Resurgent residential and infrastructure sectors are expected to kick start a rebound in project starts in the South West this year.
Glenigan’s construction research shows that the underlying value of project starts in the South West retreated by 20% last year, but in the three months to April 2019 starts were ahead 4%.
Glenigan economics director Allan Wilén says: “With the residential planning pipeline bolstered by earlier gains, we are more optimistic for growth in the South West this year.”
Housing market rebound
The main factor behind last year’s slump was big falls in three of the key building sectors. Office starts crashed by 66%, while social housing work dived 50% and private housing work dropped by 11%.
This fall was reflected in National House-Building Council (NHBC) statistics for overall housing starts in the South West, which slipped 5% last year to 14,315 units. This was their lowest level since 2013, but improvement is expected this year.
Glenigan’s construction market intelligence shows that while office and social housing work in the pipeline remains fragile, the underlying value of private housing projects securing planning permission rose 20% in 2018.
This is already feeding through into a rise in starts. NHBC data shows a 15% increase in the first quarter of this year compared to the start of 2018.
NHBC Chief Executive Steve Wood said: “Although Brexit uncertainties are impacting consumer confidence and causing some dampening of new-build and second-hand sale markets, housing remains an attractive asset class for inward investors, which does cause us to be more optimistic about Build to rent.”
Bristol is the hub of the Build-to-Rent market in the South West according to research by Savills, while Arcadis says that viability makes the region a “hot spot” for BtR.
JLL’s research shows that more than 2,000 BtR apartments will be built in Bristol alone. Rachael Sherratt, vice chair of Women in Property South West and associate at JLL in Bristol, said: “The spotlight is on Build To Rent in Bristol with funders, developers and consultants all talking about it and exploring opportunities.
Major developers building BtR schemes in Bristol, include Grainger and Cubex, which have commissioned Willmott Dixon to construct the £32 million Finzel’s Reach scheme at Hawkins & George, comprising 194 apartments.
Student accommodation projects are also coming through, such as the £91 million Streatham Campus being built by VINCI for the University of Exeter (Glenigan Project ID 16233402), while civils work is also increasing.
Kier is the top contractor in the South West, where 37% of combined orders in the year to Q1 2019 at the leading 10 contractors comprise civil engineering work. A year ago, this ratio was 26%.
Construction of two new reactors at the Hinckley Point C power station in Somerset is expected fuel a 1% rise in construction jobs in the region between 2018 and 2022 according to the Construction Industry Training Board.
With infrastructure work also set to improve significantly at an underlying level, Glenigan expects the region to recover the ground lost last year.