Analysis by Deloitte Real Estate found that nearly two million sq ft of office space was delivered to market across the cities of Belfast, Birmingham, Leeds and Manchester – and a further 4.3 million sq ft is currently under construction.
These four cities 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.”
The crane surveys monitor construction activity in the four cities by turn:
Construction activity is deemed 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, Deloitte says.
Continuing to build record highs of office space, delivering more than 775,000 sq ft in 2019 – quarter of a million sq ft more than any time since the Birmingham survey began in 2002. Office occupier demand remains strong as 53% of the 1.1 million sq ft currently under construction is already let and driven by both the public and private sectors. However, new starts are down this survey, with just 11 major schemes breaking ground in the city centre compared to 23 in 2018. Seven of the new starts are residential developments and 2020 will see the delivery of over 3,000 new homes.
Construction activity is down with 12 new starts versus 21 in 2018; office development is down 64%. However, the residential sector is at a new high for the city with 2,832 units under construction – 2,218 of which are for the build-to-rent market. An additional 2,799 student bedrooms are also being built. The city has also broken crane survey records for new education and research facilities with 420,000 sq ft completing in 2019, and more than 480,000 sq ft remaining under construction.
The skyline is changing, with 27 schemes completing in 2019 and a further 47 schemes due to complete in 2020. A total of 3,619 homes were delivered to market last year while an additional 12,357 units remain under construction. Deloitte 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 strong pipeline of retail and leisure development too. Hotel development is up 24% across 11 schemes and is set to deliver a further 2,466 beds into the city.
Simon 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.
Simon 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.”