Merry Christmas from AMA Research!

The team at AMA Research would like to thank all our clients for their custom in the past year! It has been an extremely busy time – in addition to publishing a wide range of reports, some of which were brand new titles, we have also undertaken a large number of varied client specific projects, ranging from detailed reviews of building materials to in-depth assessments of end-use contractor sectors.

During 2015, we plan to continue to improve our product and service offers, starting with an upgrade of our interactive content delivery platform in Q1.

The building and construction industry is finally showing signs of sustained improvement, driven firstly by the residential new build sector, but also by the non-residential new build sector where offices and infrastructure are forecast for good growth. We hope these improving conditions will benefit all our customers and wish everyone a Happy Christmas and a Prosperous New Year!

 

Please note that we are closed for business from 25^th December 2014 and will re-open on 5^th January 2015. We will process all orders and respond to any enquiries as soon as we are back after the Christmas break.

Positive outlook for the UK construction industry

Prospects for the construction industry are reasonably optimistic according to AMA’s latest Construction and Housing Forecast Bulletin.

Published last December, the Quarterly Bulletin indicates that housebuilding is the main driver of sector growth, with current  forecasts indicating increases in value of 22% and 16%  in 2014 and 2015 respectively. New housing starts are forecast to grow by over 10% in 2015 with medium term prospects set to be driven by Government policy changes in 2016-2018.

Prospects for non-residential construction are more moderate and varied. Office construction is bouncing back from the severe downturn in work in 2009-12, with growth of over 25% in 2013/14 and further steady growth forecast for 2015-18, while education construction work has proved more resilient in 2014 than anticipated. Entertainment and leisure construction is also buoyant and currently worth over £6 billion per annum.

The bulletin is published four times a year and provides a quarterly review of the overall non-residential and residential new build and RMI sectors, containing the very latest statistics and information, together with medium and longer term forecasts updated to take account of recent developments. The next issue of the Construction and Housing Forecast Bulletin is due out at the end of February 2015. For more information or to subscribe to the bulletin, please click on this link or contact us on sales@amaresearch.co.uk.

Online distribution of electrical products worth more than £500m by 2018

In 2014, the market for online distribution of electrical products was estimated to be worth around £400 million, representing 3% of the overall electrical products market. The market has seen consistent growth since 2008 as use of online purchasing and mobile technology has increased, and as suppliers have developed online offerings.

The distribution network within electrical products is complex, reflecting a wide range of products and a variety of end users. The largest distribution channels within online sales are electrical wholesalers and specialist retailers, while merchants and DIY retailers are also significant players in this market.

Whilst electrical wholesalers are strong in the sales of electrical products, their online capabilities are less well developed than certain other retailers. Internet retailers’ development of strong online sales platforms has allowed them to gain strength in lighting and appliances in particular. Electrical Wholesalers’ development of online platforms may be hindered by the complex discount systems in place within branches, which can be difficult to implement online.

Important companies involved in the distribution of electrical products via the internet include Screwfix, Rexel, YESSS, B&Q, Currys, Travis Perkins and a number of specialist online retailers, particularly those focusing on lighting and appliances.

Electrical products are increasingly being sourced online, both by contractors and end users and as such the outlook for electrical products distributed via this type of channel remains positive. Companies are also widening the product ranges offered through online channels and creating special online ranges and promotions in order to promote this type of distribution and to appeal to a wider audience.

Future growth, while positive, could be limited by the lack of transactional capabilities of some of the larger wholesalers and the slow uptake by electrical contractors who tend to remain loyal to local wholesaler branches and the discounts they offer. In addition, the traditional buying behaviour patterns of contractors may also delay gains in the Internet sector over the medium term future.

The market for online distribution may also remain limited in certain product sectors, such as electrical accessories, where items are low value, commodity products and distributors hold a constant, high stock level, providing less benefit to pre-ordering. In addition, growth may be limited in some sectors by the technical or specialist installation requirements of certain products, leading to the specialist contractors retaining their position and often buying through traditional channels.

“The internet sector is outperforming other distribution channels in terms of growth and there are increasing opportunities to purchase online as more of the larger suppliers develop their web and mobile sites” said Keith Taylor, Director of AMA Research. “However, the rate of growth will depend on the attitudes and opinions of electrical contractors and their propensity to use the new media.”

In the medium term, the internet electrical products market is expected to continue to outperform the overall electrical products market, increasing by 37% between 2014 and 2018 to achieve a market value of £549 million.

The ‘Electrical Products Distribution Market Report – Focus on Internet – UK 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.

Home extension planning applications remain stable

The overall level of residential planning decisions granted in Great Britain has remained fairly stable over the last 5 years despite the economic uncertainty and relatively low levels of consumer confidence.

A steady improvement in the economy and housing market in 2013 had a positive impact for the overall home repair and refurbishment sector, which increased by around 2%. The presently more positive economic outlook also influenced the number of householder improvements granted by the planning authorities, with an upturn in 2013.

In terms of regions, England accounted for 89% of ‘householder developments’ in 2013, up from 87% in 2009, with Scotland accounting for 6% and Wales 5%. The majority of householder planning decisions granted were for building extensions, with single and two storey accounting for around half of all projects undertaken.

Single storey extensions were estimated to account for around 37% of householder developments in 2013, while two storey extensions were estimated to account for around 13% of householder developments. Two storey extensions cover a variety of applications and incorporate a wide range of products including bedrooms, bathrooms, utility rooms, a garage etc., in addition to an extension of the living and kitchen areas.

