Glenigan Index of construction starts to end of July 2024

An increase in private housing starts lifts construction starts

• Work starting on-site rose by 2% in three months to the end of July 2024
• Residential construction starts rose 12% during Index period
• Non-residential project-starts fell 10% during Index period
• Civils work starting on-site rose 9% during Index period

August’s Index reveals that recent changes in the political landscape have had a modestly positive effect on sector performance. Whilst starts on site were still 11% down on 2023 figures, there has been a slight increase of 2% in the three months to the end of July 2024.

The first industrywide lift in many months, this reversal of fortune for a sector battered by strong economic headwinds over the past few years can largely be attributed to a growth spurt in private housebuilding.

There was also strong regional growth with a near-unprecedented number recording growth in the Index period, including East Midlands, South West, Wales, Northern Ireland, London, Yorkshire & the Humber and Scotland. It’s a strong indication of sector resurgence in the coming year, as indicated in Glenigan’s latest Forecast (June 2024).

As Allan Wilen, Glenigan’s Economic Director says, “The industry should be buoyed by these results, a clear sign confidence is starting to return to the market. This is evidenced by the spike in private housing starts, a longstanding barometer of investor conviction and consumer appetite. Developers will no doubt see plenty of opportunity as this vertical continues to thaw over the next six months, hopefully having a positive, knock-on effect for other, associated built environment assets.

“Social housing and non-residential sectors have remained relatively subdued, yet this is unsurprising. After all, the timing of planned projects has been disrupted by the general election and the new Government’s commencement of a wide-sweeping review of programmes. For example, the uptick in Civils should be taken as short-lived, especially in light of this week’s announcement to pause and scale back road and rail projects.

Taking a closer look at the sector verticals and regional outlook…

Sector Analysis – Residential

Residential construction experienced a particularly healthy period, despite start performance finishing 17% lower than a year ago, it rose 12% during the three months to July 2024.

This overall boost was attributed to a spike in private housing starts, which rose by 25% following a weak start to the year as developers’ sentiment toward the prospects for the housing market improved. Despite the upturn, starts were still 12% lower than a year ago.

Social housing work starting on site remained depressed, dropping by 23% against the preceding three months and being 32% down against the previous year.

Sector Analysis – Non-Residential

Non-residential performance was sluggish, with a few bright spots here and there.

Education starts held firm, with the value of underlying project starts slipping a mere 1% against the preceding three months but standing an impressive 24% up on 2023 levels.

Hotel & Leisure increased 10% against the preceding three months and were 18% up against the previous year, with various schemes contributing to the increase.

Retail starts slipped 2% against the preceding three months but stood 8% up against the previous year.

Civils work starting on-site rose 9% against the preceding three months and was 14% up against the a year ago. This was boosted by a rebound in infrastructure starts which rose by 21% against the preceding three months and by 45% on a year ago. Tamping down these fires of growth, utility starts decreased 8% against the preceding three months to stand 16% down against the previous year.

Elsewhere it was decline across the board. Industrial project starts experienced a poor period, with the value of starts decreasing 10% during the three months to July and were 34% lower than a year ago.

Health starts have continued to weaken, decreasing 30% against the preceding three months and by 39% on the previous year. Office starts also performed poorly, decreasing 8% against the preceding three months to stand 9% down on the previous year.

Community & Amenity also weakened, decreasing 44% against the preceding three months and standing 8% down on the previous year.

Regional Outlook

Refreshingly, regional performance was generally impressive, taking in the context of previous editions of the Index.

Paragons of consistently good performance, the value of starts in Yorkshire and the Humber and Scotland rose by 10% and 4% during the three months to July and was 5% and 4% up respectively on a year earlier.

Other strong performers included the East Midlands, which experienced a 33% rise in starts against the preceding three months but was still 11% lower than a year ago.

The South West, Wales and Northern Ireland also experienced double-digit growth of 16%, 10% and 39% respectively against the preceding three months, but the value of starts remained down from a year ago.

London experienced a 9% rise against the preceding three months but was 20% down against the previous year.

By contrast starts in the East of England, the North East and the North West declined by 7%, 23% and 10% respectively against the previous three months.