By introduction by Darius Helm; Statistics by market overview
After a good start, the commercial market stagnated in the spring of 2020 and remained depressed for the rest of the year, and while it looks like growth may be difficult to achieve in 2021, there are signs of an increase. activity, by segment and region. . Last year, the U.S. commercial flooring market fell 19.6%, according to Market Insights, from $ 6.36 billion in 2019 to $ 5.11 billion.
The hospitality segment saw the earliest and fastest decline, with travel virtually stopping and hotel chains quickly retreating and halting renovations. The retail and corporate segments followed closely as the shelter-in-place declarations were rolled out.
Higher education has slowed down more than Kindergarten to Grade 12, where previously funded projects have, in some cases and to varying degrees, been able to continue. Residences for the elderly, housing the people most vulnerable to Covid, have isolated themselves from the world. Government and public space projects have also slowed down considerably.
Multifamily, surprisingly, was a mixed bag. For example, apartment towers, which are served by residential dealerships, have stopped running. Particularly at lower income levels, where most of the multi-family volume resides, no one was budging, and a nationwide moratorium on evictions, while keeping a roof over the heads of tenants, put increasing pressure on tenants. owners. However, among those who have been protected from the economic impacts of the pandemic, there has been more movement. Much has been said about the rush to the suburbs, although it turns out that this was only the case in some subway markets, but certainly in places like New York, the suburbs have been inundated with demand for housing. new and existing. But in many cities, apartment construction continued, and several flooring manufacturers said new multi-family construction and renovating public spaces was their biggest business segment last year.
Healthcare, including acute care, clinics and medical office buildings, also slowed, but there were pockets of activity as some healthcare providers sought to adjust their interiors to reduce the risks of transmission of coronaviruses. In addition, temporary spaces for testing and even for patient care have generated business.
In terms of commercial flooring, three categories dominate the landscape: carpet, which holds 56.5% of the market; resilient floor coverings (mainly vinyl and rubber), which represent 23.1%; and ceramic tiles, which account for 17.2% more. The remaining 3% comes from hardwood and laminate, both of which have limited applications in the commercial market due to moisture issues and surface wear resistance.
Carpet fell more than 23% last year to $ 2.89 billion, largely because markets with the highest proportion of carpet to hard surface flooring were hit the hardest. , especially businesses, which is by far the largest market, and the hotel industry. For most carpet factories, activity in the business sector was stronger in owner-occupied spaces than in rental improvement.
Broadloom fares worse than carpet tiles because of the sectors affected including hospitality and, to a lesser extent, retail.
The resilient category fell 12.3% to $ 1.18 billion. The biggest chunk in this category, LVT, only declined slightly, partly because of its continued market share gains over other types of flooring, but also because areas with high carpet density were the most declining. The smallest, fastest-shrinking, resilient chunk in the category, CTV has dropped significantly. VCT has a strong position in retail, where there was little activity last year.
Sheet metal products, however, fared better, falling only by one digit. While there is anecdotal evidence of an increase in demand due to its lack of seams and its ability to be easily cleaned and sterilized, the biggest impact was probably due to its demand for testing centers and contextual treatment.
Commercial ceramic tiles fell 14.5%. Ceramics are essential flooring in all industries, and they are particularly strong in segments such as hospitality (including restaurants), healthcare, retail and public spaces, most of which were heavily affected last year.
Rugs lost share to other categories from 59% to less than 57%, with share gains for ceramic tiles and resilient flooring roughly evenly distributed.
So far this year has been slow but somewhat improved compared to last year. The business segment is still fairly calm but other segments are starting to show signs of life, notably education and health. Some regions are stronger than others, however, with better results in the southeast and southwest, and the northeast lagging behind.
Few of the industry leaders are ready to make predictions on how 2021 will play out, but most think they’ll be grateful to come out of the year flat, and they are already eyeing 2022 for a solid return to business. .
However, most signs point to improving conditions. In February, the American Institute of Architects’ Architecture Billings Index fell into positive territory, at 53.3, for the first time in a year, followed by 55.6 in March – the highest score since before the Great Recession – and it’s even higher in April. , at 57.9. Regionally, the Midwest and South were the strongest, with the Northeast and West lagging behind, but all were in positive territory – any score above 50 indicates increased billings.
In addition, according to Dodge Data & Analytics, starts of non-residential buildings rose 13% in March. Housing starts rose 15%, led by gains in the education, recreation and public buildings segments. And commercial starts rose 11%, with gains across all segments. However, for the 12 months ending March 2021, essentially covering the full extent of the pandemic so far, non-residential building starts have fallen 28% in the previous 12 months, with housing starts falling 28%. commercials down 30% and institutional starts down 20%.
While there are encouraging signs of increased activity, the flooring industry will have to wait at least six months to start feeling the impact, so most of the gains won’t budge until after. ‘next year.
A slow ramp-up, however, has a few silver linings. For example, the supply chain is currently under strain due to a series of interconnected conditions: ports are obstructed; container prices are skyrocketing; shipments of raw materials are delayed and capacity is limited, pushing up prices; suppliers issue cases of force majeure; workers are scarce; and changes in production caused by tariffs on Chinese products add to the imbalance. Some of these conditions are already starting to improve, such as impacts on petroleum byproducts from the February freeze in Texas, while others, including transportation and labor issues, may take much more time to resolve.
The faster the business rebounds, the more pressure it puts on these already strained supply chains and flooring manufacturers already unable to find all the workers they need. A slow and steady ramp-up could help avoid the creation of new bottlenecks and supply crises in the business and help the flooring operations run more smoothly.
However, it should be noted that whenever there is a shock in the market that significantly hinders business, there is always pent-up demand waiting for the exit. After all, businesses have to regularly renovate due to wear and tear, changing needs, and design trends, and new and growing businesses have to relocate and build. The volume of pent-up demand never matches what has been lost, many companies are easing their renovation cycles rather than rushing into new investment, but at the same time the competition is fierce in a recovering economy, and business enterprises must do their best to step forward. So, 2022 and 2023 are expected to see solid gains in the commercial flooring market, and the first wave of rebound will likely be felt by the end of this year.
For an in-depth look at the top 15 specified carpet manufacturers and commercial hard surface manufacturers, check out the June 2021 issue of Floor Focus Magazine.
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