WALES
Tender prices in Wales have been fairly consistent across the board with little change since the previous quarter. Revisions to the Building Regulations in Wales are requiring schemes to be more robust, which is increasing costs and challenging project viability.
The reduction in interest rates has been a much-needed relief for the construction market. If these continue to fall, then the pressure on margins generally should start to ease, allowing more projects to become more viable.
MARKET CONDITIONS & PIPELINE
New development across sectors and incoming investment improve outlook
Overall the market outlook for Wales is positive and the region is poised for growth with strategic investments in key projects.
We are seeing a lot of development throughout Wales across multiple sectors. There is significant investment planned for Cardiff city centre with tall buildings being the biggest trend. Public sector clients are feeling optimistic.
There has been a slight growth in project starts this quarter. While there has been some positive movement in construction output, the sector continues to face challenges in maintaining a steady flow of new contracts.
Main contractors are still bidding for work in Wales but are being more selective, with some flagging their interest in new-build schemes rather than refurbishments. The market also needs several additional main contractors to replace those that have been lost.
Planning is slow due to different constraints, like sustainable drainage approval, for example. Most clients are expecting projects to proceed but are aware of the planning challenges currently at large.
Material costs have continued to reduce but MEP costs are generally higher. Labour is more challenging to obtain. Large construction projects which need heavy resourcing, such as the Fairwater Campus in Cardiff, continue to increase labour costs.
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: Wales
▲ 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
- Our tender price forecast for Wales over the next 12 months is predicting a rise of approximately 3.5%. This increase reflects the ongoing demand for construction services and the impact of inflation on materials and labour costs.
- The forecast for the region over the next two to three years is for a steady increase, typically around 3.5% per annum.
Tender price change: Wales
▉ RLB Wales
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors (High) ▉ Competitors (Low)
INPUT COSTS
- Material costs are continuing to reduce, easing pressures on pricing works in the market and improving the programme issues previously encountered.
- The skills shortage, a nationwide issue, has resulted in increased labour costs and limited availability of resource for the industry in Wales.
SECTOR FOCUS
Data Centres
There is continued investment in new data centres in Cardiff from both developers and hyperscale companies.
Infrastructure
Crossrail continues to progress towards the first delivery phase with proposals awaiting sign-off from the Welsh Transport Minister prior to public consultation. Phase 1A will connect Cardiff Central with the Cardiff Bay area through a tram line and associated highways and public realm infrastructure upgrades. Phase 1A, due to be delivered by mid-2026, is backed by £50m from the Levelling Up Fund, matched by £50m from the Welsh government. To date no funding has been committed to Phase 1B.
Residential
Residential demand in Wales is still high, with several housing associations committed to contributing towards the Welsh Government’s target of providing 20,000 new low-carbon homes for social rent by 2026.
Retail
Rather than invest in new developments, retail clients are acquiring and utilising existing buildings such as shopping malls to redevelop into smaller, more localised stores.
