attractive.
Brownfield land is defined as land previously used for industrial purposes or certain commercial uses. In some cases, this land may be contaminated by low concentrations of hazardous waste or pollution, and has the potential to be reused once it is cleaned up. It may have been
13 kWh/m2 refers to kilowatt hours per square metre.
62 The economic value of the redeveloped Auckland Waterfront
Appendix A: Restrictions faith, and on the basis that all information relied upon is true and accurate in all material respects, and not misleading by reason of omission or otherwise.
This Report has been prepared solely for the purposes stated herein and The statements and opinions expressed in this report are based on should not be relied upon for any other purpose. We accept no liability to information available as at the date of the report. any party should it be used for any purpose other than that for which it was We reserve the right, but will be under no obligation, to review or amend prepared. our Report, if any additional information, which was in existence on the This Report is strictly confidential and (save to the extent required by date of this report was not brought to our attention, or subsequently comes applicable law and/or regulation) must not be released to any third party to light. without our express written consent which is at our sole discretion. This report is issued pursuant to the terms and conditions set out in our To the fullest extent permitted by law, PwC accepts no duty of care to any engagement letter and the Terms of Business attached thereto. third party in connection with the provision of this Report and/or any related information or explanation (together, the “Information”). Accordingly, regardless of the form of action, whether in contract, tort (including without limitation, negligence) or otherwise, and to the extent permitted by applicable law, PwC accepts no liability of any kind to any third party and disclaims all responsibility for the consequences of any third party acting or refraining to act in reliance on the Information.
We have not independently verified the accuracy of information provided to us, and have not conducted any form of audit in respect of Sea+City Projects Limited. Accordingly, we express no opinion on the reliability, accuracy, or completeness of the information provided to us and upon which we have relied.
The statements and opinions expressed herein have been made in good
63 The economic value of the redeveloped Auckland Waterfront
Appendix B: Multiplier analysis spending on a meal. In New Zealand, multipliers are typically between 1.2 and 3.0, but are mostly within a band from 1.7 to 2.3. In other words, depending on the This section explains how we use multiplier analysis in this report, as well industry, for each dollar spent directly, between $1.20 and $3.00 in total as the limitations of multipliers. spending is generated in the economy.
What are multipliers? Uses and limitations of multipliers
Multipliers are used to estimate the impact a change in production or Multipliers are often misunderstood or misused. Like most estimation employment in one industry that takes into account the impacts of that tools, they are subject to a range of assumptions and limitations, as change on upstream (supplier) and downstream (destination) industries of summarised here. the change. Additionality and displacement For instance, a tourist buys a meal at a New Zealand restaurant. That Multipliers assume sufficient unused productive resources (labour and equates to a direct spend in the economy. The restaurant had to purchase the ingredients for that meal from their suppliers. They also had capital) are available to allow the expansion in output suggested by the multipliers. If resources are already fully employed, or if economic activity to pay rent for their premises, electricity and telephone charges. All these is likely to occur elsewhere within the area being considered, we could expenses incurred by the restaurant in serving a tourist create indirect or upstream benefits for their suppliers. i.e. new jobs and GDP are generated argue that some of the activity will simply be displaced from elsewhere in in upstream businesses as a result of the tourist buying a meal. the area. In this situation, including the full impacts of the change in economic In addition, the workers at the restaurant earn wages based on the activity would be an overestimate. We thus need to clearly express the purchase of meals by tourists. These workers then buy groceries at the supermarket and purchase a range of services such as personal internet estimates as a total impact not allowing for displacement, and / or make connections or hairdressing services. This creates work for supermarket allowance for the share of activity believed to be displaced. We present both sets of figures in this report. For example, we present the total impact workers, internet service providers and hairdressers. These jobs and of Waterfront tourism in 2040, as well as the net addition to Auckland resultant GDP are induced or downstream impacts of the original tourist
64 The economic value of the redeveloped Auckland Waterfront
from Waterfront tourism in 2040.
