Construction market sentiment remains positive in the South East despite viability and planning challenges, according to a report by Rider Levett Bucknall (RLB).
The property and construction management consultant’s latest Construction Market Intelligence (CMI) report for Q1 2024, reveals resilience across the South East in the face of complexities and challenges impacting developers’ ability to progress schemes.
However, the picture is mixed with notable differences between sub-regions and sub-sectors.
The frequently reported ‘flight to quality’ in the market has continued, with occupiers focused on securing Grade A space with strong sustainability credentials, a trend likely to continue although the report notes new developer-led speculative schemes are still few and far between.
The CMI notes ‘reasonable’ activity in the Higher Education sector generally across the South East with many universities forecasting significant capital investment programmes over the next five years and beyond, as they look to upgrade campus facilities to make them more attractive to students.
Life sciences continues to be a strong sector in the Oxford-Cambridge Arc, characterised by a mix of significant developer and occupier interest and lack of supply, leading to an ongoing pipeline of speculative projects.
The report suggests, despite difficulties, the residential sector may see an improved landscape later in the year. The current lack of house building, either due to developer stagnation or planning issues, is resulting in fewer completions coming forward. The affordable housing sector has also been adversely impacted.
Pricing levels in the region are on an upward, but moderate, trajectory with pipeline opportunity generally continuing to be in a reasonable state across sectors.
As a result, tender prices are expected to remain on an upward trend, although increases are likely to be more moderate compared to recent years of high inflation.
Factors affecting expectations beyond this year include the UK’s wider political situation and economic issues, such as inflation and interest rates, as well as planning regulation and public sector investment programmes.
Overall, pricing levels are expected to remain steady, while still on an upward trend due to materials price inflation, labour and skills issues and international supply chain complexities. No significant evidence of under-pricing was reported to try to secure work.
Michael Righton, partner at RLB Thames Valley, said: “While South East’s immediate pipelines remain strong and positive, there is some caution around the longer-term view.
“With pricing levels expected to be moderate, compared to recent years of high escalation, there is a feeling that bidders might need to price keenly, although not so much that under-pricing is needed to secure work.
“Investment in all areas is key to keep developers moving schemes into construction and delivery, and security around interest rates to help viability of projects.’’
Click here to see the full RLB Q1 2024 Construction Market Intelligence report.
Image shows the University of Reading Health and Life Science building. RLB, which has worked with the university for more than 20 years, provided quantity surveying services.
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