Fit-out update: Shop fit-out

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Shop fit-out There's lots of work and bargains to be had.

Market overview

The Office for National Statistics' latest report on retail sales states that sales growth, although better than a year ago, is still unpredictable month-on-month and that the upward trend seen before Christmas has dropped since the start of the year. But if you think that means the shopfitting market is slow, you'd be wrong.

Many retailers are working on large expansion and/or refurbishment programmes and hardly a month goes by without another announcement on increased capital spend. Marks & Spencer, Primark, Asda, J Sainsbury and HSBC are among the companies providing significant workload.

A number of retailers are looking to improve the look of existing stores or to re-badge shops bought from other retailers. The main focus for work in new stores is for small to medium-sized units in town or city centres, with the local convenience store format being very popular.

All this means the shopfitting market is buoyant, with much of the work being let via framework or partnering agreements. The promise of a consistent workload for contractors helps to keep margins at a reasonable level.

Hot topics

Internet shopping

Non-store retailing has just recorded its highest three-monthly growth rate since July 2004, at 3.4%. Over the same period, sales in food stores only grew 0.2% and sales in non-food stores grew 0.4%.

To counter this, some high-profile banks and retailers are trying to refocus on the high street by offering that "personal touch". Internet shopping is a habitual concern for retailers and their shopfitters: all we know for sure is that the discussions about the web's impact will roll on.

Skills shortage

The growth of the shopfitting market on the back of increased demand from retailers has led to people shortages across the sector. This is a problem afflicting the construction industry as a whole, but in the microclimate of the shopfitting sector its effects are even more pronounced. One of the solutions is to import skilled and unskilled workers from abroad and this is happening at all levels, on virtually every project.

Store design and environment

Every retailer is trying to find the new ingredient in store design that will give them their edge over their competitors. Mezzanines, for example, were innovative a couple of years ago but are now commonplace.

The newest weapon in the retail wars is the lighting consultant. Consultants are employed, in addition to the M&E engineers, to supply a lighting design that can be bright, light and airy or ambient and sophisticated. Of course, these lighting schemes and the associated works to ceilings have increased the cost of these elements. The challenge is to produce the same results at a reduced cost by using new technology, alternative suppliers or bulk purchase.

Costs

The costs exclude shell-and-core alterations as this report is focused on fit-out works. The cost of direct supply items, such as visual merchandise, tills and telephones, are excluded as price varies depending on the retailer. Some procure these items in bulk, usually with large discounts and issue them to their contractors for installation; others prefer to buy through their contractors. The figures also exclude lifts and escalators (with the exception of department stores) and fees.

(See table below: Typical costs for a range of store types)

The fit-out costs exclude merchandising systems, IT installations, specialist installations and back-of-house equipment. The analysis was based on a fire insurance valuation for the shop units on a shopping mall in the UK.

((See table below: Store fit-out costs for units in a new shopping mall)

Lead times of typical stores

The following programme times are for the design, manufacture and fit-out of typical stores, including finishes, mechanical handling, services, perimeter and centre merchandising, backstage areas and so on:

Department store with 7432 m2 sales area