Political and Economic Woes are Holding Back Growth

Posted by UK Property Forums on 18th May 2024 -

Market growth is being hampered in the Thames Valley property and construction market by political and economic factors claims RLB’s latest construction market intelligence.

The Thames Valley construction and property management consultant and Thames Tap partner’s latest market intelligence shows the region remains resilient overall and, in some instances, shows signs of buoyancy.

Main contractors are generally feeling positive about tender opportunities over the next 12 months, although the ongoing profit warnings and insolvencies in the industry are impacting optimism across various sectors.

Price stability expected for the next 12 months and beyond

The independent consultant’s report shows that the general expectation is that tender pricing in the South-East will continue to follow a stable but upward trend for the foreseeable future.

Beyond that, the expectation is for more of the same, although this is dependent on what impact geopolitical events in the UK and globally might have on the market.

Movements in commodity and materials prices and labour costs in the region are in line with current national trends for the construction industry.

There has been no significant change in the level of new starts compared to the previous quarter, but there are some major programmes of work coming through the development pipeline.

These include town centre regeneration schemes and residential-led projects that have recently received planning approval.  Market sentiment is generally one of ongoing frustration with the region’s planning departments. The consensus is that planning is likely to be significantly impacted by evolving political events throughout the remainder of the year.

Sector focus for the South-East:

Commercial 

A mixed picture but there are signs of optimism with regards to the part letting of space at some of the more significant speculative commercial office developments. Regionally, the life sciences sector continues to be a key driver in the Oxford-Cambridge arc although the balance between supply and demand of space is being closely scrutinised given the amount of new space have recently coming through the development pipeline.

Education 

There is a significant programme of works forecast for schools across the region driven by public sector funding programmes. In higher education, despite budgetary pressures and on-going debate about foreign student intakes, there is strong interest in capital investment programmes to upgrade estates and facilities to meet sustainability and net zero challenges.

Public & Civic 

Over the last quarter there have been several announcements of large-scale town regeneration schemes incorporating a significant residential component. These are intended to be delivered through joint ventures made up of public and private sector partners, some of which are being constrained by the financial status of various local authority partners.

Residential 

House building in the South-East is not proceeding fast enough to meet targets and is being hampered by political and macro-economic factors that are impacting costs, funding and project viability.

But it is expected that the private rented sector model will continue to gain traction, given the lack of rental options in key commuter locations across the South-East.

James Miller, senior associate, RLB South-East (pictured), said: “The Bank of England’s Monetary Policy Committee is beginning to show signs that interest rates may reduce soon. Lower interest rates will reduce borrowing costs, assisting our clients to deliver much-needed affordable housing, also reducing mortgage and developer finance costs, all of which will help kickstart many new developments.”

For the RLB’s full Construction Market Intelligence Q2 2024, please click here