Waikato giant not asleep, just preparing
Huge inland port near Hamilton is very much a work in progress, Tainui Group tells Andrea Fox
Anyone noticing the lack of activity on a giant site near Hamilton might have concluded that Tainui Group Holdings’ $3.3 billion inland port project is still sleeping. They’d be wrong, says Tainui Group chief executive Chris Joblin.
Back in 2017, the first few hectares of the inland port, at Ruakura east of the city, were flagged to open early this year. But for now the vast area, which will eventually host a 480ha distribution and manufacturing hub, is barren aside from a couple of signs proclaiming “Ruakura is coming”.
Being very careful to avoid the word “delay”, Joblin assures the Herald it’s still full steam ahead, with some important announcements on progress coming this year.
In fact, he says the whole Ruakura project looks likely to be finished in
20 to 30 years instead of the 50 years originally signalled.
Meanwhile, there’s unlikely to be any building this year and no contracts have been signed with tenants.
Ruakura, says Joblin, is like a giant jigsaw puzzle.
Until some key pieces are in place — especially completion of the new Waikato Expressway interchange on Ruakura’s doorstep, now scheduled for late next year — there’s no point in signing contracts or building.
“There’s no good us having a building in there that customers can’t access, so we have changed our work programme to suit that.”
There’s also the design of the major new rail siding to finalise with KiwiRail, and some tweaking has been necessary to meet customer needs.
“The reality is, the first train won’t unload until after the expressway is finished,” Joblin says. Other roading work also needs to be completed.
Another aspect taking time is the big job facing prospective major company tenants which need to change their supply channels, some of which have been in place “since year dot”.
Meanwhile, tenant interest in Ruakura remains high. Tainui Group says it is “talking to” big names like Amazon and Chinese giant Alibaba, though Joblin won’t elaborate, and major waterways infrastructure work is underway. We just can’t see it, he says.
The Ruakura project, on the drawing board for at least 10 years and throttled by red tape until a frustrated Tainui
Group Holdings
(TGH) went to the Government in
2012 to have it declared a project of national significance, isn’t losing much by delay.
The land value has only escalated and Joblin says the economic fundamentals supporting the case for Ruakura have become even stronger.
“The pace of demand and the way the logistics sector is changing has surprised us. Things we thought would be way in the future have come closer much faster and we’ve had to change our programme to accommodate that.
“All the pressures in Auckland, the focus for people with distribution activity and for logistics, the focus towards same-day delivery in the North Island — you can’t do that if you’re domiciled in Auckland. Same-day delivery is a massive issue.
“If you need to build a 50,000sq m building in Auckland, where would you build it? You can’t grow and expand
If you need to build a 50,000sq m building in Auckland, where would you build it? You can’t grow and expand your business. Chris Joblin
your business,” says Joblin.
The big squeeze in Auckland is the thing that is likely to shave 20 years off the expected finish date for the big development, which includes a 31ha hub inland port and more than 260ha of industrial park.
Planned to be bigger than the Auckland CBD, Ruakura is expected to create between 6000 and 12,000 jobs. Linked with the TGH hub is a large housing development on adjoining land owned by established Waikato developer Webb Developments, where work is well underway.
Joblin says a “pressure wave” is building for business to move out of Auckland, and the next three years will see a lot of change and migration south.
“For a lot of our customers there’s an increasing acknowledgement of the welfare of their teams — and by that I mean their employees can’t afford to live in Auckland. Unless they do something, they are not going to have a business.
The Herald asked the Property Council NZ if Joblin’s forecast has merit or is wishful thinking. Waikato branch president Brian Squair says the council is not surprised TGH expects demand for space to accelerate completion of Ruakura.
“It is a sign that the economy of the ‘golden triangle’, encompassing Auckland, Tauranga and the Waikato, is going strong and is expected to continue to grow. Industrial land, such as TGH’s Ruakura ‘inland port’ provides a crucial logistics hub not only within the golden triangle, but connecting the golden triangle to the rest of New Zealand.
“Auckland is having challenges meeting the demand for all types of development needed to cater for its growth. It makes sense to cater for some of that growth in the Waikato where there is better land availability and good, and soon to be further improved, transportation links with Auckland, Tauranga and the central North Island.”
Joblin says there’s good value to be had for companies moving south to Ruakura, which will be served by road, rail and the ports of Tauranga and Auckland.
One prospective customer has calculated it would save 18 per cent in logistics costs. “That’s effectively their trucking costs — the size of the prize is quite sizeable.”
Asked which ports would have a presence at Ruakura, Joblin says TGH has been “consulting” with the two ports on their rail service requirements.
“These requirements have been factored into the design of the rail siding and we are confident that Ruakura will be an approved acceptance point for cargoes of both seaports.”
Logistics technology is developing at pace, he says, noting 3D printing progress and US trials of delivery by drone. Already, Ruakura has been planned for driverless trucks.
“These are the things that are coming and that we have to see into the future and plan for. We have to consider all this as we map out such a big and pivotal piece of infrastructure for the country.”
Asked for details of leasing costs and building models, Joblin says: “At this stage TGH is pursuing a design-and-build model to develop the commercial, industrial and distribution sites within the Ruakura precinct.
“This will see TGH provide turnkey solutions with long term leases of land and buildings for periods up to 30 years.”
Initially, a self-build option will not be available, Joblin says.
“We are not able to specify the leasing costs in any meaningful generic way because the value proposition varies a great deal according to the value any given tenant places on co-location with other key tenants, the ability to scale, and the assessed value of being close to the inland port and other supply chain services.”
In the years Ruakura has spent tangled in regulatory consent processes, competition has sprung up on Hamilton’s northern outskirts.
One development has been the Port of Auckland’s inland port at Horotiu. Mainfreight has built its new Waikato headquarters on a Porter Group development at Te Rapa north.
Has Ruakura lost potential tenants, contributing to the delay? “They’re different markets to what we are targeting,” says Joblin.
“Scale is probably the most fundamental difference. We are looking to cater for people needing 20,000sq m to 100,000sq m buildings. We can cater for [smaller] as well but it’s a different market.”
Joblin’s confidence that a relocation tsunami is coming from Auckland raises the question: will Ruakura be big enough, for long enough?
“We’ve thought about this. Fully developed it will be 10 per cent of today’s industrial capacity in the country. But I can see across this region the demand [for space] is going to be massive.”
Joblin says TGH has another 110ha on the other side of the Waikato Expressway if it’s needed.
He says the biggest risks for Ruakura are behind it now.
“We’ve gone through the regulatory phase, we have all the consents. Really it comes down to timing now. If there was a wide economic shock that might slow things down but it would only alter the timing.”
Joblin says TGH has invested “tens of millions of dollars to get to the start line.”
He’s noticed a lot more interest recently in “the social aspect of Ruakura”.
“It’s gone from interest in the site to interest in what Ruakura will deliver in terms of jobs. What are those jobs and how do I train for them now?”
TGH has so far funded the extensive groundworks and ground-level infrastructure at Ruakura with working capital. “The real demand for capital will come once we jump into building buildings.
“We have our balance sheet we can utilise and at some point we may choose to bring in partners.”
Like who? “There’s a lot of interest from offshore, and also onshore. We have relationships with a whole bunch of people and if it makes sense, we have the option to go down that path,” says Joblin.
“At the moment we don’t need to. “There’s always interest in Ruakura.”