SCOTLAND
The outlook for the Scottish construction industry is cautious but optimistic, which reflects the market opportunities available and the broader economic picture.
On the positive side, there is ongoing demand for commercial and mixed-use developments in Edinburgh, Glasgow and Scotland’s other major cities. Infrastructure projects remain a key driver of activity, particularly in areas like transportation and renewable energy.
Labour shortages, however, are putting pressure on project timelines and costs. Lower interest rates and cheaper borrowing will boost the confidence of developers, unlocking investment that will help to stimulate long-term growth.
MARKET CONDITIONS & PIPELINE
Growing economy will improve pipeline and project delivery
Scotland’s small open economy has grown slightly more strongly in the last quarter in comparison to the rest of the UK. By contrast, the volume of construction work in Scotland is slightly down compared to the rest of the UK. We hope to see greater stability in the economy over the next 12 months which will improve project delivery, benefiting supply chains and developers alike.
Edinburgh has huge potential to grow in terms of size and population, and could, in the future, come close to overtaking Glasgow as Scotland’s biggest city. It is working to improve the supply of Cat A office space and focusing on regeneration of areas such as Granton, which is Scotland’s largest brownfield site set on a coastal green space.
Plans have also been submitted for a £2bn neighbourhood that will provide 7,000 new homes. It is Edinburgh’s biggest single homes-led development in modern times.
Sustainability and the drive towards net zero will remain a major focus for the industry, both in the construction of buildings as well as their maintenance and operation. Passivhaus designs continue to be explored.
There is optimism the new UK government will be able to speed up the planning system, which will improve the pipeline for construction 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: 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
Prices stabilising but skills shortage will continue to impact inflation
In both the short and long-term outlook, the shortage of workers and specialist skills in the Scottish construction industry will continue to impact labour costs and, in turn, tender price levels.
Tender price change
▉ RLB Scotland
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors (High) ▉ Competitors (Low)
INPUT COSTS
- The impacts of movements in commodity prices on tender price levels have been generally in line with trends experienced in the rest of the UK.
- The cost of construction materials remains high due to inflation, but market conditions are looking more settled compared to previous periods of price volatility.
SECTOR FOCUS
Commercial
The lack of flexible and sustainable office space has caused an increase in lease renewals in both Edinburgh and Glasgow. The lease extensions, however, are mostly under two years in length. Further Cat A office space in Edinburgh has become available through the Haymarket development, which is nearing completion and already now partly occupied.
Data Centres
Scotland’s climate and excellent renewable energy capability make it a good location for green data centres, and 15 possible sites have been identified across the country.
Infrastructure
Three infrastructure projects make up the current top 10 largest construction projects in Scotland: the Cerulean Winds and Inch Cape offshore wind projects, and EGL2, 2GW HVDC cable link to be built between Peterhead, Aberdeenshire, and Drax power station in North Yorkshire.
Education
New schools and community campuses continue to be developed in Scotland, with many meeting the international Passivhaus standard for energy efficiency.
Healthcare
Budget pressures have meant plans to build new hospitals, surgeries and a network of treatment centres in Scotland have been delayed or paused for up to two years. Ongoing maintenance of current building stock and estates will continue.
Logistics & Manufacturing
The proposed Lothian Gateway development, a 98-acre logistics park fronting the M8 motorway in Bathgate, will help ease the shortage of consented land for logistics.
Sport
New stadium developments in Scotland include Dundee FC’s proposed £95m stadium and event campus, currently awaiting planning permission in principle, and a new home for Aberdeen FC.
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.
