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Industrial investment put on hold

Industrial construction has been affected by rapid changes in the global economic climate.

In recent months UK manufacturers were struggling with higher costs for raw materials and energy, now with input prices easing they face the new challenge of falling demand. This has lead to investment in new production facilities being put on hold.

A decline in consumer spending in this sector has prevented developers’ from getting involved in new speculative projects. Glenigan recorded an 8 per cent fall in the value of underlying industrial projects starting on site during 2008.

The value of underlying industrial project starts in the first quarter of 2009 fell 50 per cent on the previous year and prospects for the rest of the year don’t see much improvement.

The fall in planning approvals is also expected to lead to a sharp decline in the value of work starting on site this year.

The industrial sector has seen a strong growth in investment in warehouse facilities, specifically, demand for warehouses of 10,000m2 and above have helped boost sector growth.

Glenigan analysis also shows that the value of underlying construction starts fell by 52 per cent year on year in the first four months of 2009.

In 2008 the Midlands and Northern regions of England accounted for more than half of all industrial project starts by value. Falls in industrial construction were however, seen my most regions.

The outlook for industrial construction over the coming year is fairly bleak. Manufacturers will remain reluctant to invest when faced with weak domestic and overseas demand and surplus capacity. The uncertainty of the UK’s economic future and the limited availability of debt finance will also restrict the rise of new developments.

Glenigan also expects the fall in planning approvals to continue to depress the value of underlying construction starts in the second quarter of 2009.

Looking ahead, there is potential for industrial construction to rebound strongly in 2010. UK manufacturers should also start to benefit from improved competitiveness following sterling’s recent sharp falls against the euro and the US dollar.

Plans to remove freight bottlenecks on the rail network, combined with growing road congestion, should also encourage investment in new rail-connected distribution facilities.

However, Glenigan predicts that a heightened risk of projects being delayed or abandoned could put a stop to the sector’s anticipated recovery next year.

Project Focus: Science City

Client: Newcastle City Council

Contact: Thomas Quigley, project manager,

Value: £1bn

Details: In 2004 Newcastle was one of only six cities to be dubbed a Science City by the Government, to support their science and technology facilities. This scheme will develop a unique 19 acre Science Central mixed-use development for a science community within the city centre of Newcastle. The associated works include access roads, infrastructure, enabling, landscaping and sewer systems. The project aims to create more ‘high growth’ science based businesses through the Newcastle Innovation Machine which will focus on insight-led innovation.

Schedule: Work is expected to last for 36 months and planning applications are yet to be submitted. In recent weeks ING has been named as the developer for the project.

Latest News: In recent weeks ING has been named as the developer for the project and an official start date is yet to be released.

By Value

Starts on site and detailed plans approved £m, Oct 08-Mar 09

ValueStart On SiteDetailed Plans Approved


By Number

Starts on site and detailed plans approved £m, Oct 08-Mar 09

ValueStart On SiteDetailed Plans Approved


Top Clients for Industrial

Client NameContracts awarded in2009 year to date
  2009 year to date 
    No of ProjectsValue (£ million)  
Argos Retail Group    140  
Cemex    135  
Goodman Property Investors    227  
Airbus UK Ltd    125  
Access Self  Storage    220  
Prologis Developments Ltd    319  
BAE Systems Plc    118  
Wm Morrison Supermarkets Plc    115  
St Modwen Properties Plc    413  
Chancerygate (Langley) Ltd CO    18  


Top Contractors for Industrial

Client NameContracts awarded in2009 year to date
    No of ProjectsValue (£ million)  
Bowmer & Kirkland Ltd    341  
Mansell Plc    421  
Morgan Ashurst    218  
BAM Construct UK Ltd    118  
Winvic Ltd    316  
VolkerFitzpatrick    115  
ROK Group Plc    613  
Marshall Holdings Ltd    312  
McLaren Construction    18  
J W Muir Group    28