Naturally, the last year has been a challenge for contractors who work in the London fit-out market. I regularly conduct an informal survey with firms and sub-contractors working within the market to establish what their pipelines are looking like, and what the pressure points are. What is emerging is that there’s a two-tier system within the market.
Larger contractors (tier one), able to take on significant Grade A fit-outs generally have strong order books for the year – matching the activity in the leasing market, where we are beginning to see a flight to quality office space, as leasing levels reached the highest since the pandemic began in Q1. However, smaller firms (tier two) are not seeing the volume of projects coming forward that they need. For sub-contractors, secured work looked stronger, with M&E trades reporting order books at 80% on average for the year, and joinery reported an average of 70%. Both of these issues create real challenges for clients looking to secure the best teams.
While the economy is still only just waking up and taking its tentative first steps, some occupiers will still be carefully considering their expenditure and remain reluctant to embark on substantial office remodels, while others will be working to accelerated timelines and will need firms to design and build within a short time frame.
Although respondents said that the outlook for tendering was looking more positive, there are still significant challenges for the market. The rising cost and reduced availability of materials during the first quarter of this year has been widely reported. Shipping and commodity prices have risen sharply as global demand recovers, with some raw material costs increasing by as much as 100%, which, combined with labour shortages, is creating upward pressure on costs.