Scale of projects: technology changes
Multipliers are appropriate for estimating the impacts of relatively small- scale shocks, rather than economy-wide shocks. Major shocks often result in technology changes, with an increase or decrease in the relative role of capital or labour, which is not allowed for by multiplier analysis.
The size of the Auckland economy means that the changes on the Waterfront, while having a major local effect, are relatively small at a Regional level. It is not unrealistic applying multipliers in this instance.
Changes in relative prices
Multipliers assume that the relative prices of goods, services, capital and labour remain constant. For instance, multipliers assume an increase in output within a particular industry will not cause changes in the price of the inputs used by that industry, or in the relative price of capital or labour.
65 The economic value of the redeveloped Auckland Waterfront
Appendix C: Overarching care to cross-check data wherever possible. Double-counting and conservatism assumptions Throughout the report, we have erred on the side of caution in estimating the impacts of the Waterfront. Wherever possible, we have eliminated This Apppendix summarises the overarching assumptions adopted in the double-counting, a common error in economic impact assessments, and report. which unrealistically inflates figures.
Dollar figures Nevertheless, we acknowledge that some degree of double-counting may be included. In particular, there are two areas where there will be some All figures are presented in 2010 dollars unless otherwise stated. double-counting: Wherever possible, estimates from reports from other sources have been 1. We have estimated the total and net additional employment on the updated to 2010 dollars. The figures in this report may thus not match Waterfront as a result of the redevelopment, but have also counted the exactly with the figures in the original reports from which data has been employment generated by visitors to the Waterfront (general tourism, sourced. For instance, a figure of $50 million in 2006 dollars will be events or cruise passengers and crew). Some of the employment presented in the report as $56 million in 2010 dollars, based on GDP generated in Auckland Region by the visitors will be based on the deflators sourced from the Reserve Bank of New Zealand. This allows for Waterfront. comparison of the various values presented in the report in a meaningful 2. Growth in the overall number of people visiting the Waterfront will way. include some cruise passengers and visitors to events based at the Data sources Waterfront, which may also be captured in the overall tourism figures.
We therefore conducted an analysis to evaluate the likely impact on overall Where possible, we have attempted to verify data sourced from a wide figures of this double-counting, discussed below. range of stakeholders. Nevertheless, in many cases we have relied on data or suggestions made by private and public data owners believed to have the best information available. PwC does not take responsibility for the accuracy of data supplied by other data owners, while we have taken
66 The economic value of the redeveloped Auckland Waterfront
An approach to estimating double-counting there will be 7,000 in Sea+City plans), will also spend on accommodation, food and beverages. The simplest way to determine the extent of double-counting is to consider the Waterfront employment profile (see section 3), and estimate what On the other hand, visitors do spend some money on retail (souvenirs, share of employment on the Waterfront was directly the result of an supermarkets), culture and recreation (museums, casinos, sports events) increase in visitors (and was thus already captured in overall tourism, or road transport (buses, taxis). We should thus make some allowance for event, or cruise spending). Not every restaurant meal consumed on the double-counting in these industries. But most of the output from these Waterfront will be by a visitor from outside Auckland. At the same time, industries will be consumed by Auckland residents. not every visit to a doctor based at the Waterfront will be by a resident of To give a general indication of the scale of the potential double-counting, Auckland. This mix of consumption of goods and services by visitors and we estimated the share of direct GDP and output generated by residents is represented in Table 36. accommodation, food and beverages employment on the Waterfront in
