Article Number : 5777 |
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| Date | 8/2/2010 9:25:34 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=5777 |
| Abstract | By Steven Feldman CHICAGO—In the aftermath of increases in attendance and optimism at NeoCon 2010, exhibitors reported indicators point to a commercial market poised for a gradual rebound... |
| Article | By Steven Feldman CHICAGO—In the aftermath of increases in attendance and optimism at NeoCon 2010, exhibitors reported indicators point to a commercial market poised for a gradual rebound. “Last year every indicator was down, explained Glen Hussmann, president and CEO of Tandus. “It’s gone from across-the-board negative to at least some mixed signals. We’re even hearing some design firms starting to hire.” Don Dolan, vice president, Masland Contract, noted, business this year has been flat to up slightly “The high end got hit harder than the low end, which is why we may have suffered more than others.” The strongest segment has been government, but the retail segment “is coming back.” Business is also rebounding nicely for Bentley Prince Street. According to Anthony Minite, president, the first quarter 2010 was up over fourth quarter 2009, and the second was trending higher than the first. “Last year’s quarters were going the wrong way; this year we see a positive trajectory.” Beaulieu Commercial started seeing the turnaround over the last few months, said James Lesslie, president. “The area that’s been most negatively affected is hospitality, but it looks like corporate and tenant improvement is increasing.” But it’s not just government and corporate. Roppe is seeing healthcare and education come back. “That’s where the money is being invested,” said Dee Dee Brickner, marketing coordinator. “Primarily K-12, but we have our fair share of university jobs. They are looking for value and life cycle costing, not necessarily the least expensive.” Then there are companies like J&J and Amtico, which told FCNews business in 2010 is up double digits. “We do a large portion in retail, and that’s where we have seen a huge increase,” said Jenny Rogers, director of marketing, J&J/Invision. Amtico credits innovation for the company’s good fortune in 2010. “We are coming out with unique designs and concepts because we continue to invest in R&D,” said Kim Apostolos, Southeast regional sales manager. Corporate Corporate represents the largest commercial segment, and the one under the most pressure. While mills agree things are getting better, it’s a mixed bag when trying to assess first-half performance. “Corporate is still down mid-single digits from 2009 with tile up and broadloom down,” said Tom Lape, president, Mohawk. “The market overcorrected itself, but we’re now seeing it stabilize.” Some money is finally being released in corporate, according to Tandus’ Hussmann. “Two trends are apparent: An overbuilt environment and the square footage per employee is being cut by half…There is an oversupply of space and demand is shrinking [meaning] the segment is being driven by renovation.” Tim Baucom, vice president, commercial sales and marketing, Shaw Industries, is seeing growth coming from the end user because, as companies re-hire, they are having to reconfigure spaces. As a result, “the low end is being deferred and the high end is being pushed to the middle. People are being more responsible about their spending.” He said the drivers are value, performance and environmental responsibility. John Wells, president and CEO of Interface, told FCNews to add smarter design to the list. “Carpet tile is still a trend, with a variation in texture and complexity of pattern, especially large-scale pattern.” Education Two trends are impacting the health of this segment: Unemployment and federal stimulus money. As the job market remains tight, more people are either remaining in or returning to school. Plus endowments overall are down. That forces higher education to renovate as schools compete for students. The other driver has been stimulus money, particularly at K-12, but there are concerns its affects may soon dry up. “Much of education dollars go to state government funding” Wells said, “and that is under pressure.” Bentley is also seeing growth in higher ed, but it’s not all university driven, Minite said. “People who aren’t working are going back to school—vocational, trade, etc.” Tandus, which has a strong position in K-12, due in large part to its unique Powerbond product, said business is spotty because of the budget problems states and municipalities are having. Business has been steady for Shaw, “but we are not seeing a large bump,” Baucom said, “as the stimulus dollars don’t appear to be there this year.” Healthcare The story here also surrounds two trends: The growth of assisted living and, with that, the desire to create a more residential look and feel to these properties. However, price points remain paramount. “In recessions gone by, healthcare has made it through relatively unscathed; not this time,” Tandus’ Hussmann said. “Reduced spending matters. Budgets matter. Still, in this segment, more than anything else, we see an emphasis on the quality of interior environment.” Masland’s Dolan said, “It’s all about a hospitality-like, homey feel. But they are also looking for performance characteristics— that’s where specialty backing and solution-dyed nylon come in.” Bentley’s Minite added, “We are seeing healthcare more as a hospitality-type product application. It’s become