London fit-out report - January 2019
The second half of 2018 saw a volatile market reflecting continued uncertainty in the economy. This is in conjunction with our wider market forecasts, which also indicate minor growth towards the end of 2018.
While the end of 2018 reported minor growth, pipeline visibility continues to reduce as Brexit uncertainty remains, creating an unpredictable and volatile fit-out market. The full outcome of Brexit will be followed with great interest as the fit-out market begins to react to a potentially challenging 2019.
The following five key trends have been identified in this report:
Clients are cautiously considering long-term leases
Visibility in the pipeline has been reduced further as the hesitancy remains amongst clients reviewing their workplace strategy. Clients are holding back on investment until the impact of Brexit has been realised and risk profiles can be reassessed.
Contractors are attempting to ‘Brexit-proof’ themselves in a buyers’ market
Our survey shows that, while the full impact of Brexit is yet to be realised, fit-out contractors are seeking to fill order books and minimise their exposure to the impact. Changes to management structures and implementation of aggressive bidding tactics are reported as we enter into a ‘buyers’ market’.
Overheated sub-markets are challenging main contractors
While main contractors seek to ‘Brexit-proof’ themselves, the mechanical and electrical (M&E), joinery and partition sub-markets in particular are showing signs of overheating. Trades are reporting that their resource is operating at near-full capacity as a result of live projects over £25 million in value. This limit in resource is reducing the competition when tenders arise and inflating prices for these key trade packages. It is recommended that clients engage with the supply chain early in the design process to increase the pipeline visibility.
Single stage is on the rise
While the past six months have reported that large scale projects are best procured on a two-stage tendering strategy, this is set to change over 2019. Clients are looking to reduce their risk profile as the market begins to cool.
Skills shortages remain present
There is continued reporting of skills shortages across the fit-out market, as well as the construction sector as a whole. This will prove to be the biggest challenge facing the industry due to the historic reliance on migrant labour and an ageing workforce.
To access the full London fit-out report for January 2019, please complete the short form below and you will receive a PDF copy by email.