Alternatives buoy regional construction activity

New starts in alternative sectors such as student accommodation and hotels have picked up the pace across major regional cities, according to Deloitte’s latest Regional Crane Survey, defying expectations for an overall slowdown in development activity. A record number of homes were delivered in Birmingham, while Manchester completed its highest-ever number of hotel rooms in a year. Meanwhile, Leeds has a record total of student accommodation schemes in its pipeline. John Cooper, partner in real assets advisory at Deloitte, said: “While we expected some lag in delivery following a construction slowdown during peak pandemic, development activity across the quartet cities remains positive and, in some cases, record-breaking.” The survey, which tracks activity in Belfast, Birmingham, Leeds and Manchester, showed there were 74 new starts in total during 2022, broadly in line with 72 reported for the year before. Of last year’s new starts 37 were residential, with more than 6,500 new homes delivered to market in 2022. More than 21,500 homes remain under construction across the four cities, up from 19,763 recorded at the end of 2021. Students drive Belfast and Leeds growth Student accommodation was a key driver of development activity in Leeds, with seven new starts bringing the total to a record-breaking 11 schemes under construction. These schemes are set to deliver 3,294 student bedrooms, a 48% increase on 2021 figures. In addition, the survey recorded one education new start, which was a 13,562 sq ft extension of Leeds Arts University. Development activity in Belfast was also boosted by student housing projects. There were 1,850 student bedrooms under construction in Belfast, with two new starts in 2022 comprising 427 beds. Notably, the £370m Ulster University campus on York Street completed in 2022, creating more than 800,000 sq ft of education space, while Queen’s University student centre added 120,000 sq ft. Across all sectors, Belfast saw a total of 23 major schemes completed or under construction in 2022, the same as in 2021, and nine new schemes broke ground in the city during the year versus seven one year ago. The city posted two residential new starts in 2022, equating to 86 homes. Those were the first residential new starts in the city centre since 2019. Mikey Percival, assistant director at Deloitte Real Estate, said: “Broadly speaking there’s a real positive push towards delivery of new homes in all of the regional cities. “Certain regional markets are more mature when it comes to the BTR market. These are places like Manchester and Birmingham and now Leeds. Belfast is kind of slightly early on that journey, but it’s done really well in terms of increase in residential population through PBSA.” Resi slips but future bright Leeds had 22 new construction starts in 2022, in line with the prior year, and the second-highest since the crane survey began in 2006. Of those, two were hotel schemes, one more than in 2021 and above the annual average of 1.7. Works have also begun on five housing projects, adding 3,226 homes. The data showed 65% of residential developments under construction in the city centre were BTR-focused, with 2,101 homes coming forward. Less positively, the level of residential development activity in Leeds slowed from 2021, when 4,326 homes were under construction. Manchester also recorded a slight dip in housing completions for the first time in seven years, with 2,734 homes delivered to the market. However, Deloitte noted that there were no signs of a slowdown, with 17 new residential schemes breaking ground – the highest since 2018 – and a steady pipeline of 11,759 new homes for the next three years. Delivery of hotel rooms was on the rise in Manchester, hitting a record of over 1,500 – up three times from last year’s 466 figures, with an additional 691 under construction. Birmingham’s construction activity was led by residential developments, with 13 new schemes totalling 6,487 new homes under construction, up 37% year-on-year. In addition, a record-breaking 2,398 homes were delivered to market in 2022 – the highest figure recorded in the survey’s 20-year history – growing from 1,520 in 2021 and surpassing the record-breaking 2,072 homes delivered in 2020. 2022 saw one new hotel scheme in Birmingham – the refurbishment of the Central Methodist Hall in the city core, which is set to add 155 rooms to the 731 rooms across three hotels under construction. Office design (and re-design) The development of office space in Birmingham has also bounced back, up 40% from the previous survey, totalling nearly 867,000 sq ft under construction. Although this represents a 40% increase from 2021, it does not quite approach the levels seen in 2020 of more than 1m sq ft. The move comes as the office market is undergoing change as a result of Covid-19, as developers design schemes to meet the increasing demand for grade-A floorspace, sustainable buildings, and workspaces that are flexible and collaborative. As such, 2022 has witnessed the fewest office new starts in Belfast in the history of the survey, with just two new projects breaking ground and set to deliver 242,000 sq ft of workspace. This follows the largest volume of office space, totalling 571,000 sq ft, completed since the Belfast Crane Survey began in 2016. Deloitte associates the move with disruption created by the pandemic resulting in a delay in office completions. Across all four cities, new offices under construction totalled around 3.66m sq ft last year, and 1.38m sq ft delivered to market during 2022, compared with 3.5m and 1.6m respectively. Cooper said: “We have seen office schemes return to planning as developers respond to the changing demands of occupiers who seek flexibility, high-quality amenities and a workspace that meets sustainable targets.” Gloomy outlook for standalone retail Elsewhere, Deloitte noted that the retail sector is experiencing a slow recovery post-pandemic, as consumer spending habits continue to move towards online shopping. No new major retail scheme broke ground for the second consecutive year in Leeds or Birmingham, although Deloitte noted that shops are thriving as part of mixed-use developments within the cities. In Leeds, the future pipeline for large-scale mix use developments is expected to bring 53,228 sq ft of commercial floorspace. Similarly, in Birmingham, the survey found 41,204 sq ft of retail space delivered as part of mixed-use schemes, with 117,713 sq ft under construction and 262,841 sq ft in the pipeline. Manchester recorded 381,000 sq ft of leisure and retail space under construction during the past year, while Belfast saw 120,000 sq ft of city centre leisure space created through the redevelopment of the former Debenhams store at the CastleCourt shopping centre. Dan Barlow, managing partner regional markets at Deloitte UK, said that more public and private investment is needed to support levelling up. Barlow said: “Supporting UK inclusive growth is about enabling people and places to reach their potential. “Investment by both the public and private sectors will need to continue to help inclusive economic growth, as well as creating vibrant places where people want to live and do business.” To send feedback, e-mail evelina.grecenko@eg.co.uk or tweet @gre_eve