SOUTH WEST
We are seeing demand across a range of sectors, supporting confidence in the region’s construction market over the medium to long term. In particular, RLB has identified new opportunities for growth in the infrastructure sector, but these will rely greatly on effective collaboration between industry and government.
The historically slow planning approval process has been a hinderance to development in the South West and has magnified the region’s housing shortage. The government’s reforms to the planning system are much needed and it is anticipated this will accelerate construction and boost employment in the region.
MARKET CONDITIONS & PIPELINE
Major project starts and strong pipelines increasing market confidence
The construction market in the South West is feeling relatively positive. Investors are being attracted by the region’s potential for growth, public sector clients are feeling optimistic and there are a high number of bidding opportunities.
The general mood is being boosted by the major developments taking place Bristol such as the Northern and Southern Gateway projects and Brabazon, which will transform the former Filton Airfield into a thriving new neighbourhood for the city.
There has been a slight growth in project starts this quarter. Pipelines look strong with several large projects that have been in planning for several months now being approved and getting underway. Main contractors are reporting a slight increase in anticipated projects going to tender in the next year, compared with the previous 12 months.
The planning process, however, is still very slow with projects being held up by low resource levels within local authorities. Generally, clients are aware of the planning issues and remain positive about their projects making progress.
Large construction projects which need heavy resourcing, such as Hinkley Point C, continue to increase costs. Other schemes such as Gravity in Bridgwater are also beginning to impact the market by soaking up labour.
Tendering is becoming more competitive and supply chains confirm that insolvencies remain a high risk, suggesting there are regional hotspots where insolvencies are impacting local supply chains.
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: South West
▲ 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
- As materials cost inflation remains in negative territory, there have been fewer reports of impacts on tender price levels. Our tender price forecast for the South over the next 12 months is predicting a rise of approximately 3%.
- The forecast for the region over the following two to three years is for a steady increase, between 3% and 3.75%. The level of government spending on projects going forward will likely affect tendering contractors’ view of the market and their pricing.
Tender price change: South West
▉ RLB South West
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors (High) ▉ Competitors (Low)
INPUT COSTS
- Mechanical and electrical, infrastructure and equipment remain hot areas for pricing due to wage increases of specialist labour and imported plant inflation.
- Insulation, wood and curtain walling are among the construction materials seeing increases, but the market overall is reporting three consecutive quarters of price drops for materials. Wage inflation is minimising this impact as skills shortages continue to increase labour costs.
SECTOR FOCUS
Commercial
The commercial sector remains a tough market in the South West with supply currently matching demand. Rates across town centres, however, are peaking above average levels.
Energy
Energy generation appears to be an expanding market in the region. This follows the announcement by the government that it will site small modular reactors at local decommissioned power stations.
Residential
There is still high demand across the South West, with house prices rising on a monthly basis despite current mortgage rates. There are major plans underway for the regeneration of Bristol, such as the Western Harbour scheme which is currently in planning for 2,500 new homes.
Sport
Plans are currently progressing at Bristol Sport’s Ashton Gate Sporting Quarter for a new urban village which will provide 500 homes, a 4,000-seater basketball arena, a hotel, and a sports and convention centre. There are also plans underway to convert an airport hangar at Filton into a 19,000-seater entertainment venue.
BRISTOL, UK
Flagship PBSA development
RLB is supporting Cubex, a leading regional real estate developer, with cost management services on a new 22-storey purpose-built student accommodation development in the centre of Bristol.
The scheme will provide up to 530 student bedrooms across a mixture of cluster and single units. Situated adjacent to the River Avon, it will help to regenerate the local area and form part of the city’s long-term flood defence plan.
The development, which will connect to Bristol’s heat distribution network, is targeting a BREEAM ‘Excellent’ rating for its sustainability performance. It will be one of the first buildings in the South West to undertake the Building Safety Act’s Gateway 2 approval process.
