News
Glenigan: Large office developments postponed, as value of shelved projects drops overall
20/07/2010
The number of projects being put on hold during 2010 has fallen consistently since last summer, due in part to fewer projects being planned and subsequently starting on site during 2009.
With less credit available, and businesses reigning in spending in the face of reduced revenues during the recession, only the cream of planned projects made it through to construction last year. This meant that of the projects to reach the start on site stage, there were fewer that were likely to be shelved. Additionally, returning confidence in the private sector has also helped reduce the number of postponements and cancellations over the first half of 2010 - particularly in the residential sectors.
The number of projects that went on hold was down 64% over the three months to July, compared to the same period last year. The underlying value of projects (i.e. <£100m) that were placed on hold fell quicker, by 71%, during the second quarter of the year compared to a year ago.
30% of all projects put on hold during the month of July were offices, which was significantly larger proportion than the recent past: over the last 12 months, office projects only accounted for 13% of postponements. There were three large projects in particular that were to blame for this spike. Two office buildings in London, worth a combined £160m, and a £90m development in Leeds were shelved last month. Because of this, London suffered the biggest loss of value due to postponements during the month of July than any other region.
In contrast, education experienced the biggest percentage drop in projects being put on hold over the three months. However, this picture is misleadingly optimistic, as many projects have now been cancelled, having been on hold, due to the termination of the Building Schools for the Future (BSF) programme by the coalition government. Indeed, like many other sectors, education has already seen an increase in the value of cancellations. Even before the full impact of the BSF closure had has been calculated, education accounted for 37% of all cancellations in July.
The good news is that there has been a significant rise in the value of projects which, after being put on hold, have then been restarted. Across the country, restarts rose by over a third last quarter compared to the previous three months. This was supported in particular by the office and private housing sectors, which both saw substantial increases. The robust flow of restarted private housing schemes, which accounted for 37% of project restarts last quarter, is good news for a sector which is still recovering following last years retrenchment.
This article has been reproduced from the Glenigan Subscriber newsletter, made freely available to CIMCIG members, who also get a 10% discount on Glenigan services. See the rest of the newsletter here - http://www.glenigan.com/media/weekly_newsletter/20th_july_2010.aspx
