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AM26082

AMA COMMERCIAL GLAZING MARKET : 2002

Overview

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Companies covered include:

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Table of Contents

Executive Summary

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EXECUTIVE SUMMARY

Since 1996 the UK commercial glazing systems market has grown steadily, with office, retail and leisure newbuild and refurbishment having provided most of the impetus, contributing to an estimated market value of around £1.84 billion in 2002.

Since 1999 the overall market is estimated to have grown by over 50 percent reflecting an significant upturn in demand and buoyancy in most sectors. Forecasts indicate further growth of around 20 percent by 2006, as continued Government investment in health and education stimulates the market for new and refurbished buildings.

Out of all the sectors the commercial window market is the largest, accounting for approximately 40 percent of the total market. This sector has recently experienced high levels of growth, which can be largely attributed to demand from the private commercial sector. Within this sector, new build and refurbishment programs for commercial offices have been the driving force behind the growth. During the majority of the 1990s, growth opportunities offered by the public sector had been stifled by lack of investment. However, this area is currently experiencing a construction boom due to the government's improvement programs in the education and healthcare sectors, the majority of which are largely driven by PFI (Private Finance Initiative) financed construction and RMI (repairs, maintenance, improvement) projects.

In the commercial window market aluminium and composites account for around 57 percent in terms of value, though these are typically more expensive than other frame materials. Aluminium is used in a wide range of commercial applications ranging from schools to skyscrapers and is therefore more resilient to any downturns in a particular sector than is the case for other materials, such as PVC-U and timber.

PVC-U and timber account for around 28 percent and 10 percent respectively, of the windows market by value. PVC-U windows are mainly specified for public sector buildings such as schools, NHS hospitals and Local Government offices and timber is mainly used where local planning regulations stipulate its use e.g. the refurbishment of 'historic/traditional' buildings, and on small industrial estates.

The ground floor treatments segment of the market is estimated to account for around 27 percent of the market by value however it is difficult to analyse owing to the wide range of applications. The market has seen substantial growth over 2000-2001 based on substantial investment in shopping centre developments, rail station upgrading and city centre regeneration projects. However, in the medium term, the market looks to offer more steady growth after the recent completion of many large-scale retail projects.

Façade glazing accounts for some 25 percent of the market by value, with aluminium being the most commonly specified frame material, which constitutes around 82 percent of the market. If included, PVC-U capping on an aluminium base would increase the material's share to around 87 percent. The remainder of the market can be accounted for by structural glazing and steel framed façade glazing. The main impetus behind growth in the market for curtain wall between 1999 and 2002 has been from the rapid growth in the new build and refurbishment programs for commercial offices. The increasing planning approval of 'skyscraper' buildings has led to a surge in construction in London and throughout the UK with many more at the planning stage.

Roof-glazing is the smallest sector, which accounts for an estimated 8 percent of the market. This is broken down further into atrium/mall glazing, pre-fabricated rooflights and patent glazing. Over the period 2000 - 2002, this sector has seen significant growth. Key drivers include Millennium developments, such as the roof over the British Museum's Great Court; shed glazing at many of the mainline rail stations e.g Sheffield Midland and Brighton, and mall roof-glazing at the many in-town shopping centre developments e.g. West Quay Shopping centre in Southampton.

In April 2002, the revised Part L of the Building Regulations was introduced. The aim of this is to improve energy efficiency in buildings through higher insulation standards for glazing systems in order to meet reductions in CO2 emissions in accordance with the Kyoto protocol. This has led to the development of higher specification glass and frame materials, which have now reflected on increased tender prices. The public sector had until relatively recently suffered a decline in investment. However, in 1998 the introduction of the 'New Deal for Schools' has led to dramatically increased construction output, as between 1999 and 2002 the output is estimated to have risen by 74 percent in value. Also £3bn of PFI investment in healthcare has increased construction output and in the period from 1999 to 2002 contractors output is estimated to have risen by 27 percent.

In 2002, construction in the public sector has been buoyant, beyond 2002 the growth seems set to continue with the ongoing investment programs in the education, health and prisons sectors. In the private commercial sector there is a further decline in leisure construction, this is largely due to the completion of a large number of Millennium developments that created a period of unsustainable high growth. Over the next few years the key driver will be mixed developments which include commercial office space featuring retail and housing. The strongest growth is expected to take place outside of London due to the increasing saturation in office space and falling rents within the capital, this situation will be further heightened once the current spate of high rise construction projects are completed.

The aluminium systems sector can be broadly divided into bespoke and systems segments although there are some companies that cover both markets. The bespoke sector is characterised by low-volume high-cost façade glazing projects, which have a considerable influence upon total market performance while the systems sector consists of systems companies that sell aluminium profiles to fabricators, which in turn manufacture and usually install the glazing systems.

The market leaders in the systems sector are Kawneer, Sapa and Schuco which, together account for 35-40 percent of the market. The fabrication/installation sector is highly fragmented, partly due to low barriers to entry and no significant economies of scale. Consequently, rates of return tend to be below 5 percent, recently resulting in several company failures. Leading companies include Solaglas, Dane Architectural, Charles Henshaw, Glamalco, SLW Architectural Aluminium and Parry Bowen. Large European companies have become the main contractors in the UK market, these companies mainly focus on high-rise curtain wall and large atrium glazing projects.

Permasteelisa is currently the largest player in the UK market and its position has been further strengthened following becoming the majority share holder of Josef Gartner. Other leading companies are Focchi, Schmidlin, Structal and Seele.

Companies that are relatively new to the UK market, but which are currently expanding their presence, include Waagner Biro, GIG Fassadenbau, BUG Alu-technik, Metallbau Frueh and Eiffel. With the decline in construction in many other European countries more continental contractors are expected to focus on the large number of high value contracts for planned skyscraper and large office buildings to be construction or refurbished in the UK over the next few years.

Text © 2002AMA Research

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