Office Furniture Dealers market remains fiercely competitive

The overall UK office furniture market has been through a sustained difficult trading period, with the market declining substantially in 2009/10. However, it has recovered somewhat since then, with sales reaching an estimated £665m in 2013.

There is still a surplus of supply capacity over demand, despite some well-known companies having ceased to trade, and this has resulted in suppliers having to cut prices further to maintain share.

The two main distribution channels for office furniture are via the dealer network, accounting for 44% of the market, or directly to end users, with around a quarter of the market. Retail furnishing groups and miscellaneous outlets account for 20% of the market, whilst superstores and mail order sales account for the remaining 11%.

The office furniture dealers’ sector is extremely fragmented with an estimated 2,000 to 2,100 branches in the UK, largely single branch enterprises. Dealers source their furniture mainly from UK based manufacturers, although they have increasingly used importers to supplement their offering in recent years.

The majority of dealers source their products from individual manufacturers and this enables them to offer a comprehensive range of products at different price points, however, some dealers have close links with individual suppliers, usually with the larger companies. Having good quality products with enhanced features is the most important factor when dealers are looking for a supplier and this is particularly true of the premium sector, where it is important to differentiate from other distribution channels in order to avoid direct price comparison.

The supply chain in the market is likely to experience some changes, with further growth in the SOHO market benefiting the less traditional channels of supply, such as multiple furnishing retailers, superstores, mail order and the Internet in the short to medium term future. Competition is expected to be relatively intense due to the furniture multiples offering a wide range of flat pack products at lower prices. Growth in this sector may entice new entrants into the market, although this is more likely to be on the manufacturing side, rather than in the retail sector.

The dealers’ market is expected to show modest growth in the next few years, increasing from an estimated £293m in 2013 to £318m in 2018. Although the share of the market held by dealers is forecast to decline to 42% by the end of the period, growth in the overall market should more than offset that decline.

Keith Taylor, Director of AMA Research said: “The dealers’ channel is expected to see low-level growth over the next few years, though it is expected that their market will remain challenging. Retailers, such as IKEA, Argos and Tesco, together with Internet suppliers are likely to be joined by other multiple retailers and are expected to increase their share of the market using catalogues and the Internet to support their nationwide chains of outlets.”

The ‘Office Furniture Dealers 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.

Explosive growth in the UK LED Lighting market

In 2013, the UK LED lighting market was estimated to be worth £330 million at manufacturers’ selling prices (MSP). This incorporates all finished, mains-operated LED lighting products, domestic and non-domestic used within construction and building.

The LED lighting market is currently experiencing an explosion in growth as the new technology becomes more widely accepted in the mainstream lighting market, further encouraged by energy cost savings and CO2 concerns, driven by legislative changes. 

The market is largely reliant on total system upgrades and new installation applications. Non-domestic end users dominated in 2013, accounting for 95% of the market in terms of value. Infrastructure is the leading sector within LED lighting with many councils replacing or planning to replace conventional street lighting with LED lighting, attracted by significant energy cost savings, lower CO² output and long life cycles.

The Leisure & Entertainment and Health & Education sectors have been high early adopters of LED lighting and will continue to be major end use sectors in the near to medium term. Retail use is growing strongly whilst office, industrial and domestic use will expand over a longer time period.

In 2013, the LED lighting market was characterised mainly by sales of LED luminaires, accounting for an estimated 75% of the market, with the rest of the market made up by replacement LED lamps and LED controls and accessories. The use of this technology for lighting often requires installation of specific luminaires in order to achieve the full benefits. However, product development within LEDs is largely focused on development of replacement and retrofit products, greater efficiency and improved colour rendering index (CRI).

Distribution is led by direct sales as many manufacturers introduce, and have a better understanding of, the new technology, but this will change longer term. This channel is further supported by the dominance of larger public sector projects, which tend to source directly from manufacturers. Electrical wholesalers and specialist distributors are also significant players and their share is likely to grow as the technology becomes more widely established and used by the electrical contractors more widely. Retailers, including DIY, supermarket, and high street stores are the principal suppliers to the domestic market.

The supply of LED products is led by five main suppliers who are estimated to account for around 80% of the market. The remainder of the market is fragmented comprising many second and third tier specialist and smaller firms.

The average price of LED lighting products has fallen in the last 12 months driven by the growing volumes of sales, manufacturing techniques and increasing competition in the UK market. However, LED products remain significantly more costly than many alternatives restricting volume sales, particularly in the domestic sector.

The LED lighting market is expected to continue to experience significant growth as the new technology further penetrates the lighting market. This is likely to be supported in the short-medium term by government cutbacks hitting public sector budgets and prompting investment in technologies which provide reductions in long term running costs. 

