Construction levels in London have reached the highest level since 2008, with £7.4 billion worth of projects underway or in the pipeline, according to new figures.
In central London alone JLL and Glenigan’s UK Commercial Construction Index calculated that 8.3 million square feet of office space was under construction at the end of Q1 2016, well ahead of the long term average of 5 million sq ft In the West End construction started on nine office projects in the first quarter, totalling 596,997 sq ft, the highest level since the end of 2014.
Office, retail and industrial projects topped the survey, together accounting for over half of commercial construction activity. The offices sector regained some momentum this quarter with £4.9 billion worth of projects kicking off, up 21.1 per cent compared to the previous quarter.
However, London bucks the broader trend. The capital’s activity rose by almost 20 per cent in Q1, a 9 percent increase on year-on-year levels, but overall commercial construction activity in the UK is down over the 12 months to the end of March to £23.0 billion, a fall of 7.2 per cent on the previous quarter.
“Generally, the construction industry remains cautious, however a recent fall in costs has offered some rebound for the commercial sector,” said Helen Gough, lead director of JLL’s Buildings & Construction team. “While total construction starts fell marginally this quarter, construction data on the whole remains volatile. Construction activity levels remain solid with London showing notable signs of resilience.”
But Jon Neale, lead director of JLL’s UK Research team, said that growth will be ‘moderated’ by political and economic headwinds: “Construction activity is down on the annual and quarterly comparison, although activity levels are broadly in line with the long term trend over the last five years. Nevertheless, the pace of growth we have seen over last couple of years is beginning to moderate.
“This could be partly due to wider economic and political uncertainty but to some extent, growth will also be moderated by skills and resources shortages with workloads nearing capacity in some cases.”
But while core sectors look set to become increasingly competitive, many investors are spreading their wings with the appetite for alternative assets growing, most notably in student housing, where activity has increased 5.1 per cent to £5.8billion year-on-year.
Allan Wilén, economics director at Glenigan, added: “There are many reasons to remain optimistic – commercial construction activity in London and in many of the major regional cities remains solid. Major infrastructure projects such as Crossrail will also drive activity and with further projects in the pipeline there is positive momentum. New orders activity from the ONS also suggests there will be continued growth in construction activity this year with new construction orders for commercial property increasing by 62% (Q4 2015) from their lowest point in Q3 2012.”
Lead Director, UK buildings and construction