Market signals strong as construction activity increases

The latest Glenigan/ JLL Commercial Construction Activity Index paint a picture of robust and continued construction growth across the UK. Commercial construction for the 12 months to the end of December rose to £24.8 billion, an increase of 4.3% on the previous year. In line with previously reported growth in new build activity, December data indicates an increase in the total volume of new build projects which rose to £14.7 billion (up 15.2% y-o-y). The latest rise in overall construction activity mirrored the trend recorded for construction output at the end of 2015 with the UK Construction PMI up from a seven-month low.

The report highlights a continued willingness to commit to core sectors, particularly Industrial with activity well ahead of year end 2014 figures. The ‘core’ commercial sectors of offices, industrial, retail and hotels saw volumes total £14.5 billion (up 1.7% y-o-y). Notable projects underway or due to start include the £50 million refurbishment of Meadowhall Shopping Centre, Sheffield and the c. £150 million mixed use development at The Haymarket, Edinburgh.

Construction costs have risen steadily through Q4 2015 with leading contractor order books remaining full and benefiting from a strong pipeline. Capacity throughout key trades and supply chains continues to be one of the primary drivers behind construction cost inflation despite improvements to underlying commodity prices, notably oil. Tier 1 suppliers are remaining selective in their bidding activity with low risk two stage and negotiated appointments remaining favourable and key to securing contractor programme commitment and product quality.

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