CONTEXT
The London commercial market has endured another period that has failed to return the positive levels of activity and industry confidence that some expected. Will the rest of this year, leading into 2026, be any different? (And will November’s budget provide any impact?). Whilst some funders are suggesting that next year will be riper for investment, without a critical mass of such sentiment, the jury remains out.
Backed by the government’s Industrial Strategy and Spending Review, a greater emphasis on national infrastructure and major public programmes offers potential significant work. This could support companies in those sectors, as well as those looking to pivot into new areas. The capital’s commercial market remains subdued, yet it has nevertheless seen persistent tender price inflation - albeit at levels that are lower and more stable than in previous years – against a background of sticky consumer price inflation. Whilst material prices have levelled out, labour shortages, and wage increases represent a significant driver of construction price inflation.
A constrained and conservative supply chain in this market means that prices continue to edge up because of input cost pressures. It also points to the real risk of a future price spike should there be any meaningful hardening of the commercial pipeline. We are currently maintaining our relevant tender price forecasts for the forthcoming years but as ever we will be monitoring supply/demand dynamics constantly.
AT A GLANCE: TPI FORECAST
Tender Price inflation forecast for London real estate projects
Source: Turner & Townsend alinea - November 2025
With elevated construction costs further pressured by continuing inflation, as well as unfriendly financing conditions and softened yields, the most pressing issue on most projects is viability. The impact of this is an inability to meet abundant demand for space.
It is therefore critical that project teams work together at the outset to address viability issues: to test briefs; apply greater focus at an earlier stage to both design strategies and detailing; to secure the help of key parts of the supply chain sooner; to set up projects with clarity and alignment. Things that the Construction Private Sector Playbook promotes and what the Building Safety Act aims to achieve.
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