TPI Survey Feedback

WORKLOAD

Based on our latest TPI survey, improving client confidence signals the potential for forward pipeline growth. But unless this renewed confidence translates into the procurement of actual work on site soon, construction faces the prospect of a workload slump.

Currently, workloads are heavily concentrated in a handful of active sectors, notably data centres, life sciences, commercial office refurbishment and fit-out. These sectors are poised to provide an outsized stream of workload for the foreseeable future. Other sectors, such as residential and industrial, are increasingly feeling the impact of weaker forward pipelines. This lull in activity has prompted greater keenness from contractors tendering on projects in these sectors.

Despite some projects in pre-construction being paused, clients are showing increased optimism toward potential new schemes. Appetite for new work is improving and more opportunities are re-circulating the market. While new enquiries are steady, they remain below the levels of growth seen during the post-pandemic bounce back. Nonetheless, G&T continues to receive numerous requests of early budget and feasibility estimates.

Undoubtedly, a significant long-term catalyst for workload growth is the net zero carbon agenda, spurring demand for new sustainable construction and refurbished space. Developers are keen to keep up with this trend, which is expected to further propel workload expansion across the industry

MARKET CONDITIONS

Perceptions of market conditions experienced a subtle shift in Q2 2024, as indicated by our survey. Most remained neutral or had a slight lean towards the negative in their assessment of market activity and the competitive landscape – a trend perhaps influenced by the significant variation in market activity across different sectors. However, there was an uptick in the proportion of respondents (from 14% to 22%) noting increased market activity (and tendering passivity) since Q1 2024.

Whether this suggests momentum is building towards a recovery and market conditions are normalising remains to be seen. Much depends on the interest rate cutting cycle and how risk averse the industry remains in light of several market pressures.

The recent rise in activity in the market is not yet translating into substantial development and construction commitments. Many projects have embraced a ‘wait-and-see’ approach or a ‘pause-and-continue’ strategy, waiting for market and financial conditions to improve.

While showing signs of improvement, a general lack of capacity persists, maintaining the view that it’s a suppliers’ market. Contractors, while eager to secure projects for 2025 and beyond, continue to exercise caution and selectivity in their bidding decisions. Concerns about the prevalence of insolvencies within the supply chain loom large, prompting many contractors to proceed with extreme caution.

Against a backdrop of weaker new order growth, some clients anticipate greater hunger to secure work. The hope is that fewer tendering opportunities should lead to more competitive pricing. However, the picture is more nuanced than this. Many contractors have chosen to diversify, shifting their focus to where demand is high (ie data centres and life sciences) to spread their risk and open themselves up to more potential opportunities. Bid lists are therefore healthier in these sectors but this has made it more challenging to secure tenderers on projects in the more traditional, but presently less active, sectors (ie residential and new build commercial office).

Ultimately, until interest rates begin to fall, financing for new developments across all sectors will likely remain constrained. Nevertheless, market sentiment is slowly improving and hopes of a turnaround in the construction industry are gaining traction.