The government is also committed to promoting energy efficient products, through their use within public sector projects and through the introduction and strengthening of energy conservation and monitoring legislation. However, the lack of product standards in the market has led to some consumer reluctance to purchase LED lamps due to poor experiences with lower quality products in the past. This may continue to restrict growth in the short term.

“In the medium term, as the commercial and increasingly the domestic sectors utilise the new technology, and with higher volumes of housing required and increasingly sophisticated, task orientated lighting used across all markets, LED lighting will see high volume growth supported by a wider range of sectors” said Keith Taylor, Director of AMA Research. ”We expect the market to grow rapidly until 2018, when the it is estimated to be worth in excess of £1bn.”

The ‘LED Lighting 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 Water Saving Plumbing Products Market growing rapidly

The UK water saving plumbing products market is estimated at £164 million at Manufacturers Selling Prices (MSP) in 2013, according to a new report by AMA Research.

During the period 2009-2012, the market for water saving plumbing products was relatively flat - in line with the difficult economic situation at this time. However, since 2013 the market for water saving plumbing products has seen an increase, with demand picking up as the economy and new housebuilding levels improve. The core product sectors of the UK water saving plumbing products market are water efficient bathroom products (87%) and water recycling systems (13%).

Water efficient bathroom products are distributed through a wide range of channels. The main distribution channel continues to be merchants with the DIY multiples also holding a substantial share. Other channels include bathroom specialists and online retailers. The vast majority of water recycling systems are distributed either through plumbing and drainage merchants or direct via water recycling specialists. There are also a growing number of online retailers operating in this market sector.

There is an increasing awareness and demand for water saving products in UK homes and businesses. Demands for water are continuing to rise and maintaining supplies to meet these demands is becoming increasingly difficult. The development of new housing in areas of water stress, population growth and a doubling in the number of single person households since the 1970’s have increased demand for water.

In addition, there has been a significant growth in the number of second bathrooms, en-suites and cloakrooms. In 2013, it is estimated that around 22% of all UK properties have two or more bathrooms and around 41% have two or more cloakroom / WC facilities.

The future performance of the water saving plumbing products market is likely to be driven by government legislative changes and growing concerns and attitudes towards water usage and its impact on the environment. The compulsory requirement for water meter installations in new housing and the introduction of The Water Label as standard on water-using bathroom products from summer 2014 will also increase awareness among householders of the benefits of water saving products.

“The replacement of inefficient WCs in particular will be motivated by more widespread water metering and the rising cost of water. Nearly two thirds of water is used in the bathroom either for showering, hand washing/bathing or flushing the toilet. With around 7 million inefficient high flush WCs still in use in the UK, there is a significant replacement opportunity that could achieve substantial water savings.” said Keith Taylor, Director at AMA Research. “Furthermore, most new-build schools, colleges, offices, government buildings, multi-residential and retail buildings will be designed to meet a higher BREEAM rating.”

Digital technology will also become more prevalent in UK bathrooms and play an important role in sustainability. For example, water efficient bathroom products that operate automatically with electronic sensors and digital systems that allow water flow to be controlled and run for a set period of time.

By 2018, the market value is forecast to be around £220 million, which represents an increase of around 35% compared to the market size in 2013.

The ‘Water Saving Plumbing Products 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.

Event Equipment Hire market to grow by 23% over the next 5 years

The UK market for event equipment hire is estimated to be worth some £560m in 2013, according to a new report by AMA Research. Good weather in 2013, particularly over the key months of the year, benefited the events sector and consequently the event hire sector.

The UK has a well-developed infrastructure of event destinations, venues and service suppliers, and the market does not appear to have been impacted by the economic downturn to the same extent as many other product and service sectors, though corporate events have seen a decline.

The market was boosted significantly in 2012 due to the Queen’s Diamond Jubilee and the London 2012 Olympic Games and related events. While good weather provided a boost to the market in 2013, some post-Olympic readjustment meant that the market size fell marginally during the year compared to the peak in 2012. However, underlying growth remains strong with prospects for 2014 positive, given the reasonable weather.

It is estimated that the exhibitions & trade show sector accounts for the largest share of the event market at more than 50%. Other key sectors include sports, music, festivals & cultural events, corporate hospitability and ‘other events’ such as charity events and hobby festivals. The largest equipment hire sectors are estimated to be staging, structures & seating, and portable buildings & sanitation, which have a combined share of 50-60% of the market.

