That is not a bad outlook given the background noise being generated by Brexit, with fears of the unknown reportedly leading to investment decisions being delayed, which has a knock on effect on construction demand. Opinion seems to be growing, however, that these investment plans are only delayed, not cancelled. And it isn’t all doom and gloom out there.
Barbour ABI, for example, report a near 10% rise in new orders in January compared to December, which was 7.6% ahead of November, with infrastructure contracts ahead by 18.5%. As the President points out in his column, infrastructure is a growth area in which demand for structural steelwork is rising.
As we report in News, the latest Deloitte Real Estate Crane Survey shows that confidence among developers is high despite the subdued economic backdrop. The survey shows either sustained or increased levels of construction activity in key regional centres like Manchester, Birmingham, Belfast and Leeds.
An earlier survey of the London market showed construction down by 13%, but this was due to completion of some very large schemes. The development pipeline remains above average, Deloitte noted, and almost half of space under construction is already pre-let. It doesn’t take much for the London market to show a significant worsening of its outlook though – projects tend to be bigger than in the regions so a single delayed project can have a big impact.
Having said that, as Deloitte point out, activity at the reported levels given the market uncertainties is testament to a strong appetite for growth. Development activity in Manchester, for example, is at record levels with 78 sites under construction compared to only one crane observed in 2011.
Another confidence boost recently was the news that Citigroup is about to invest £1.2Bn to buy the 45-storey Canary Wharf building – 25 Canada Square – that currently houses its European HQ. This is being hailed as a clear sign that one of the world’s largest banks expects London to remain a key global financial centre, a market that has shown an overwhelming preference for steel-framed solutions over many years.
Many, if not most, of these multi-storey developments in London and the regions will be steel-framed. The development market is fast-moving and tenant demand can change quickly, which brings steel’s adaptability to the fore as steel-framed buildings can be relatively easily and quickly reconfigured for changed uses. A strong market in upgrading existing building stock looks likely to be a feature of demand in coming years as tenant needs change.
Demand growth is coming from technology, media and telecom companies ahead of traditional up-market tenants from the financial sector. Steel is recognised as providing the flexible, aesthetically pleasing modern buildings that these companies demand, partly to attract staff. The uncertainty around Brexit will be a distant memory one day, hopefully soon, but property investors will have cause to remember steel with gratitude for a very long time to come.
Nick Barrett – Editor