Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Recovery won't start until 2010

The outlook remains grim for industrial projects as the downturn continues to bite

Glenigan recorded an 11 per cent fall in the value of underlying industrial projects starting on site during 2008 and prospects for 2009 remain subdued. The number of projects in the pre-construction pipeline has fallen

With newly built, speculative developments accounting for a growing proportion of available industrial space, the flow of new projects starting on site has slowed over the last 18 months. The downturn was reflected in official figures with warehouse-related output falling by a third during 2008. The decline in output follows an 18 per cent fall in new orders for warehousing projects during 2007, according to Glenigan analysis. The slide in manufacturing output accelerated during the closing months of 2008, with manufacturing volumes in the fourth quarter of 2008 down 5.1 per cent on the previous quarter.

Overall, these factors have led to dramatic falls in the value of underlying construction starts. During the three months to February 2009, the value of underlying industrial starts fell 29 per cent year-on-year.

The North West, traditionally a strong region for industrial construction, saw the value of underlying starts fall by 37 per cent last year, while project starts also fell across the Midlands, Wales and Yorkshire and Humber. Nevertheless the Midlands and the northern regions of England collectively accounted for over half of all project starts by value.

Scotland, Northern Ireland and the South East of England all bucked the general downward trend and saw a rise in projects starting on site during 2008. Industrial construction appears to be shifting away from London, with it accounting for only 5 per cent of project starts during 2008.

The outlook is mixed. Based on the projects in our database, Glenigan does not anticipate a sustained recovery in the value of underlying industrial starts until at least 2010. Moreover, given the current economic climate, there is an increased risk that projects will be delayed or abandoned, which may hamper the sector’s recovery. We expect the value of underlying construction starts to be weaker in 2009, falling by around 24 per cent.

Looking forward to 2010, Glenigan’s preliminary forecast suggests that potentially industrial construction starts should rebound strongly. On the upside, in time, UK manufacturers should begin to benefit from improved competiveness following Sterling’s recent sharp falls against the Euro and the US dollar. This should help temper the impact of the general weakening in UK and Global economic growth. In addition the current expansion of UK port facilities should act as a spur to develop accompanying distribution facilities. Similarly, planned investment to remove freight bottlenecks on the rail network, coupled with growing road congestion, will encourage investment in new rail connected distribution facilities.

Client focus: St Modwen Properties

Latest project: Development of 15 commercial units on a former power station site in Letchworth. Glancy Nicholls Architects was appointed architect last month. The project is at pre-tender stage and work is expected to start in July.

Biggest project out to tender: £750m project for commercial park and housing at former Rover works at Longbridge in Birmingham. This scheme has been given the go ahead by a government inspector in February. Work is expected to start in November and last for four years. The client is Advantage West Midlands and Halcrow is the consultant.

Recent activity:. In the industrial sector, St Modwen has awarded three contracts worth £12m so far in 2009, compared to a total of nine projects worth £35m last year.

Contractors they have awarded more than one project to: Crispin & Borst, Carey Group, John Sisk, Allenbuild, Mansell, Morgan Est, Morgan Ashurst, Rok, Norwest Holst

Vital statistics: 150 employees; £410m turnover

Contact 01727 732690

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.