Resi starts in the regions surge ahead of offices

Residential-led projects have driven a solid uptick in new starts across major regional cities, while office and hospitality builds have slowed, according to Deloitte’s latest Regional Crane Survey. The survey, which tracks activity in Belfast, Birmingham, Leeds and Manchester, shows that there were 72 new starts in total in 2021. This was up from 53 in the previous year. Of last year’s new starts, 38 were residential and entirely concentrated in Birmingham, Leeds and Manchester. Across the three cities, 19,763 new homes were under way, the second-highest number recorded since the report began. There were no new residential starts in Belfast, but Deloitte noted that work is set to begin this year on two mixed-use schemes comprising 1,200 homes. Resi leaps in Leeds Leeds saw its highest ever level of resi-related activity in 2021, with the number of homes under construction up 63% year-on-year to 4,326. Works were carried out on 18 residential developments in the city during the year. John Cooper, partner in real estate at Deloitte, said Birmingham and Leeds had gained “significant traction” in new build-to-rent projects, drawing parallels with residential growth trends seen in Manchester since 2014. “This reflects favourable economic conditions and significant investment in placemaking, including more outdoor amenities, the creation of new parks, and the introduction of independent and creative retail and leisure space,” said Cooper. Both Manchester and Leeds hit record highs in floorspace for the education sector, with 938,876 sq ft and 465,958 sq ft completed respectively during the year. For the former, this was boosted by the launch of the Manchester Engineering Campus development. In student accommodation, the number of bed spaces rose by 23% in the four cities to 2,550 year-on-year, with a further 4,287 under construction. Office construction falls Some 1.6m sq ft of office space was delivered in the cities last year, dropping from 2.5m sq ft in 2020. Deloitte said completion dates for schemes have lagged on the back of continued pandemic-related disruption. Birmingham fared the worst for office space under construction, dropping by 40.6% since last year to 616,661 sq ft. However, 751,664 sq ft was brought to market in the city during the year, reaching its second-highest level since records for Birmingham began in 2002. Workspace under construction slipped to 3.5m sq ft across Belfast, Birmingham, Leeds and Manchester in 2021, from 3.6m sq ft in the previous year. Also ticking down was the number of new-build hotels, with the industry yet to recover to pre-pandemic levels. There were 947 hotel rooms delivered in 2021, compared with 1,008 the previous year. Notably, more than 900,000 sq ft of retail and leisure space was under construction across the cities at the end of 2021, up from 795,150 sq ft in 2020. This underlined the resilience of both sectors during the pandemic, said Cooper. “Rather than traditional retailers, we are seeing diversification in the occupiers taking space through bars, restaurants and event spaces, which could offer a more experiential high street in an era of reinvention,” he added. Refurbs on the rise Researchers at Deloitte also pointed to a growing trend for refurbishments, although new builds still account for the majority of projects. Cooper said: “ESG climate-related targets and occupier demand is set to drive a future pipeline of new-build office development with exceptional ESG credentials. It also means an increased delivery of new floorspace being supported through refurbishment projects.” By region, Leeds and Birmingham posted the largest uplifts in total construction activity. Across all sectors, Leeds saw 22 new starts in 2021 – the second-highest number in the city since the report began in 2006. In Birmingham, 18 new projects broke ground last year, up from 10 in 2020. Researchers at Deloitte said Manchester broadly sustained development volumes year-on-year. While the number of new starts remained static on the previous year at 25, there was an overall reduction in its pipelines for homes, offices and hotels. Moreover, office supply in the city was constrained compared with typical years, with four schemes completing in 2021 and just 404,584 sq ft delivered to market. This was below an average of 537,475 sq ft per annum between 2014 and 2021. Belfast set for a comeback Belfast was the only city with less activity overall. Twenty-three schemes were either under construction or completed during 2021, which was flat on the previous year. Office space under construction declined by 26.7% to 663,000 sq ft, with 346,277 sq ft completed. However, Deloitte said 2022 was set to be a “record-breaking” year for offices in the city, with more than 650,000 sq ft under construction across five schemes. Additionally, work has commenced on the new Belfast transport hub, which aims to provide more than 1m sq ft of retail, leisure and transport infrastructure space in 2024. Daniel Barlow, managing partner for regional markets at Deloitte, said: “It is encouraging to see overall construction activity remaining resilient across regional cities, despite a number of challenges. “Regional cities are gearing up for a good pipeline of development for 2022. There is expected to be an uplift in construction across all sectors, as the levelling-up agenda progresses, with further investment in centres.” To send feedback, e-mail evelina.grecenko@eg.co.uk or tweet @Gre_Eve or @EGPropertyNews