Office development in some of England’s key cities has taken a tumble, while workspace under construction in Belfast has boomed, research by Deloitte shows.
According to the consultant’s latest Regional Crane Survey for 2019, which reviews construction activity in Belfast, Birmingham, Leeds and Manchester, office development activity has dropped in both Leeds and Birmingham since 2018.
Leeds saw the biggest decrease in workspace construction activity, diving by 66% to around 289,000 sq ft in 2019 compared with 804,000 sq ft the year before.
Office space under construction in Birmingham fell by 21% in 2019 to roughly 1.1m sq ft, down from 1.4m sq ft in 2018.
Food for thought in Leeds
Simon Bedford, real estate partner and regional head at Deloitte, said that, while Birmingham’s dip in office construction was “not particularly relevant” considering that activity is high and the city has done “very well” in managing to prelet a lot of space under construction, the decrease in activity in Leeds should be noted.
“They’ve had a relatively strong office market for the last four to five years, but they’ve suffered from a lack of new starts,” he said. “Office starts are down, and I think the city will be looking at that quite carefully.”
He added: “I would have expected Leeds to be doing better than it is. There may be some issues around availability of sites. They’ve actually had quite a strong year for residential, so it’s possible that developers have been choosing to build residential rather than offices.”
A strong story for Manchester
Although office development was up by 37% year-on-year in 2018 in Manchester, the city saw activity level out in 2019, with more than 2m sq ft of workspace under construction for the second consecutive year.
Bedford said this paints “a very strong story” for the city, coupled with the fact that a lot of this office space has been prelet. Manchester also saw the highest number of office schemes (five) breaking ground last year.
Belfast is booming
While the regions in England may have seen office development activity slide, Belfast has experienced the opposite. Northern Ireland’s capital city saw workspace under construction soar by 37% to more than 839,000 sq ft in 2019, up from 610,000 sq ft in 2018.
Bedford said this is “a remarkable story” for the city, which has done very well out of making a beeline for the tech, digital and some back-office function occupiers.
“They are doing extremely well. Their figures compare favourably with most of the UK regional cities,” he said. But while office development may be booming, Belfast’s housebuilding activity is “not good”, according to Bedford, and is lagging behind its regional city peers.
The city saw the lowest volume of homes being built and the biggest decline in residential construction activity, with 27% fewer homes under construction in 2019 (132) than in 2018 (180).
“Where Belfast needs to work harder is on creating a city centre residential market,” Bedford said. “They are the only UK city which hasn’t cracked this yet.”
Mixed residential news
Meanwhile, Leeds and Birmingham’s residential development activity was on the up compared with Belfast and Manchester.
Leeds saw the biggest hike in housebuilding activity, up by 27% from 2,232 homes under construction in 2018 to 2,832 in 2019. Birmingham followed suit, with an 8.7% rise in activity from 5,065 homes under construction in 2018 to 5,506 in 2019.
Although Manchester saw a 14.6% drop in housebuilding activity, the city is building more homes compared with any of its regional peers. There were 12,357 homes under construction (compared with 14,480 in 2018), and the consultant predicts in the survey that nearly 9,000 of these will be delivered over the course of 2020 – the highest number on record since the city’s crane survey began in 1999.
Not HS2 reliant
Despite the uncertainty over the future of HS2, Bedford said he doubts that property has sat on its hands when deciding whether to pursue schemes in the regions affected by the infrastructure project.
“I think each of the three UK cities [Birmingham, Manchester and Leeds] absolutely wants it. But despite not having it, we’re delivering this development programme,” he said. “The cities will continue to thrive before HS2 arrives – that’s not to say that we don’t want a positive decision on HS2 as soon as possible, because we do. It will bring more certainty to the market and bring more confidence.”
Bedford said the latest Crane Survey shows that, despite political uncertainty – both with regard to Brexit and the fact that the Northern Ireland Assembly has only just reopened after its collapse three years ago – the UK market has remained resilient.
“There have been variations, and there are some cities that aren’t delivering as much as they were compared with last year,” he said. “But overall, there are still a lot of cranes on the skyline.”
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