“Prohibitive costs” involved in construction projects in major UK cities led to a sharp decline in the number of new developments breaking ground in 2024, according to a new report from Deloitte.
Deloitte’s latest Regional Crane Surveys, which covers the central areas of Belfast, Birmingham, Leeds and Manchester, has revealed the number of new starts fell from 63 in 2023 to 47 last year.
The firm’s report cites construction inflation costs, influenced by global economic factors, as a major challenge for the sector.
Of the 47 new starts, 22 were in the residential sector, 11 were offices and three were hotels. There were zero new starts in retail/leisure and education.
However, Deloitte’s report added that ongoing activity remained strong, with the cities recording a total of 130 schemes under construction across a range of sectors including offices, residential, hotels, retail, education and student housing.
But after four consecutive annual increases in the number of residential homes under construction, this year’s survey saw a seven per cent decrease on previous years to 23,673 in 2024.
There was also a 17 per cent year-on-year decrease in the office sector in terms of the volume of space under construction to 2.8 million sq ft.
However the student housing sector recorded a two per cent rise in the number of bedspaces under construction to 8,664 in 2024.
Deloitte: ‘We expect a recalibration in the year ahead’
John Cooper, infrastructure and real estate partner at Deloitte, said: “Our latest regional crane surveys underlined that while levels of residential, office and student schemes under construction remain healthy, there has been a clear reduction in the number of new schemes breaking ground.
“This reflects the challenging economic and geopolitical backdrop that is impacting investment and a willingness for the construction sector to take on risk.
“We expect a recalibration in the year ahead as developers and construction companies weather the economic fluctuations and adapt to the shifting landscapes around them.
“There remains a healthy construction pipeline across the four cities, with ongoing dynamism in the residential sector, while appetite for student housing is enduring.
“The challenge for developers and investors, as well as local authorities, is to continue to facilitate schemes that will enable growth in these cities, creating liveable, well-connected and thriving environments.
“However, while costs to build and get schemes moving are prohibitive, we would not expect levels of new developments to immediately rebound.”
Manchester ‘leading the way’ despite drop off
Of the 47 new starts across the four cities, 20 were in Manchester, according to the Deloitte report.
While that figure marks a third year of decreased new starts and is at its lowest level since 2014, 27 projects were completed in 2024, a significant increase from the previous year.
Of the new starts, 11 were new residential schemes, with six in the office sector. There was one new student housing schemes and one new hotel.
Manchester saw just under 1.1 million sq ft of office space delivered to market in 2024, with 1.5 million sq ft still under construction.
In the residential sector 4,448 homes completed construction, and there are 10,788 homes under construction and set to be delivered over the next four years, according to the Deloitte report.
Zoe Davidson, infrastructure and real estate partner at Deloitte, said: “Looking at the residential sector, rental growth has continued to rise across the four cities, with Manchester leading the way in terms of the number of homes under construction.
“However, it’s important to note that measures such as the Building Safety Act, which, while essential, have added complexity and lengthened timelines for the delivery of residential projects.
“Our results show that no new build traditional offices started construction in 2024. This is despite a robust occupier demand for large-scale, modern, adaptable, and sustainable offices that can serve the needs of tomorrow’s workforce.
“With headline rents unable to keep pace with construction inflation, refurbishments are continuing to dominate construction activity in the office sector.”
Mixed picture for Birmingham
In Birmingham 3,180 homes completed in 2024, the highest amount in Deloitte’s crane survey’s history for the city (2002).
However, across all construction sectors the 11 new starts were the lowest recorded number since 2020.
This was despite the survey having an expanded boundary to align with the definition of the city centre in Birmingham City Council’s new ‘Our Future City Plan’, in 2024.
According to the Deloitte report, 36 developments remain under construction.
The report added that office and student residential sectors are “showing strong levels” of floorspace under construction.
The Deloitte survey recorded 2,242 student accommodation bedspaces under construction, the highest level recorded by the Birmingham Crane Survey.
Over 310,000 sq ft of office floorspace was delivered in 2024 and a further 814,574 sq ft is under construction.
Leeds hits 11-year low
Leeds saw 11 new schemes start in 2024, below the Leeds Crane Survey average of 14.
The figure represents a third consecutive year of declines, and the lowest since 2013.
Eight of the new schemes are residential or student housing, following “two bumper years of delivery in the sector”, the report said.
There are 24 sites currently under construction, with 19 completions recorded in 2024.
There were 1,361 homes completed in the city centre in 2024 and a further 4,185 under construction.
There are two offices and one new hotel scheme on site, while there was no new activity in the hospitality, retail and leisure, education, healthcare or transport sectors, the report added.
Office developments surge in Belfast
There were five new starts in 2024 in Belfast, two fewer than in 2023.
The Deloitte report also revealed that 144,000 sq ft of office floorspace is under construction, a 20 per cent increase on 2023.
Belfast also saw one new hotel scheme brought to market and one new hotel scheme start on-site.
The Deloitte survey reported signs of a potential new wave of hotel developments, with over 2,000 hotel rooms in the planning pipeline.
As for student housing, there was a 13 per cent rise in the number of bedspaces under construction (1,224 in 2024 vs. 1,081 in 2023), and a modest rise in the number of completions compared to the previous survey (1,081 in 2024 vs. 1,073 in 2023).