The January 2024 issue of the Glenigan Construction Review covering Q4 2023 reveals valuable insights into the sectors expected to experience the highest levels of activity within the industry for the coming year.
It shows underlying project starts (under £100 million) were up by 4% on the previous three months, driven by a marked upturn in new housing activity.
Meanwhile, the value of new work starting in the hotel and leisure, retail and community & amenity sectors all picked up markedly in the fourth quarter.
A surge in new work starting on new housing developments was behind a 19% increase in private residential starts in the fourth quarter although they have yet to return to the level seen a year earlier. Encouraged by lower mortgage rates and the prospect of more rate cuts to follow this year, most major housebuilders have been opening-up new sites.
The largest UK housebuilder, Persimmon, noted in a January trading update that it had seen a ‘strong improvement’ in private net sales rates in the fourth quarter, compared to the period a year earlier. Meanwhile, the December RICS UK residential survey showed that agents’ expectations for three- and twelve-month housing sales picked up for the second month running.
The upturn in activity may also reflect developers’ keenness to get new projects started ahead of the April 1st introduction of the next stage of The Building Safety Act involving new duties relating to fire and structural safety and potentially extra costs on new schemes.
Large-scale developments
New work on large-scale housing developments is proving a good source of new work for contractors. Starts on major housing projects (over £100 million) were worth almost £4 billion in the fourth quarter, up 23% on the previous quarter and 17% higher than a year earlier.
One major project in the sector where detailed plans have been submitted and work is due to start this summer is Galliard Homes’ £150 million scheme at The Point Milton Keynes Redevelopment involving 500 flats and commercial space (Project ID: 13276343).
Meanwhile at Renshaws Yard at Staines in Surrey (pictured), detailed plans have been granted and a contract awarded to Dandara for a £110 million development of 391 flats. Work on the Build-to-Rent scheme is due to start this spring (Project ID: 17341113).
And although new contract awards slowed towards the end of the year there are encouraging signs on the housing work pipeline for 2024; fourth quarter detailed planning approvals in the sector rose 26% on the previous three months.
Leisurely finish
Contractors in the hotel & leisure sector saw a stronger finish to 2023 which bodes well for the workload in the sector. The value of projects starting on site shot up to £506 million in the three months to December, a rise of 85% on the previous three months.
Moreover, main contract awards in the hotel & leisure sector were worth approaching £700 million, up by 25% on the previous three months, whilst underlying contract awards in the sector rose by almost half on the same basis.
One significant project in the sector where a contract has recently been awarded is the £77.5 million, ten-storey Apart Hotel with commercial space in Fieldgate Street in London’s Whitechapel. Bamfords Trust is the main contractor on the scheme and work is due to start later this year (Project ID: 21506912).
Meanwhile in West Yorkshire, detailed plans have been granted and contracts awarded on a £20 million conversion of The George Hotel located in Huddersfield’s conservation area for client Radisson Hotel Group. Work on the scheme involving over 5,000 sq m of space is due to start this spring (Project ID: 19167940).
The outlook for hotel & leisure-related projects is also looking sunnier; detailed hotel & leisure planning approvals in the fourth quarter were up 21% on the period a year ago. The upturn has been centred on underlying hotel & leisure projects (under £100 million), rather than the major schemes that capture the headlines.
The budget hotel chains – a key source of new contracts in the sector – have started the new year in a confident mood. In a new year trading update, Premier Inn reported an 11% increase in accommodation sales in the quarter to the end of November. The chief executive of Whitbread, the hotel chain’s parent company, said: “In the UK, we continued to see robust demand for our hotels driving high levels of occupancy and strong pricing.”
Meanwhile, an upturn in new construction work on supermarkets and shops was behind a 6% increase in retail starts in the fourth quarter compared to a year earlier. Half of all starts in the sector involved supermarket projects which were worth £163 million, up 29% on a year ago. Shop starts, up 59% on a year earlier, and petrol filling stations were also busier.
The value supermarket chains are maintaining busy development programmes. Lidl UK for example has recently submitted detailed plans for a £3.85 million grocery store at Bridgwater in Somerset with over 2,000 sq m of retail space and 107 car parking spaces. Work is due to start later this year and run for seven months (Project ID: 24025686).
Elsewhere, at Horwich near Bolton in Greater Manchester, Aldi Stores has submitted detailed plans for a £3.7 million supermarket involving around 1,804 sq m of retail space and where work is due to get underway this summer (Project ID: 22127508).
Community & amenity planning
New work prospects are also looking healthier in the community & amenity sector. The value of work started in the fourth quarter was almost £0.5 billion, up 28% on the same period a year earlier and boosted by a sharp upturn in new work on government buildings.
Most encouragingly was a surge in the value of detailed planning applications for community & amenity projects to £672 million, almost triple the level of the period a year previously. The go-ahead for a major prison in Glasgow (Project ID19429386) and more schemes in Wales, London and the West Midlands will create opportunities for new work in the sector.
For full analysis of Q4 performance download the January 2024 Glenigan Construction Review now.
