The UK interior fit-out and refurbishment market is estimated to have seen substantial growth of 8% per annum in 2014 and 2015, according to a new report by AMA Research. Fit-out and refurbishment output continued to increase during the recession, albeit at lower levels of 2-4% per year, as many major clients, particularly in the office and retail sectors, commissioned interior refurbishment works rather than costlier new build projects.
Until 2013, there was also a noticeable increase in estate rationalisation across many areas of commercial sector activity as clients focused on how existing properties could be re-developed and re-branded. In 2014 and 2015, however, increasing confidence among client organisations, in the commercial office sector in particular, has resulted in an increase in speculative new build that in turn has generated growing demand for fit-out. Key to this is the ongoing need to address the shortage of Grade A space, particularly in Central London but also in most other major cities. However, this need has also continued to sustain demand for upgrading ageing Grade B stock. The result of this has been an acceleration in growth in the overall market in 2014 and 2015.
Overall, commercial offices constitute the largest market for interior refurbishment and fit-out with around 27% of output and Central London the largest market, followed by business parks across the Home Counties /South East. Despite renewed growth in speculative development, many client organisations remain fairly cautious, opting to ‘stay and refurbish’, as an ongoing shortage of affordable Grade A space looks likely to drive up demand for high quality refurbishment. As a result, retrofit refurbishment and remodelling of existing space into Grade A space is providing the main focus for occupiers requiring cost effective space over the short to medium term.
In the retail sector, store conversions and interior refurbishments, especially among the grocery multiples, are far more significant areas of activity than new build. The trends towards online shopping, changes in consumer food shopping habits away from large weekly to smaller more regular purchases and the changing composition of the High Street are among factors driving these changes. Major reductions in government capital spending programmes in education and healthcare have forced a significant shift in development programmes from new build to lower cost remodelling and refurbishment of existing buildings. In the healthcare sector, both organisational change and financial constraints in the NHS estate are leading to the focus shifting towards improving and refurbishing the current NHS estate.
The conversion of LA supported schools to Academies and Free Schools status, the creation of new primary school places and the Priority Schools Building Programme (PSBP) are key factors driving demand for fit-out and interior refurbishment services in education. In the higher education sector, there are significant opportunities for fit-out and refurbishment work going forward, as universities remodel their capital programmes to meet revised funding expectations. The main emphasis on construction projects in the higher education sector is now towards refurbishment and upgrade of existing facilities as well as ongoing maintenance and improvements and less towards new build projects.
The outlook for fit-out and refurbishment work in the leisure sector remains mixed with significant expansion plans announced by the budget hotels, food & drinks service and budget fitness club sub-sectors contrasting with less buoyant prospects for sectors such as the betting & gaming industry.
There are two very large specialist contractors in the interior refurbishment and fit-out market, which account for a significant share of the market.
“There have been relatively few major new entrants into the interior refurbishment and fit-out market in recent years, and much of the turnover generated from leading companies is from repeat business or long term contracts and store roll-out programmes.” said Keith Taylor, Director of AMA Research. “Clients typically prefer to use contractors from preferred lists. However, an increasing number of large national contractors have diversified into or expanded their operations within the fit-out market, particularly in the office and retail sectors, underpinned by the continuing pressures on new build.”
The ‘Interior Refurbishment and Fit-Out Market Report – UK 2016-2020 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.