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Deloitte Real Estate UK Cities Crane Survey 2013

A welcome increase in regional construction activity with office, residential and student housing all on the rise

14 October 2013

An improvement in developer sentiment has led to a resurgence in construction activity across five major city centres according to the latest UK Cities Crane Survey.

Research conducted by Deloitte Real Estate records an increase of 80 per cent in the number of new schemes starting construction over the last 12 months compared to last year. 45 new projects have been recorded across the five major regional UK cities – Birmingham, Manchester, Leeds, Edinburgh and Glasgow.

Head of research at Deloitte Real Estate, Anthony Duggan, commented on the increased levels of construction:

“Compared to the less than positive story last year, our regional research now illustrates a rise in development activity, matching the recent improvement in the UK economy. We have recorded construction increases in office space and student accommodation as demand for both continues to rise. Similarly city centre residential is beginning to appear back on the agenda with a number of schemes breaking ground.”

The commercial office market is described as on the cusp of a new development cycle with a total of 11 new office construction starts. This represents the largest number of new starts in five years, and is set to deliver 837,000 sq ft to markets that have seen little development over recent years.  As the pressure on the existing volume of available Grade A space becomes more acute due to this previous lack of construction activity, developer sentiment is improving and more schemes are now being funded.  The survey is keen to emphasise this increase in construction activity is not set to oversupply the market; the development pipeline remains some way behind than recorded at the peak of the cycle in 2009.

Developers remain keen on student housing with new construction of purpose-built accommodation quadrupling (10 new starts). This current activity will deliver 2,900 bedspaces across the study cities. The demand dynamics of this market remain strong with student numbers expected to continue to increase and investors continue to look to buy into this property asset class for stable returns and solid rental growth.

The market for city centre residential development has improved somewhat over the past year with increasing developer confidence and financial government support resulting in a two-fold increase in the number of units being built. Approximately 1,400 units are under construction across three of the city centres monitored in the survey.  However, this remains some way below the 10,135 units recorded in crane surveys at the peak of the market in 2007.

Manchester has seen a surge in development activity confirming it is the most active city in the survey. The city recorded 19 new construction starts including eight residential schemes set to deliver nearly 1,000 city centre units. Scotland’s cities are also seeing development increase with Glasgow recording four new construction starts compared to none last year, and Edinburgh nine.

Duggan concluded:
“The thrust of development activity this year sits with Manchester, Edinburgh and Glasgow, but the results are generally good news across the board with four out of five cities showing an increase in new starts compared to just one city in 2012. Residential development has seen a two fold increase with 1,400 units under construction, although this is still comparatively weak compared to the height of the market. Sentiment is certainly returning amongst home buyers and residential developers, with the help of government backed initiatives.

“This increase in construction is unlikely to be a one-off.  With an improving residential demand, supply shortages appearing in a number of the commercial property sectors and signs of increasing activity from investors in regional commercial real estate. It looks like we will see more development activity over the next 12 months.”

Ends

Note to editors
About The UK Cities Crane Survey: The annual survey uses data from July 2012 to July 2013. It measures the development activity across five major UK regional cities - Birmingham, Manchester, Leeds, Glasgow and Edinburgh. The survey monitors construction levels across the office, retail, residential, student housing, education, leisure and hotel sectors. It is seen as a good measure of developer sentiment and highlighting future commercial and residential supply.

About Deloitte Real Estate

Deloitte Real Estate redefines the concept of a full-service real estate business, offering a breadth of capability and an innovative approach unequalled in the market.

Our team combines traditional property services with financial and business advisory expertise to deliver integrated solutions on the most simple assignment to the most complex.  We apply a depth of insight drawn from our understanding of all industries and sectors to advise occupiers, lenders, investors and the public sector on every aspect of real estate in an increasingly complex world.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

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