Refurbishment makes up 46% of London pipeline as Turner & Townsend flags delivery gap

Turner & Townsend has said London's greatest construction challenge is increasingly one of delivery rather than demand, with refurbishment now accounting for 46.0% of the capital's pipeline, in its Q4 2026 UK market intelligence.

The consultancy said demand for high-quality office space and new housing in London remains strong, but planning constraints, financing costs and development viability continue to limit progress.

Turner & Townsend alinea, which published a summary of the London spotlight, said developers are turning to refurbishment and retrofit as faster, lower-risk routes to market, and that contractor appetite remains selective, with risk allocation and procurement strategy increasingly influencing project outcomes.

Stephanie Marshall, Managing Director, Cost Management, UK, who authored the insight, wrote: "In today's market, cost pressures are no longer driven by construction demand alone."

Tender price forecasts

The report forecasts UK real estate tender price inflation of 3.75% in both 2026 and 2027, easing to 2.75% in 2028. Infrastructure tender price inflation is expected to stay higher, at 5.25% in 2026 and 2027 before falling to 4.00% in 2028, which Turner & Townsend said represents a return to the long-run average.

Sector	2026	2027	2028
Real estate	3.75%	3.75%	2.75%
Infrastructure	5.25%	5.25%	4.00%

Turner & Townsend said the UK market continues to face weak activity, rising costs and increasing uncertainty, but that the central challenge for organisations is no longer simply addressing inflationary pressure. The most significant cost pressures, it said, are now project-specific influences rather than traditional inflation.

Those pressures are particularly evident in the mechanical, electrical and public health (MEP) market, where the consultancy said contractor selectiveness, design quality and risk allocation increasingly influence tender returns. Supply chains in MEP and specialist trades are prioritising margin over turnover growth, and most sub-contractors the firm spoke to put improving margins ahead of growing revenue.

Market background

The report's construction market section draws on Q2 2026 data, which it said showed total new work output rising by 0.4% in the quarter but sitting 6.1% below a year earlier, with new orders down 18.1% over the past year. It cited an expectation of growth of just 1.6% in new work output in 2027, and EY Parthenon research recording eight profit warnings from listed housebuilders in the first half of 2026.

Turner & Townsend said investor confidence in UK infrastructure reached its highest level since 2023 in Q2 2026, and that major infrastructure programmes, energy projects, data centres and sports developments continue to advance while output, orders and confidence remain subdued in many other sectors.

Separately, the Office for National Statistics (ONS) published its latest construction output bulletin on 12 November. It estimates total construction output in Great Britain fell by 0.7% in Q3 2026, with private new housing, down 4.7%, the main negative contributor. Monthly output grew by 0.8% in September.

The ONS said total new orders rose by 1.2%, or £107m, in Q3 compared with Q2, driven mainly by public other new work and private commercial new work. Construction output prices grew by 3.2% in the 12 months to September 2026.

Turner & Townsend said that while London's long-term fundamentals remain strong, bringing projects forward depends on viability, certainty and informed decision-making. Its forecast table runs to 2028.