Zander Muego, Director at consultancy Thomas & Adamson, part of Egis Group, shares his thoughts on what might lie ahead in the short term for construction.

The construction sector has entered 2026 with a heightened sense of caution. According to BCIS, growth in the UK construction market is projected to remain modest, at around 2% to 3% annually, though resilience in certain markets continues to create opportunities.

The sector faced challenging conditions in 2025. While some market divisions had been buoyant in previous years, cost pressures, funding constraints and regulatory challenges limited activity. At the same time, other areas benefited from targeted capital deployment and shifting priorities.

Early signs in 2026 point to a similar pattern, with pockets of stronger activity in specialist markets where demand and investment remain robust. Several key themes are already emerging and are likely to shape the sector this year.

Continued focus on existing buildings

Making better use of existing buildings remains a defining theme in 2026. Policy drivers around embodied carbon, combined with tighter market conditions, are prompting more developers to refurbish or repurpose existing assets rather than deliver full new-build schemes.

This shift is driven not only by environmental priorities but also by commercial considerations. Even where planning permission for new build exists, development appraisals are struggling to absorb rising construction and financing costs. Adapting existing structures is often proving to offer stronger returns. As a result, there is a growing pipeline of projects aimed at improving viability, efficiency, and long-term performance through the adaptation and re-use of existing buildings.

This is particularly relevant where secondary office accommodation is appropriate for adaption to alternative hotel use. As the value of secondary office stock declines, conversion is becoming increasingly appealing as a way to add value and bring otherwise redundant built assets back to life.

A limited but evolving residential market

Residential development continues to face challenges, with high costs and stretched appraisals making new schemes difficult to deliver. Demand for additional homes remains strong, particularly for affordable housing and build-to-rent, but economic conditions are constraining progress.

Government planning reforms in England, designed to streamline approvals and boost delivery, along with new measures such as the Building Safety Regulator, are shaping viability and development decisions. Broader housing reforms like the Renters’ Rights Act 2025 are also influencing market dynamics.

In Scotland, while The Housing (Scotland) Bill may help to stabilise the investment environment, potentially encouraging some paused projects to move forward, project affordability remains a major ongoing challenge.

Sustained development in the prime office market

Development activity in the office sector is showing signs of growth, driven by strong demand for prime office space in core markets such as London, Edinburgh, and Glasgow. Occupiers continue to prioritise high-quality, well-located grade A environments, creating opportunities for both new developments and refurbishment of older buildings.

As employers refine hybrid working strategies and place greater emphasis on energy performance, the focus on quality over quantity is likely to sustain development momentum through 2026.

Public sector priorities – decarbonisation and defence

Although large-scale public capital investment remains limited, funding continues to focus on established priorities. Decarbonisation remains central to government policy, with long-term commitments to net zero guiding initiatives across the public estate, supporting essential upgrades and retrofits across schools, hospitals, and local authority buildings.

Meanwhile, the defence sector is set to see increased investment. The 2025 Autumn Budget reaffirmed the spending figure of 2.6% of GDP, including funding for munitions and capability upgrades, underpinning a growing pipeline of defence-related projects across the UK in 2026 amid ongoing geopolitical uncertainty.

Façade remediation and PFI transitions set to grow

Growth of the façade remediation market is expected to continue in 2026. With substantial legislative progress already made in England, similar measures anticipated in Scotland, focused on cladding and wider building safety requirements, will support ongoing demand for this type of project in the post-Grenfell era.

At the same time, many older Private Finance Initiatives (PFI) are approaching the end of their contracts. As these agreements wind down, local authorities will assume greater responsibility for ageing assets, increasing the need for maintenance, refurbishment, and long-term estate planning.

Together, these developments are likely to drive more complex, high-value projects, particularly for teams experienced in managing multi-stakeholder schemes.

The outlook for 2026

Overall growth is expected to remain modest, but shifting investment priorities are creating opportunities. As policy developments take effect and capital is directed toward areas such as prime office development, building safety, and the refurbishment and conversion of existing assets, those who align with these priorities are likely to see the greatest impact.