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The contract furniture sector is primarily influenced by
the level of commercial and construction activity within the economy and
is subject to general levels of business and consumer confidence. The
contract furniture market was worth an estimated £735m in 2005 and
current forecasts indicate growth levels of 3-5% per annum, with the
market expected to reach an estimated £848 m in 2009.
The contract
sector is less volatile than the domestic furniture sector but is still
susceptible to downturns in economic activity and influenced by overall
levels of commercial and industrial growth. Between 1998 and 2000, the
contract furniture market performed reasonably well, supported by the
volume of projects within the leisure sector in preparation for the
Millennium celebrations, the growth in pub and restaurant chains and the
budget hotel sector.
However, between
2001 and 2003, a series of economic and political events including 9/11,
SARS and the Iraq conflict affected certain sectors of the contract
furniture market. The leisure sector, particularly
hotels
were affected by these events, which resulted in lower levels of
confidence from the operators and reduced levels of investment.
Consequently, a proportion of new build and refurbishment projects were
postponed, reducing demand for contract furniture and restricting growth
of the market. In addition, over the same period there were signs of
high levels of competition in the
health club
sector, which again resulted in lower levels of investment.
Higher levels of
investment in the
health and
education
sectors have been major drivers in the contract sector in recent years,
in particular the growth of student accommodation. Another factor
supporting the growth of the contract furniture market is the
MOD’s
SLAM (Single Living Accommodation Modernisation) Project.
Prospects for the
contract furniture market are modestly optimistic. The market is
expected to achieve growth rates of 3-5%, between 2006 and 2009 as the
uncertainties of previous years’ performances are overcome. The high
level of expenditure in health and education is expected to continue in
the medium term, along with higher levels of refurbishment and new build
in the hotel sector, thereby motivating the market somewhat.
In addition, the
Olympic construction
programme is also expected to provide opportunities in the contract
furniture market. Although there are no definitive figures on likely
construction output resulting from the successful Olympic bid for 2012,
estimates range from £2.5bn to £10bn, with the latter figure including
much of the infrastructure work which will be required to facilitate the
Olympics, i.e. roads, rail, park and ride etc, along with other
committed expenditure on the Thames Gateway for example.
However, the
demand for contract furniture is only expected to gather pace in the
latter stages of construction, e.g. 2009 onwards, when the initial focus
on developing infrastructure and buildings etc, is completed.
In 2005, the
contract dining and upholstered furniture sectors accounted for the
largest share of the market with 27% and 18% respectively. The
upholstery sector has lost share, albeit marginally since 2003. However,
one sector that has shown relatively significant growth since 2003 is
the Educational furniture sector, increasing from 16% to 18%. This
sector has continued to achieve high levels of growth since 2001, when
educational furniture accounted for just 13% of the overall contract
furniture market. This can largely be explained by the substantial
increases in government spending on education over the past few years.
The contract beds
and bedroom furniture sectors have retained a stable market share since
2003 of 10% and 13% respectively, which has largely been kept buoyant by
expenditure in the healthcare and higher education sectors.
The remainder of
the market is comprised of ‘other furniture’ sector (Reception Areas,
Lobbies, Communal Areas, Hotel Rooms), which accounts for approximately
14% and in general the products are used in all end-use sectors,
therefore the market responds in a similar fashion to the overall
contract furniture market.
In terms of key
suppliers, the structure tends to differ between the major product
sectors. The contract market for beds and upholstered furniture is
similar to that of the domestic market, with a number of manufacturers
supplying both sectors. In the bedroom and dining furniture market, the
supply structure is highly fragmented, while educational furniture
suppliers tend to be more specialised.
In terms of
end-use applications, the
leisure sector
is dominant accounting for approximately 37% of the market. This sector
has experienced some decline over the past 2 years due to a chain of
economic and political events. However, investment levels showed a
slight upturn in 2005 with prospects relatively positive in the
foreseeable future.
Education
has gained share and accounts for approximately 32% of the market due to
increased government spending, substantial increases in student numbers
and accommodation requirements, in addition to growing competition
within the sector. The
health
sector has also benefited from the government’s commitment to improve
the health service and accounted for 20% of the market in 2005.
Finally the
‘others’ sector accounts for 11% of the market and has gained share in
recent years supported by the investment in the MOD sector.
Overall, the
distribution of furniture within the contract sector is dominated by
direct supply
to end-users. However,
depending on the end-user, the distribution channel is likely to change
accordingly. For example, the leisure industry is more likely to use
architects, interior designers, contract furnishers and hotel buying
groups. Conversely, the healthcare sector tends to use a central buying
group as the market is highly fragmented. In the education sector, the
individual schools are taking greater control of budgets and are
determining their own requirements etc.
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