Construction activity across major UK cities rose markedly with 72 new projects beginning construction in 2021, up from 53 in 2020, according to Deloitte’s Regional Crane Survey.
The Deloitte Regional Crane Survey monitors construction activity across a range of sectors including offices, residential, hotels, retail, education and student housing, providing a barometer of developer sentiment and future supply.
The construction of new residential development was strong in Manchester and Birmingham in 2021, while hitting record levels in Leeds. Across the three cities, the construction of 19,763 new homes was underway in 2021 - the second highest on record. Meanwhile in Belfast, although there were no new homes under construction in 2021, two large mixed-use schemes that could deliver 1,200 new homes are anticipated to begin in 2022.
John Cooper, partner in real estate at Deloitte, commented: “Similar to residential growth trends in Manchester since 2014, Birmingham and Leeds have now also gained significant traction in new build to rent projects over successive survey years. This reflects favourable economic conditions and significant investment in placemaking including more outdoor amenities, the creation of new parks, and the introduction of independent and creative retail and leisure space. Through this investment, we are seeing the emergence of vibrant and popular neighbourhood communities in regional centres which will also continue to attract and retain the best talent in those locations.”
Over 2021, the survey shows 3.48 million sq ft of office space was under construction across the quartet of cities, reducing slightly from 3.61 million sq ft in 2020.
The amount of office space delivered in the four cities eased in 2021, with 1.58 million sq ft completed - down from 2.5 million sq ft in 2020. This easing in completions during 2021 was likely driven by both high volumes of development completing in 2020, and completion dates for schemes lagging slightly due to pandemic-related disruption.
There is also an emerging trend of rising refurbishment projects compared to new builds* across the four cities.
Cooper added: “ESG climate-related targets and occupier demand is set to drive a future pipeline of new building office development with exceptional ESG credentials. It also means an increased delivery of new floorspace being supported through refurbishment projects. Asset managers are looking to build resilience into existing buildings that struggle to meet regulatory requirements, due to be brought in during 2023 and 2030.
“The pandemic has brought many changes from the way we work to our retail habits. Regionally we’re seeing this reflected in schemes switching use, often to residential, to fill gaps in areas of surging demand.”
In terms of retail and leisure, across the four cities over 900,000 sq ft of space was under construction at the end of 2021, up from 795,150 sq ft over 2020.
Cooper said: “Looking at commercial opportunities outside of the office market, it is positive that the survey shows there is resilience despite the pandemic. Rather than traditional retailers, we are seeing diversification in the occupiers taking space through bars, restaurants and event spaces which could offer a more experiential high street in an era of reinvention. The retail offering echoes the rising trend of ‘hyper local shopping’ from our recent future of retail report, which bodes well for growth in regional centres.”
Hotel development remains at low levels compared to before the pandemic. There were 947 hotel rooms delivered across the four cities in 2021, with a further 2,870 under construction. This compares to 1,008 rooms delivered in 2020. However there are a number of new hotels expected to open across the four cities in 2022, coinciding with a reported recovery in international tourism markets during the year.
The cities have delivered 2,550 student bed spaces, with a further 4,287 under construction. This is a 23% increase in student housing under construction compared to 2020. Both Manchester and Leeds observed a record high in educational floorspace completed in 2021 (938,876 sq ft and 465,958 sq ft, respectively).
Daniel Barlow, managing partner for regional markets at Deloitte, said: “It’s encouraging to see overall construction activity remaining resilient across regional cities, despite a number of challenges. Regional cities are gearing up for a good pipeline of development for 2022. There is expected to be an uplift in construction across all sectors, as the levelling up agenda progresses, with further investment in centres.”
