The problem looks set to increase the costs of developing the harbourside, a hearing into the issue at the Dunedin Centre heard yesterday.
It puts doubt on plans to redevelop Fryatt St wharf sheds with restaurants, bars and tourism-related shops, as part of wider plan for the Steamer Basin.
Continuing evidence for Chalmers Properties' witnesses on day eight of a two-week hearing, civil and structural engineer Lou Robinson said the Fryatt St wharf was in serious disrepair.
The Birch St wharf was better, although similar problems were developing there.
Because of that, the buildings behind them were insecure.
"The seawall behind both wharves is likely to collapse in due course, in the ordinary course of events, and very likely to collapse in a strong earthquake.
"Unless the seawalls are replaced, no buildings should be sited on land immediately behind them."
A minimum requirement for the wharves would be replacement or repair of piles and deck framing, and the replacement of timber decks.
Replacement of the whole of the Fryatt St wharf would be prudent, at a cost of about $9.8 million.
The Birch St wharf would cost about $4.3 million, though the possibility of retention was high.
Mr Robinson said the seawalls should be rebuilt, which would cost $5500 a metre.
Commissioner Roger Tasker said it was hard to see how a developer would move to the site to develop it when there were such high underlying costs.
"[And] if they remain derelict it's not going to do a lot for the development."
Yesterday's hearings were also notable for an unexpected return by Chalmers Properties chief executive Andrew Duncan, who was keen to stress the "human face" of the company, and said that Chalmers would not be the prime developer.
Responding to strong concern from local businesses, he said Chalmers would work with investors, leaseholders and occupiers to secure alternative sites within or outside the harbour basin for those who needed to remain in the area.
Chalmers owns most of the land there.
Economic consultant Phil Donnelly told the hearing the three to four-storey height restrictions the council had suggested in its plan change would limit Chalmers Properties' ability to recover the costs of development.
That was because, as Mr Robinson had said, the cost of necessary piling, or rafting of foundations for constructing buildings more than one or two storeys tall, was high.
Dr Donnelly said there were too many "unjustified" restrictions in the plan change on activities that could take place at the harbourside.
The 3000sq m cap on retail floor space, the 6000sq m cap on office space and the height restrictions on building would have two adverse effects.
They would undermine developers' ability to recoup costs, and constrain the catalyst for development.
University of Auckland Assoc Prof Clinton Bird, an urban design and architecture consultant, argued the project needed to go ahead in full.
With the concentration of port activities at Port Chalmers, and rationalisation of operations at Dunedin, warehousing, cargo sheds and berthing were no longer required at the Steamer Basin.
After researching the history of Dunedin's development, Prof Bird said, it became clear the city had an underlying urban design heritage, structure and geometry, "which is a matter of fact, not opinion".
There was a significant structural connection between the Octagon and the harbour, on the Stuart St/Mason St axis that provided a spine, or backbone for the city.
It was necessary to find a way to enhance its status, and overcome the severance caused by the railway station and line.
Prof Bird said he fully supported Chalmers Properties' objections to the removal of stage two of the project as had been recommended by theDunedin City Council.
Dunedin was born out of a bold plan.
"It now deserves an equally bold plan and visionary level of custodianship that will enable it to grow and thrive throughout the 21st century."
Mr Lumsden asked him if his idea was realistic considering local industry's resistance to moving from the area, and the possibility oil exploration might provide more industrial activity there.
Prof Bird said the plan change was the enabling of a long-term vision.
He said it was a case of industry remaining where it was until businesses decided the area was no longer viable.
Planning consultant Christine Ralph said a land use survey had shown 26% of the property in the area was listed as vacant, residential or unknown.
Other city sites, such as Carisbrook and Burnside, might be suitable for multi-tenanted industrial complexes, Ms Ralph said.
