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Fears of ‘double-dip’ recession as more projects are put on hold

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Number of building projects shelved increases for second month in a row

The number of construction projects being shelved is again on the rise, prompting fears that the recession will be deeper and longer for architects than many predicted.

According to the latest data from industry tracker Glenigan, the rate of new schemes on which the client has suspended all design, planning and construction activity has increased in the past two months – scotching hopes of an early economic recovery.

In June the number of UK projects moth­balled rose to 756 – a near-28 per cent rise on the April low point, when just 591 schemes were put on hold.

Chris Brown, chief executive of developer Igloo Regeneration, said the statistics confirmed his fears of a ‘double-dip’ recession.

He said: ‘People have kept going with schemes in planning because it enhances the potential to realise cash from the site. But, once planning is secured, those schemes are put on hold.’

‘Office values are still falling [and though] yields have stabilised.. rents are still heading down. I still expect a double dip so we may see the numbers of projects on hold rise again in the future.’

The worst-affected sectors are: commercial offices, where the total of projects put on ice has increased by more than 30 per cent, from a low of 67 projects in March to 88 in June; and education, where last month 66 schemes stalled – a 50 per cent rise on the 43 in April.

James Pickard, director of London and Leeds-based practice Cartwright Pickard, said his practice ‘did not expect a significant improvement in workload for another 12 months’, while former RIBA president Jack Pringle said: ‘There’s a we’re-not-out-of-the-woods-yet feeling. People are not spending because confidence is low.’

The number of housing projects on hold has dipped, from 288 in May to 282 last month. Tim Murray, director at Moxon Architects, said: ‘While there were small but promising signs, accompanied with some speculative inquiries regarding large scale commercial sector projects in late May and early June, they appear to be staying on the backburner for now. But we experienced an increase in residential inquiries last month.’

Other comments from the industry:

Chris Potter, co-founder of practice P+HS, said: ‘It’s certainly true that, despite public promises of continuing investment, many healthcare bodies are taking time to review their investment plans to ensure that they are affordable in the years to come. Investment in buildings, either through capital or through reimbursement for leases, is being slowed until their long term financial picture becomes clearer. This slowing is affecting major schemes linked to a number of initiatives which are designed to save money in the long run, thus threatening that ability to save money by providing more efficient service delivery.
‘We have a number of schemes which have received approval in principle, but where funding is still not forthcoming.’

Julia Feix, co-founder of Feix and Merlin, said: ‘[We] have first hand experience of how depressing these figures really are as a few of our projects have been put on hold for the foreseeable future, too.
‘However, this has prompted us to re-define our audience and flex our carefully crafted network, jumping not only industry sectors but quite literally national borders. We found ourselves right in the middle of a fantastic new project designing a pop-up shop in Manhattan’s Lower East Side. Hard times just require balls of steel… they should really be available as free issue from RIBA.’

Rab Bennetts, founder of Bennetts Associates, said: ‘Housing projects, like our City Road Basin scheme in London, are showing real signs of life after having been put on hold two years ago.
‘This is partly because the Government has indicated that some pump-priming finance may be available for affordable housing but there is also a feeling among developers that it may not be long before the private residential market might pick up. The blockage is caused by the reluctance of the banks to go back into the mortgage market but this can’t go on forever and, in London at least, there is still a massive underlying demand for housing.
‘If the residential market began to move, other things would follow, such as white goods sales, which would be good news for the economy as a whole.  The commercial development market is likely to be dead for a long time yet. Added to this, the Government has given advance warning that public sector funding will be cut next year, so the construction industry is going to be in a worse condition next year than this, unless housing gets moving again.’

Mark Hobson, managinig director of Maber, said: ‘The pattern we have seen developing over the past year is that our corporate clients and commercial/residential developer clients have progressively put projects on hold. However our workload has remained reasonably stable and this is down to a Building Schools for the Future programme in Derbyshire, primary school and social housing opportunities through framework agreements with local authorities and various university projects. In the main projects funded through public finances.
‘We are experiencing some commercial and residential enquiries but they tend to be tentative and are not developing at the pace that they would have done over the past few years. Residential developers are looking at forward planning on land in preparation for the upturn. Currently we have only a handful of private residential schemes in the office where as over the past five years this has made up something in the order of 30-35 per cent of turnover.’




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