Fit-out needs a makeover

As the 70 or so employees at Ibex Interiors were told to pack their cardboard boxes and leave the building, they may have been entitled to ask: so what happened? It was not so long ago when many of these employees enjoyed the trappings of working in this part of the construction industry, which was seen as sexy, modern and rather well paid compared with the “traditional” sectors.

Spurred on by the “big bang” in 1986, the fit-out sector was created as financial and banking tenants demanded large, deep-plan, shell-and-core office space from developers such as Stanhope, Greycoat, MEPC and others. A construction niche was born that had a new language, a new set of trade contractors and a management approach where the customer was king. Companies like Stanhope Interior, Bovis, Nico, Structuretone and Laing took the lion’s share of this market, providing clients with a refreshing “non-adversarial” approach.

A construction niche was born that had a new language, a new set of trade contractors and a management approach where the customer was king

The good times flowed and “me too” companies such as Ibex, Overbury, Knight Harwood, BW, 8Build, Collins, Paragon, Como and Parkeray were created, importing their approach and staff from the original start-ups. As the nineties progressed, office tenants continued to demand more and more IT, communications and M&E equipment from their fit-out contractors and designers as they pushed new ways of working.

Halcyon days indeed, which lasted 20 glorious years until the demise of Lehman Brothers in 2007 and the subsequent crash in the financial sector.

As margins on tenders are cut to the bone, and a do-or-dare attitude permeates the sector, it is inevitable that contractors will continue to feel the heat. Couple this with the growing trend towards “design and dump” contracts which transfer large amounts of risk to the fit-out contractor under a JCT format, and one can see how a toxic environment has been created for this sector.

For some clients, the seduction of the design-and-build offer from companies such as Maris, Modus and Morgan Lovell - the 3Ms - is seen as the holy grail of a fixed price, fixed design and fixed approach. In reality, the popularity of design-and-build and the pressures facing the fit-out sector share a common theme: clients are desperately seeking low-cost options and consultants are under continued fee pressure, which means that the “cuddly” management approach of the fit-out process is also under pressure.

Just look at the shape of today’s “new” companies, such as CBRE, EC Harris/Arcadis, Aecom and others, which have morphed into global “client platforms” that drag their nets deep across the property landscape. Maybe they could provide a clue for the survival of the fit-out sector? Clients want simplicity from their suppliers, and fit-out contractors have been slow in working this out.

The current mantra is to either stay small and agile, an “eat what you kill” approach, or go large and global, maximising economies of scale. Do not expect a comfortable ride if caught in the middle ground. A few have worked this one out. ISG, and to a certain extent Mace, have invested in a network that offers fit-outs to Fortune 500 companies in the key cities of the world.

However, the model is constantly evolving. Note how Argent, after the success of King’s Cross, has shifted away from office-only schemes. Recessions always create opportunities and so the fit-out sector must also broaden its offer in order to survive.

As chair of the Thames Valley Property Forum, I feel passionately that we need to develop a platform which allows debate and discussion on these issues across not just the Thames Valley but London and the UK. The UK Property Forum will help identify the challenges ahead and maybe we can begin the journey back to the heady days when the Corney & Barrow in Broadgate Circus was the centre of the London fit-out universe.

Matthew Battle is a former employee of Ibex and now chair of UK Property Forum