SCOTLAND
With a number of buoyant sectors including the energy sector and data centres, combined with a drive for improvements in the quality and quantity of housing stock, the market is balancing short-term hesitancy with medium-term pipeline prospects.
While underlying material input costs have been easing, the industry has a skills shortage and badly needs investment in skills to replenish the workforce in the longer term. Tender price forecasts remain relatively stable for the coming few years. However, with little latent capacity in the market, any changes in output will likely result in revisions to forecasts.
MARKET CONDITIONS & PIPELINE
Market hopeful planning reforms will boost pipelines and project starts
The general sentiment in the Scottish construction industry is optimistic currently. Projects commencing on site have marginally increased since the last quarter.
The new government has brought better clarity to the construction market in Scotland. There is much hope resting on anticipated legal reforms, planning changes, and new procedures and processes. Scotland will have a new planning hub in 2025 as part of efforts to try and increase the rate at which planning permission for homes is granted.
There is a strong pipeline of construction work and projects across the country. A rise in retrofit projects along with greater innovation in construction to improve the sustainability of housing will create more opportunities.
The launch of the Construction Pipeline Forecast Tool has been widely welcomed. This tool, developed by the Scottish Futures Trust in partnership with industry and public sector bodies, provides a look forward as to the anticipated public sector spend within construction. It is giving the sector greater visibility of future projects, allowing businesses to plan and resource accordingly.
The skills gap, however, is a major issue and Scotland needs to address the need for more than 26,000 additional construction workers over the next five years.
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: Scotland
▲ 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 Scotland over the next 12 months is for a rise of approximately 3%.
- For 2026 and beyond, a steady increase is forecast, typically around 3% per annum.
Tender price change: Scotland
▉ RLB Scotland
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors (High) ▉ Competitors (Low)
INPUT COSTS
- Movements in the cost of materials have been generally in line with trends being currently experienced in the rest of the UK.
- The ongoing shortage of skilled labour in the Scottish construction industry will inevitably increase pressure on costs.
SECTOR FOCUS
Commercial
The commercial property market is being heavily influenced by the demand from organisations to provide best-in-class facilities in order attract employees back into the office. This makes quality construction and design all the more important along with stringent monitoring of projects.
Data Centres
There is a race to build new data centre infrastructure and Scotland is in pole position due to its clean energy surplus and grid connectivity.
Logistics & Manufacturing
Logistics and manufacturing remains somewhat of a stand-out sector in Scotland as rents continue to be competitive compared to other areas of the UK. There is still strong growth potential along the M8 and M74 corridors.
Residential
There is hope that the government will commit long-term funding to the construction of more affordable homes. If these are to meet the Scottish equivalent to the Passivhaus standard, the industry will have to work with the government and stakeholders to be balance costs and environmental design.
SPEYSIDE, UK
The Macallan Distillery
RLB’s specification consultants supported the delivery of The Macallan Distillery and Visitor Experience, a project which won the RIBA Award for Scotland 2019 and was shortlisted for the RIBA Stirling Prize in the same year.
The Macallan is one of the most famous whisky makers in the world and its distillery, with a spectacular rolling roof that reflects the local landscape, offers a range of experiences for visitors.
Data and analysis compiled by:
