The value of office starts is set to surge but the amount of new social housing will plummet in 2016, according to construction analyst Glenigan
The forecast produced by the industry expert predicts that the value of overall starts will increase by 6 per cent during the year as the sector gains momentum after uncertainty surrounding the general election.
The report found that offices are set to be the biggest beneficiary of growing confidence, with the sector expected to grow by 49 per cent over the coming 12 months.
The report said: ‘Demand for more quality office space has been growing in the UK’s “core” cities over the last 18 months.
‘This rising demand for office accommodation and a lack of development activity has tightened the supply of available office space in major UK office markets, and investors and developers are now racing to respond to the changing market conditions.’
However, Glenigan has revised its estimation of 2015 office growth down to 4 per cent, due to uncertainty surrounding the election result.
Changes to government policy, including a 1 per cent cut to council and housing association rents each year for the next three years, are set to lead to a fall in the value of social housing starts of 17 per cent next year, the study concluded.
It said: ‘Social housing providers are now expected to rely upon private funding to meet a greater proportion of their projects’ development costs.
‘The reduction in government capital funding is a constraint on sector activity.’
The value of private housing starts is expected to rise by 11 per cent in the coming year, up from 3 per cent during 2015.
Small falls are also expected in the industrial and education sectors, although amenity buildings are expected to rise by 10 per cent, according to the report.
After registering declines in starts during 2015, Wales, Scotland, South West England and London are expected to bounce back strongly in 2016, with the increase in office activity set to boost growth in London and the West Midlands particularly.
However, Glenigan said that the continuing weakness of the retail sector and a reduction in hotel and leisure activity will limit growth in the North West, Yorkshire and Humber and South East England.
2016.01.04 Glenigan 2016 Forecast by region