Construction trends are changing quickly. While private and social housing starts are falling sharply, commercial developments, especially offices, are experiencing a strong rebound. What’s behind this? Let’s break it down.
Overall, the total value of new construction projects has slowed. In the three months to the end of August, the value of new projects (under £100 million) dropped by 4% and is 6% below last year’s level.
Although there is a push in residential construction, housing starts plunged by 18% compared to the previous quarter and are 16% lower year-on-year. On the other hand, private housing is down by 16%, and social housing fares even worse, down 24% quarter-on-quarter and 17% year-on-year.
Where housing slows down, the commercial sector is making a comeback. Non-residential starts increased by 13% quarter-on-quarter and are 11% higher than last year! Office projects saw a huge rise of +103% quarter-on-quarter and a staggering +232% year-on-year, driven by large developments like the retrofit at 30 Finsbury Square in London. Other sectors showed mixed results: industrial +1%, health +7%, community and amenity down 26% in the quarter but up 35% year-on-year, and hotels & leisure slightly down quarter-over-quarter but up 4% year-on-year.
Regionally, London leads with a 39% increase over three months and a 36% boost year-on-year in project starts. The North East jumps 61% year-on-year and 29% quarter-over-quarter. The West Midlands grew 21% over the quarter and 36% year-on-year. In contrast, the South East, South West, North West, and Scotland all saw declines.
Why does this matter? The data changes the story. While housing construction stalls, commercial projects are surging, especially in key urban areas. This indicates shifting investor confidence. Developers and contractors might need to rethink resource allocation, focusing on sectors and regions showing resilience. The divergence from macro sentiment indicators, like the S&P Global PMI (which still shows contraction), suggests that on-site activity—ground truth data—is more positive than the sentiment surveys imply.
How can you respond? Are you exploring commercial developments or office retrofits? Is your strategy shifting towards regions like London, the North East, or West Midlands? What data tools, such as Glenigan’s Index, are you using to guide forecasts and decisions?
