Victoria Gate helps region’s construction sector outperform UK
COMMERCIAL construction volumes in Yorkshire have outperformed the rest of the UK, including London, during the first three months of 2015.
That’s according to JLL and Glenigan’s UK Commercial Construction Activity, which states that total starts in Yorkshire from the beginning of the year to the end of March totalled £2.4bn, an increase of 30.6% compared with the previous quarter, the highest increase seen in any region.
This figure was boosted by Hammerson’s Victoria Gate scheme in Leeds.
The rise in volumes compares with a much smaller increase of 7.3% in Greater South East (London, South East and East of England) a decline of -14.2% in the North West and -9.2% in the West Midlands, within the context of weakening growth in the UK economy, falling from 0.6% in Q4 2014 to 0.3% in the first three months of 2015.
The downside to increased volumes according to JLL is an increase in construction costs which are expected to rise well ahead of inflation, primarily due to limited contractor capacity, growth in the commercial sector and a sustained rise in the residential market. Specific trades are experiencing significantly higher than inflation costs including mechanical and electrical services, curtain walling and demolition contractors, where labour shortages are pushing up costs. Labour and material strategies are also affecting construction, with the lead-in time for bricks, for example, extending out up to 16 weeks.
Tony Stott, director of building and construction at JLL, said: “Volumes increased most in Yorkshire during the first quarter of the year and are a sure sign of buoyancy within the construction market. However, there are several factors at play which could place the long term recovery of the region’s construction industry at risk.
“One issue raised by our research has been a shortage of ‘trades’ including bricklayers, electricians and demolition contractors, meaning that some potential new build projects, particularly in London, are being delayed. Contractors are therefore being increasingly cautious about the jobs they are going for.”
The report reveals that the total annual total starts for new commercial builds and existing projects rose by 7.9% over the first three months. The retail and hotel sectors saw particularly strong first quarters. Volumes only fell in one sector – medical – although the industrial construction market was relatively flat.
