Recovery in Sight for Panellised Modular Building Systems

The UK market for panellised modular building systems is estimated to be worth some £440 million in 2013, according to a new report by AMA Research. Forecasts for growth are relatively optimistic, but are dependent on recovery in the housebuilding and other key construction markets.

The market has remained subdued following a period of significant decline between 2008 and 2010, primarily due to the downturn in housebuilding activity. However, from 2013 onwards the recovery in the economy coupled with temporary shortages of aircrete blocks and bricks, have fed through to increased demand for MMC. However, from 2015 the market is likely to experience more modest growth rates as this situation changes.

The timber frame sector is by far the largest under review, with trends here largely underpinning those at the overall level. By value, the timber frame market was worth over £300m, with light steel framing, concrete and SIPs accounting collectively for around £110m. Key end use sectors for panellised modular building systems are houses, apartment blocks, schools, budget hotels, smaller healthcare and care facilities, and purpose built student accommodation. However, demand across the public sector has been impacted by cuts at central departmental, agency and local authority levels.

The industry has undergone some restructuring in recent years, with the exit of a number of major suppliers, particularly in the timber frame sector. Market supply is fairly fragmented, with no suppliers having dominant market shares - there are only three relatively large manufacturers of timber frame system that regularly report annual sales over £20m.

“We could see sustained recovery in the demand for panellised modular systems in the short to medium term, provided that key construction sectors continue to recover” said Andrew Hartley, Director of AMA Research. “The government’s pledge to support the development of up to 30,000 affordable homes in England and the general upturn in the housing market should mean that housebuilding will provide a key sector for growth.”

Another potential key driver is the government’s Modular Building Systems Framework, which should encourage the increasing specification of steel frame and timber frame modular building systems on public sector projects, and factors that should help overcome barriers to specification include the mandatory implementation of BIM across the public sector.

Taking these factors into account, forecasts for the short to medium term are for steady growth within the range of 3-5% per annum until 2018.

The ‘Panellised Modular Building Systems Market Report - 2014-2018 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.

Electrical Contracting Market Returns to Growth

The electrical contractors market was estimated to be valued at around £18.2bn in 2013, having seen moderate levels of growth since 2011, according to a report published last month by AMA Research. Growth rates are forecast to improve from 2014 onwards, although the market will remain competitive with profit margins under continued pressure.

While electrical contracting is thought to have been less affected than some other areas within the construction industry during the recession, the electrical contractor market declined in 2009/10. In 2011, increasing raw material prices provided a boost to the market in terms of value. However, this was offset to a great extent by weak demand in the private sector and the government’s spending cuts taking effect, and the growth rate seen in 2011 could not be sustained, leading to a flat market performance in 2012.

Current estimates are more positive, and point to a return to growth from 2013 onwards. Business confidence has been higher during the year and there have been some positive signs that the economy could finally be recovering from the downturn.

Competition remains fierce among contractors, with reports of businesses continuing to submit tenders at, or below, cost price in order to secure work or retain clients. Profit margins, which were already under pressure, have declined further. Consolidation activity amongst suppliers continues to be high within the market. This has led to a number of major players increasing in size over the past few years. The growth in strategic acquisitions is also in response to the growing focus on integrated services within the sector, with contractors widening the range of services offered.

A key area of growth in recent years has been installations aimed at improving energy efficiency and reducing carbon emissions, driven by increasingly stringent legislation and regulations around this, but also given impetus by the long-term cost savings that can be made by installing such systems, driven by increasing fuel costs.

Future prospects for the sector are moderately positive, with the electrical contracting market expected to show growth of around 3% per annum over the next few years. However, this depends largely on the performance of the non-domestic and domestic construction sectors. The housing sector is one of the key sectors likely to underpin growth within the electrical contracting market over the next few years, as demand for new housing is constantly increasing.

Keith Taylor, Director of AMA Research, said “Growth in the future is also likely to be motivated by legislation around carbon reduction, and renewable energy in particular. Solar panel installation currently represents a fast growing sub-sector of the electrical contracting market. A shift to LED lighting should have an impact on the market and data centres also remain a potential source of growth.”

Forecasts indicate that the market may reach £20.6bn by the end of 2018, providing the economic climate continues to improve.

The ‘Electrical Contractors Market Report - 2014-2018 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.

