Today, Glenigan, one of the construction industry’s leading insight and intelligence experts, releases its widely anticipated UK Construction Industry Forecast 2023-2025. The key takeaway from the November Forecast, which focuses on the three years 2023-2025, is the construction industry will continue to struggle in the face of a challenging economic climate. Particularly, restrained private sector investment, a housing market slowdown, weak UK economic growth, and high interest rates will continue to suppress sector activity for the remainder of the year. Despite short-term woes, renewed construction growth is forecast for 2024 (+8%) and 2025 (+7%) as the prospect of a recovering economy and market certainty lifts consumer and business confidence, boosting the industry. This report is predominantly focused on underlying starts (< £100m in value), unless otherwise stated, and contains a comprehensive overview of the current state of the construction industry. Sluggish economic conditions set to stall short-term growth Construction starts have remained weak throughout 2023, with a poor economic outlook putting the brakes on work starting on-site. The fallout from last Autumn’s mini-budget has weighed heavily on private sector activity, made worse by sharp interest rate rises in recent months. The persistent economic disruption has prompted clients and developers to scale back on planned investments, causing detailed planning consents to fall back 10% during the first nine months of 2023. Main contract awards have also dipped, standing 11% lower during Q.3 2023 than the same time a year ago. Glenigan predicts a decline across most non-residential sectors during the rest of 2023, with project-starts falling 20%. Recovery on the horizon It’s not all bad news, with public sector construction providing a relative bright spot during 2023 as Government underspend was rolled forward to the current financial year, boosting departmental capital programmes. Despite conditions remaining tough for the rest of 2023, gradual recovery is forecast for 2024 and 2025, with firm development pipelines already pulling through to support a rise in industrial and office starts. Improved consumer confidence and household spending are also expected to feed through to lift activity in consumer-related verticals, including private housing and retail. This is anticipated to have a knock-on effect on investment in logistics facilities from 2024 to meet demand for online retailing. However, these positive predictions will likely be offset by declines in public sector investment in education and health as government-funded projects are reviewed post-election. Commenting on the Forecast, Glenigan’s Economic Director Allan Wilen says, “After sharp falls in starts and a challenging set of economic circumstances in 2023, construction can expect gradual improvement in market conditions over the next two years. Interest rates now appear to be at their peak, and a gradual easing in rates from 2024 should help to rebuild private investors’ and homebuyers’ confidence and lift private sector activity. “As the industry emerges from the current downturn, structural changes are also providing opportunities in non-residential verticals such as warehousing and logistics, office refurbishment and fit-out, and the repurposing of redundant commercial premises. Near term, increased government funding is expected to drive education, health, and community & amenity starts, although budgets are likely to be reviewed post-election, potentially tempering activity during 2025. “Going forward, the industry will need to target these new areas of opportunity but be adaptable to shifting conditions and moving targets, ensuring they have the expertise and resources to increase their exposure to growing markets and locations wherever they arise.” Taking a deeper dive into sector verticals… Tentative growth for private residential construction Private housing market activity fell sharply during Q.1 2023 as starts on-site softened thanks to economic uncertainty and inflated mortgage costs. Retrenched starts have continued throughout the year alongside further increases to the base interest rate. Faced with a slowdown in housing market activity and low house prices, the development pipeline has also been constricted by developers opting to build out existing sites over new projects. While weak private housing starts are expected to continue throughout the rest of 2023, with Glenigan forecasting a 23% decline, housing market conditions will gradually improve. Better household incomes may cause buyers to take advantage of reasonable house prices, helping to support a partial recovery during 2024 (+4%) and 2025 (+11%) as housebuilders respond to improved consumer confidence and strengthening property transactions. Social housing slowdown High construction costs over the past two years have constrained development activity into 2023, with housing associations forced to reappraise the viability of new projects. Coupled with this, the slowdown in the private housing market has had a knock-on effect on social housing starts, resulting in fewer opportunities to take forward mixed tenure developments. This has caused an estimated fallback in project-starts of 13% this year. However, greater cost stability is anticipated to increase development activity over the next two years, lifting starts, with a 7% growth forecast for 2024, and 5% for 2025. Online retailing to boost industrial sector Having enjoyed a strong rebound post-pandemic, industrial starts have fallen back sharply in 2023. Last year’s growth was largely driven by significant growth in logistics and light industrial projects, fuelled by increased demand from online retailers. However, spiralling interest rates have dented the capital value of industrial property and have knocked investor confidence, while slowing domestic and overseas demand has tempered manufacturing investment in facilities, resulting in stifled sector output. As such, Glenigan is forecasting a massive 44% drop in 2023. Nevertheless, industrial starts are forecast to return to growth over the next two years. A stronger economic outlook is expected to drive online retail, encouraging a demand revival for premises next year with a 17% predicted growth in 2024, and 21% in 2025. Retail recovery The sector is forecast to experience sharp falls in project-starts, slipping back 28% in 2023 as stalled UK economic growth and consumer spending deter investment. An overhang of empty retail premises, as well as the growth in online sales’ market share, are also predicted to constrain retail construction starts in the short term. Despite this, improving consumer spending is expected to support a partial recovery in

