City boom lifts new-builds to 13-year high

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The Independent Online

New buildings are springing up in London and the South-east at the fastest rate for more than a decade thanks largely to boom times in the City, according to a new survey.

The report published yesterday by the Royal Institution of Chartered Surveyors showed the number of London land surveyors reporting rising construction workloads outnumbered those reporting declines by 36 percentage points in the first three months of this year, the largest balance since the survey began in 1994. Workloads on private commercial construction more than doubled, it said.

David Stubbs, senior economist at Rics, said the strength of London's financial services sector was the main factor behind the construction boom. "You only have to look at the number of cranes in the City to see the tremendous amount of building work going on," he said. "Many companies are beefing up their London offices, moving services that were previously headquartered in New York and other financial centres to the capital. And with the price of commercial property soaring, it is very tempting for the construction industry to build more office space."

The Square Mile is attracting investors in commercial buildings because a shortage of space is pushing up rents as firms add staff. Ken Livingstone, London's Mayor, is encouraging more skyscrapers to make better use of limited space. The tallest yet will be the 1,016-foot, Renzo Piano-designed Shard of Glass, which will stand on the South Bank of the Thames by London Bridge and is due to be completed in 2011.

Other developments in the pipeline for the City include the Leadenhall Tower, or Cheese Grater, and the Broadgate Tower and 201 Bishopsgate scheme which are on course to open next year.

Mr Stubbs added that the 2012 Olympics should keep the building bonanza going, with extensive regeneration planned for Stratford, east London, alongside the construction of the Olympic Village. There are also plans to build 160,000 new homes in the Thames Gateway, which stretches from east London along the north Kent and south Essex coasts and takes in the Olympic site as well as Canary Wharf.

The report showed the national construction picture is also strong, with workloads rising at the fastest pace for nearly three years, boosted by a strong housing market and buoyant commercial property market. The construction of schools, hospitals and offices is leading the way. "The immediate outlook for the construction industry is sound, as a healthy economic outlook continues to boost workloads," Mr Stubbs said.

That view was backed by a separate construction survey from the Chartered Institute of Purchasing and Supply showing UK building activity grew in March at the fastest rate for more than three years. The survey's purchasing managers' index - a gauge of overall activity, including new orders and employment - registered 58.9, up from 57.3 the previous month and the highest since December 2003. A reading above 50 denotes expansion. The commercial, housing and civil engineering sectors all clocked up growth, and many firms said successful planning permission applications had contributed to the increase.

Ed Stansfield, property economist at Capital Economics, said: "Historically, activity levels in the commercial construction sector have provided a reasonable cross-check on the plausibility of all-property rental growth forecasts up to six months ahead. The latest data continue to suggest that our end-year forecasts for rental growth of around 4 per cent remain on track."

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