By Louis Iannaco
In contrast to their residential counterparts, professionals whose livelihoods depend upon the health of commercial business enjoyed a fairly solid 2007. With commercial sales making up one-third of total industry sales during the year, the contract part of the floor covering industry increased approximately 4.5% over the previous year.

According to research conducted by FCNews, the North American commercial flooring market held steady in 2007 with construction completion segments increasing in nominal dollar terms. Overall, most segments were healthy and growing, with corporate, healthcare and education leading the way.

In 2007, the contract side continued to be buoyed by the impact of projects that went into place in 2006 and last year, particularly healthcare, education and hospitality. Business in many important sectors continue to show signs they are on their way to rebounding back to where they were prior to 9/11.

Since the attacks of that fateful day, certain segments of the contract side either crept slowly forward or came to a complete standstill, such as hospitality and corporate. Both began opening up in 2005, and continued on the upswing in 2006 as well as in 2007.

Corporate profits rose, allowing companies to go ahead with projects they had put off for a few years. This represented quite a boost to the industry since the corporate sector leads the way as the largest piece of the commercial pie, and it doesn’t just focus on carpet tile. Hard surfaces, such as wood and ceramic tile, are being specified in more and more commercial flooring projects.

Hard surface strong

Whether it is the exhibitor showcase during the convention for the StarNet Commercial Flooring Cooperative or NeoCon in Chicago, it is easy to see the influence and increased use of hard surfaces at the commercial level. Whereas this part of the industry used to be dominated by carpet tile and broadloom, with resilient a distant second, currently there is a wide variety of hard flooring products being specified in wood, ceramic tile and laminate.

In hospitality, people began traveling again in 2005, increasing in 2006 and, for the most part, strong once again in 2007, as almost five billion passengers took to the skies. Even with the tough present economic conditions and concerns about oil (which took hold primarily in the final quarter of last year), over the past two years (2006, 2007) the airline industry began seeing numbers it had not seen since 9/11. In addition to vacationers, business travel has remained strong. Add to this the wireless Internet boon and the many hotels and convention centers once again had valid reason to renovate and remodel, something they had put off in previous years.

While the hospitality market did very well in 2007, there is a feeling that it will peak in 2008 and dip in 2009 because of the general rising cost of transportation, with the feeling as jet fuel and gasoline prices go up, people will be traveling less. This— increased oil prices— was the segment’s biggest obstacle in 2007, one that will probably remain as such for 2008.

Corporate seemed to be the strongest commercial market last year. It was and continues to be a fairly strong sector, with most major projects going forward with enthusiasm due in large part to employment still being strong. And, as several sources noted, the segment’s strength is also due to the fact that it was not overbuilt like it was in the early 1990s, with many corporations wanting to redo their spaces.

Laminates continue to play an increasingly important role in the commercial segment. Commercial laminates are continuing to take market share in addition to and along with preferred hard surface products. While still a very small percentage of the total volume of product sales in commercial venues, laminate’s popularity in this area continues to grow. With the technology, aesthetics and durability inherent in commercial laminate flooring, it is apparent that laminate is thought by many to be the appropriate choice and is gaining in market share.

Wood is making inroads in the commercial arena as well and is being used primarily in specialty retail, hospitality and multi-family residential (high-rise). Designers for these key commercial channels are selecting wood flooring for design and durability. At a broader level, many commercial designers are trying to capture a more residential feel, and wood flooring allows them to select products that create a particular look or image while providing the durability needed for these spaces.

In resilient, the commercial segment has maintained a steady course with increased sales. Today’s commercial resilient sector is seeing an increase in sustainability, a focus on texture and color innovations as well as enhanced technology.

Good health, positive growth

Due to the aging population, the healthcare market is growing and will continue to do so, according to the commercial players. Buoyed by changing demographics, the whole issue of wellness and healing, the graying of America and a large percentage of disposable income being spent on healthcare continuing to grow, the segment continued to be, for lack of a better term, healthy in 2007, especially since assisted living and senior living are looked at as being part of healthcare. Not only are assisted living homes still in demand, they are opening up at an extremely rapid pace.

Much like the corporate sector, healthcare businesses are continuing to move away from sterile, medical-looking environments to a more natural, home-like feel. This has opened up the segment to a variety of new and different products. In addition to continued growth in this area, there is also a focus on green.

These are just some of the reasons hard surface producers have had a growing presence at the last three or so NeoCon shows. A number of companies, specifically from the hardwood and ceramic tile sector, have made their debut at the commercial market in recent years, continuing with the latest edition earlier this month, letting both architects and designers know they have products to meet their demand.

One of the fastest growing product segments in the commercial arena, modular carpet continued to experience very healthy growth in 2007. As a matter of fact, several manufacturers reported percentage growth for 2007 (over 2006) in the high teens and beyond, with many saying it has surpassed broadloom. The corporate segment’s strong growth is in large part due to the booming business being done in carpet tile.

Education also continues to do well, as universities compete for students, everyone is trying to make sure they have a great environment because they are really marketing toward parents. More young people are going to college than ever, and they are asking the universities for responsible buildings.

Modular carpet has also seen very good growth here. K-12 is much more of a value story, as it is a competitive segment focused on cost efficiency. It is a market where bonding issues and construction money are approved and are not being pulled back.

Largest challenge

The biggest challenge for those involved with the commercial sector in 2007— no surprise here—was the continuation of raw material increases as well as increases in energy and freight. Rising oil and natural gas prices combined with escalating transportation costs and increasing global demand have resulted in unprecedented price escalation for key raw materials.

The prices of oil-based raw materials and energy sources have reached new and sustained high levels. Falling raw material costs are not anticipated any time soon, sources noted. The situation is not confined to the flooring industry; and hard surface flooring continues to be a good value within the commercial sector.

Probably the biggest highlight from the commercial sector continues to be the environmental awareness of both firms and the green benefits of their products. The environmental awareness of all commercial carpet manufacturers is at a much higher level than some of the other products that go into commercial interiors, and the industry is beginning to be recognized for that.

While there are certainly some companies that have been touting it longer than others, everybody is beginning to understand that being green is not just something to be marketed, it’s a way of life.

With 2007 being a strong if not spectacular year for the commercial sector— especially considering how the industry performed overall—going forward into 2008, with increased emphasis on sustainable practices, exciting opportunities have presented themselves, paving the way for more growth in the future.