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Commercial activity slows to £24.1bn for Q3 2015

A dramatic slowdown in new office building drove a reduction in commercial construction activity of nearly 8 per cent in the year to Q3 2015.

There was a total of £24.1bn of commercial work in the 12 months to the end of September, according to JLL and Glenigan’s latest index, representing a 7.9 per cent drop versus the 12 months to the end of June.

The value of offices starts across the UK was down 35.1 per cent to £4bn, compared with £6.1bn in the year to June 2015.

Starts in London were also down, their overall value falling 30 per cent to £4.5bn from £6.4bn in the previous index.

However, JLL and Glenigan said the dip was largely down to “an unusually strong Q3 2014 dropping out of the cumulative figures”.

Of the £4bn in total offices starts, £2.1bn was in London, including the Scalpel and One Angel Court worth £500m and £125m respectively.

Regionally, Northern Ireland experienced the biggest gains in construction activity, up 23.8 per cent in the year to Q3 compared with the year to Q2.

Of the English regions, the East Midlands was up 19.1 per cent and was the strongest performer, followed by Yorkshire & the Humber, up 11.4 per cent.

There were also increases in the West Midlands (up 5.4 per cent) and the North-west (up 3.4 per cent).

In contrast, activity in the South-east fell by 19 per cent.

The report said this implied a “continuing… resurgence in construction activity” in major cities outside of London.

However, London and the South-east still represented around 40 per cent of all UK construction activity, despite a fall in the overall value of work for the combined region to £9.5bn.

The strongest individual sector performer was education, which recorded £6.5bn of starts over the 12 months to Q3 – a 4.9 per cent increase on £6.2bn in the year to June. Industrial also performed well, up 4.8 per cent to £3.3bn for the period.

The report said construction costs had risen steadily through Q3 2015, with main contractor order books remaining full and benefiting from a strong pipeline.

It added: “Capacity throughout key trades and supply chains continues to be one of the primary drivers behind construction cost inflation despite improvements to underlying commodity prices, notably oil.

“Tier one suppliers are remaining selective in their bidding activity with low-risk two-stage and negotiated appointments remaining favourable and key to securing contractor programme commitment and product quality.”

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