Construction and fit-out project managers are reporting price increases across UK real estate sectors, says Savills, as sterling’s post-referendum currency nosedive has a direct impact on costs.
A 10% decrease in the value of the pound has resulted in a 2-3% increase in build costs – where 60% of materials are EU imports – according to construction consultancy Gardiner & Theobald. As a result, all sectors are seeing build costs remain high or rising, and many prime residential projects are already coming in with higher price tags.
The Savills Programme and Cost Sentiment Survey (S.P.E.C.S) has risen by 11 points in the last quarter to 17 out of a possible 24, signifying that both build costs and timescales have increased for the first time this year as a result of ongoing macro economic uncertainty.
The survey tracks sentiment regarding the cost of construction, costs of fit-out and associated time scales for all grades and geographies of commercial and residential real estate across the UK. Any score above zero indicates that costs and timescales are generally rising; sub-zero indicates a fall. For 2016 so far, Savills has recorded an average quarterly score of 10.5, meaning that the latest quarter is well above the current index average.
Simon Collett, head of building and project consultancy at Savills: “The second edition of S.P.E.C.S has highlighted how project delivery, in different sectors and geographies, is being impacted following the EU Referendum. Our index demonstrates that for the first time this year both costs and timescales are increasing. Looking forward, we expect there could be further volatility to the index once Article 50 is set in motion.”