Independent Welsh construction and property management consultancy, Rider Levett Bucknall (RLB UK) reports a positive short and long term outlook for Wales’s construction sector in its latest construction market intelligence Q3.
Planning and sustainable drainage (SuDs) approvals have slowed some schemes in recent quarters, but projects previously held in the system are now progressing, with site starts increasing.
Positive signs on approvals and project starts contributing to brighter outlook
Wales continues to show stable economic activity, reflected in the number of live construction projects across the country. Cardiff, Swansea and Newport, the three biggest cities in Wales, continue to perform well. Demand for new houses and apartments is strong, and consents are being secured at pace. However, elevated interest rates are encouraging some developers to landbank sites, affecting immediate starts, particularly on private sale and build-to-rent schemes
Investment in data centres and laboratories is building a healthy technology & life sciences pipeline, with several schemes starting on site in the last quarter.
New project starts are beginning to pick up from the previous quarter, lifting confidence. Planning remains slow due to resource constraints in local authorities, and clients are factoring in longer lead in periods before starting on site.
Tier one contractors are selective in their procurement strategies and continue to favour two-stage tendering. At subcontractor level, there is growing competition as new opportunities slow to get to site, which is easing pricing levels and relieving pressure on construction inflation in the short term.
Tender Prices and Input Costs
Regional tender prices are forecast to rise in line with general inflation over the next 12 months, steady, not the sharp increases seen in recent years. This contrasts with the UK wide trend of weaker order books driving tighter, more competitive bidding and increasing downstream delivery risk.
At a national level, input costs are under pressure, with recent indices pointing to modest downward adjustments. Regionally, workload is evenly spread across trades, although groundworks and MEP remain particularly busy and costs in these trades are continuing to increase.
Daniel Walker, Associate Cost Manager, RLB Wales comments,
“Welsh Government support is underpinning activity in the residential and education sectors. Housing associations are progressing with schemes whilst schools and colleges are also advancing major projects on their campuses. Universities continue to rationalise their estates but we’re seeing encouraging signs of capital projects returning in the higher education sector. With planning lead times still extended and tender prices projected to rise steadily early contractor engagement and clear procurement strategies will be key to securing capacity and controlling risk.”
Read RLB’s Construction Market Intelligence Q3 please click here.
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Image source: RLB