Our markets: Building Products

Commercial construction
14.2% of Group sales, 46.5% of BP sales

The performance of the non-residential construction market, measured in square footage terms, finished the year flat compared to 2006 according to the Dodge construction report. Tomkins is mostly exposed to the public buildings and office segments. These areas showed increases of 38.1% and 4.2% respectively. Office vacancy rates increased to 12.8% in the fourth quarter of 2007, which is still at historically low levels.

Outlook
Dodge estimates that the non-residential construction market will fall by about 7% in square footage terms in 2008.

Commercial construction (square feet, million)

Source: McGraw-Hill (Dodge)

Residential construction
10.5% of Group sales, 38.9% of BP sales

The weakness seen in US residential construction in the second half of 2006 continued into 2007. Housing starts were at a rate of 1.4 million, down by 24.8%. Housing starts are now at a 16-year low.

Outlook
The NAHB is forecasting the market to be down around 20% with housing starts at around 1.0 million units in 2008, compared to 1.4 million in 2007. With sales of new homes at their lowest in over a decade, inventory levels of existing homes at a 20-year high and the sub-prime mortgage crisis tightening lending standards, this market is not expected to recover until 2009.

Annual US housing starts (units, thousands)

Source: NAHB