Developers, contractors, and occupiers are all feeling the pressure of rising construction costs with materials prices, labour costs, and supply chain challenges driving up project budgets. For industrial businesses looking to invest in new warehouse space or upgrade existing sites, understanding how to manage these costs is more important than ever.
Stuart McCallion (SEGRO), described the meteoric rise in construction costs and the importance of sharing risk with contractors. He explained, developers must ensure that their contractor partners remain profitable to keep projects moving forward and maintain build continuity. This collaborative approach helps everyone navigate a market where costs can change rapidly and unpredictably.
Kris Britland (Mirastar), pointed out that construction costs have doubled over the past ten years. This increase is not just about inflation but also reflects the growing demand for higher quality and more sustainable buildings. Certifications like WiredScore Industrial and BREEAM are now non-negotiable for many large occupiers, so developers must construct industrial sites with these standards in mind to stay competitive.
To counter rising costs, innovation is key. McCallion highlighted the role of modern methods of construction in reducing waste and controlling budgets. Offsite manufacturing, modular building techniques, and digital project management can all help streamline delivery and improve cost certainty. By embracing these new approaches, developers can deliver high-quality spaces more efficiently and with less exposure to volatile material prices.
The challenge for today’s industrial projects is finding the right balance between quality, sustainability, and cost control. As was mentioned by Britland, what was once considered an enhancement, like advanced connectivity or green building features, is now expected as standard. Developers who can deliver these features without pushing costs out of reach will be best placed to attract and retain occupiers.
McCallion also noted that risk sharing is not just about contracts and pricing. It means early engagement with contractors, flexible procurement strategies, and a willingness to adapt as market conditions change. Building strong relationships across the supply chain is essential for managing risk and delivering successful projects.
Schedule a demo of our capabilities and find out exactly how we're helping businesses just like yours to achieve their mission.
