Commercial property construction in London reached its highest level since 2008, with activity totalling £7.4 billion in the first quarter of 2016 while the picture was more mixed regionally according to JLL and Glenigan’s latest UK Commercial Construction Index.
At the end of Q1 2016, the level of speculative office development under construction in central London totalled 8.3 million sq ft well ahead of the long-term average of 5 million sq ft. Of the English regions, only three saw year-on-year growth – the West Midlands, the North West and the east of England.
Activity slowed particularly in Yorkshire & Humber in the first three months of 2016 – £1.4 billon of new construction starts commenced during this period, a 44% year on year fall. This was mainly due to an unusually strong Q1 2015 affecting the cumulative figures. During the first three months of 2015, £2.4 billion of work started in the Yorkshire and Humber region including work on the £600 million Victoria Gate retail scheme in Leeds.
Tony Stott, lead director of JLL’s Buildings & Construction team in Leeds, said: “Construction activity in the region is down on the annual and quarterly comparison, although activity levels are broadly in line with the long term trend over the last five years. Nevertheless, the pace of growth we have seen over last couple of years is beginning to moderate. This could be partly due to wider economic and political uncertainty but to some extent, growth will also be moderated by skills and resources shortages with workloads nearing capacity in some cases.”
Allan Wilén, economics director at Glenigan, concluded: “There are many reasons to remain optimistic – commercial construction activity in London and in many of the major regional cities remains solid. Major infrastructure projects such as Crossrail will also drive activity and with further projects in the pipeline there is positive momentum. New orders activity from the ONS also suggests there will be continued growth in construction activity this year with new construction orders for commercial property increasing by 62% (Q4 2015) from their lowest point in Q3 2012.”
