Yorkshire & Humber Construction Market poised for growth, driven by private housing boom

The latest Construction Market Intelligence (CMI Q1 2025) report from Yorkshire & Humber-based construction and property management consultant, Rider Levett Bucknall (RLB UK) forecasts a positive outlook for the region’s construction sector, with private housing emerging as the fastest-growing sector.

Key Regional Developments

Regional market sentiment remains generally optimistic, with significant development activity across the region’s larger cities, including Leeds, Sheffield, Bradford and York.

Leeds remains a focal point for development, particularly in high-rise residential and commercial units. The residential market in Sheffield is still very active. In Bradford, City Village will see more than 1,000 homes built on three locations in the city centre. York Central is one of the UK’s largest city centre regeneration schemes and a mix of commercial and residential units will be developed over the coming years.

Outside of the cities, there remains a push to deliver residential units to meet housing targets, and additional sites and development zones are being prioritised by local authorities to stimulate growth in employment in the industry and logistics and manufacturing sectors.

Local authorities are under pressure to build more social and affordable housing and therefore this subsector should see increased growth as the government has targeted the construction of 90,000 social units per year.

Residential developers, however, are nervous about proceeding with schemes as delays in planning and approvals, coupled with high interest rates, are creating a risk to project delivery and viability.

Tender Prices & Index Costs

RLB tender prices in Yorkshire & Humber are expected to rise by 3.5% over the next 12 months, with annual increases of 3.5% to 3.75% forecast beyond 2026.

• MEP remains heated, as are some of the more traditional trades such as bricklaying and façade specialists.
• Hyperinflation is stabilising, but insulation costs and imported materials remain costly due to global supply chain challenges.
• Skilled labour shortages continue to pose challenges for the industry and statutory pay increases will compound the issues.

Sector Insights

Education

In higher education, there are significant challenges locally with institutions facing reduced revenues, falling international student numbers, and staff and energy cost increases. Most Capex spend relates to refurbishment or maintenance projects due to lack of long-term budget security.

The schools’ sector is continuing to develop with the Department for Education’s push for academisation. The change in government created some uncertainty but investment has been reignited, particularly around provision for pupils with special educational needs and disabilities (SEND).

Energy

On-site construction activity has commenced on Yorkshire GREEN, an initiative by National Grid to upgrade and reinforce the high-voltage electricity network to improve the transfer of clean energy across the country. The region has seen several permissions being sought for rural solar farms and battery storage facilities, particularly in East Yorkshire which benefits from larger expanses of flat land.

Healthcare

With 33 NHS providers within the region, there remains good opportunities in both new-build projects and refurbishments of the ageing estate. But delays to plans such as ‘Building the Leeds Way’, a new hospital programme, will mean a refocus on the short to medium-term plans of Trusts to maintain and develop their estates.

Logistics & Manufacturing

The vacancy rate in Yorkshire stands at 9.63% (compared to the North East’s 2.40%) due to the addition of new speculatively developed space and second-hand space. However, 12% of this vacant warehouse space is under offer and expected to exchange in Q1 2025. The demand for logistics and industrial property fell slightly in Q3 2024, but overall demand for 2024 was still 15% ahead of 2023.

Public & Civic

The outlook is reasonably optimistic outlook with the continued push for investment in regeneration, infrastructure and placemaking, and rationalisation of existing estates and improvements to historical assets. Access to external funding, such as the Heritage Lottery Fund, and the drive of the new combined local authorities, which are starting to find their feet, may mean that aspirations could become reality.

Residential

Some sizable schemes in Leeds and Sheffield are planned to start on site in 2025. Large developments and high rise build-to-rent schemes, however, continue to face challenges with Building Safety Act approvals. Private housing developers are still struggling with viability, compounded by high interest rates, changes to stamp duty bands and obligations to provide affordable housing targets.

Sam Wightman, RLB Yorkshire & Humber Associate Cost Manager comments, “Yorkshire & Humber continues to attract strong investment from private developers, while the public sector also presents opportunities. The residential market remains resilient as clients continue to drive developments, particularly with retrofit and affordable housing which may be a consequence of government targets. Healthcare has been a key sector for the region over the past decade, but with public funding constraints, we anticipate major schemes in the pipeline being put on hold.

The Building Safety Act and regulatory approvals remain significant barriers, slowing progress and hindering developer confidence. We anticipate that tender prices will increase with the continued skills shortage, the increase in National Insurance, and enhanced regulations to meet net zero. Despite these challenges, the long-term outlook remains positive.”

 

For RLB’s full Construction Market Intelligence Q1 report, please click here.