Peter Chesters, Group Marketing Manager at Barbour ABI reflects on 2023 and offers his predictions for the year ahead.
Commercial property developers have faced exceptional challenges over the past few years. From unprecedented changes in what occupiers need spaces to deliver, fragile consumer confidence and a rapidly shifting policy environment, to financial pressures from high borrowing costs and rapid construction cost inflation, overcoming the viability hurdle has been quite a challenge, explained Peter.
Peter said: “At Barbour ABI, our white papers, snap analysis, and reports are to help transform a company’s strategic planning and make data-driven decisions with reliable, external construction industry data. The data I have used in this article spans from January to October 2023. “We tracked a 14% contraction in the overall value of contracts awarded, with commercial and retail awards down 12% and hotels, leisure, and sport suffering a sharper 30% contraction. This paints a subdued picture for output in 2024 and further declines are likely in the first half of this year. On a much brighter note, our planning approvals data offers some optimism as 2024 gets underway. Approvals across all sectors dipped by just 1% compared with 2022 suggesting that the decline in activity may be close to its nadir. Especially encouraging is the resurgence in the hotel, leisure and sports sectors after 2023’s weak performance. Project approvals in this sector jumped 17% while commercial and retail approvals broadly remained on par with 2022 at the national level.
“Regionally winners and losers are beginning to emerge as appetite for commercial projects starts to return. Eastern regions were the first to see commercial demand strengthen. Awards for commercial and retail contracts recorded modest growth in London and the East of England, while activity in the East Midlands steamed ahead. Approvals data suggests this trend is set to continue, posting growth of 15% and 25% in London and the East of England respectively in the first ten months of the year and Yorkshire and the Humber is poised to join its easterly neighbours in the commercial revival. Awards and approvals data for hotels, leisure and sports projects are prone to significant swings as large projects with long delivery programmes hit the numbers. The North East, North West and Wales currently top the growth league table in this sector. This is better news on the approvals front which is encouraging but developer decisions to progress schemes will take wider economic, demand and financial factors into consideration.
“2023 ended with an economic whimper and geopolitical tensions were elevated, but there are a few reasons to be positive. Consumer price inflation has moderated, business and consumer confidence has improved and the consensus view among independent forecasters provided hope that the base rate has peaked. Furthermore, behavioural changes triggered by the pandemic to how we work, shop and play have largely normalised, strengthening our understanding of current market requirements.
“We’re not out of the woods but 2024 is definitely starting on a brighter note than 2023”.
Continue reading to see what 2024 might have in store for commercial development as well as insights into what 2024 will hold for the sector from two industry figureheads.