By Louis Iannaco
After escaping what had made life in the residential sector so rocky for the first two-thirds of 2008, the commercial market was finally hit by the faltering economy, making business for the year what can be best described as flat.

The most affected segments, carpet wise, were corporate and retail followed by hospitality, while government, healthcare and education fared better overall. As a matter of fact, many view the government sector as not only having done well in 2008, but as one of the few commercial segments doing well so far in 2009.

With broadloom accounting for more than two-thirds of all flooring in the commercial market, the corporate arena saw modular tile once again taking market share from wall-to-wall. Carpet tile, according to several mills, was actually up while wall-to-wall sales suffered.

In 2008, carpet sales have been estimated to be approximately $3.5 billion in specified commercial, with another $900 million in main street sales.

In hard surface, ceramic tile and resilient, buoyed by technological advancements in recent years, remained the segment’s strongest sellers with hardwood and laminate lagging behind. While ceramic tile may be down between 15% to 20% in 2008 in both dollars and square feet, it continues to do well when comparing it to sales of laminate and hardwood.

In laminate, of the estimated 20% that is commercial, approximately 5% to 7% of that is main street business. Retail continues to be a strong segment for commercial laminate, followed by healthcare and hospitality.

In hardwood flooring, commercial sales in both dollars and square feet for 2008 came in at $405 million and 171 million, respectively. The bulk of commercial hardwood sales were for school gymnasiums and retail stores.

Also in 2008, 54% of commercial sales of hardwood flooring were solid, while 46% were engineered products. Engineered wood flooring is growing in commercial, albeit slowly, as it has some distinct advantages including the ability to be installed with glue, nails, staples or floated above or below grade.

The biggest decline in hardwood commercial sales occurred in the retail segment. Retailers, feeling the pinch from the declining U.S. economy, curtailed construction and renovation plans as their sales fell amidst the economic problems in the U.S.

The education sector was buoyed by federal funds to renovate aging buildings on school campuses. Offices also declined as firms cut back in light of declining sales, reduced work forces and growing economic uncertainty.

Ceramic’s influence on commercial

Until 2006, ceramic tile was typically 70% residential and 30% commercial (in dollars). Because of the drastic downturn in residential, it is now estimated that in 2007 the ceramic tile industry was 65% residential and 35% commercial. In 2008, it is now estimated that with an additional shift, 60% is residential and 40% commercial.

For 2008, ceramic tile imports represented approximately 70% of industry dollars and 80% of total industry square footage. This is consistent with 2007.

Estimates also indicate that 2008 ceramic tile shipments by square feet were close to 50% porcelain body. This number has been increasing over the past several years as both new domestic production and imports from China are largely porcelain body. Imports from Italy and Spain continue to be mainly porcelain body.

With share in hard surface commercial down overall for 2008, sales also fell slightly to just over $2 billion. And while ceramic tile commercial sales may have been down anywhere from 3% to 5% in 2008 compared to 2007, the segment was still one of the hard surface commercial leaders for the year and looks as though it will continue on this track, along with resilient. Hardwood took the largest tumble.

Resilient, while remaining relatively flat for 2008, may ultimately do better in the future with many keeping an eye on expenditures. With hardwood and laminate sagging, wood-look LVT products may increase in popularity.

How the segments did

The corporate segment was affected severely in 2008 as things took a sharp fall during the third quarter. The slowdown seemed to have the greatest affect on high end, with low end not far behind.

While its downturn was not as sharp as corporate, retail was hit hard as well. With the housing decline continuing, retailers are not as apt to take on remodeling or renovation projects. If the housing market can steady itself, however, this may help retailer business sometime later this year or in early 2010.

After several strong years, the hospitality segment also took a hit with many projects over the last half of 2008 and into 2009 being postponed or even canceled in light of the economy.

Healthcare and education remained relatively active markets, with much of the positives in healthcare attributed to a demand by baby boomers. An increasing immigrant community has also led to increased enrollment in schools. Government also fared well, and has gotten off to a positive start in 2009.

One of the major challenges to face mills doing business in the commercial sector in 2008 was the escalating price of raw materials. With oil reaching $160 a barrel last summer, business could not help but be affected. Companies found it very difficult to keep pace without passing on increases to their customers. And the continued weak economy has hindered new home construction.

The hunch among many in the industry has a recovery beginning toward the end of first-quarter 2010. The feeling is there are commercial projects out there but getting funding for them has been difficult. When this changes, many believe fortunes in the commercial flooring arena will change for the better as well.

One aspect that has remained constant in commercial flooring sales is anything green. What began as something many saw just as a fad, many in the industry now believe the continued emphasis on environmental initiatives is a bright spot that will help lead the industry out of its doldrums.