Table 36 Level of consumption of goods and services produced on 2040. In other words, we assumed that the spending by visitors on other the Waterfront goods and services is balanced out (in double-counting terms) by the spending by residents on accommodation, food and beverages. Accommoda tion, food & Other goods Our work with Sea+City to estimate which industries would grow out to Level of consumption beverage & services 2040 suggested that around 1,420 FTEs would be directly employed in Auckland Region Residents Low High accommodation, and food and beverages on the Waterfront in 2040. They Visitors High Low would generate $56.2 million in GDP. Visitors spend most of their money on accommodation, food and As a share of direct GDP produced across all four areas evaluated – beverages. However, it would be unrealistic to say that only visitors from industry profile, cruise industry, Waterfront-based tourism, and Waterfront outside Auckland spend any money on accommodation, and food and events – this equates to 3.2% of GDP and 7.1% of employment. In other beverages on the Waterfront. Similarly, it would be unrealistic to suggest words, one could argue that we have overestimated direct GDP due to the that we exclude all accommodation, and food and beverages employment Waterfront by 3.2% and employment by 7.1%. on the Waterfront and only capture this employment in visitor spending. Auckland residents at large, and Waterfront residents themselves (of which In terms of net additional GDP and employment generated in 2040 by the redeveloped Waterfront, the potential estimated double-counting is 1.5% of
67 The economic value of the redeveloped Auckland Waterfront
GDP and 3.1% of employment. GDP by a further $35.5 million, and direct employment by a further 631 FTEs. We do not believe these percentages are significant, particularly given the maintaining real spending per visitor at current levels out to 2040. We arguments below that highlight the levels of conservatism we have built have made some allowance for the likely increase in attractions and into our overall estimates. activities causing a moderate 10% increase in visitor spend on the Offsetting double-counting: conservatism Waterfront, and have allowed for a change in source country of
We believe that the level of caution built into our assumptions and visitors. However, we have not allowed for any growth in real projections more than compensates for the small area of overlap we may spending per day or per visitor. A 16% increase in real spend per not have quantified or included. Throughout the report we define as clearly visitor over 30 years (i.e. 0.5% a year) would mean that in 2040 a as possible what is included and excluded in each calculation, so the further $17.2 million in direct GDP and 306 FTEs would be added. reader can follow our approach to estimating the various components of Another argument that suggests a double-counting figure of less than the the overall impacts. rough estimate of $56.2 million in direct GDP calculated here is that cruise
Specific steps we have taken to ensure the figures we present are passengers and crew are only likely to spend part of their time in Auckland conservative and defensible include: Region on the Waterfront. That means that a lot of their spending even on accommodation, and food and beverages may be elsewhere in the reducing Horwath projections of total visitors to Auckland by more than Auckland Region, generating employment there. Similarly, visitors to half. This has cut the potential impacts on direct spending in Auckland events will be spending money not only on the Waterfront, but also Region due to Waterfront tourism by $343 million in 2040, with a elsewhere in Auckland Region. resultant $150 million lower estimate of direct GDP added in 2040 (almost three times more than the estimate of double-counting presented above). assuming only a small increase in length of stay on the Waterfront, from 3.33 hours to 5.00 with the redevelopment, and that half this growth is displaced from elsewhere in the Region. Doubling the amount of time spent on the Waterfront (to 6.66 hours) would increase
68 The economic value of the redeveloped Auckland Waterfront
City of Sydney. (2009). 2009 Sydney New Year’s Eve Creating jobs and Bibliography economic benefit to the City.
Covec. (2009). The Impact of the Louis Vuitton Pacific Series 2009 on American Public Transport Association. (2008). Public Transportation Auckland. Prepared for AucklandPlus and Auckland City Council.
Reduces Greenhouse Gases and Conserves Energy: The Benefits of Covec. (2009). Measuring the Economic Contribution of Events to Public Transportation. Auckland. Prepared for Auckland City Council.
Auckland City Council. (2007). Wynyard Quarter: Integrated Transport Covec. (2009). Volvo Ocean Race 2011-12: Feasibility study. Prepared Assessment. for Auckland City Council.
Auckland Regional Council. (2009). Auckland Cruise Terminal Project: Davis, T; and Hale, M. (2007). Public Transportation’s Contribution to Cruise Passenger Survey. U.S. Greenhouse Gas Reduction. Produced for SAIC.
