NORTH EAST
The outlook remains cautious but optimistic overall. Investment from public and private sector clients alike is underpinning confidence in the region’s construction market, bolstered by the progress of some landmark developments.
Geopolitical uncertainties and an ongoing skills shortage continue to affect the construction industry as a whole, and the North East also faces its own challenges. Residential planning approvals have decreased by around 10%, underscoring the scale of the challenge in delivering the government’s housing targets. Clients and contractors both continue to have margins squeezed by rises in National Insurance contributions and corporation tax.
MARKET CONDITIONS & PIPELINE
Public sector investment and increased project starts driving up market optimism
The market outlook for 2025 remains positive across the North East with strong growth in the housing and industrial sector expected.
The region’s construction market faces challenges like the rest of the nation, but continued public sector investment, with the promise from the government to build vast quantities of housing, along with the focus of private developers on industrial and sustainability projects, are giving cause for optimism.
The North East Combined Authority has committed funding to some key schemes, including £16m for investment zones located within NETPark in County Durham and for the Energy Central Institute in Blyth, Northumberland.
Project starts have increased within the period with up to £531m value of works commencing on site across the region. Enabling works at the £475m Crown Studios site in Sunderland have commenced and progress continues on the Pottery Lane development, which will deliver much-needed housing in the Newcastle area. Freight Island, a huge entertainment and dining destination, is set to arrive at Eldon Square in the autumn of 2025, generating an estimated £30m for the local economy.
There has been a slight decrease in main contract awards. Planning approvals in the period have decreased by around 10%, though key developments such as the next phase of works at Sunderland’s International Advanced Manufacturing Park have been approved. Tier 1 and 2 contractors remain busy with strong pipelines from some major wins on large regional projects.
RLB Market Activity Cycle
The RLB Market Activity Cycle is a representation of the development activity cycle for the construction industry.
RLB considers 10 sectors to be representative of the construction industry as a whole. Each sector is assessed as to which of three activity level zones – peak, mid or trough – best represents the current status of the sector within the cycle. This assessment is then refined by identifying whether the current status is in a growth phase or a decline phase.
The subjective current performance of sectors is identified by ascribing one of the coloured arrows (shown in the legend of the chart) to each sector. NB: In this analysis, sectors are not individually weighted.
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Market sector activity analysis: North East
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Consolidating the results of a region enables the calculation of a regional representation of percentage of sectors in each phase of the cycle at a point in time.
Market sector activity analysis: United Kingdom
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Consolidating the results of multiple regions enables the calculation of a national representation of percentage of sectors in each phase of the cycle at a point in time.
TENDER PRICES
- The tender price forecast for the North East is predicting a rise of 3.7% in the next period with a decline later in the year.
- Thereafter, an average annual increase of 3% to 4% is forecast.
Tender price change: North East
▉ RLB North East
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors (High) ▉ Competitors (Low)
INPUT COSTS
- Overall pricing levels remain stable with no major difference reported from the previous quarter.
- Mechanical and electrical costs remain high. Several cladding subcontractors went into administration in 2024 within the region which has caused significant issues.
- The rises in NI contributions and corporation tax have impacted some schemes, with main contractors looking to pass these costs onto clients where applicable in contracts through ‘changes in law’ clauses.
SECTOR FOCUS
Data Centres
The sector has been boosted by the government’s recent announcement that the North East could be the site of AI growth zones to help regenerate former industrial areas. Blackstone’s plan to build a £10bn data centre on a derelict industrial site in Blyth has been granted outline planning permission by Northumberland County Council.
Infrastructure
Work is continuing on the Northumberland Rail Line, which is bringing passenger trains back into service between Ashington and Newcastle, with the remaining stations opening in the coming months. As well as improving local connectivity, the £298m scheme is set to drive investment and create job opportunities.
Logistics & Manufacturing
Despite the low vacancy rate, there has been a steady demand for industrial and logistics space. The market is characterised by a high level of leasing activity, particularly for modern, high-quality facilities. Investment volumes have been stable, with a focus on new developments and modernising existing facilities to meet the growing demand for state-of-the-art logistics spaces.
Residential
The first phase of the Gresham regeneration project, part of the wider masterplan for Middlesbrough, has been submitted for planning. The proposed £120m development will include more than 230 build-to-rent properties and residential accommodation for more than 450 students.
DURHAM, UK
Weardale Lithium
RLB is supporting the engineering consultant and lead designer, Arup, to develop the scheme proposals for Weardale Lithium’s pilot processing plant at the 35-acre former cement works at Eastgate, County Durham.
We have supported Arup and Weardale Lithium since project inception to provide cost, risk and procurement advice and value management, developing the early order of cost estimates through to RIBA 3 level detailed cost plans to inform optioneering, and considering efficient routes to market for the procurement of the construction works and positioning Weardale Lithium for future phases.
