Glenigan Index of construction starts to end of August 2024

Private residential performance increase lifts construction starts

• The value of underlying starts rose 7% against the preceding three months.
• Residential construction-starts increased 22% on the preceding three months but fell back 8% on 2023 figures.
• Private housing vertical performance surges 30% during the Index period.
• Non-residential project-starts fell by 11% against the preceding three months to stand 9% down on a year ago.
• Civils work starting on-site increased 18% against the preceding three months and was 9% up against the previous year.

The September Index sees an uptick in construction-start performance, driven by activity growth in key verticals including residential and civils. Encouragingly, the value of underlying work starting on-site rose 7% against the preceding three months, despite standing 7% lower than a year ago.

Commenting on the findings, Glenigan’s Economist, Drilon Baca, says, “It’s heartening to see project-starts rising during the Index period. As market inflation and persistently high interest rates start to ease, we’re noticing an increasing confidence among developers which is starting to buoy the residential market.

“The industry can also take hope from signs of individual vertical recovery. For instance, civil engineering project-starts grew by almost a quarter against the preceding three months. However, the new Government’s keenly-anticipated Autumn Budget and upcoming spending reviews are expected to have a significant effect, particularly on infrastructure starts. This will likely stall activity as Whitehall postpones major road and rail projects until more clarity around earmarked funding is given. On the bright side, this could just as easily be offset by the relaxing of other regulation, particularly around planning processes welcomed by the sector and potentially boosting starts from Q.4 2024.”

Taking a closer look at the sector verticals and UK regions…

Sector Analysis – Residential

The overall value of residential project-starts improved during the Index period, rising 22% against the preceding quarter. However, the value remained 8% lower than the previous year.

Private housing was the September Index’s stand-out performer, with work starting on-site increasing 30% compared to the preceding three months despite falling short of 2023 levels by 4%.
Conversely, social housing performed poorly, with project-starts slipping back 4% against the preceding quarter, and 21% against the previous year.

Sector Analysis – Non-Residential

Performance in non-residential sectors was mixed.

Industrial project-starts achieved significant growth against the preceding quarter, rising 45% during the three months to August but remaining 27% lower than a year ago. The vertical was boosted by the commencement of the £60 million development of four industrial/warehouse units in Hillingdon, London.

Positively, retail starts saw a modest increase of 3% against the preceding three months and stood 4% up on the previous year.

Community & Amenity starts decreased by 31% against the preceding three months but rose 1% when weighed up alongside the previous year. Likewise, hotel & Leisure project-starts decreased by 22% against the preceding three months but finished 17% higher than the previous year.

Other sectors did not fare as well. Education starts declined by 29% against the preceding three months and fell 22% compared to 2023.

Health and office starts both experienced a weak index period, with health project-starts decreasing by 28% against the preceding three months and by 44% on the previous year, while office starts fell by 14% and stood 27% down on 2023 figures.

Sector Spotlight – Strong Civils Performance

Civils work starting on-site experiences a particularly strong period, posting impressive performance scores, rising 18% against the preceding three months and standing 9% up on the previous year.

This growth was largely attributed to healthy performance in the infrastructure vertical, with starts up by 31% against the preceding three months and by 36% compared with a year ago. A key contributor to this growth was the commencement of the new HS2 station at Old Oak Common in London.

Yet sluggish utility starts tempered hopes of runaway success, decreasing by 3% against the preceding three months and stood 23% down against the previous year.

Regional Outlook

The East Midlands experienced a welcome 65% rise in starts against the preceding three months, standing 16% up against the previous year.

The South West and Northern Ireland also registered strong growth, with starts rising 20% and 32%, respectively, against the preceding three months, standing 6% and 36% up against the previous year.

London saw a 10% increase against the preceding three months but was 8% down against the previous year.

Scotland experienced a 20% increase against the preceding three months but remained 13% down on the previous year.

Elsewhere, regional performance was poor. The value of starts in Yorkshire and the Humber and Wales declined by 19% and 6% during the three months to August and were 12% and 46% down respectively on a year earlier.

The East of England experienced a mixed period, increasing 18% against the preceding three months to stand 13% down on the previous year. The North East and the North West performed poorly, declining by 35% and 15% respectively against the previous three months, and standing 29% and 12% down against the previous year.