Resurgence in UK construction sector during Q3 2014
6th January 2015
JLL and Glenigan’s latest UK Commercial Construction Activity Index reveals that non-residential new build activity is increasing rapidly, with the value of new starts over the year to Q3 amounting to £12.5bn - up 5.4% on the year to Q2.
Commenting on the research, Helen Gough, director of JLL’s UK Buildings & Construction team, said: “This resurgence appears to have been driven by a strong rise in office construction with a 12-month total of £5.7bn, up 55% on the equivalent figure for Q2. These figures further demonstrate blossoming developer confidence.”
Overall activity amounted to £23.6bn, a 4.2% increase on the Q2 figure, a result of a slower rate of growth in refurbishment and extension (£11.1bn, +2.9%).
Jon Neale, head of JLL’s UK Research team, added: “While the recovery is encouraging, our Index shows that there is also a strong North/South divide in office construction figures. The South East at 36% saw the most significant increase, followed by the South West at 12% and London at 10%. In contrast, volumes fell back in the North West, North East and both the Midlands regions.”
Meanwhile, the rise in activity overall is leading to supply chain issues. Helen Gough, director of JLL’s Buildings & Construction team, explained: “The increased demand is leading to procurement pressures which are in turn driving-up costs in the sector. Skills shortages in the construction industry are at their highest level since 2008. We estimate that as a result of these factors, overall costs have already risen by 4% year-on-year, and will increase to 5% by the end of 2014.”
Allan Wilén, Economics Director at Glenigan, concluded: “The latest JLL/Glenigan Commercial Construction Index reveals a strengthening in non-residential projects starting on site. This welcome rise in industry workloads is accompanied by rising construction costs and extended lead times. These pressures are expected to intensify over the coming year as construction growth gathers momentum.
"Designers and consultants will have to increasingly involve main contractors and their supply team at an early stage of a project’s development to ensure that it is delivered to time and budget. These pressures highlight the need for integrated supply chains and should act as a spur to the take-up of supporting technologies such as BIM.”