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Commercial property set to drive 7.3% increase for construction starts in 2015

Figures released by construction analysts Glenigan forecast a 7.3 per cent increase in project starts for 2015, driven by a flourishing commercial sector.

The Construction Prospects for 2015 report, prepared by Glenigan’s economics team, suggests rising private sector investment and improved consumer confidence will underpin further growth in both detailed planning approvals and project starts next year.

Underlying project starts in the UK are expected to have risen by 8% this year, primarily due to an uplift in private housing and non-residential building projects.

Output volumes rose 0.8% during the third quarter of 2014 to stand 2.9% up on a year earlier, the sixth consecutive period of annual quarter on quarter growth.

Commenting on the construction outlook for next year, Allan Wilén, Economics Director at Glenigan, said: “The industry’s forward pipeline points to sustained output growth in 2015.

“Current output growth largely reflects the strengthening in project starts recorded by Glenigan during 2013 and the opening months of this year, with rising private sector and infrastructure investment lifting industry workloads.

“The pre-construction pipeline also remains firm, with strong growth in private housing approvals, in particular, offsetting weakness in public sector areas.”

He added: “Renewed consumer confidence and the accompanying revival in the general housing market have emerged as key growth drivers for both construction activity and the wider economy.

“However, Prime Minister David Cameron’s economic warnings at the G20 Summit this week underline the importance of continuing to foster private sector confidence to safeguard future economic and industry growth.”

The office sector is set to dominate industry activity in 2015, with a 23% rise in project starts anticipated following relatively steady growth of 8% this year.

Office starts are expected to pick up in major metropolitan areas as the demand for more quality office space spreads beyond London. Retail and leisure project growth is also forecast to be spread widely across the UK as consumer spending picks up across the country.

The residential market will remain an important engine for construction growth, with private housing project starts due to rise by 12% in 2015.

Activity is expected to ripple out from London and the South East as faster average earnings growth further strengthens consumer spending and confidence.

Following a strong rise in detailed planning approvals last year, industrial starts are on track to rise by around 50% during 2014, with 18% growth anticipated for next year.

In contrast, government-funded investment generally remains constrained. Social housing starts are a particular weak spot, with the value of project starts falling by 5% this year and a further 12% decline forecast for 2015.

In the wake of rising political concern that the economic recovery is regionally unbalanced, with London soaking up all the growth and job creation, Glenigan data now points to a broader recovery in construction activity across the UK.

London remains an important growth area, but the north of England and Wales have seen the fastest pace of growth in 2014.

Strong regional growth is forecast for the West Midlands in 2015, while Scotland is expected to bounce back as projects deferred in the run up to the independence referendum vote get underway.

Click here to download a copy of the Construction Prospects for 2015 report.

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