While offices, housing and student accommodation are all taking root outside London, the infrastructure that will make them blossom is lacking, according to the latest Deloitte Crane Survey.
Belfast, Birmingham, Leeds and Manchester are part of Deloitte Real Estate’s latest crane survey series which monitors construction activity across a range of sectors including offices, residential, hotels, retail, education and student housing.
Simon Bedford, partner and regional head at Deloitte Real Estate, said: “Regional cities continue to show huge resilience in the face of recent economic uncertainties in delivering record volumes of city centre living, offices and education. Investment and job creation is trending in all the crane surveys as developers respond with high levels of new office space – 5.6 million over the last three years, most of which was already pre-let or quick to let on completion.”
Pauline Biddle, managing partner regional markets at Deloitte, added: “The crane survey findings are further evidence of regional growth which supports the Government’s priority in spurring economic success in the regions. London is a global hub of crucial importance, however our regional engines are essential for national growth so that all parts of the country, and the people who live there, are able to achieve their full potential.
“The report also reflects the shift as businesses expand, relocate and choose to head-quarter in regional cities with local authorities working hard to deliver plans and position themselves as alternative attractive locations for global and domestic businesses.”
Exploring key cities, the crane surveys monitor construction activity in:
Belfast
Construction activity in the Northern Irish capital is strong with a total of 26 schemes under construction or completing in 2019. Twelve new projects have started in the city this survey, up from just nine new starts in 2018. Office development is up 229,000 sq ft bringing the total Grade A office space under construction to 839,500 sq ft. Belfast’s development pipeline remains resilient but investment in the city’s infrastructure is needed to support future development.
Birmingham
This West Midlands city continues to build record highs of office space delivering over 775,000 sq ft in 2019 – quarter of a million sq ft more than any other Birmingham crane survey. Office occupier demand remains strong as over half (53%) of the 1.1 million sq ft currently under construction is already let and driven by both the public and private sectors.
New starts are down this survey with only 11 major schemes breaking ground in the city centre versus 23 in 2018. Seven of the new starts are residential developments and 2020 will see the delivery of over 3,000 new homes.
Leeds
Construction activity in Leeds is down with 12 new starts versus 21 in 2018, with office development down 64%. However, the residential sector is breaking crane survey records with 2,832 units under construction and 2,218 of these homes will be delivered in the city centre for the ‘Build to Rent’ market.
An additional 2,799 student accommodation rooms are also being built, the highest in the Leeds crane survey history. The city has also broken crane survey records for new education and research facilities with 420,000 sq ft completing in 2019, and over 480,000 sq ft remaining under construction.
Manchester
This North West city’s skyline is taking shape with 27 schemes completing this survey, the second highest since 2006, and a further 47 schemes are due to complete in 2020. A total of 3,619 homes were delivered to market this survey whilst an additional 12,357 units remain under construction. The survey expects nearly 9,000 of these homes to be delivered in 2020 and this will be the highest on record since the Manchester crane survey began in 1999.
The volume of office space under construction exceeds two million sq ft for the second consecutive survey and the city has a healthy pipeline of retail and leisure development too. Hotel development is up a quarter (24%) across 11 schemes and is set to deliver a further 2,466 beds into the city.
Bedford said: “It’s been a record year for residential with the three English cities delivering more homes than at any time since 2007 and our development pipeline suggests this trend will continue. However, fewer homes have been delivered than we’ve previously anticipated driven by a lack of skilled labour, increasing costs, scarcity of development land, and developers being at capacity. This could present real challenges for future delivery.
“The crane surveys are showing changing patterns in the retail and leisure sectors. Developers have moved away from big schemes favouring smaller projects – primarily linked to residential blocks – such as units for food, beverage and convenience retail. This trend should help regional cities’ place-making agendas, delivering new and exciting neighbourhoods and more independent offers as these schemes appeal to smaller enterprises.”
Education is still a big driver of construction activity in each of the cities with nearly three million sq ft of learning facilities under construction. The four cities are also set to deliver 7,495 student bed spaces in the city centres and more is in the development pipeline as the universities continue to invest in both teaching accommodation and student housing.
Looking ahead, Bedford concluded: “Developer sentiment remains high but we’re seeing real challenges arising in the need for infrastructure investment to keep up with the pace of real estate. Cities are recognising the climate change emergency and we expect to see policy shifts as cities respond, such as reducing vehicle access to city centres. This will have a near term impact on the development and construction sector and is an important theme we will be closely monitoring.”
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