Property developer British Land expects construction cost inflation to run at 6% a year over the next few years.
British Land has 1.5 million square feet of property under construction at the moment, nearly half of which is at 5 Broadgate in London. Total current value of projects under construction is £909m and they are expected to cost £358m to complete.
For these projects, 87% of costs are fixed, the company said, so inflation will have limited impact on them.
British Land today unveiled pre-tax profits of £1.8bn for the year to 31st March 2015, up from £1.1bn for the previous year. Excluding property revaluations and gains or losses on disposals, underlying pre-tax profit was up 5.4% to £313m.
In its results statement, Btish Land said: “Construction costs increased across the market, most notably in London reflecting rising input costs and contractors' increasing margins after a prolonged period of margin pressure. We expect cost inflation of around 6% per annum."
It added that the impact of this cost inflation had been largely offset by improving property values.