Geopolitical risk sees build cost sentiment push out
As 2026 started, sentiment was positive across sectors, with an improved outlook for viability, which has been severely challenged over the last few years. While it remains too early to accurately assess the impact of the conflict situation in the Middle East on UK real estate markets, we are observing early evidence that materials suppliers are starting to pass on cost increases for certain fossil fuel-related inputs.
This also correlates with the latest reading from the Savills Build: Perspective index, which, after falling negative at the back end of 2025 for the first time since our index began, rose sharply in 2026 to reach a score of 36. This suggests that many sectors expect to see increases in both build costs and programme length.
The outlook for the year remains uncertain. Even in a best-case scenario of near-term conflict resolution, global shipping routes and energy prices will take time to normalise, suggesting that we should expect elevated readings in the Build: Perspective index for the remainder of the year.
The silver lining to the situation is twofold, however. First, with fewer projects moving forward, contractors could choose to absorb cost increases and price projects with the aim of securing work, thereby reducing build costs. Second, development pipelines could shrink through 2026, which in turn sees vacancy rates fall and rents continue to rise, which improves development viability over the medium term.
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