Economic impact of the Skycity fire

Danaë Anderson

25 Oct 2019

It was an unusual analogy for SkyCity CEO Graeme Stephens to use on Wednesday when referring to the rebuild of the New Zealand International Convention Centre (NZICC), following a fire that engulfed the roof of the still under-construction building.

In Greek mythology, a phoenix, near the end of its long life, settles into its nest of twigs which then burn, reducing it ashes. From those ashes, a fledgling phoenix rises – renewed and reborn.  However, unlike the phoenix the NZICC was not at the end of a long life but nearing the beginning.  Nonetheless, the roof – described by one expert as a flammable panel of wood, straw and bitumen – burnt like kindling as the fire ignited.

As the fire enters its third day, acrid black smoke still envelops the Auckland CBD, leaving a trail of destruction, questions, worried central city businesses and workers. While the larger players of SkyCity and Fletcher Building will be looking to start rebuilding as soon as possible, the dependent contractors’ and subcontractors’ losses will emerge in the coming weeks.

Many of these firms were working exclusively on the project and had hired extra workers to cope with demand. This work stage was largely specialised internal and external fit-outs, so businesses will have tools and equipment that lie ruined within the smoke and water-damaged building structure. In addition, these workers will be wondering when (or if) they will return to work.

Small businesses in the central city, already bearing the brunt of construction for the City Rail Loop have been forced to close or have lost large volumes of customers due to road closures and advice for people to ‘stay away’. These are additional barriers for businesses dependent on foot traffic; it is not known how long the impacts will be felt, and only limited compensation is available through government support mechanisms.

However, for the insurance industry, there will be a flurry of activity in terms of claims assessors, loss adjusters, and insurance investigation. Those providing replacement material will see significant product movement in the coming months, and Auckland could expect to see a (short) spike in its construction sector productivity linked to the rebuild – disasters are excellent for growth.

While this disaster may potentially provide a bonus for some limited economic sectors, this is a major loss of revenue in the convention industry and is said to be worth $500 million dollars a year. Negative flow-on effects for Auckland of service sector employment, conference income, accommodation, and the publicity from opening a new ‘iconic building’ will just be some of the losses from this disaster in the short to medium term.

And there is now a question mark as to whether the giant Asia-Pacific Economic Cooperation (APEC) 2021 forum will be held at the NZICC as planned.  The probable loss of hosting rights will be a major blow to an already encumbered, over-time and over-budget project.

While the financial losses will be tallied and reported over time, of greater concern is the worker exposure to chemical toxins and smoke inhalation. Questions need to be asked about the exposure levels for contractors working on-site at the time of the fire, as well as SkyCity workers within the entertainment precinct. Union criticism has centered on the long delay that it took to evacuate some workers from the main Sky City gambling and hotel sites, allegedly after they began inhaling smoke, along with lack of face masks, and consistency of instructions to all workers.

For the hundreds of firefighters, their close-up exposure to toxic fumes as well as heat and smoke may lead to lung conditions and other toxin-exposure illnesses in the future – 9/11 and the Grenfell Towers provide examples of this.

Traffic gridlock, street closures, and general public confusion on the streets also showed just how an inadequately prepared Auckland is for any sort of disaster. If this sort of event can bring the largest city in the country to a standstill, it does not bode well for an event such as a tsunami or volcanic eruption. While the NZICC has turned into a proverbial Trojan Horse for SkyCity and Fletcher Building, its long reconstruction will continue to cause concern for many other stakeholders, for a variety of reasons.

First appearance

This opinion piece was first published in the Noted.co.nz. Read it here.