Roma Finance, the borrower first lender, achieved its record month in October, not only for new business following the highly successful launch of its new FLOW product range. New business increased by 51.2% in October compared to the average levels for 2023 as a whole. Roma has experienced multiple record-breaking periods of enquiries and completions over 2023, and a review of cases in underwriting show this to be continuing. Roma has its highest ever pipeline in both volume and value with demand for its RomaFLOW products, the fast completions channel, being its most popular range. The new RomaFLOW range has been put in place as a result of the continued success of the process of the same name. Roma believes the surge in enquiries and cases demonstrates the success of the new range and the continually growing requirement for short term finance and the drive of landlords, developers and property investors to continue their own growth aspirations. Michael Allison, commercial director said, “I am delighted by the results of this first month and November has started strong as well. The results clearly demonstrate the quality of our sales teams, our strength and commercial flexibility in underwriting and the unwavering way we work with brokers and borrowers to achieve positive outcomes. The amount of repeat business, recommendations and referrals we continue to receive are testament to this. This is another fantastic step on our trajectory to achieve our business plan and every possible positive outcome for customers.” Building, Design & Construction Magazine | The Choice of Industry Professionals 

The multi-let industrial sector continues to offer a compelling investment rationale Lismore Real Estate Advisors yesterday released its review of the Scottish investment market for Quarter 3 of 2023. With a number of larger transactions, Q3 was more positive than anticipated, with activity trading at £398m, which is up 17% on Q2 of 2022 and 8% below the five-year average. There is an increase in stock coming to the market and Lismore anticipates that Q4 volumes are likely to be lower than the five-year average. The key transactions in the quarter included the £62.5m (7.8% yield) acquisition of Craigleith Retail Park, in Edinburgh by US investor, Realty Income from Nuveen. Also in the capital, the prime mixed-use block, 40 Princes Street was bought by Remake Asset Management for £29.525 (7.5% yield) from Redevco. Scotland’s largest outlet centre was acquired by Global Mutual and Patron Capital for a price of £57m (14% yield), whilst pension fund manager, Weslayan, acquired a prime industrial asset let to Biffa at Eurocentral from Capreon for £6.74m (6.2% yield). In terms of pricing, the gap between buyers and sellers has started to narrow. Confidence remains elusive but there is an acknowledgement that we are starting to “find a level” where valuers are more comfortable. Logistics and multi-let industrials remain stable, whilst offices remain the hardest sector to call with a real divergence of opinion on future prospects and where true value lies. Retail warehousing looks like offering good value and in the living sector, appetite remains robust, but the number of relevant transactions has been limited. When looking at buyer activity, funds remain selective and quite opportunistic, with core-plus buyers starting to see some value in offices, leisure and retail warehousing where values have fallen to a level that debt can be accretive. Stock selection remains paramount, and the patience shown by opportunistic buyers looks like it will be rewarded in the not too distant future. Chris Macfarlane, Director of Lismore comments: “While there are encouraging signs at a macro-level, with interest rates peaking, inflation easing and build costs plateauing, it still feels like there are some challenges ahead, particularly for those with historic debt, grappling with the prospect of more expensive re-financing. “The market will settle and we are anticipating an improvement in investment volumes, as confidence improves over the next 12 months. The recovery is unlikely to be uniform across all sectors but multi-let industrials seem to have weathered the storm better than others and are well-placed to see improvement. It offers good letting prospects, is less capex hungry and a lack of new development all make for a compelling investment rationale.” Investors expect next year to be a buying opportunity in the multi-let industrial sector Recently Lismore investor research showed that more than two-thirds of respondents will be seeking buying opportunities in the multi-let industrial sector during Q4, with property companies and investment managers, with 69% and 88% being most positive. Over the next 12 months, 46% of respondents expect prime yields in the sector to remain the same, with considerable positive sentiment from investment managers with 56% expecting yields to harden. With prime yields having moved out by 150-200 bps, the sector should provide opportunity for the weight of capital targeting the sector to acquire prime assets offering genuine value. When asked to rank the key drivers of occupational demand, location was identified as the most important by 54% of respondents, with macro-economic sentiment second on 34%. Surprisingly total occupational costs was a distant third on 9%,suggesting there is potential for rental growth to continue its upward trajectory. Only 3% of respondents identified ESG credentials as the key driver, suggesting that sustainability in the multi-let sector is still being driven by landlords. For an expert view on the multi-let industrial sector, Lismore spoke with Will Lutton, Head of Investment, Industrials REIT who said: “We have ambitious growth plans, so portfolio acquisitions will form the lion share of transactions by value. The multi-let industrial sector remains fragmented and we have always seen value in aggregating smaller individual estates along the way and we want to continue to benefit from this. “In the short term, we expect rates to remain high and economic conditions to be uncertain, which may to lead to investment opportunities for well capitalised investors, as others struggle to refinance existing holdings. When the underlying risk free rate starts to come down as central banks get comfortable that inflation is under control and we move into a more normalised debt market, yields are likely to harden. In the short term, we anticipate rates remaining high and uncertain economic conditions to continue which may lead to investment opportunities for well capitalised investors. Chris Macfarlane concludes: “No sector has been immune from the wider macro-economic challenges and the effect that they have had on the market, however, it has not been a uniform slow-down. While the logistics, office and retail markets have seen more significant adjustments, the multi-let industrial sector has fared better. We predict that yields will stabilise into 2024 and investment volumes will increase in the sector as confidence starts to return.” The full Lismore Quarter 3 2023 Review, including Research Findings & Expert Views is available to download from: HERE Building, Design & Construction Magazine | The Choice of Industry Professionals