Commercial development across Britain “lagged behind a booming economy” last year, claims an industry survey. Almost £23bn worth of new projects were started in the year to the end of June — a rise of just 6.6 per cent.
The figures — revealed in the Jones Lang LaSalle (JLL) and Glenigan annual construction index — also show that new-start volumes are still more than a third behind pre-crash levels when the 2007 to 2008 survey recorded £36m worth of projects.
Of this year’s £22.7bn total more than half, £11.9bn, was spent on new commercial developments; a year-on-year increase of 4.7 per cent. Although making good progress the lack of finance remained a “major issue”, stressed JLL’s head of UK research, Jon Neale.
Before the recession a lot of investors were willing to take on more risk, he explained. Today, investors and companies putting money into the property sector are favouring standing stock or existing occupied buildings.
“The problem seems to be the way the profile of the lending market has changed,” Neale added. “One would hope that this will balance out and investors will start lending to development, but I don’t know whether that will help supply in the short term.”
The “unsurprising” preference for refurbishment projects is reflected in the index which shows that £10.8bn was spent on regeneration and upgrade schemes; at 8.7 per cent slightly up on 2012-2013.
Looked at regionally, London was the strongest single market taking almost 25 per cent of the national total with £5.5bn worth of projects underway. The number of schemes within the capital also rose by 27.2 per cent against the previous year. “London’s commercial output is 12 to 18 months ahead of the rest of the country,” admitted Neale.
Outside London, regional growth was weaker. New starts and refurbishments fell by 6.3 per cent to £13.6bn.
Northern Ireland witnessed the biggest regional growth where new-starts and regeneration projects were 209 per cent up on a year earlier but that, adds the index, was from a very low start line. Wales and Scotland saw increases of 65 per cent and 15 per cent respectively against 2013 figures.
Other high and lows were:
“The regions will revive in the next six months, but there are some serious challenges ahead with capacity and the industry’s ability to respond to the growing supply pressure, especially Grade A office space,” said Neale.
Helen Gough is JLL’s lead director of buildings and construction. She is convinced that contractors have become “a lot more picky and choosy” with the projects they entered, mainly because of an acute skills shortage in the construction industry.
“Access to suitable finance is also forcing many developers to move into refurbishment,” she said, “and to look at the quality of existing space and seeing how it can be improved.”
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