Brookings Institution. (2005). The Benefits of High Density Development. ECOTEC. East Midlands Inland Waterways. (Date unknown). Benefits of Presented to the Delaware Valley Smart Growth Alliance 2nd Annual Investing in Waterway Projects. Forum, November 17, 2005. Graham, DJ. (2005). Transport investment, agglomeration and urban Business Events Council of Australia. (2008). A national business events productivity. Centre for Transport Studies, London. strategy for Australia 2020: The business of events – Australia’s untapped Horwath Asia Pacific Limited. (2006). Business case / regional economic potential. impact report of proposed marine events precinct. Prepared for Auckland Cape Town Routes Unlimited. (2009). Western Cape tourism barometer: City Council. your provincial tourism intelligence source. Volume 3, Issue 2, 2009. Horwath Asia Pacific Limited. (2006). Wynyard Point Redevelopment – Ciccone, A. (2002). Agglomeration effects in Europe. European Tourism Potential. Prepared for the Auckland City Council. Economic Review, 46, pp.213-227. Institutio Valenciano de Investigaciones Económicas. (2007). Economic Ciccone, A; and Hall, RE. (1996). Productivity and the density of impact of the 32nd America’s Cup, Valencia 2007. economic activity. American Economic Review, 86, pp.54-70. Intergovernmental Panel on Climate Change. (2007). Fourth Assessment
69 The economic value of the redeveloped Auckland Waterfront
Report: Climate Change. Sea + City. (2009). Sustainable Development Plan. Version 1
Klap, A; and Capill, R. (2009). New Zealand bid for ITU World Sea + City. (2007). Wynyard Quarter: Urban Design Framework. Championship Series Grand Finale in Auckland 2012: Feasibility study. Simpson, C. (2009). 2017 World Master Games – New Zealand: Prepared for Triathlon New Zealand. Feasibility plan (draft). Prepared for SPARC and New Zealand Masters MacroPlan Australia. (2006). Western Reclamation Marine Industry – Games Ltd. Regional Benefits. Prepared for Auckland Regional Council. State University of New York at Plattsburgh. (2005). Economic impact Marine Industry Association. (2010). NZ Marine News, Spring 2010. study: 2005 Ironman event. Prepared for Essex County – Lake Placid Convention and Visitors Bureau. Market Economics. (2003). The America’s Cup build-up to the 2003 defence: Economic impact assessment. Prepared for the Ministry of Sydney Harbour Foreshore Authority. (date unknown). Darling Harbour: Tourism. Visitor frequently asked questions.
Market Economics. (2003). The Economic Impact of the 2003 America’s UrbanMetrics Inc. (2009). Waterfront Toronto Economic Impact Analysis. Cup Defence. Prepared for the Ministry of Tourism. Executive Summary. Prepared for WATERFRONToronto.
Market Economics. (2009). New Zealand Cruise Industry Study. Williamson, J; Paling, R; and Waite, D. (2007). Assessing agglomeration Prepared for the Ministry of Economic Development, Cruise New Zealand, impacts in Auckland: Linkages with regional strategies. Produced for and Tourism New Zealand. Auckland Regional Council.
Market economics. (2006). Wynyard Point Study: Marine and Fishing Williamson, J; Paling, R; Staheli, R; and Waite, D. (2008a). Assessing Cluster Research. Report three. Prepared for Auckland City Council. Agglomeration Impacts in Auckland: Phase 2. Produced for the Ministry of Economic Development, Wellington Market economics. (2006). Wynyard Point Study: Wider Economic Growth Impacts. Report three. Prepared for Auckland City Council. Wilson, D; and Stupnytska, A. (2007). The N-11: More than an acronym. Goldman-Sachs Global Economics Paper No. 153. Rice, PG; and Venables, AJ. (2004). Spatial determinants of productivity: Analysis for the regions of Great Britain. Centre for Economic World Green Building Council. (2009). Six continents, one mission: How Performance Discussion Paper #642. green building is shaping the global shift to a low carbon economy.
70