According to major client Landsec, which operates with a select list of contractors, tender margins have been raised by its main contractors to help absorb rampant material and labour inflation on fixed-price jobs.
Landsec chief executive Mark Allen said: “Our tier 1 contractors operate on an open book transparent basis to allow us to understand supply chain pricing.
“So where a few years ago we would see contractors bidding on a margin of 5%, now tenders are at 8-9%.”
Allen said that building cost inflation hit 6% last year on its projects and predicted it would continue at this rate for the year ahead as high energy prices and shortages continue to dog the industry.
But he said Landsec would still be pressing ahead with three office schemes in the capital this year.
Laing O’Rourke Timber Square scheme for Landsec will start shortly
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Allen said that while estimated rental value rates continued to grow at over 3% they would offset the present rate of build cost inflation in London.
The developer also aims to start its Manchester Mayfield housing-led scheme this year, while preparations are underway to start next year on a major expansion of MediaCity and the first phase of its O2 retail centre 1,800-home redevelopment on Finchley Road in north London.
London office project starts
TDC – total development costs. (2) – zero carbon scheme
Mixed-use urban scheme starts
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