Operators in the Building Project Development industry bring together the financial, technical and physical resources required to complete a property development. Upon completion, the property may be delivered to a client for subsequent use or sale, or the developer may retain equity interest and derive income via rental fees charged. The financial and operational performance of development markets rests on a number of economic and socio-economic factors, ranging from property valuations and price movements to market sentiment and credit conditions.
Industry revenue is estimated to increase at a compound annual rate of 2.8% over the five years through 2020-21, to reach £30.6 billion. Despite the EU referendum dampening investor sentiment and cooling property markets, the collective performance of UK property developers remained resilient in the years prior to the COVID-19 (coronavirus) pandemic. Against a backdrop of policy support, high levels of investment in the housebuilding market translated into strong demand for development solutions. Moreover, growth markets in the business sector aided demand for newly developed office space. However, the economic shock caused by the coronavirus pandemic has wiped out recent gains in property development markets. Severe supply chain and market disruption due to the pandemic has resulted in market sentiment falling. Relative to the property market, transaction activity fell, property values initially depreciated and rental fee income stalled, all before pent-up demand was subsequently released post-spring 2020 lockdown.
However, due to a lacklustre period, many property developers posted significant net deficits on the revaluation of property portfolios and warn of reductions in both income and profit. In 2020-21, industry revenue is expected to plummeted by 15.1% year-on-year.
Gainsborough House - Adderstone Group Investment
Reflecting market recovery and the underlying need for development activity, industry revenue is forecast to rise at a compound annual rate of 2.5% over the five years through 2025-26 to reach £34.5 billion. However, the full extent of the economic fallout from the pandemic remains uncertain and, for the foreseeable future, developers will likely remain concerned with regards to cash balances and insolvency pressures.
At least through the near term, property markets are expected to be somewhat volatile, particularly in the retail segment as the pandemic has only exacerbated troubles among bricks-and-mortar retailers.
Pipewell Quay - Development by Adderstone Group
Industry revenue is forecast to rise at a compound annual rate of 2.5% over the five years through 2025-26 to reach £34.5 billion.
Industry overview provided by IBISWorld.
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