Rush of deals ‘signals boom for builders’
They are experiencing a rush of contract negotiations that suggests a big pick-up in activity across Scotland early next year, and builders which were forced into “suicide bidding” are now taking their pick of projects.
Euan McLeod, a partner at Shepherd & Wedderburn, said the rise in activity was across all sectors, including new residential developments, hotels and offices being built on a more speculative basis than has been the case since the financial crisis.
He said: “There’s a buzz at the moment among developers, and to a certain extent it’s self-fulfilling. Planning teams are run off their feet at the moment.”
The construction sector has experienced a steady recovery over the last year, as housebuilding has increased in response to government measures to help buyers. However, McLeod expects that a more dramatic rise in activity will be seen in 2014, as he has been drafting many more contracts for projects which are expected to break ground later this winter.
He said the Aberdeen market has long been in robust health thanks to its well documented boom in North Sea-related activity, but Glasgow and Edinburgh look set to enjoy more of the action in the coming months.
“We are drafting dozens of tender documents now to start early next year,” he said. “What’s encouraging is that it’s across all sectors, even the office market, which has been pretty quiet for a while.”
Long-term regeneration projects are also making a comeback in the Central Belt, bringing years of steady work for some businesses.
The rapid increase in potential contracts means firms that had been fiercely competing for work are now able to put their prices up.
McLeod’s colleague in the construction team, Iain Drummond, said: “UK contractors are now able to be pretty choosy about what they tender for. They are starting to ignore the public sector in particular because they know they will have to go very low on price.”
Drummond believes a higher-margin environment will be more healthy all round. He is currently dealing with a spate of contractual disputes which he says have arisen because of tender offers that were too low, leaving no margin for unforeseen costs.
“There’s a rebuilding of relationships which for some time had been very skewed towards buyers,” he said.