Other important hire sectors are power generation & climate control, audio-visual & lighting, signage, traffic & crowd control, security & portable access, interiors and access equipment & other plant. The sector has seen some changes in recent years as event organisers improve standards of safety, comfort and sanitation, as well as investing in better AV equipment to enhance the visitor experience – all factors driving growth in equipment hire.

“2014 has been positive for the event hire sector and the market is forecast to grow steadily to 2018. Up-coming sporting events across the period, as well as a wide range of music concerts & festivals, exhibitions & trade shows and corporate events, are expected to boost the equipment hire market to over £600m by the end of the forecast period.” said Andrew Hartley, Director of AMA Research. “While adverse weather can impact negatively on the market, developments in the climate control and structures product sectors have led to outdoor events being less dependent on the prevailing weather.”

The ‘Event Equipment Hire 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.

Online distribution of garden products set to double by 2018

In contrast to the overall garden products market, online gardening sales have experienced substantial levels of growth in recent years and the internet is by far the fastest growing distribution channel for garden products. In its newly published report on this sector, AMA Research estimates that the Internet garden products distribution market is now worth over £300m at retail prices.

Consumer shopping behaviour is changing, influenced by digital technology, and many non-specialist suppliers such as garden centres, store-based garden product retailers and mail order/ catalogue companies are increasingly entering the online retail market. Use of mobile phones and tablets is also growing rapidly and some non-specialists have seen rapid growth in the ‘click and collect’ service.

Selling over the Internet tends to favour some product categories over others, with garden leisure, garden equipment and horticulture being key products for sales online. There are also significant differences in mix between the specialists and non-specialist online retailers by product group. For example, garden sundries and chemicals are dominated by the non-specialists, whilst the specialist e-tailers compete well in garden leisure and horticulture.

The Internet garden market is still relatively immature and is expected to continue to show strong annual growth levels, although inevitably the pace of growth will slow down as the market matures. Taking these issues into account, it is estimated that the UK Internet garden products market will be worth an estimated £744 million in 2018, more than twice its current size.

Andrew Hartley, Director of AMA Research said: “The Internet has removed barriers to entry previously enjoyed by traditional store-based retailers and other suppliers, which has allowed small and medium sized specialist e-tailers to enter the garden products market, creating a new competitive dynamic. By 2018, it is estimated that the Internet garden products market will account for an estimated 15% of the total garden products market, up from around 8% in 2013.”

There are a number of key factors affecting the future prospects for the Internet garden market in the UK, including consumer spending levels, the pace of economic recovery and overall trends in online e-retail shopping. Demand for garden products is also heavily affected by the weather, and as a result there are likely to be fluctuations of sales growth and decline on an annual basis.

The ‘Internet Garden 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.

Positive market prospects for kitchen and bathroom distributors

Overall, conditions in UK kitchen and bathroom markets have remained difficult over the last five years, with low levels of housebuilding - and a difficult housing market generally - significantly affecting these sectors, particularly bathrooms. However, housebuilding levels increased in 2013 supporting modest value growth and the kitchen and bathroom distributors’ market was estimated to be worth £840 million at distributors’ selling prices at the end of 2013.

In 2013, the total UK kitchen and bathroom products market is estimated to have reached a value of £6,027m at DSP, and the distributors’ share of this market in 2013 was approximately 14%.

Increasing raw material costs and higher transport costs have impacted on margins in the sector over the last 2 years. Generally however, a number of distributors have avoided significant losses by focusing on logistics to reduce transport costs and own brand product ranges offering higher margins.

National distributors account for around 75% of the market, with large regional distributors making up most of the rest of the market. A large proportion of distributors’ sales are bathroom products, with around 30% of sales falling into this category.

The growth of showering continues to add pressure to the bath sector, with additional bathroom installations such as en suites favouring shower enclosures and wet room areas. Distributors’ share of the kitchen furniture market has remained fairly stable in recent years, with distributors continuing to supply all sectors of the market.

Sales to kitchen and bathroom specialists dominate the distributors’ market, accounting for 40%. Builders’ merchants are also a key customer accounting for 29% of the market. Other customers include DIY Outlets, other retailers such as department stores, electrical independent retailers and others including sub contractors and end users such as local authorities or housebuilders.

“The kitchen and bathroom supply chain has changed in recent years, with growth of Internet retailers in the plumbing and bathroom sectors, allied to more difficult conditions in some of the domestic contract sectors of the market.” said Keith Taylor, Director of AMA Research. “With more positive market prospects in the future, it seems likely that the Internet channel with continue to prosper, benefitting the kitchen and bathroom distributors”

The report estimates that the market will reach a value of around £1.1bn in 2018.

The ‘Kitchen and Bathroom Supply Chain Market Report – Focus on Distributors - 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.

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.