Wales Construction Market Forecasts Positive Outlook with Strategic Investments Ahead

The latest Construction Market Intelligence (CMI Q1 2025) report from Welsh construction and property management consultant, Rider Levett Bucknall (RLB UK) highlights a positive outlook for the region’s construction sector, driven by strategic investments and a strong demand across key sectors.

Key Regional Developments

Wales is seeing significant investment across multiple sectors, with Cardiff City Centre emerging as a hub for tall buildings, and public sector clients expressing optimism, supporting a stead pipeline of new projects.

While there has been a slight growth in regional project starts this quarter, the sector continues to face challenges in maintaining a steady flow of new contracts. Main contractors are still bidding for work in Wales but are being more selective, with some flagging their interest in new-build schemes rather than refurbishments. The market also needs several additional main contractors to replace those that have been lost.

Planning delays remain a major challenge, with constraints such as sustainable drainage approvals slowing progress. However, most clients are expecting projects to proceed but are aware of the planning challenges currently at large.

Material costs have continued to reduce but MEP costs are generally higher. Labour is more challenging to obtain. Large construction projects which need heavy resourcing, such as the Fairwater Campus in Cardiff, continue to increase labour costs.

Tender Prices & Input Costs

RLB’s tender price forecast for Wales over the next 12 months is predicted to rise by approximately 3.5%. This increase reflects the ongoing demand for construction services and the impact of inflation on materials and labour costs.

The forecast for the region over the next two to three years is for a steady increase, typically around 3.5% per annum.

• Material costs are continuing to reduce, easing pressures on pricing works in the market and improving the programme issues previously encountered.
• The skills shortage, a nationwide issue, has resulted in increased labour costs and limited availability of resource for the industry in Wales.

Sector Insights

Data Centres

There is continued investment in new data centres in Cardiff from both developers and hyperscale companies.

Infrastructure

Crossrail continues to progress towards the first delivery phase with proposals awaiting sign-off from the Welsh Transport Minister prior to public consultation. Phase 1A will connect Cardiff Central with the Cardiff Bay area through a tram line and associated highways and public realm infrastructure upgrades. Phase 1A, due to be delivered by mid-2026, is backed by £50m from the Levelling Up Fund, matched by £50m from the Welsh government. To date no funding has been committed to Phase 1B.

Residential

Residential demand in Wales is still high, with several housing associations committed to contributing towards the Welsh Government’s target of providing 20,000 new low-carbon homes for social rent by 2026.

Retail

Rather than invest in new developments, retail clients are acquiring and utilising existing buildings such as shopping malls to redevelop into smaller, more localised stores.

Dan Walker, RLB Wales Associate Cost Manager, comments, “Tender prices in Wales have remained relatively stable this quarter.  However, revisions to Welsh building regulations are requiring schemes to be more robust, which is increasing costs and challenging project viability. The reduction in interest rates has been a much-needed relief for the construction market. If these continue to fall, then the pressure on margins generally should start to ease, allowing more projects to become more viable.”

For RLB’s full Construction Market Intelligence Q1 report, please click here.