Construction Industry - 2022 Roundup and Forecast For 2023
As we approach the end of 2022, it is important to reflect on the changes that have happened this year and to forecast where they may lead us in 2023. This period of reflection is an important opportunity to understand, assess and respond to situations, both within and outside of our control to ensure that we continue to deliver on our exceptional track record for successfully placing specialist talent into the most appropriate roles to not only satisfy but delight our clients.
Our market intelligence partner, Glenigan, published their Construction Industry Forecast 2023/24 this week. While construction industry output is forecast to dip as a whole over the next year or two, there were really positive insights for some of Build Space's key markets.
Logistics & Industrial (Open Space)
The impact that COVID had on the high street is still being felt in this area, with internet sales at 24.2% in August 2022 compared to a pre-pandemic level of 19.1% in February 2020. This is a slight downturn against the peak of 37.8% seen in January 2021, which is believed to be driven by the rising cost of living. This has had a significant impact on discretionary spending across all areas of the retail market.
From a construction perspective, internet-based retailers have gained a significant market share and will continue to consolidate and maintain their own profits. As a result, the need for logistics space, such as warehousing and distribution units, will remain for the foreseeable future. Growth of 24% in this area in 2023 is forecast.
Commercial Office (Work Space)
The COVID impact is also clear in this sector, with many office buildings continuing to operate well below their maximum capacity. This is especially so in the capital, where 12% of London-based workers report that they plan to work from home five days a week where possible.
The rise of hybrid working and the need for hygienic and well-maintained office facilities has seen a 4% increase in office construction projects this year, predominantly refurbishing and remodelling to accommodate new, modernised working practices and collaborative working requirements.
We anticipate investment in this area increasing in 2023 as landlords are required to make energy efficiency upgrades to their let office accommodation to raise its EPC rating to a minimum of Band E. This is mandated by the new legislation which comes into effect in April. Major refurb and remodelling projects look set to continue apace in 2023 too.
Education (Modular Space)
There is significant uncertainty in this area, exacerbated by the rapid changes that have occurred within Government this year. The Department for Education has reported an anticipated increase in the numbers of secondary school and special school students which will peak in 2024 before easing off to a level which is still above that seen today.
The Government's commitment is to rebuild 500 schools over the next decade, with 161 schools having been selected for investment as of July 2022. It is anticipated that investment in this area will be essential in adequately equipping students with the facilities that they need in order to succeed. Although there have been delays with the DfE framework projects, 2023 looks set to be a massive year for our Modular Space Team who are partnering with most of the Main Contractors awarded schemes due to go site over the next twelve months.
Civil Engineering (Civils Space)
Civil engineering starts tapered off by 4% during 2022 due to a reduction in significant contract awards and the requirement for more detailed planning approvals. This current weakness is forecast to be short-lived, however, as the Government has reiterated its intention to progress infrastructure investment in order to achieve its UK Growth Strategy. This includes national and local authority road improvement projects and enhancing the UK's energy security.
The sharp increase in energy prices has made headlines this year and addressing this is bound to be a priority for the Government in 2023. We anticipate that this will result in greater investment in offshore capability and other forms of UK-based energy generation, including hydro, solar and nuclear. It is likely that progress on the Sofia wind farm expansion, Dogger Bank B/C and Hornsea Three/Four in 2023 will increase confidence in this area, opening the door for further civil engineering investments.
5G & Full Fibre Broadband (Comms Space)
Despite the rise in hybrid working patterns, the Comms Space has remained relatively static this year but it is anticipated that significant change is just over the horizon with 5G standalone networks set to be deployed in the UK in 2023. There are currently 25 5G operators around the world and this number is expected to double by the end of 2023, offering significant potential for the telecommunication installation and networking market.
We believe that this offers exciting opportunities to capitalise on growth in the next-gen area, offering increased potential for construction projects supporting government, education, health, manufacturing and e-commerce industries, amongst others.
Despite the negative economic headwinds in the world with rising inflation and energy costs squeezing households and businesses in equal measure, there remain some really hot sectors in the construction industry. Build Space helps build teams for the leading Main Contractors and Providers in each of these spaces, supplying the best management, technical and commercial staff in the country.