Karen Fletcher, editor of The SectorScope, scans the road ahead for green lights and potholes.
Uncertainty is the new normal, so what might happen in 2025 months is really anyone’s guess.
There are underlying macroeconomic factors which have left the construction industry with shifting ground beneath its feet.
However, for those who can navigate confidently, there are also trends which offer opportunities for this year and beyond.
Starting with risks ahead, there are three broad areas for concern:
These may seem like niche issues for politicians, but our industry needs clear direction
Karen Fletcher Editor of The SectorScope
Risks on the road ahead
* Interest rates and nervous investors
The financial ups and downs of 2024 have left us all feeling a little seasick.
Uncertainty over future interest rates makes investors more cautious, so when they put money into projects, returns must beat the rising cost of borrowing.
As Bisnow recently noted: “The next few years for real estate will be all about buying the right asset in the right market and growing the rent.”
* Uncertain sustainability targets
The government is yet to confirm if Minimum Energy Efficiency Standards (MEES) for commercial properties are being re-set at the higher minimum of C by 2028, or B by 2030.
In the HVAC sector, we also lack clear guidance on the UK’s adoption of the faster F gas phase down that has been set by the EU.
Some building owners and developers are going ahead with energy efficiency and carbon reduction upgrades despite government prevarication, which is wise if you have the budget.
However, a lack of certainty in this area creates risk, particularly for buildings teetering on the brink of becoming stranded assets. These may seem like niche issues for politicians, but our industry needs clear direction.
* AI and energy use
The UK has set its sights on being a renewable energy powerhouse by 2030. But a booming UK data centre sector (see below) will inevitably lead to significant increases in energy demand – see the Republic of Ireland for the problems that causes.
No matter how much the data centre sector focuses on reducing Power Usage Effectiveness (PUE), the new generation powering our AI economy is going to require hefty cooling systems.
This could create a significant hurdle on the UK’s road to renewable generation. The government needs to strike a balance or face serious consequences.
Opportunities for growth
* Data centres
With PM Keir Starmer welcoming our AI robot overlords with open arms, we can safely anticipate massive growth in the UK’s data centre sector. There are already several new developments underway, with many more in the pipeline from some the data industry’s biggest players.
It should be a huge opportunity for the construction sector in general. And HVAC specialists who can offer the right technology should also benefit as energy efficient cooling will be critical in these new buildings.
* Build-to-rent
There is strong BtR growth in London, Birmingham and Manchester. Further afield there are also significant developments in Bristol, Leeds, Cardiff and Glasgow bringing new-build opportunities across the UK.
The key to success for these projects is a fast, efficient build so developers can benefit from rental income as soon as possible. This has seen BtR adopt offsite construction and prefabricated products such as pod bathrooms.
In the HVAC sector, the scale of these buildings makes it possible to adopt commercial-type solutions. A few of the latest projects are leaning into sustainable credentials, and there is increasing interest in energy-efficient, low-carbon tech such as heat pumps.
* Science and technology buildings
There are major developments at science parks within the golden triangle between Oxford, Cambridge and London. But there is a lot of activity beyond this well-established science zone.
Manchester has been particularly active in developing its offerings for science and technology companies looking for a place to establish themselves. New and refurbished science buildings are springing up in the city and on its outskirts – a big growth area. Birmingham is encouraging science developments too.
Another trend is refitting office buildings to provide space for science and technology tenants. This is happening at Canary Wharf, for example, where office buildings are being transformed for a new science-led future.
There are clear opportunities here, particularly for lab design and installation specialists, which includes areas such as high-spec ventilation systems.
* Offices
The UK office market is splitting into two distinct groups. At the top end are the new grade-A, well-appointed offices, which are also highly likely to have strong sustainable credentials such as a good BREEAM or NABERS rating (or both) – and which are built to meet future MEES requirements. These attract high rents and brokers report demand that consistently outstrips supply.
At the other end of the spectrum, are older office buildings, with fewer modern facilities and which are likely to have lower EPC ratings. Some of these have been snatched up for retrofitting, with a focus on providing a better working environment and meeting future sustainability standards.
For the construction and HVAC sectors, both new-build offices and the retrofit market offer excellent opportunities for work. This will certainly grow if the government clarifies its position on raising the Minimum required EPC to C and then B by 2030.
Peaks and troughs
At The SectorScope, we track hundreds of news stories and one of the key trends we see is that while one sector takes a dip, another is on the rise.
Successful businesses in 2025 can make the most of the opportunities ahead by targeting customers in more than one sector, to spread risk.
There also a clear direction from developers and building owners that they are interested in low-carbon and energy efficient solutions for all types of building – even where government is yet to clarify its position.
As always, adaptability and forward thinking will be critical for success.
Karen Fletcher, editor of The SectorScope