more relaxed, less institutional.” To that end, Bentley is offering more solution-dyed goods and backing options that make the product applicable for more acute healthcare. But it’s not just carpet. Chip Braulick, senior marketing manager, CBC, said his company is seeing an appetite for more LVT. “They want more design features, but it still has to perform. That’s what’s great about the Halo product [recently purchased by CBC]. It’s a higher performance LVT.” He added that warm colors and brown tones are popular. Mary Docker, founder of Halo, said there is a difference between assisted living and hospitals. “Assisted living is still more neutral; hospitals are trying to get more glamorous and a bit more cutting edge by using more metallics and color.” Amtico’s Apostolos, agreed style and performance are critical in healthcare but, in these uncertain times, having a brand the A&D community can trust goes a long way. “Amtico has been around for a long time. Architects and designers know we will sell them the right product. They can specify us with confidence.” She agreed with Minite in that facilities are moving toward hospitality-type looks. “They don’t want to feel like patients who are going to a prison.” She cited the entry-level Spacia as a product doing well because “budgets are important.” Retail This segment is said to more closely parallel the residential replacement market than any commercial sector. As consumers feel more confident about spending money to spruce up their homes, they are also in buying mode for other products. And one major way in which retailers compete for those dollars is by providing the best possible shopping environment. Shaw’s Baucom said. “Retailers are very conscious of their appearance, so they don’t want to look thread bare.” Natalie Jones, vice president, commercial brand development and creative product, Mannington, called retail “one of our strongest segments” in the first half of 2010, but noted it’s all renovation and hardly any new construction. “If you have a retail space, you can’t delay [refurbishing] forever.” Mannington is also finding a more educated end user. “We’re seeing life-cycle and maintenance costs part of the conversation more today than ever before,” she added. Retail has been historically strong for Masland, which also saw good numbers the first six months of 2010, according to Dolan. “Companies held back at least two years in upgrading or re-doing their stores, because they are looking for a newer, fresher look. Maybe be more relevant.” Hard surface suppliers are also seeing some projects that had been on hold starting to let loose. “Companies are looking for jazz, easy maintenance and performance,” said Amtico’s Apostolos. “Retail is all about image, and a floor speaks volume to their image.” She said the hot button in this segment today is service. “Often budgets get approved at the 11th hour and the project needs to be started immediately. We have a shorter lead time because we have the ability to make to order.” J+J’s Rogers agreed that service is key. “We are not the lowest price, but they keep coming back to us because of service. Our designs are good, our pricing is good, but it’s the service that wins the day.” Government While this represents a small portion of the commercial market, it nonetheless has been a bright spot for many manufacturers over the past year. Some cite their GSA contracts, while others say it’s a whole lot more than that. Bentley’s Minite agreed government work is booming, citing court systems as one example. Environmental attributes and price are the drivers. While “government work is moving more toward sustainability,” the biggest change is product mix. “We are seeing more carpet tile in this segment, which traditionally had been a broadloom user.” Interface’s Wells noted the good thing about government is it will spend money whether it has it or not. “We are seeing a lot of project work tied to funding.” Amtico also attests to a “phenomenal” amount of activity, “not just GSA but state and local governments as well,” Johnson said. Shaw is finding the bulk of the business at the federal level while classifying business at the municipal and state levels as “a little dicey,” Baucom said. “So many local municipalities are tied to housing values, so as value has come down, revenue has come down.” He also attested to the fact government has become its own segment within the commercial market. “We used to think of government as corporate products with a different selling process. Now we are seeing it as its own segment. They want to change patterns and behaviors, and they are the ones driving many of the environmental programs. The target numbers on recycled content is being driven by the government.” While government has been good for Masland in 2010, Dolan noted “this is the government’s time of year to buy. Its fiscal year ends Sept. 30, so it’s use it or lose it.” Hospitality This segment, covered extensively in the June 14/21 issue of FCNews, was down more than 35% in 2009 and was easily the most negatively impacted by the economy. Shaw’s Baucom attributes the stagnation in large part to the credit crunch. “Property owners can’t get the renovation capital they want.” However, some mills are “finally” seeing some projects come off the sidelines, but the rebound is slow. (Editor’s note: This story was edited due to space constraints. To see the complete version, which includes greater insight into each commercial segment, visit our website, fcnews.net.) |