Whilst falling short of the lofty heights of the pandemic period, take-up in 2024 reached just under 28m sq ft. This left take-up just 1% higher than in 2023, but crucially 7% above the pre-Covid average. Speculative development announcements have slowed in recent quarters, falling below the post-pandemic average in 2024, but remaining well ahead of the pre-pandemic average. Despite UK policy uncertainty declining somewhat since the 2024 UK general election, a much hoped-for upturn in the UK construction sector has been slow to materialise.

Despite initial optimism in early 2025, the vacancy rate remains at its highest level since 2011, with supply continuing to rise and a decade low in built-to-suit (BTS) transactions. The data suggests that investors and developers are thinking twice before progressing capital-heavy new-build schemes or refurbishments.

Forecasts for the UK Construction Tender Price Index currently range from 2.5% to 3.5% from 2025 to 2027. Whilst inflation has eased from recent peaks on the back of falling energy costs, labour costs are set to rise due to the increase in employer NIC rates, which also weighs on general business sentiment. Both upward and downward cost pressures persist, meaning that, for now, TPIs remain broadly in line with inflation. Similarly, while the Trump administration’s upcoming tariffs may harm business confidence, arguments can be made that they may also lower steel prices domestically due to excess supply in the short term. A mixed picture indeed, and whilst rolling uncertainty prevails as a theme, Savills maintains the opinion that contractor insolvency risk remains elevated.

Minimum Energy Efficiency Standards (MEES) in England and Wales continue to drive energy-efficient refurbishments. The regulations are expected to further tighten to a minimum rating of C in 2027 and B in 2030. Developers continue to focus on achieving the highest ESG standards, with BREEAM Outstanding featuring more regularly in the sector. The landscape for ESG performance standards continues to evolve, most recently with the pilot launch of the UK Net Zero Carbon Building Standard (UKNZCBS), with which we are already seeing developers seeking to align their schemes with.

Although build programmes have stabilised since the easing of Covid-era supply pressures, I&L developments still face challenges in speed-to-market delivery. Securing a power supply remains a key programme risk. Sites with easy access to power are becoming rarer, and the extent of network reinforcement and the time taken to connect new developments continues to go out. As the industry seeks to decarbonise so natural gas connections to new builds are being replaced by a higher dependency on electrical connections. Combined with occupiers increasingly turning to automation for their operations, as well as increases in on-site electrical vehicle (EV) charging, so electrical capacities and grid pressure to provide them are set to continue to increase. These factors are pushing developers to explore and maximise on-site renewable energy production, often creating commercial opportunities for both landlords and tenants where the existing local electricity grid constraints can accept connection. 

_{Read the articles within Savills Build: Perspective report below}