Opportunities for construction amid uncertainty

Image Credit: Ryder Architecture

Business concerns over the economy and Brexit and a slowing housing market make for a less than encouraging backdrop for the latest Glenigan Construction Industry Forecast for UK construction activity. But although the value of construction project starts is predicted to fall by 6% this year and a further 4% in 2019, the forecasts also point to a number of opportunities for construction amid the uncertainty.

Growth markets offering new tender opportunities include logistics and warehouse space, secondary schools, universities and student accommodation together with build to rent and health. Civil engineering contractors also stand to benefit from the start of work on some major infrastructure projects. Meanwhile, the Midlands and the North are set to be the best-performing regions over the next two years.

Logistics space in demand

The strength of demand for new logistics and warehouse space to handle goods ordered online should offset some of the expected downturn in manufacturers’ investment. This should help limit the fall in new industrial construction project starts to 4% this year and 9% next year, according to the forecasts.

The confidence in the logistics/warehouse sector has been highlighted in recent weeks by the successful launch - ahead of a stock market float - of a new £300 million investment trust, Tritax Eurobox, that will focus on buying large distribution warehouses across Europe. The trust will share management with Tritax Big Box, one of the largest owners of logistics space whose tenants include Amazon and DHL.

Although the value of new private housing construction starts is forecast to fall by 13% this year and a further 8% for 2019, the build to rent homes market is growing rapidly, particularly in London, Manchester and Birmingham. In the first five months of 2018 alone, the Glenigan Index says that construction projects worth £324 million and involving some 2,100 new build to rent homes were started.

Building for learning

Tender opportunities for work across Britain’s universities – where the value of planning approvals almost doubled in 2014 and 2015 – are set to remain buoyant as institutions compete for domestic and overseas students. Planning approvals rose sharply in the sector in 2017 and in the first five months of 2018.

Glenigan’s Construction market analysis reflects the momentum in the sector. It shows tenders have recently been returned on a £2 million extension to an energy centre at the University of Sheffield (Glenigan Project ID 18064849). Meanwhile tenders are invited for a £3 million extension at the University of Essex, (Glenigan Project ID 18236650) whilst work has recently started on the £14.4 million Cypress office building at the University of Liverpool (Glenigan Project ID 18000368).

Secondary school construction projects are also set to expand to meet rising pupil numbers. The value of school projects winning detailed planning approval rose 50% in the first five months of 2018 which should mean more starts next year. The Glenigan Construction Industry Forecast is anticipating that the value of overall education construction starts is set to rise by 11% in 2018 before slipping back slightly by 2% in 2019.

Although NHS capital budgets will continue to be squeezed, health-related construction is set to rise this year. Boosted by an increase in laboratory and research construction projects, the value of health planning approvals rose by 16% to £2.3 billion in 2017. This is forecast to translate into a 15% rise in the value of health sector starts this year before a 6% dip in 2019.