Fewer projects shelved despite uncertainty

Latest Glenigan data shows that the value of projects being put on hold has continued to fall over the last few months, after significant declines over 2011. 

Last year, the underlying value of projects being placed on hold fell by 29% on 2010 as the construction industry continued to stabilise. This trend continued over the three months to May 2012, as the value of shelved projects fell by 18% compared to a year earlier. 

In general, this trend has been consistent throughout the construction industry. Following the downturn of five years ago, there were a high number of schemes which were envisaged during times of greater optimism and access to credit which were then shelved and later cancelled. Since then, developers have been more cautious in initiating projects, so that only the most feasible and well financed were progressed through the planning process. As such, there are fewer projects likely to be placed on hold, despite the industry’s uncertain prospects.

There have been a few sectors which have seen an increase in shelved projects over the last three months. As previously reported by Glenigan, there has been an increase in the value of retail projects being placed on hold. This has been driven by a spate of Tesco projects as the firm has shifted its priority from new build projects to refurbishing existing stores.

In addition, there were a number of office projects which have been shelved over the three months to May. There has been an increase in the number of office projects gaining planning approval, according to other Glenigan data, and the continued turbulence in Europe and weak domestic demand may have dissuaded developers from bringing these projects to starting on site.

Glenigan data also shows that the underlying value of projects which were cancelled over the three months to May, having been on hold, doubled compared to a year ago. In particular, there was an increase in the value of cancelled private housing and education projects over the last three months. However, the general level of cancelled projects is substantially below the level seen in 2010.