Crane drain: Construction falls to 10-year low
Commercial property development in the UK has plunged to its lowest level in over a decade, as tighter monetary conditions and sparse demand continue to weigh on construction.
According to a fresh analysis from Costar, just 68m square feet of offices, industrial and retail sites was being developed at the end of September, a 16 per cent decrease on the the same period last year and 34 per cent less than the 2022 peak of 103m square feet.
The slowdown – which took commercial development to its lowest since 2014 – was especially evident in retail, where the 3.2m square feet of real estate under construction was less than a quarter of the peak hit in 2017.
Mark Stansfield, Costar’s director of UK analytics, said the figure was “bar far the weakest level this century”.
“High vacancy rates, weak lending conditions, and the perception that the UK is over-retailed have deterred developers from creating new retail space,” he added. “Indeed, some centres are being removed from the stock through conversion or repurposing, with net deliveries likely to be negative in the coming years.”
A soft rental market has also led to a slowdown in new starts on warehouse construction. As of September, there were 16 per cent fewer warehouses being built than the same time last year, and 37 per cent fewer than during the peak enjoyed in early 2022.
Construction slumps despite Labour’s efforts
The slump comes despite a concerted push from ministers ramp up construction levels across Britain amid fears that a thorny and dysfunctional planning system is acting as a break on economic growth.
Housing secretary Steve Reed has co-opted ‘build, baby, build’ – a former Morning Wire campaign – as his mantra in an attempt to cut through development-stifling legislation and regulation.
But a recent overhaul of planning legislation – as well as the last two years of loosening monetary policy – have yet to translate through to new commercial construction projects.
Development of offices was also found to have fallen, dropping a quarter from its 2022 peak. The sector has been rocked by a combination of higher interest rates elevated construction costs and an uncertain outlook for demand, as companies reevaluated their physical footprint in the wake of the pandemic.
“Data on national construction starts does not hint at a near-term turnaround in any sector,” Stansfield added. “Developers broke ground on just 5.9m square feet across the office, industrial and retail sectors in the third quarter of 2025, the weakest amount since the aftermath of the financial crisis in 2012.”