Brexit: Implications for the Construction Market

The outcome of the EU referendum has created significant uncertainly for the property development market. These are Building Consultancy’s predictions of how the leave decision may play out for building construction.

Overheated construction market and slower tender price increases

If uncertainty means development activity will slow, this will add capacity to an overheated construction market in London and the South East and may help slow the current rate of tender price increases.

Increase in domestic manufacturing of construction materials and the sustainability effect

If imported building products become relatively more expensive, it may spur the mid-term development of domestic manufacturing. That is not the only driver; the equivalent concept to food miles is increasingly a material issue in sustainability accreditation for specifiers of building materials and components who are now encouraged to source locally.

Contractors to act cautiously on potential price risks with contract terms

We are likely to see contractors push back on the risks associated with potential price increases and delays if imported products significantly increase in cost or new border restrictions cause unforeseen delays. Brexit related clauses could be inserted in contracts to push the risk back to the client; alternatively contractors may aim to add a price premium to cover the risk.

Foreign currency activity will favour inward investment in UK development projects

Whilst the focus will be on the behaviours of occupiers because they fuel the development industry, the relative value of the Pound to currencies other than the Euro may make the UK a more attractive place for overseas investment in development projects.

Uncertainty around EU Directives and Regulations affecting property

There is a great deal of uncertainty surrounding the future of environmental legislation. Major changes are at least two years away, though there are still questions in the short term over whether, for instance, the UK must still transpose amendments to the EIA Directive before the end of April 2017. Read our earlier “Brexit: the only certainty is uncertainty” article.

 

 

Download our Brexit – Implications for the Construction Market briefing.

To read more about CBRE’s views on Brexit, download our The Long Goodbye? research report.

 

If any of the above predictions concern you, please contact us for further advice or visit our website to learn more about our services.

 

Brexit, Construction, Developers, Investors, Occupiers,
David Hitchcock

David Hitchcock

Head of UK & EMEA Building Consultancy

Head of UK & EMEA Building Consultancy

+44(0) 20 7182 3345

david.hitchcock@cbre.com