• Trade Uncertainty

Recent geopolitical uncertainty, with US tariffs announced on 2 April, has certainly weakened the economic outlook. At this stage, it is too early to assess the potential impact on global real estate markets as, ultimately, real estate moves slower than the news cycle at the moment. However, the current uncertainty is likely to impact confidence across the board as stakeholders will be tempted to delay decisions until the impact of the trade tariffs on the economy becomes clearer.

• Build: Perspective score stable on a quarterly basis

This latest reading from the Savills Build: Perspective index demonstrated continued stability in both build costs and project timescales on a quarterly basis. As the year progresses, it is difficult to see how geopolitical uncertainties stimulate greater construction output, but the likelihood of base rates falling faster than predicted may improve viability in some cases, which could stimulate demand on a sector-by-sector basis.

• A tale of two office markets

With office occupiers gravitating to prime stock, we are continuing to see differing dynamics in the London and regional offices markets. In London, 2025 will see record development completions, whereas in the regions, funding remains an issue, suggesting comprehensive refurbishments will be the main route to delivering prime office space.

• New legislation impacting HRBs

Gateway 2 approvals under the Building Safety Act are causing significant delays to the delivery of Higher-Risk Buildings (HRBs) in the living sector. This bottleneck, together with ongoing viability challenges, has led to a significant fall in new starts on site. In response, many developers are looking to lower the height of schemes below the 18m HRB threshold, with a consequential reduction in the number of homes delivered.

• Contractor insolvency remains a key issue

According to the Insolvency Service, in September 2024, construction firms accounted for 16.2% of all insolvencies in England and Wales, with 292 construction businesses becoming insolvent. Whilst main contractor insolvency is happening, it remains a rare occurrence. However, we are witnessing many more events at sub-contractor level as these organisations work to much tighter profit margins, so any fluctuations in costs can have an outsized impact.

_{Read the articles within Savills Build: Perspective report below}