Region’s market holding up, says RLB
In the latest construction market intelligence report for Yorkshire and Humber, Rider Levett Bucknall said that it expects to see market improvement in mid to late 2024.
RLB reports that no significant change in Q1 2024 is expected, given current uncertainty and following the reduction of new starts in 2023.
Labour and skills shortages continue to put pressure on contractors’ ability to deliver development opportunities, which has held construction prices at typical levels despite a weakening in demand in key sectors.
However, said the firm, significant schemes are progressing through the planning system, including a new innovation hub at White Rose Park in Leeds, a 15-storey mixed-use scheme in Holbeck, and the 40-storey co-living King’s Tower in Sheffield.
Matt Summerhill, managing partner RLB Yorkshire and Humber said: “As we enter 2024, our latest research shows that the Yorkshire and Humber region is proving resilient, particularly in Leeds and Sheffield, despite numerous schemes having been significantly impacted by the interest rate rises during 2023.
“We anticipate that during mid to late 2024, we will see an improvement when an easing of interest rates is more likely, which should enhance confidence across a number of sectors.”
Tender prices and input costs
- Steady price inflation expected in 2024
- The outlook for Q2 and beyond is more positive, with a return in consumer confidence which will impact directly on multiple sectors.
- Sharper price increases anticipated in 2025 and beyond, but this is a significant assumption dependent on the outcome of the next UK general election and worldwide geopolitical events.
- Prices of manufactured products such as windows are up, highlighting the impact energy, labour and transportation costs are having generally.
- There has been a reduction in materials prices overall, with key reductions in steel and timber.
- More typical labour cost increases are expected through 2024.
- The shift towards high-quality and sustainable prime office space, particularly in Leeds, is a continuing trend as the region settles into hybrid working
- Educational institutions remain on their journey to rebalance meeting spaces to enhance the student experience and reflect hybrid working. The balance between committing funds to net zero and reducing carbon emissions versus new and refurbishment opportunities is a significant challenge
- Continued opportunities in logistics and manufacturing across the region. Developments have slowed as key logistics tenants hold investment decisions due to low consumer confidence levels. An increase in consumer confidence in the coming months should unlock multiple opportunities and promote sustainable growth.
- There are many public sector schemes in planning and development as local authorities create opportunities through the Towns Fund and Levelling up Fund. Challenges around project viability remain, as historic budgets often precede the significant levels of inflation experienced in 2023, which is slowing progress on many schemes.
The full report is available to view online.