London fit out report - autumn 2016

Our autumn survey of tier one and tier two suppliers tested market sentiment, expected tendering conditions and expected price rises.

A turbulent few months has seen a change in attitude in the market as the fit out sector reacts to the result of the EU referendum.  In our summer survey, the market was anticipating a steady warming with key trades such as M&E and Joinery being particularly stretched.  While these trades continue to be in demand, the immediate fall out has seen more aggressive bidding of work combined with price inflation as a result of the weak pound.

Single stage tendering has made somewhat of a comeback during Q3 with many contractors now reporting that this is where the majority of their opportunities are coming from.  The market has responded to the ‘leave’ vote by looking to secure turnover in the short to medium term.

Inflation levels in the London fit out market have been around 5 percent for 2016.  Our survey reveals that inflation levels are expected to be around 5 percent for the next 24 months. 

  • 5.1% Tender price inflation 2016
  • 5.4% Tender price inflation 2017
  • 4.8% Tender price inflation 2018

In this issue we explore how the London fit out market has reacted to this changing landscape.

Brexit impact

The uncertainty felt immediately after the ‘Brexit’ vote seems to have persisted into the fit-out market throughout autumn 2016 and it seems that uncertainty will characterise the market going forwards. Tender workloads have decreased slightly as a response to the initial vote, although many are expecting these to have rebounded as clients become clearer on their future real estate strategy.  The overall theme running through the fit-out market is one of cautious optimism.

Our summer survey identified that market conditions were expected to get warmer, with 50 percent of respondents anticipating this trend. Post-Brexit, market sentiment has cooled with the majority expecting the market to remain the same. 

A large selection of the contractors we surveyed stated that the market is very much in good health, with increased opportunities for small/ medium sized contractors. Material costs have increased as sterling continues to toil after large scale devaluations post ‘Brexit’ vote. This has had a knock on impact on tender prices, with contractors pricing in risk on longer running projects.

Tendering conditions

tendering conditions with key.jpg

The level of opportunity remains high, however, this sentiment is not felt throughout all the supply chain. Some larger opportunities are coming to market, which will mean sub-contractors in particular will begin to be more selective on the projects they target. Yet, niche trades, such as audio visual work, will see less opportunities. Essentially mixed messages across the varying stages of work streams.

Download the full report to find out about inflation rates, industry commentary and key challenges and indicative costs across category A and B.