RIDER LEVETT BUCKNALL | MIDLANDS TENDER PRICE FORECAST
Q2 2021
The second quarter of 2021 is showing the continuation of workload trends identified in the first quarter, namely high levels ofactivity, running in parallel with the mass COVID-19 inoculation exercise nationwide and the downstream effects of materials importation delays and labour availability questions.
General Market Overview
Although Covid inoculation is proceeding rapidly, the complexity of the issues in construction remain a mixture of pandemic-related issues and wider economic and market considerations. Phased re-opening of the economy remains in progress. Other issues affecting the economy revolve around the end of the stamp duty holiday in July and the end of furlough in September. On top of all of that, government is committing to “Build Back Better”, with their publicised significant investment in infrastructure and skills being met with concerns that immigration policy may now stifle retention, let alone the expansion, of the skilled workforce. Workplace constraints are set to remain for the foreseeable future, and although construction has dealt with them better than most other industries, they remain obstacles to normal operations and levels of profitability.
Midlands Overivew
Key issues in and around Birmingham have revolved around materials availability and associated price volatility, increased demand in the market and contractors’ strong appetite for replacement workload.
These factors in combination, and set in context of Covid constraints, have created a complex cocktail of influences on bid-pricing.
Market conditions have generally improved in many sectors, with greater pipeline prospects
Private sector projects may be taking longer to reach site, often due to a combination of funding challenges and movement in contractor-pricing arising from delays to commencement. Particularly strong regional sectors include industrial (big and small box), and city apartments (for sale and build to rent). Likewise, whilst the infrastructure sector may be dominated by High Speed 2, there is strong pipeline across most infrastructure sub-sectors.
Previously weaker sectors are beginning to show some
signs of life, but it is evident that there has likely been a structural shift affecting some property asset classes. Hotels and hospitality clients are closely watching the return of trade, with some considering investment to entice returning customers and others seeking opportunistic acquisitions.
Regionally, a number of public sector clients are expected to come to market, with overlay works for the 2022 Commonwealth Games expected to ramp-up. There has been some growth in higher education, and developer-led purpose built student accommodation appears largely undented by the pandemic, as quality of accommodation becomes increasingly important.
Office schemes appear a mixed bag, with some high profile starts in the period, and a number of refurbishment and vertical extension schemes in a state of flux. There are early signs of city-centre retail re-purposing, but no significant projects have yet been brought to market. These are likely to feature heavily as, nationally, city cores evolve.
Moving from Q1 to Q2 2021 has generally seen increased materials pricing coming to the fore in tender pricing. Steel prices have been most volatile, affecting not only hot rolled, but all types of steel-based products. Aggregates and timber are also affected by demand issues and supply side shortfall.
Generally improved workload pipelines have seen supply chain willingness to absorb cost increases reduced. Not only are materials prices now feeding through to tenders, but contractors’ willingness to offer extended fixed price periods is reducing and price risk is now a feature again in tender submissions, particularly for longer-term projects. Consequently, tender prices are moving, but there has not yet been a significant or sustained rebound.
Contractors’ bid capacity is showing some strain, with a focus back on suitability, scale and bid-resource need. The speed of turnaround from bid to appointment is therefore a real selling point as contractors look to use their bid-resource efficiently.
