London
Material prices in London have largely stabilised quarter‑on‑quarter, shifting the balance of risk back toward labour and programme delivery. Despite a more competitive tendering environment, contractors remain cautious about programme exposure, and we’re still seeing preliminaries and contingency allowances hold firm.
There’s been a modest lift in forward-looking sentiment, helped by easing inflationary pressure and more predictable interest rate expectations. However, London, like other regions, is not immune to short-term reactions to yet more US tariff announcements. While these haven’t materially increased pricing or driven overt contractor concern, they do add to a wider sense of uncertainty around global economic and geopolitical conditions, reinforcing a cautious approach to procurement and investment.
We’re also keeping a close eye on the growing influence of AI in construction. In the near term, the biggest advantages will likely come from sharper cost certainty, faster delivery cycles and clearer programme control. As construction specialists, we see AI not as a replacement for professional judgement but as a practical tool that strengthens decision-making and enhances our service.
MARKET CONDITIONS & PIPELINE
Project starts set to take off as soon as market and economic conditions improve
Looking ahead, London’s construction pipeline carries plenty of potential, but confidence remains finely balanced. On the ground, current activity is steady rather than buoyant, with a clear divide between sectors that are advancing and those that are still sitting tight.
Private for‑sale residential continues to play it safe, reflecting slower sales rates and ongoing funding constraints. In contrast, purpose-built student accommodation, build-to-rent and, increasingly, pockets of public sector-led residential, are showing early signs of renewed momentum. These shifts are subtle for now, but worth paying attention to as they tend to signal where delivery appetite will land next.
In the meantime, much of the market feels like it’s in a preparatory phase. Schemes are being retested, specs interrogated and procurement routes stress tested. It isn’t stagnation; it’s groundwork. Once financing conditions ease or sales rates stabilise, many of today’s paused or re‑profiled schemes could move forward quickly because the heavy thinking is complete.
Major regeneration projects remain a key marker of longer-term confidence. Earls Court is a good example – around 4,000 homes, significant workspace, and wider place-making ambitions – with construction expected to begin in late 2026. It shows that large-scale schemes are still progressing in the capital but are more carefully phased and commercially disciplined than in previous cycles.
RLB Market Activity Cycle
The RLB Market Activity Cycle is a representation of the development activity cycle for the construction industry.
RLB considers 10 sectors to be representative of the construction industry as a whole. Each sector is assessed as to which of three activity level zones – peak, mid or trough – best represents the current status of the sector within the cycle. This assessment is then refined by identifying whether the current status is in a growth phase or a decline phase.
The subjective current performance of sectors is identified by ascribing one of the coloured arrows (shown in the legend of the chart) to each sector. NB: In this analysis, sectors are not individually weighted.
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Market sector activity analysis: UK
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Consolidating the results of multiple regions enables the calculation of a national representation of percentage of sectors in each phase of the cycle at a point in time.
Market sector activity analysis: LONDON
▲ Peak Growth ▲ Mid Growth ▲ Trough Growth
▼ Peak Decline ▼ Mid Decline ▼ Trough Decline
Consolidating the results of a region enables the calculation of a regional representation of percentage of sectors in each phase of the cycle at a point in time.
TENDER PRICES
- On the surface, London tender prices appear relatively calm, with none of the sharp swings seen in recent years. Beneath that stability, however, contractors are pricing with caution, shaped as much by recent experience as by current confidence levels.
- The post-Covid inflation spike may be fading, but it has not been forgotten. As a result, tender returns continue to reflect thoughtful risk management, firm preliminaries and selective contingency allowances.
- Looking ahead, we expect tender prices to move steadily rather than abruptly over the next 12 months, with gradual upward pressure rather than any major step changes.
▉ RLB London
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors' range (High & Low)
INPUT COSTS
- Contractor pricing behaviour continues to show a measured approach. Rather than returning to aggressive volume chasing, most main contractors are focused on replenishing their order books selectively with key partners, prioritising the quality of work secured over sheer workload.
- Labour remains the most significant source of inflationary pressure, particularly across MEP, finishing and specialist trades, where supply still struggles to meet demand. The persistent skills shortage continues to be felt acutely in London and remains a bigger driver of cost movement than plant or materials.
- By contrast, core material pricing has stabilised, with steel, concrete and timber showing little movement quarter on quarter. While no major material spikes are visible at present, future pricing will depend on how quickly the next wave of schemes progress.
SECTOR FOCUS
Commercial
Office activity is split between two extremes. At one end, older and less efficient stock continues to be repurposed or paused, reflecting changing occupier expectations and the cost of achieving higher ESG standards. At the other, a handful of large, premier grade new-builds are moving forward, particularly in the City. The office tower known as 1 Undershaft, for example, set to be the tallest in the Square Mile, illustrates that genuine demand still exists for best-in-class space with strong sustainability credentials.
Data centres
Data centres remain a growth hotspot, driven by AI workloads and demand for cloud computing. The region is seeing new approvals, with hyperscale facilities and edge data centres expanding rapidly. The challenge, as always, is power and land availability, but investment appetite remains strong.
Hotels & Leisure
The leisure and entertainment sector is seeing renewed momentum, driven by strong demand for large‑scale attractions and experiential destinations. Such schemes can generate significant economic activity and kickstart major improvements to local transport and infrastructure.
Residential
London’s residential sector presents a mixed picture. Private for-sale schemes remain cautious, but purpose-built student accommodation and build-to-rent continue to show modest growth. Affordable housing is expected to get a boost, though the market is still awaiting details on public sector funding timetables. Overall, the sector is steady but selective.
Retail
Smaller retail schemes are struggling, with consumer habits firmly shifted to online shopping. However, large destination retail, often part of mixed-use redevelopments, is holding strong. Projects like Battersea Power Station show that experiential retail still draws crowds.
CASE STUDY
Barkers of Kensington
The former Barkers department store on London’s Kensington High Street is being transformed into a modern, highly sustainable mixed-use commercial building following an extensive refurbishment led by RLB.
Our experts are responsible for the cost and project management of the redevelopment and retrofit, which has preserved the historical character of the iconic art deco landmark while securing its long-term future as prime office and retail space.
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