South East
The construction and property market in the South East is expected to continue to show resilience. This is despite various challenges and the fact that construction activity and market dynamics are being adversely influenced by key economic factors such as inflation, interest rates and labour shortages in the supply chain.
These factors are causing challenging market conditions for developers and investors, but the wider prosperity and strength of the region is also being supported by various large-scale major projects across different sectors. These include projects in infrastructure, aviation, data centres, nuclear, entertainment and leisure, and mixed use residential-led schemes, some of which involve huge programmes of work being planned to be delivered over the next five to 10 years.
MARKET CONDITIONS & PIPELINE
Construction sector remains resilient and active but planning process continues to challenge developers
The construction sector across Reading and the wider South East has stayed resilient overall. Major programmes of work are continuing to come through the development pipeline across a diverse range of sectors, and from a healthy mix of client types including occupiers, developers, institutions and central government-funded organisations.
The potential of the Oxford-Cambridge arc, and the extent to which this can be truly unlocked to support wider regional economic development and prosperity, remains high on the political agenda. A consultation on creating a Greater Cambridge Urban Development Corporation closes on 1 April. This corporation would become a major delivery vehicle for arc‑related growth.
While the UK economic and political backdrop creates headwinds, there is still a reasonable level of market activity and this is expected to continue. The planning process, however, is still holding up projects, particularly for new-build residential high-risk buildings with reported figures of up to 75% being rejected by the Building Safety Regulator, which brings significant challenges for developers operating in this space.
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: SOUTH EAST
▲ 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
- The upward trend in tender price inflation continues to be seen across the South East and this is expected to remain the case for the foreseeable future.
- Contractors’ margins are being maintained, with increasingly selective bidding and risk aversion on complex schemes protecting their profitability.
▉ RLB South East
▉ BCIS (National) TPI ▉ BCIS (GBCI)
▉ Competitors' range (High & Low)
INPUT COSTS
- Feedback suggests that Tier 1 contractors continue to maintain a high level of risk aversion and governance at corporate level and are increasingly selective about the market sectors they pursue.
- Given contractors’ keenness to secure pipeline, however, pricing is likely to remain reasonably competitive throughout the first half of 2026, notably for projects with a high certainty of proceeding due to secure funding streams. While margins remain under pressure, they are largely stabilised.
- Among Tier 2 and 3 contractors, there is noticeably greater competition, leading to aggressive bidding to sustain workloads and maintain market presence in a crowded environment.
- MEP trade packages continue to be a key inflationary driver.
SECTOR FOCUS
Data centres
The region’s data centre sector continues to expand, with hyperscale and edge facilities in high demand. SEGRO’s Slough Trading Estate continues to develop and large hyperscale campus facilities are being built along the M4 corridor and in South Oxfordshire. However, power constraints and planning resistance are emerging as key challenges.
Education
Despite numerous challenges and headwinds facing the education sector, there still seems to be some level of activity. But priorities have shifted towards the management and development of existing assets across estates, with bigger new-build projects becoming less frequent and impacted by wider viability and funding issues and perceived value for money.
Life sciences
With a rebalance of the supply versus demand equation throughout 2025, and with a level of oversupply becoming apparent in some regional markets, there continues to be a level of a cautious optimism. The medium to long-term position remains positive, with investment fundamentals remaining strong. Even though there is an ongoing pipeline of schemes receiving planning consent, we expect that construction starts may be delayed in some cases until occupancy rates improve.
Residential
The sector continues to be challenging across the South East from a viability perspective and is likely to remain so in the short to medium term. The recent announcement by John Lewis Partnership that it is abandoning its 10,000-home build-to-rent plan is endemic of the current market situation where developers are battling against economic pressures such as high interest rates, inflation and poor investment conditions.
CASE STUDY
Riverlabs
Riverlabs, a 28-acre life sciences campus in Ware, Hertfordshire, forms a vibrant hub within the 'Golden Triangle'. Comprising three phases of development, the campus offers state-of-the-art laboratory spaces with a focus on sustainability, targeting an impressive 75% carbon reduction.
Delivering comprehensive cost planning that spans from light touch of existing builds to detailed estimates for full refurbishment of a fully fitted lab, the RLB team also added value by incorporating utilities cost management and project and programme management services.
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