NORTH EAST
The sentiment in the region is palpably optimistic, with big regeneration plans being developed and implemented by local authorities, some of which have been bolstered by initial funding from the new North East Combined Authority.
The future of the market will likely depend on the ongoing response to economic conditions and how challenges such as the need for affordable housing and the skills shortage in the industry are managed. We’re likely to have to wait until the Budget in October to appreciate the full impact of what a Labour government means for the North East’s construction sector.
Across the region, RLB’s specialist fire advisory and decarbonisation services are in high demand, as clients across multiple sectors continue to navigate compliance with the Building Safety Act and how to implement their net zero strategies.
Our building surveying teams are also still seeing a strong requirement for estates rationalisation advice from clients with large estates who would benefit from optimising their physical assets.
MARKET CONDITIONS & PIPELINE
Region buoyed by investment and increase in project starts
There is continued optimism in the North East construction market. The region had the strongest performance across the UK in Q2 2024, with project starts increasing 56% against Q1 2024. This was an increase of 8% on this time last year. We see this trend of new projects getting to site continuing for the rest of 2024.
The region has been buoyed by announcements of new public sector investments and is hopeful the creation of the North East Combined Authority (NECA) will provide greater political stability and unlock more investment opportunities.
The need for affordable housing remains a priority and NECA will play a part in influencing the region’s housing strategy. From 2026, it will have the power to set the strategic direction of the Affordable Homes Programme, creating a single funding pot for housing and regeneration.
New investment, while welcome, will create challenges around skills shortages. There is already a very high utilisation within the region of personnel that have the correct skill sets for large-scale infrastructure projects.
Infrastructure and residential detailed planning approvals both increased over the last period and remain the joint largest sectors in this regard. Hotel and leisure developments also performed well in terms of value of detailed planning approval.
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
Tender price inflation forecast to stabilise over next 12 months
A steady work pipeline and a return to more typical levels of material price fluctuations will lead to steadier increases in tender price inflation overall.
The ongoing skills shortage is one of the key factors impacting project delivery and price pressure currently, given the number of major developments in the region which are swallowing up a significant amount of resources.
For the next 12 months, this picture is expected to stay the same. Beyond that, global geopolitical and economic headwinds may impact on investment and create more uncertainty in demand within certain sectors.
Tender price change
▉ RLB North East
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors (High) ▉ Competitors (Low)
INPUT COSTS
- Steel prices continue to fall while other commodities remain relatively stable, which is reflected in the mixed picture we are seeing.in material prices.
- Material prices have fallen slightly overall with the biggest drops in plywood and reinforcement bar. Metal doors and windows have continued to increase in price.
- Due to the skills shortage in construction, labour prices continue to increase generally, adding further pressure to the viability of projects.
SECTOR FOCUS
Commercial
Full planning permission has been approved for the first phase of the £475m Crown Works Studios in Sunderland, which is expected to become one of the largest film-making complexes in Europe. Work on the development is due to start in November.
Energy
Across the region there is a significant amount of investment in projects including H2Teesside, one of the UK’s largest low-carbon hydrogen production facilities, SeAH Wind, the world’s largest bespoke monopile manufacturing facility for the offshore wind industry, and a 1GW battery energy storage system at Teesworks, the UK’s largest industrial zone. Several significant carbon capture projects have also been proposed but no announcements have been made yet.
Infrastructure
Infrastructure projects underpin the region’s regeneration and long-term growth with significant investment in transport and industrial infrastructure planned, driven by initiatives like the Levelling Up Fund and the formation of the North East Combined Authority (NECA). NECA signed off £100m of transport spending at the end of July, which includes funding for a business case to expand and refurbish the Tyne and Wear Metro.
Logistics and Manufacturing
Demand for industrial space, particularly for high-quality and energy-efficient units, remains robust. A focus on sustainability has driven interest in newer, more efficient properties, but the overall availability of such spaces remains limited due to a constrained development pipeline.
Public & Civic
Middlesbrough Council is applying for full funding from the National Lottery Heritage Fund to restore the Old Town Hall. The building’s redevelopment will help to regenerate a historically significant part of Middlesbrough and support its thriving digital and creative sectors.
Residential
Economic and political uncertainty have led some private sector housing developers to adopt a cautious approach, though we are still seeing ongoing activity, particularly in the build-to-rent sector where demand remains strong. A 50-acre brownfield site on the banks of the Tyne, known as Forth Yards and with the potential to bring 2,500 homes to Newcastle, has just received a £5m funding boost from NECA.
MIDDLESBROUGH, UK
Old Town Hall
As part of a multi-disciplinary team, RLB is providing cost management services to Middlesbrough Council for the renovation of the Old Town Hall, a Grade II listed building.
The project involves the demolition of a 1970s extension, which will be replaced by modern, flexible office accommodation, and the creation of new quality public realm.
The building’s redevelopment will help to regenerate a historically significant part of Middlesbrough and support its thriving digital and creative sectors by providing incubator space for start-up businesses.
The scheme is being funded by the National Lottery Heritage Fund.
