Consistently monitoring the outlook of industry is an important part of our process as trusted advisors to construction industry finance decision makers. In our most recent market observations, there is still more to be positive about when compared to 2022 and early 2023, says Matt Law, our project monitoring director.
As pointed out earlier this year and in 2022, whilst there are still external pressures from the overall economic situation resulting in increases in material prices, pressure on wages and issues with product availability, it is an improving situation. At Naismiths, we do expect that forecasting and pricing certainty will improve somewhat over the remainder of the year and into next. However, the caveat to this is that the market does need to prepare for the possibility that prices are unlikely to fall.
What is certain is that the key to any development success is having access to the best and most current information available. At Naismiths, we have historical and current data from across our extensive UK construction project monitoring portfolio from multiple sectors. By using this, we can help forecast the changes that could impact your property development project.
5 industry sector considerations for funders and developers in 2023
Budgets and inflation
It’s a new world, curb that optimism bias, budgets should be prudent, taking account of previous inflation when establishing budgets, but more positively there is less inflation risk moving forward. The Building Cost Information Service reported that tender prices rose by 0.7 per cent between Q2 and Q3 of 2023, this equates to 4.0% annual growth, down from 9.4% in the previous 12 months. Moving forward, construction costs are predicted to rise just over 3% in the year ahead to Q3 2024. Tender prices are predicted to be slightly less at 2%, which is likely down to the willingness for contractors to secure work.
Programme and plan for delays
Be realistic, we know there are labour shortages, insolvencies remain an issue and regulations are changing. So, while a prudent approach to development programming is recommended, construction stage supply chain backup options are essential.
For lenders, know your borrower and contractor. Review their current book and understand what lies ahead in their pipeline. Your project may meet all the requirements, but an earlier project suffering could impact your project.
When margins are tight and deadlines under pressure, corners can be cut. Be vigilant and liaise with the consultants, including Building Control and the warranty provider to be confident that your project is being delivered to the best possible standard.
Health and Safety
As with Quality Control, when pressures are placed on a project, the risk of accidents can increase. Raise the issue early on as ultimately it benefits everyone involved in the process.
Project monitoring services
Get in touch with our team today to speak with one of our regional offices across the UK. Our team provides hands-on, practical advice, real-time project monitoring services, as well as building consultancy advice, restructuring and advisory resources and our cost forecasting tool and digital reporting platform, Naismiths analytics.