Crane survey highlights weak activity levels
The latest Drivers Jonas Deloitte UK Cities Crane Survey for 2012 shows that activity levels remain low across all UK property sectors. The survey, which monitors development levels of property in Manchester, Leeds, Birmingham, Glasgow and Edinburgh, has identified just 25 new construction starts across the five cities, which is 36% less than in 2011.
Development activity for office space in particular remains subdued, with just over 1.1m sq ft of offices currently under construction across the cities, down 3% from 2011 and a whopping 74% below the peak recorded in 2007. Drivers Jonas Deloitte notes that office-based employment growth has contracted in recent years, which has led to low take-up volumes of office property in 2011 and 2012.
Anthony Duggan, head of research at Drivers Jonas Deloitte, says pre-leasing activity is likely to be the key driver of any new office space built in the short term. However, he notes that the falling levels of available office space of Grade A quality – as a result of low construction levels in recent years – could provide some upward pressure on prime rents, and in turn lead some developers to begin to consider speculative schemes over the next 18 to 24 months.
The survey also notes weak residential-sector development but points out that activity in the education sector – particularly higher education – has seen steady growth, also including purpose-built student housing schemes.
Overall, Drivers Jonas Deloitte does not expect to see the low level of development activity in the UK’s regional centres reversed any time soon. “Construction is a key indicator of the health of the economy; it is therefore not surprising that our latest Crane Survey has returned such muted results. Funding for development remains challenging, and with low occupier demand across most sectors the results reflect the challenges facing the construction sector,” Mr. Duggan noted.
