Mix of private and public sector investment keeping Yorkshire & Humber market strong says latest market intelligence from RLB

Leading construction and property management consultants, Rider Levett Bucknall (RLB UK) claim that the market in Yorkshire & Humber continues to be strong thanks to a steady level of activity and new starts across a mix of public and private sector projects with clients planning new developments as well as rationalising existing assets, according to its latest Construction Market Intelligence report Q2 2024.

Outlook is for price inflation to return to historical norms

The local consultants who have offices in New Station Street, Leeds and in Fountain Precinct in Sheffield estimate that over the next 12 months and beyond, tender prices in the region are forecast to increase in line with inflationary levels typically seen in the market prior to Brexit, the pandemic, and the war in Ukraine.

In the past quarter commodity and materials price movements in the region have mirrored national trends for the construction industry and there have been significant rises in preliminary costs – increasing from 15% to 20% on some developments.

Leeds remains the region’s hub for private developer investment. Sheffield, which in previous years has experienced most growth in public sector, healthcare, and university construction projects, is now seeing more private investment coming into the city as market conditions become more viable.

Planning is taking longer than normal due to challenges in resourcing, discharging conditions and Section 278 agreements for public highways works. The Building Safety Act and changes to building regulations are causing challenges for clients around viability and is impacting on the design and construction of higher-risk buildings.

Sector focus for Yorkshire & Humber

Commercial 

The commercial market in Leeds continues to perform strongly with office space uptake increasing and a new headline rental of £37 per sq ft, a rise of 3%. Average Grade A office rentals increased in the year and this upward trend is expected to continue.

Education 

All colleges and universities in the region remain active in rationalising their estates and continue to focus on decarbonisation. The value of projects has reduced but there is more activity aimed at improving the student experience on campus.

Logistics & Manufacturing 

Uptake in space continues at a steady rate across the Yorkshire & Humber region, specifically on the M1 and A1 transport corridors.

Public & Civic 

Local Authorities across the region are keen to decarbonise and rationalise their estate to meet new demands for hybrid working.

Residential 

Private residential development remains a very robust segment of the market in Leeds and York. In the smaller towns across the region, local and regional planning authorities are still seeking to deliver affordable schemes as well as improve their current assets. Projects have been struggling with viability over the past year but there is optimism that a cut in interest rates will unlock new development.

Lewis Hunt, Senior Associate, RLB Yorkshire & Humber comments, “The construction and property market in Yorkshire & Humber is experiencing steady growth, sustained by a mix of residential and commercial projects. Increasing demand for affordable homes is driving new housing developments.  Leeds and Sheffield are undergoing significant redevelopment, with high-quality office and commercial projects attracting growing private investment. However, challenges persist, including rising material costs and a shortage of skilled labour. Despite this, the market outlook remains positive.”

For the full RLB’s full Construction Market Intelligence Q2 2024, please click here.