New commercial work in London doubles in two years

A survey of leading contractors working in London has backed anecdotal reports of a big upturn in commercial work, with contract awards running at twice the rate of two years ago.

The survey by consultant Aecom, found that contractors including Laing O’Rourke, Skanska, Mace, Lend Lease, Brookfield Multiplex and Wates, had secured more than twice as much work for 2014 as they had for 2012 when the survey was last carried out.

The main contractor market survey found the contractors now have 70% of their workload secured for next year, compared with 38% at the same time in 2011.

They are now predicting tender price inflation of between 2-5% in the capital in the next eighteen months.

Aecom itself is predicting tender price inflation in the capital of between 2-4% in 2014, with further inflation of 3-6% in 2015.

The report finds that the drivers for cost inflation are contractors becoming more selective over projects, shortages of concrete and bricklaying gangs, and just the general availability of work meaning contractors are able to bid at reasonable margins.

Trades particularly affected by the upturn are cladding, drylining, joinery and M&E.

Aecom director Nick Clare said the market shift was particularly notable in the last quarter of the year.

He said: “Developers procuring construction work need to set up projects attractively to appeal to the best contractors – a remarkable turnaround given that only six months ago most contractors displayed a hunger for new work.

“The property market should not be surprised to see cost inflation built back into contractors’ appraisals for projects. However, this is also a story of two construction industries. Outside London tender price inflation is still relatively flat.”