Don't hold your breath Christchurch

The elephant in the room called Christchurch has finally been recognised, and it took one of the country's smartest business brains to say it. Jonathan Ling, the head of Fletcher Construction, says in the NZ Herald on Monday morning that "the actual physical rebuild of Christchurch .... (is) on hold until the aftershocks tormenting the city come to an end."

Hallelujah. Someone has finally said it. You can't rebuild in Christchurch until there is some certainty that there won't be more earthquakes.  Even if you rule out ever re-building on land subject to liquefaction, and even if the new buildings are constructed to a higher earthquake standard, there are still issues of insurance and securing of assets. There are also some tricky commercial decisions as well.

Ling said that the continuing aftershocks were "piling uncertainty onto the timing of a full throttle rebuilding programme."

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10734757

Fletcher Construction is in a unique position to know. The company runs the Earthquake Commission's  Canterbury earthquake project management office and is  also one of five companies working with the Christchurch City Council and the NZ Transport Agency on between $2.2 billion and $2.7 billion worth of infrastructure repairs.

Here is the problem.  What developer is going to put a lot of money into a building that might collapse again in a series of future quakes?  What lender will put up a mortgage for such a development? And who will insure it?

And in any event where is the demand? Commercial enterprises are not flocking back into Christchurch, partly because there is no obvious recovery plan, and partly because of huge uncertainty about the business risk.

The Christchurch firms that have moved from the CBD to Riccarton, Addington and Burnside aren't going to rush to go back into the red zone, and the longer they are out of the CBD area the more accustomed they will become to doing business from their new locations. Also it may be years before the red zone is clear anyway.

And then the question will be who wants to go there. If the office worksheets don't go back then the retailers won't. And the service industries that depend on foot traffic, chemists, booksellers, lunch bars, hair dressers and the like won't go either.

Christchurch runs the risk of having an empty CBD which the passage of time and the slow pace of clean up and recovery has rendered useless.

The government's announcement that it's willing to buy the five thousand houses on land which cannot be rebuilt on, is welcome and will be a relief to the homeowners concerned. But that's only one aspect of the problem.

Christchurch is literally becoming a big black hole into which the rest of the country is pouring vast sums of money with no real certainty that it produce a healthy and prosperous community as a result.