Commercial construction rises with residential downturn

The latest Glenigan Construction Index, powered by Hubexo, reveals a complex picture for the UK construction sector as of September 2025. While optimism for a broad industry recovery has faltered, commercial construction growth has offered a critical lifeline against the sharp slowdown in residential activity.

Covering the three months to the end of August 2025, the Index tracks underlying construction projects worth up to £100m, providing built environment professionals with an invaluable analysis of sector performance and market dynamics.

Key highlights

Overall construction starts declined by 4% on the previous three months and were 6% down year-on-year.
Residential construction fell sharply, with starts down 18% on the preceding three months and 16% compared to 2024.
Non-residential construction activity increased by 13%, standing 11% higher than last year.
London, the North East, and the West Midlands led regional growth, while the South East, South West, and Scotland lagged behind.

Residential construction: confidence slips as growth reverses

The UK residential construction sector faces increasing pressure as investor confidence wanes and government policy uncertainty continues to affect housing delivery.

Private housing starts dropped by 16% both quarter-on-quarter and year-on-year.
Social housing construction saw even sharper declines, down 24% on the quarter and 17% compared to 2024.

This downturn marks a reversal from the optimism seen earlier in 2025, when residential construction had been a key driver of industry growth. Persistent headwinds such as rising costs, tighter mortgage conditions, and concerns about potential tax changes are now slowing momentum across the housing market.

Non-residential construction: commercial sector leads the way

In contrast, non-residential construction projects offered a more positive outlook, with several verticals showing resilience and even remarkable growth.

Standout Growth in Office Construction

Office construction starts rose by 103% over the quarter and an astonishing 232% year-on-year.
Growth was bolstered by major schemes, including the retrofit of 30 Finsbury Square in London, reflecting the sector’s ongoing pivot toward sustainable, retrofit-first strategies.

Other Non-Residential Sectors at a Glance

Industrial construction: up 1% quarter-on-quarter but still down 11% compared to 2024.
Healthcare construction: up 7% on the quarter, though 5% down year-on-year.
Community & amenity projects: down 26% on the quarter, but up 35% year-on-year.
Hotel & leisure construction: down 5% on the quarter, yet 4% higher year-on-year.
Retail construction: the steepest decline, down 23% compared to the previous three months and 34% year-on-year.
Education construction: fell 14% quarter-on-quarter and 37% compared to last year.

Civil engineering and infrastructure: a mixed performance

Infrastructure and utilities construction continued to show volatility, underlining ongoing uncertainty across the sector:

Civil engineering activity: up 2% compared to the preceding quarter, but still down 22% year-on-year.
Infrastructure construction: rose 12% during the Index period, but down 17% year-on-year.
Utilities projects: down 9% on the quarter and 27% year-on-year.

Regional construction performance: London and North East shine

Regional variations remain significant across the UK construction market.

London: £2,973m worth of project starts, up 39% quarter-on-quarter and 36% year-on-year.
North East: strong growth with starts up 29% on the quarter and 61% year-on-year.
West Midlands: up 21% on the quarter and 36% compared to 2024.
South East: down 15% on the quarter and 21% year-on-year.
South West: down 29% quarter-on-quarter and 32% year-on-year.
North West: down 5% on the quarter and 12% year-on-year.
Scotland: down 16% compared to the previous three months and 29% year-on-year.

Industry outlook: uncertainty ahead of Autumn budget

Glenigan economist Drilon Baca warns that contractors and subcontractors face a challenging period ahead:

The residential downturn highlights the fragility of recovery within the housing sector.
The commercial construction sector is performing strongly, but uncertainty around government fiscal policy—particularly property taxation—could impact investment decisions.
Ongoing international economic pressures are expected to weigh on construction growth through late 2025.

Commercial construction provides stability amid housing weakness

The September 2025 Glenigan Construction Index underscores the uneven nature of the UK construction recovery. While residential construction activity is facing steep declines, commercial and office construction growth is helping to sustain industry momentum.

With London and the North East driving regional expansion and offices leading sectoral growth, the industry demonstrates resilience in the face of uncertainty. However, persistent economic headwinds, policy speculation, and subdued civil engineering activity suggest that volatility will remain a defining feature of the market for the rest of 2025.

For contractors, developers, and investors, the key takeaway is clear: commercial construction is rising as residential downturn kicks in, creating both risks and opportunities across the built environment sector.

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