Research from RLB forecasts growth in the residential and life sciences sub-sectors in 2025.

The construction and property management consultant has published its latest Construction Market Intelligence (CMI Q1 2025) report which forecasts continued activity throughout 2025, but with mixed trends across different sub-sectors.

The report’s price forecast for the South East for the next 12 months predicts a rise of approximately 3.25 per cent and RLB anticipates a subsequent uplift of around 3.5 per cent per annum.

Key regional developments

Optimism has been created by the number of large-scale developments and big announcements including the new focus on the Oxford-Cambridge Arc and major capital investment plans for Heathrow Airport, including the third runway.

But the report found that while the ONS Consumer Price Index remains stable, factors such as excess demand, geopolitical conditions, rising employment taxes and transportation challenges may introduce further pricing volatility.

It suggests investors and developers may now consider procuring materials earlier in the project lifecycle.

Rising input costs

  • Costs associated with mechanical, engineering and plumbing labour and materials are on the rise, along with civil engineering costs.
  • The rise is largely driven by increased demand for electrical equipment and civil engineering products, stemming from significant infrastructure, data centre energy projects across the UK.
  • The pressures are contributing to long lead times for electrical equipment and delays in grid connections.

Sector insights

Data centres – The report notes increased levels of activity and interest outside what have typically been the core data centre hotspots in the region, in line with growth in demand across the sector generally.

Education – Capital investment programmes are being reprioritised and, sometimes, scaled back as the higher education sector deals with challenges around funding and fee levels. Much of the sector is currently focused on upgrading ageing estate to tackle the backlog caused by maintenance issues and decarbonisation targets.

Infrastructure – Several large-scale projects are in the pipeline in the aviation and defence sectors. Some are being referred to as ‘once in a generation’ opportunities.

Residential – The sector continues to be impacted by issues such as interest rates, economic uncertainty, construction costs and sales values.

While some PDR conversion schemes are still happening, build-out activity among housebuilders has been subdued. However, there is hope that recent announcements such as the £300 million funding for the Affordable Homes Programme may provide a positive boost.

RLB associate commercial manager in the South East Andrew Flourentzou (pictured) said: “There is plenty of market activity up to planning stage but we’ve seeing developers pause to assess market conditions, viability and exit strategies before proceeding to construction.

“Many large schemes remain ‘on the shelf’ as developers wait for stronger levels of demand before proceeding. We are also seeing main contractors applying caution in selecting which projects they bid for at the tender stage.”

The full report can be seen here.

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