The news on the economic front recently has seemed to have been mostly – at best – in the ‘it could be worse’ category. Threats to energy prices as a result of the Middle East hostilities have poured a further potential dampener on those ‘animal spirits’ that are so vital to giving funders and developers the confidence to proceed with investments.
But those spirits are still alive and not all is doom and gloom. Last month we saw silver linings among the current clouds, with reports that conditions were right for a surge in office construction in London, for example. One forecast was that there will be a shortfall of some 11 million sq ft of space in London alone over the next five years.
Developers are obviously aware of that, and as we read in News this month, the City of London Corporation has announced that a record number of planning approvals were granted in 2025. Some half a million square metres of office space was granted planning permission with half of this already under construction, so developers seem ready to move as soon as permissions are granted, and there is a lot more to come down that pipeline.
There are 30 major commercial schemes currently under construction in the City and demand for high-quality workspace continues to outstrip supply. New development activity is said to reflect both long term confidence in London’s role as a global financial and professional services centre, and growing demand for sustainable, Grade A office space from international occupiers. High quality, amenity rich office space is in high demand, with vacancy levels continuing to fall, and prime supply exceptionally tight. Tenants are hungry for new space, and leasing activity last year reached its strongest annual performance since 2019.
The encouraging thing about all this is that almost all – if not in fact all – of these buildings will be steel framed. The tight restrictions on space in locations like the City make it extremely unlikely that any other material would be economic or practical. The relatively low self weight of steel often means that extra floors can be provided within the same height of building, and lower weight also means extra floors can be added during future redevelopments using the original foundations. These factors can transform the prospects of projects going ahead at all.
Gardiner & Theobald’s latest Tender Price Inflation Report in February was another encouraging indicator, finding that tender price inflation expectations were edging higher, but seeing early signs that schemes recently delayed by any of a number of reasons for giving funders and developers pause for thought might now be being progressed. G&T said current activity was being supported by legacy workloads, but there is potential for a ‘more meaningful release of deferred projects’ later in 2026.
Other suggestions of improving conditions came from the January UK Construction PMI, which rose sharply to 46.4, marking the slowest reduction in activity for seven months and the strongest reading since mid-2025. New orders remained in decline, but the pace of contraction was found to have eased, particularly in commercial work – a source of strong demand for constructional steelwork.
Overall, the evidence points to a market that remains cautious, but one where the depth of the downturn is moderating with improving sentiment and enquiry levels. So the demand is there and the funding is there; all waiting for a removal of uncertainties.
Animal spirits to overcome uncertainties?
The news on the economic front recently has seemed to have been mostly – at best – in the ‘it could be worse’ category. Threats to energy prices as a result of the Middle East hostilities have poured a further potential dampener on those ‘animal spirits’ that are so vital to giving funders and developers the confidence to proceed with investments.
But those spirits are still alive and not all is doom and gloom. Last month we saw silver linings among the current clouds, with reports that conditions were right for a surge in office construction in London, for example. One forecast was that there will be a shortfall of some 11 million sq ft of space in London alone over the next five years.
Developers are obviously aware of that, and as we read in News this month, the City of London Corporation has announced that a record number of planning approvals were granted in 2025. Some half a million square metres of office space was granted planning permission with half of this already under construction, so developers seem ready to move as soon as permissions are granted, and there is a lot more to come down that pipeline.
There are 30 major commercial schemes currently under construction in the City and demand for high-quality workspace continues to outstrip supply. New development activity is said to reflect both long term confidence in London’s role as a global financial and professional services centre, and growing demand for sustainable, Grade A office space from international occupiers. High quality, amenity rich office space is in high demand, with vacancy levels continuing to fall, and prime supply exceptionally tight. Tenants are hungry for new space, and leasing activity last year reached its strongest annual performance since 2019.
The encouraging thing about all this is that almost all – if not in fact all – of these buildings will be steel framed. The tight restrictions on space in locations like the City make it extremely unlikely that any other material would be economic or practical. The relatively low self weight of steel often means that extra floors can be provided within the same height of building, and lower weight also means extra floors can be added during future redevelopments using the original foundations. These factors can transform the prospects of projects going ahead at all.
Gardiner & Theobald’s latest Tender Price Inflation Report in February was another encouraging indicator, finding that tender price inflation expectations were edging higher, but seeing early signs that schemes recently delayed by any of a number of reasons for giving funders and developers pause for thought might now be being progressed. G&T said current activity was being supported by legacy workloads, but there is potential for a ‘more meaningful release of deferred projects’ later in 2026.
Other suggestions of improving conditions came from the January UK Construction PMI, which rose sharply to 46.4, marking the slowest reduction in activity for seven months and the strongest reading since mid-2025. New orders remained in decline, but the pace of contraction was found to have eased, particularly in commercial work – a source of strong demand for constructional steelwork.
Overall, the evidence points to a market that remains cautious, but one where the depth of the downturn is moderating with improving sentiment and enquiry levels. So the demand is there and the funding is there; all waiting for a removal of uncertainties.