Office and residential scheme completions have soared in key regional cities, defying the odds during the coronavirus pandemic.
Despite delays caused by the lockdowns, the amount of office space delivered across Leeds, Belfast, Manchester and Birmingham rose by 28.4% year-on-year to nearly 2.5m sq ft, according to the latest Deloitte Real Estate Regional Crane Survey.
However, office space under construction declined by 16.5% across the cities during 2020 to 3.6m sq ft, from an equivalent of around 4.3m sq ft in the previous year.
Simon Bedford, partner and regional head at Deloitte Real Estate, noted that the regional office pipeline has “softened somewhat” as developers “take a ‘wait and see’ approach to future demand”.
New home completions surged by nearly 67% year-on-year to 8,197 across Leeds, Birmingham and Manchester.
Belfast was the only city not to experience a sizeable increase in residential completions, after delivering no new homes in 2020, compared with 180 in the previous year.
A further 18,912 homes are under development across the four cities.
In the four city centres, 5,405 student bed spaces were delivered, with a further 3,485 in development, signalling ongoing investment from universities and private student accommodation providers in both teaching accommodation and student housing.
The total number of new starts across all sectors in the four cities slipped to 54 during 2020, from 57 in the previous year.
Bedford said that, on the whole, there is a “major focus” for new residential developments to provide outdoor space and community facilities, reflecting the trend towards small-scale retail and leisure offerings as part of wider mixed-use schemes.
He pointed to an increased focus on localism as well as a “greater level of commitment to small independent businesses that can easily identify the origin of their goods”. He posited that this could have a “positive knock-on effect” for the high street.
Bedford said: “All things considered, 2020 will be one of the stronger years in overall terms and points towards the ongoing renaissance of our major UK cities.”
Daniel Barlow, managing partner for regional markets at Deloitte, said: “There are real signs of recovery and resilience across the UK, and it is incumbent on us all to maintain momentum to ensure that all cities, towns and villages level up.”
New home completions were the highest on record for Manchester, with works on 4,914 homes finished in 2020. This compared with 3,619 in the previous year.
Residential projects under construction in the city dipped slightly by 0.2% to 12,322 homes. This was the shallowest reduction compared with its rival cities: Belfast posted a 68% decline in homes under construction, while Birmingham experienced a 27% decrease.
Manchester saw the biggest decrease in office space under construction during the year, dropping by 38% to 1.3m sq ft. This was mainly owing to 1.2m sq ft of floorspace delivered in the same timeframe, which Deloitte said was the largest volume delivered since 2008.
Across all sectors in the city, 35 schemes completed in 2020, up from 27 in 2019. This reflected the high levels of new starts in Manchester in recent years. During 2020, 24 schemes started on-site.
Hotel beds still undergoing development at the end of 2020 dropped for the first time since 2015, down by 2% to 2,397 beds. However, the overall pipeline was still double the 994-bed average since 2007.
The amount of student housing being built in the city plunged by 66.3% to 942 bed spaces, but completions rocketed to 1,410, from 384 in 2019.
Residential completions reached a record high in Birmingham after 2,072 homes were delivered during the year, reflecting the highest yearly total of the past decade. Its performance in 2020 was also well above a 10-year average of 607.
Student housing completions marked a record high for the city, totalling 1,458 bed spaces. This compared with 810 in 2019.
At the same time, the city posted the steepest decline out of the four cities in student accommodation space under construction, falling by 76% to 447 bed spaces.
Unlike Belfast and Leeds, Birmingham delivered a higher year-on-year volume of hotel space, with completions rocketing to 224 beds from zero in the previous year.
Hotel construction activity was also up by 40%, to 523 beds.
At the other end of the scale, the volume of office space under construction fell for the fifth consecutive year, with completion of just over 210,000 sq ft in 2020.
Deloitte observed that this followed a landmark year in completions in 2019, when more than 775,000 sq ft of new and refurbished office space was delivered.
Just over half (51%) of office space still under construction is prelet.
The total number of schemes under construction in Birmingham fell to 34, from 41 in 2019.
The city’s construction activity was mainly underpinned by investment in grade-A office development, with 1.3m sq ft of space either under development or completed in the year. Of this, the amount of office space under construction was up by 7.7% to 904,277 sq ft.
Two-thirds of new office space in the city remains empty.
Notably, retail activity was on the up compared with Leeds and Birmingham. At the end of 2020, 175,000 sq ft of retail space was under construction in Belfast, compared with 34,000 sq ft in the previous year.
There were no new hotel projects, after a surge in completions between 2016 and 2018.
Altogether, there were 23 major schemes that were under construction or completed in 2020, down from 26 in 2019.
The amount of office floorspace delivered in Leeds reached 667,059 sq ft, peaking at its highest level since 2016, when it totalled 700,000 sq ft. The city’s performance this year was well above an average office space delivery level of 315,787 sq ft since 2006.
Office schemes under construction grew to 381,768 sq ft, up by 32% on the previous year.
Leeds saw 12 new starts in 2020, remaining static on the previous year. A quarter of those are residential developments, which are expected to deliver 731 new homes.
Three of those developments are for the build-to-rent market, with BTR accounting for 69% of all new homes under construction.
Deloitte said this reflected the need to boost the quality of rental stock in city centres to meet the demand generated by young professionals.
In contrast, there was only one new start in student accommodation and no new starts in retail, leisure, education or healthcare.
The number of hotel completions in Leeds dived to zero, from 204. However, there are 54 hotel beds under construction, compared with none in the previous year.