“The nature of the extension can vary from the installation of a new kitchen and open plan living area to a simple utility room and downstairs cloakroom. In 2013, the vast majority incorporated a kitchen and living area” said Keith Taylor, Director of AMA Research. “The growth of the trend towards contemporary design has motivated consumers to create a clean and uncluttered look throughout much of their home. This has led to a demand for more open plan arrangements, particularly in existing homes where improvement and redesign is undertaken”.

Although the UK economy remains fragile, there is more optimism for a continued recovery in the construction industry and the housing market, along with improving consumer confidence & spending. Low interest rates and rising house prices are encouraging consumers to undertake larger scale home improvements, particularly as there have now been a number of years of deferral of product replacements and home improvements.

Into late 2014 and beyond, average UK house prices are forecast to rise by around 6% in 2014 and thereafter by between 4% and 5% to 2017 driven by the continued economic recovery and prospective rises in average earnings. Rising house prices in the longer term should provide underlying support for the home improvement market, particularly high value improvements such as building extensions.

However, the expectation that interest rates are eventually set to rise in 2015, will exacerbate affordability issues and slow house price growth to around 2-3% by 2018. Consequently, the level of building extensions is expected to achieve modest growth in the medium term, reflecting growing consumer confidence and spending and perhaps a return to the trend of carrying out improvements prior to placing properties on the market.

Affordability issues are the main barrier to growth as banks and building societies require more information regarding borrowers' finances in order to assess their income, outgoings along with potential interest rate increases, before making a decision on how much to lend. However, it is reasonable to assume that homeowners with good levels of equity and those considered low risk by lenders will continue to undertake improvements, which should provide underlying support for the market. In addition, overall residential RMI expenditure is expected to achieve a steady rate of growth in the medium term to reach around £28bn by 2018. 

The ‘Home Extensions Market Report – GB 2014-2018 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services with over 25 years experience 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.

Confidence returns to the Warehouse Construction market

After years of decline, confidence is starting to return to the warehouse market as developers respond to an improving economy, recovering levels of manufacturing and current high levels of demand for warehouse property.

Improving market sentiment and a pick-up in economic activity has seen total demand for warehousing floor-space across all regions improve with take-up rising by around 28% in 2013.

In 2014, many developers and occupiers active in the logistics and industrial sector remained relatively cautious and, as a result, new construction continues to be driven mainly by build-to-suit activity. In 2014, speculative development rose to around 2.1m sq. ft., but this is still significantly below the peak recorded in 2007 and 2008.

There continues to be good demand for larger distribution, both from retailers and third-party logistics operators due to an acute lack of available space. This trend is likely to continue with the growth of internet shopping as retailers distribute their online sales from retail warehouse space. In addition, as internet sales continue to rise, they are anticipated to lead to a major change in the logistics market, as retailers invest in major warehouse developments purely for internet sales.

In terms of occupiers, retailers continued to drive the warehousing market in 2014, committing to large pre-lets and the importance of the sector is likely to continue in 2015, driven by discount grocery retailers, such as Lidl and Aldi, who continue to acquire more regional distribution centres to support their expansion plans. In addition, the manufacturing sector now accounts for a larger part of the warehousing market than in previous years, with increasing occupier demand now driven by an upturn in manufacturing output and, in particular, growth in the automotive export market.

Developers have reported an increase in the number of occupiers switching from centralised distribution centres to a smaller, regional ‘hub’ model of warehouse. As the major supermarkets continue to improve their e-fulfilment networks and the need for quicker delivery times increases, competition for smaller, urban distribution hubs near cities, particularly in London – continues to grow.

On a regional basis, most areas of the UK have seen an increased level of activity in 2013 and 2014, with the traditional industrial markets in the Midlands and the North remaining the focus of activity. Greater London and the South East experienced rising activity in 2013 but take-up remained below trend levels in these markets due to supply constraints. In addition, the geographical bias of speculative development is weighted towards the Midlands, South East and the East of London, primarily driven by London’s Gateway Logistics Park.

The switch from traditional store retailing to online retailing is likely to cause a significant structural change in the warehouse sector, changing the type of space required. This could lead to a ‘two-tier’ market becoming established, with more smaller distribution centres close to urban markets to fulfil express deliveries, supported by remote and larger distribution centres through which to replenish smaller urban warehouse hubs. This is leading to retailers needing delivery facilities in multiple locations and the warehouse market is expected to see more speculative development of sheds of less than 250,000 sq. ft. in the suburbs, close to good road networks.

“Warehouse construction is expected to have begun a steady recovery in 2014 in response to general economic recovery, an improving manufacturing sector, efforts by retailers to streamline their supply chains and increased demand from logistics businesses serving the e-commerce industry.” said Andrew Hartley, Director of AMA Research. “As a result, output is estimated to have grown by around 10% in 2014, with further growth forecast in 2015-2018.”

Beyond 2015 and up to 2018 the warehouse market is expected to grow year on year to reach a value of £1.7bn in 2018, though this is still well below its peak in 2007. The warehouse construction market continues to face a number of challenges including increased competition and, in particular, an acute shortage of industrial land, particularly in locations close to major urban conurbations in some areas and planning delays.

 The ‘Warehousing Construction Market Report – UK 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.