The latest regional crane survey from Deloitte Real Estate has recorded an 80% year-on-year increase in the number of major new schemes starting construction in Birmingham, Manchester, Leeds, Edinburgh and Glasgow.
The survey counts office projects over 10,000 sq ft, retail projects over 10,000 sq ft, residential projects over 25 units, and major education, leisure and hotel schemes. Deloitte looked at data from July 2012 to July 2013.
Head of research at Deloitte Real Estate, Anthony Duggan, commented: “Compared to the less than positive story last year, our regional research now illustrates a rise in development activity, matching the recent improvement in the UK economy. We have recorded construction increases in office space and student accommodation as demand for both continues to rise. Similarly city centre residential is beginning to appear back on the agenda with a number of schemes breaking ground.”
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The commercial office market is described as on the cusp of a new development cycle with a total of 11 new office construction starts, the highest number since 2008. This compares to just four in 2010, but 23 in 2008.
Of the current space under construction, only a quarter is prelet, compared to half last year, suggesting that some developers have become bolder and are pressing ahead with speculative development.
There has been a small upturn in the number of new hotel starts with five standalone schemes and one mixed-use scheme recorded in the survey. Retail construction, however, recorded a fall.
The survey highlights strong growth in the student housing sector, with 10 new project starts that will deliver 2,900 bed spaces across the study cities.
The report says that demand is likely to remain strong with student numbers expected to continue to increase and investors confident of stable returns and solid rental growth.
The market for city centre residential development has improved somewhat over the past year with 12 major new projects starting on site, compared to just four in 2010 and 28 in 2008.
Approximately 1,400 units are under construction across three of the city centres monitored in the survey. However, this remains some way below the 10,135 units recorded in crane surveys at the peak of the market in 2007.
Manchester is the most active city in the survey with 19 new construction starts including eight residential schemes.
Deloitte’s Duggan said: “The thrust of development activity this year sits with Manchester, Edinburgh and Glasgow, but the results are generally good news across the board with four out of five cities showing an increase in new starts compared to just one city in 2012.
“This increase in construction is unlikely to be a one-off. With an improving residential demand, supply shortages appearing in a number of the commercial property sectors and signs of increasing activity from investors in regional commercial real estate. It looks like we will see more development activity over the next 12 months.”
