Fit-Out
and Interior Refurbishment Market
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In
this third edition of the report we have included the public sector
for the first time, with the key focus being on schools and to a
lesser extent healthcare. This is primarily because over the next 15
years, the most stable area of demand for fit-out/interior
refurbishment services will be the schools market, underpinned by
the Building Schools for the Future programme.
As we have defined it, the market primarily
comprises main contractors typically project managing the interior
fit-out element of non-domestic newbuild/shell & core developments
and full upgrades or refurbishment of existing non-domestic premises
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Within the context of this report
the fit-out & refurbishment industry is estimated to be worth £7.8bn at
main contractors prices in 2007, which represents strong growth over 2006
activity levels.
Since the
recovery of the office market in 2005, following the onset of recession in
the financial services and TMT (telecoms, media & technology) sectors in
2002, contractors output in the fit-out & interior refurbishment sector
has shown a steady underlying increase.
This has
primarily been underpinned by the subsequent recovery in speculative and
pre-let office construction in Central London, an unprecedented level of
activity in the development of tall buildings in the UK’s major cities,
and increased levels of investment in public sector works, in particular
schools newbuild and refurbishment.
The office sector is by far the
most important area of demand for fit-out and interior refurbishment,
estimated to account for 30-40% of main contractors output, followed by
the retail industry. Overall levels of demand from the retail sector have
been impacted upon by relatively poor trading conditions during late 2007
and early 2008, with only the grocery multiples sector managing to buck
the generally flat market conditions.
Over the short term, full order
books among main contractors operating in the office sector suggest that
trading conditions in 2008 will be reasonably buoyant, although demand
from 2009 is likely to slow down considerably. Without doubt, the recent
level of credit-fuelled consumer spending has ended and is unlikely to
recover in the short term. This will inevitably have an impact upon
trading in the retail and leisure industries, and in turn lead to lower
levels of construction activity - the main exception being the grocery
multiples. However, over the medium term, the Olympic Games programme
should generate demand for interior refurbishment as both hotel operators
and owners of other leisure/entertainment establishments – particularly
across South East England – will need to invest in upgrading premises
ahead of 2012.
Early 2008 is seeing the first
indications of a slowdown in the office construction sector, which may not
impact heavily on the fit-out market in 2008, but will feed into medium
term market prospects if the current credit crisis is sustained. As a
result, our forecasts for 2009-10 indicate a substantial slowing in the
rate of growth, but this could turn into a potentially severe downturn if
confidence in speculative office construction is undermined and projects
are cancelled.
AMA Research’s report “Commercial
Interior Refurbishment and Fit-Out Market UK 2008-2012” is available
in hard copy or electronic format for £625 and can be ordered online at
www.amaresearch.co.uk
or by calling 0871 3103450. |
