JLL and Glenigan’s inaugural Commercial Construction Index reveals that Yorkshire was one of only two English regions to report an increase in commercial development over the 12 months to June 2014.
According to the Index £1.7 billion of commercial projects started across Yorkshire over the 12 months to June 2014; a 7.3 per cent increase compared with the previous year. Significant construction starts over the last three months including the Flemingate redevelopment in Beverley and Central Square in Leeds helped buoy this figure.
Work began on £22.7 billion of commercial projects in the UK over the 12 months to June 2014, an increase of 6.6 percent on the previous 12 months. Unsurprisingly London was easily the strongest single contributor, accounting for almost a quarter of the entire UK total (£5.5 billion);
The development of new workplaces, shopping centres and industrial facilities is playing an increasingly important role in Yorkshire’s economic recovery however the Index also highlights concerns that the development of commercial space is still lagging the UK’s booming economy – and could prove a constraint with time.
Jeff Pearey, Lead Director – North East region at JLL, said: “Notwithstanding the positive news about construction trends, the volume of commercial space being started in the region has not risen substantially since the recession and is still significantly behind the position before the crisis. There is evidence of an increasing supply shortage, particularly in the office market. Grade A vacancy rates are now below two per cent in Leeds and whilst we have seen a 7 percent increase in construction starts over the last year the amount of development needs to accelerate if this is not to hamper longer term recovery.
“Occupier interest in Yorkshire continues to build although the absence of new buildings remains an issue in the office and industrial sectors. Availability of development finance is still the major issue however.”
JLL also warns that whilst construction work has picked up, with new building and refurbishment projects across the region such as Evans’ refurbishment of Minerva and Capitol in Leeds and a new manufacturing unit for Haribo in Pontefract, conditions for contractors are tough at the moment.
Tony Stott, Head of JLL’s Building Consultancy team in Leeds, added: “Thankfully the worst is over in terms of the economic conditions, which is providing much needed relief and a positive outlook at last. But this change in fortune does have its challenges. During the recession, subcontractors and consultants battened down the hatches, shrinking the size of their businesses down in the face of economic uncertainty and to make it worse, a lot of people have left the industry altogether. The latest RICS market survey highlights that 51 percent of firms are concerned that there is insufficient labour to meet demand.
“Conditions for contractors are tough at the moment, but not because of lack of work. As the market has lifted, materials prices have risen to record highs while a long and deep industry recession has depleted the supply of skilled labour. Cities such as Leeds are already starting to see a shortage of grade A office space, and their revival could be affected if development does not gain pace or if there is skilled labour shortfall in the wider construction sector which could increase costs and mean delays for developers.”
Of the main commercial sectors, retail was the leading improver, with new project values increasing by 19.2 per cent to stand at £2.3 billion. Significant projects included the refurbishment of Selfridges in London and the refurbishment of the Mailbox in Birmingham (Q4 2013), as well as Westfield’s restarted Broadway Shopping Centre in Bradford (Q1 2014), which helped buoy the overall Yorkshire total also.
