UK Commercial Construction Faces Challenging Times

Posted on 4 November, 2012 by Jodee Redmond

The good news for the UK is that recently-released GDP figures indicate the country has officially pulled out of the recession. However, the results of a study of the commercial construction sector indicate that challenging times lie ahead.

The Castles in the Air report, prepared by the UK’s largest commercial insurer RSA, suggests that commercial construction projects in the UK won’t reach pre-recession levels until 2023. The drop in output levels since 2007 is £13 billion.

The report further states that the recession has resulted in a peak-to-trough decline of 42% in construction output. This figure closely follows the GDP.

In the years between 2007 and 2011, the value of construction activity decreased from £41 billion to £28 billion. This number is expected to decrease again in 2012 by another £1 billion and will remain in a negative growth pattern until 2014. At that point, a modest 0.3 per cent rise is expected.

The results of the study indicate that new projects are stalled in all parts of the country. The value of construction output has declined in most sectors. Warehouses and offices have seen the largest drop in demand at 62 and 51 per cent, respectively.

The drop in output for retail property has been lower, at 27 per cent. Eight cities were examined for the report which showed a strong North-South divide. Predictably the South East and London fared better than Scotland and Northern England in all respects.

The report also revealed that office rents have decreased by 16 per cent in the UK on average. Vacancy rates in the first quarter of the year were approximately 12.6 per cent and demand for new prime office space is predicted to remain weak in the medium term.




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