Bouyant Market for Data Centre Construction in the UK

The market for data centre construction is estimated to be valued at around £1.1bn in 2013, following two years of exceptionally high level growth. However, while take-up rates continue to increase, data centre construction output is likely to fall from 2014 onwards as demand is absorbed by the relatively high levels of existing vacant space.

Market performance has otherwise been variable, with falls during 2009 and 2010 as a result of the economic downturn affecting a number of key sectors for data centres, such as financial services and retail. Subsequently there was a return to growth in 2011, and data centre construction activity was at a very high level throughout 2012 and into 2013.

This was due to the growing interest in cloud computing in combination with improving business confidence, which led to a release of projects previously on hold. Energy efficiency is another key driver of market growth. The effects of improving energy efficiency in data centres can be seen immediately, bringing the additional benefit of substantial savings on operational costs, of which power accounts for a large share. This has driven demand for modular solutions, from rack-based solutions to complete data centre pods and containerised solutions.

One key trend that may affect the market negatively in the longer term is that of data centre consolidation. The government, as well as a number of private businesses, have announced plans to consolidate their data centre estates and move operations to fewer, larger and more efficient data centres. The full impact of this is yet to be seen in the market.

In terms of contractors, the data centre construction market is extremely fragmented. While most large M&E contracting businesses are key players, companies involved in data centre construction range from major building contracting groups and commercial developers, to data centre specialists and operators, modular building manufacturers and IT equipment suppliers. It is likely that further consolidation will take place among operators, specialists and construction/engineering firms in the near future, as the market remains characterised by a large number of new entrants and small market shares, even among the established leading players.

Demand is expected to continue to grow, particularly from technology, media and content providers, with the financial sector also expected to pick up following some definitive signs of economic recovery in early 2014. However, much of this demand is likely to be absorbed by existing vacant data centre space as more businesses opt for the co-location model. The impact of the government’s data centre consolidation project is likely to lead to a reduction in the value of RMI and upgrade spend in the sector from 2015 onwards.

It is estimated that between 2014 and 2016 the market will continue to decline in value terms, however, by 2017 it is expected that the amount of vacant space will have reduced and build levels will have started to rise again. The market is forecast to once again exceed £1bn by the end of 2018.

Keith Taylor, Director of AMA Research, said: “It appears that data centre construction is emerging as a significant sector in its own right, and one key trend seen over the past 2-3 years is that of integrated service offerings. Commercial operators and data centre specialists now offer a wider range of construction services and product/equipment suppliers are targeting whole ranges specifically at the data centre sector. These often include software solutions for monitoring and management as well as design & build services.”

The ‘Data Centre Construction Market Report - 2014-2018 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.

UK Interior Refurbishment and Fit-Out market worth over £7bn

The interior refurbishment and fit-out market in the UK was worth an estimated £7.1bn in 2013, according to a new report published by AMA Research. Having endured a period of significant decline in value terms since 2009, it now seems as though the market is on the road to recovery, with growth in 2012/13 estimated at 2-3% per annum in value terms, and forecasts for 2014/15 more optimistic as demand gains momentum.

Factors stimulating the market include an increasing focus on major refurbishment and fit-out projects in the commercial sector – particularly in London - as newbuild activity remains constrained as a result of continued caution among developers in many parts of the UK.

The retail sector represents a major end use sector, accounting for around 20% share of the market value, whilst commercial offices represent the largest sector overall. During 2013 a more sustained recovery was seen in the commercial office market, with take-up and investment returning to levels not seen since the start of the economic downturn, particularly in London but also in some regional centres.

Though many retailers in the retail sector have scaled back their development programmes, more stable market conditions are encouraging the continuation of refurbishment and expansion plans in some sectors, such as the grocery sector where there is a switch to more convenience stores, providing impetus for market growth.

“The outlook for the interior refurbishment and fit-out market in the medium term is positive, with a number of major developments expected to come through in the office l sector and an increased focus on refurbishment work across all sectors” said Andrew Hartley, Director of AMA Research. “Re-branding and upgrading programmes announced by the budget hotels, value gym, cinema and grocery retail sectors will also create continued opportunities for fit-out and refurbishment contractors.”

The report estimates that the market will see annual growth rates of around 4-5% over the next 3-4 years, to reach a value of over £8.5bn in 2018.

The ‘Interior Refurbishment and Fit-Out Market - 2014-2018 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.