Hicksville, N.Y.—Summertime means school is out, vacations begin and business generally slows down as the days turn hotter. But for those involved in the commercial industry things are not only starting to heat up, they are staying strong as companies and governments continue to pour money into new projects and renovations.

“Continued employment growth, corporate profits and improvements in the budgets of state and local governments all contribute to higher levels of building activity,” said Dominic Rice, Armstrong Commercial’s vice president of resilient products.

Going into this year, many pundits and research organizations felt the commercial sector would experience low to mid single-digit growth. But with the year almost half over, most are now predicting a growth rate between a conservative 8% to a high of 12%.

“Overall,” said Jack Ganley, president of Mannington Commercial, “the contract arena is healthy. Just about every segment within commercial is strong and we feel very good about how the year has gone and will continue.”

“Our members are already beginning to feel the summer crunch on labor,” said Fred Williamson, director of special projects for StarNet Commercial Flooring Cooperative. “They’ve been busy all year, even though a lot of commercial work gets put off to summer. So, we’ve already been under pressure and we haven’t even entered the pressure cooker of summer. Skilled labor is certainly in high demand right now.”

Except for the retail part of the commercial industry, there is a pretty unanimous feeling that every segment in showing strong signs of growth. Retail is the only one people point to as being flat to moderately down. So what is driving the growth?

“There are a lot of dynamics going on economically that is supporting commercial activity,” said Rice. “While there are some over-arching factors each segment has its own specific reasons.”

The segments being spoken of are education, healthcare, hospitality and corporate. These and retail make up the vast bulk of what can be called true contract areas. And one of the key reasons why commercial is so strong has to do with the corporate sector. Estimates put the category up from 10% to 14%.

“Corporate came back pretty strong starting in mid 2005,” noted Ganley.

Lori Dowling, president and CEO of StarNet, explained since 9/11 “we’ve been cautiously watching it grow, but this year it really came on. With the stock market and corporate profits up, new facilities are being built whereas in recent years they weren’t.”

In education both the primary and secondary levels are seeing strong growth—up between 5% to 9% over 2005.

“There is a great deal of investment in this segment,” said Rice. “We have a very aging infrastructure and most projects were put off last year due to a number of factors such as increased costs in all construction materials.”

“At the higher education level, which many of our members do work in,” said Deb Esbenshade, StarNet’s director of member services, “there are huge endowments and they are using that money to build all sorts of new facilities—libraries, art centers—and they tend to use high-end products as well.”

Healthcare is projected to enjoy an increase of 4% to 8% as hospitals keep upgrading, the need for assisted living continues, specialized medical clinics are springing up everywhere, etc.

Hospitality also seems to be picking up, with growth estimated at 2% to 6% as personal and business travel levels have rebounded to pre-9/11 levels. Though, experts note, this sector is not experiencing this type of strength in all parts of the country.

The one commercial sector that has not “wowed” anyone is retail. While there is definitely activity in the renovation area, there are not many new storefronts or malls being built.

(Editor’s note: Part two will look at some of the issues/challenges the commercial industry has had to deal with and what is being done to combat them.)
—Matthew Spieler