Turner & Townsend Alinea has left its tender price forecasts for London unchanged for this year and next as it warned of ongoing output declines in both commercial and private housing work.
The consultant held its tender price inflation forecast for 2025 at 3% and at 3.5% for both 2026 in its latest London market report.
While the research highlighted signs of optimism in some sectors including infrastructure and private industrial, it found the capital’s commercial market remained subdued amid persistent consumer price inflation and government tax rises.
The commercial sector, which includes offices, leisure, retail and health, is now more than a third smaller than it was before the start of the covid pandemic and has fallen to around 20% of all construction work, down from an average of 30% in the decade before 2020.
Meanwhile, infrastructure has moved in the opposite direction, more than doubling in size over the same period and now accounts for around a quarter of all output, driven by government support.
But the report found some encouraging signs for commercial work including a slight dip in the office vacancy rate from 8.1% to 7.8% in the second quarter of this year and rising take-up by occupiers for large transactions.
The report also laid bare the decline in the residential market over the past year, caused partly by delays for gateway 2 approvals from the Building Safety Regulator and rising costs of construction caused by new fire safety legislation, which have lengthened programmes.
Data from Molior, quoted in the T&T Alinea report, has found the number of homes under construction at any one time has fallen by a third over the past five years from around 60,000 in 2015-2020 to 40,000 in 2025, and is forecast to fall further to 20,000 by the beginning of 2027.
T&T Alinea said sentiment in the investor developer market appeared similar to the beginning of this year “albeit with a slightly more pessimistic outlook for the broader market”, adding that London “is not moving forward confidently”.
The firm held its tender price forecast for 2027 at 3.5% but said the figure could be affected by increased confidence if the London construction economy recovers, particularly the commercial sector.
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