Commercial sectors lead strong finish to 2013

Strong growth in the retail, office and industrial sectors have helped to drive construction activity during the three months to December 2013, according to new Glenigan figures.

The Glenigan Index, which covers the value of projects starting on site from October to December 2013, is up 15% compared with the same period in 2012 as commercial construction activity continues to accelerate.

The value of non-residential project starts has risen by 21%, with gains in commercially funded and education projects. This marks a second consecutive quarter of growth in non-residential construction starts, for the first time since the first half of 2010.

Retail starts during the three months to December were double the level during the final quarter of 2012, demonstrating the impact of improving consumer confidence during 2013.

Education project starts have also seen strong growth during 2013 and during the latest three months were 35% higher than the final quarter of 2012, with starts for the year as a whole up by 19%. However this followed a severe slump during 2012 and starts are still 14% below their value in 2011.

The monthly Glenigan Index is based on extensive research of every construction project starting in the UK over the previous three-month period and provides an indicator of developing activity in the industry.

Commenting on the figures, Allan Wilén, Economics Director at Glenigan, said: “Our expectations for construction activity are positive, in line with the brightening economic outlook. However recent consumer data has underlined the importance of business investment to sustaining a recovery that has been based so far on consumer spending.”

Civil engineering was one of the fastest growing sectors in 2013 in terms of underlying project starts, with the sector enjoying double digit growth since August. Starts were 41% higher during the final quarter of 2013 than a year ago due to equally strong growth in the value of both infrastructure and utilities projects over the period. This is expected to remain buoyant during 2014, with further growth in renewable energy project starts following December’s announcement of renewable energy ‘strike’ prices.

Office construction activity has also continued to strengthen, up by 20% on a year ago, while industrial construction has risen by 15%.

Allan said: “Business sentiment remains high and firm occupier and investment demand for new industrial and logistics, office and prime retail space will drive further rises in new starts during 2014.”

In contrast, the health and community & amenity sectors, squeezed by scarce government funding, continued on a long term trend of decline during the final quarter of 2013. Health project starts were 9% lower than a year ago, while community & amenity starts were down 18%.

While the value of social housing project starts was 23% higher year on year, private housing starts fell against a strong performance in 2012. Developers are building out existing sites at an increased rate; however recent figures suggest that the degree at which new projects are starting has not increased dramatically.

Glenigan research during the final quarter of this year showed a broader spread in growth across the UK, albeit from a low base in some areas.  Indeed, the value of project starts was higher than a year ago in every part of the UK except the east of England. Project starts in Northern Ireland increased throughout 2013 and during the final quarter were over double the level of a year ago. Recent months have marked a turnaround in Welsh project starts, with the value of starts during the last three months 29% above a year ago and the outlook for 2014 is for continued growth.