Development projects in the East Midlands are becoming more costly as developers struggle to source skilled labour, according to leading property consultancy JLL.
As the economy has started to improve, construction work has picked up, particularly in the South and South-East as the retail sector flourishes offering lucrative contracts and luring skilled labour ranging from bricklayers and electricians to site manager and Quantity Surveyors away from the region.
The inaugural JLL/Glenigan index shows that whilst construction has been underperforming as a component of GDP until relatively recently, in Q1 output rose by 1.5% ahead of general GDP growth of 0.8%.
London is easily the strongest contributor to this performance accounting for almost a quarter of the entire UK total at £5.5 billion and in terms of recovery the capital is perhaps 12-18 months ahead of the rest of the country.
David Hastings who leads the Building & Development team at JLL in Nottingham, said: “Clearly many contractors have gone where the work is and whilst the regions are starting to show signs of economic recovery too, the security of working on large residential or commercial schemes in the capital with a 12 to 18 month build programme is very appealing.”
“During the recession, subcontractors and consultants also battened down the hatches, shrinking the size of their businesses 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% of firms are concerned that there is insufficient labour to meet demand.
“Now, although there are signs of economic improvement, small businesses are very reluctant to commit to expansion, having had their fingers burnt in the past and with the possibility of increased interest rates looming, they are, instead, cherry picking jobs.
“This is leaving developers facing a shortfall of labour, which could create problems for key building projects coming on stream in the region, particulary the commercial schemes which typically operate at much tighter margins than residential.
JLL project managers have sought to overcome these challenges with contingency planning systems for major projects including regular checks on staffing levels and sub-contractor attendance.
Mr Hastings 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. There is an increasing demand for buildings to be constructed at a faster and faster pace. However the current skills gap means it is difficult to meet this demand and that the cost of labour is being pushed up so the developers are incurring increased costs and delays.”
