Commercial market: State of the industry, indicators point to activity in many segments

Commercial market: State of the industry, indicators point to activity in many segments
July 19, 2010

Chicago—In the aftermath of increases in attendance and optimism at NeoCon 2010, all indicators point to a commercial market poised for a gradual rebound after a challenging 12 to 18 months. So said the many flooring exhibitors that took part in the show.

Jenny Rogers, director of marketing, J&J/Invision, went into NeoCon with uncertainty, not knowing what to expect in terms of traffic. Not only was the showroom “bombarded,” but J+J was inundated with decision makers. “Many people wanted samples immediately. That’s how we determine how good the show was.”

Glen Hussmann, president and CEO of Tandus, agreed. “The quality of attendance is better than it has been historically. There are projects under way, projects being considered.” He also spoke to attendee attitude. “Last year every indicator was down. It’s gone from across-the-board negative indicators to at least some mixed signals, particularly corporate renovation. We’re even hearing some design firms starting to hire.”

Indeed, business conditions had not lent themselves to optimism for quite some time, but that seems to be changing. “The high end got hit harder than the low end, which is why we as a company may have suffered more than some of the lower-end manufacturers,” said Don Dolan, vice president, Masland Contract. “But business this year has been flat to up slightly.” The strongest segment has been government work, such as military bases, he said. “We have also seen the retail store planning segment come back.”

Business is also rebounding nicely for Bentley Prince Street. According to Anthony Minite, president, first quarter 2010 was up over fourth quarter 2009, and the second quarter was trending higher than the first. “We are seeing real good movement in corporate. There is a lot of pent-up demand. Last year’s quarters were going the wrong way; this year we see a positive trajectory.”

The first half has also been kind to Bentley’s parent, Interface. John Wells, president and CEO, told FCNews business has grown the first part of this year compared to last year. “We attribute this to some large end-use relationships and contracts as well as our global business. Half our sales have been outside the U.S.,” adding that projects started getting turned loose the latter part of last year.”

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, where it looks like corporate and tenant improvement is improving.”

Zach Zehner, vice president of hard surfaces, Mannington Commercial, echoed Lesslie in that it’s only been over the last few months where things became slightly better. “The industry has been responding to our Choices That Work message about driving solutions. We can look at the best features of our products–broadloom, carpet tile, resilient sheet, LVT, VCT, rubber–to best fit what the customer needs as opposed to driving a particular product category. Another aspect is a stronger integration of our products between different categories, like wall base tying into hard surface. That story is resonating.”

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. “It’s primarily K-12, but we do have our fair share of university jobs. They are looking for the value and life cycle costing, not necessarily the least expensive. LEED attributes are big, and a lot of the government funding is based on garnering LEED silver at a minimum.”

Then there are companies like J&J/Invision 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,” Rogers said. “Mid-level retailers like Target and Kohls are renovating stores. The one thing they want is to ensure their brand is well represented.”

Amtico credits innovation for the company’s good fortune in 2010. “We are coming out with designs and concepts the industry hasn’t seen before, and we continue to invest in R&D,” said Kim Apstolos, Southeast regional sales manager.


Corporate represents the largest commercial segment, and it also has been the one under the most pressure. While manufacturers agree things are getting better, it’s 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. “I think you’re seeing the market stabilize, but you have to realize the market overcorrected itself. The one thing we lose sight of is we are convinced markets can overheat, but we forget they can overcorrect.”

Some money is finally being released in corporate, according to Tandus’ Hussmann. “Two trends are apparent: an overbuilt environment and the square footage most corporations are working with per employee is being cut by half. People are working out of homes, cars and sharing cubicles. There is an oversupply of space and demand is shrinking, which means you probably won’t have any meaningful amount of commercial construction for some time. So this segment is being driven by renovation. We need leases to expire, we need people to come in and paint and carpet. That has driven our business over the years anyway. So we are not so concerned as things recalibrate.”

Tim Baucom, vice president, commercial sales and marketing, Shaw Industries, said he is not seeing growth in tenant improvement, rather it is coming from the end user because as companies re-hire, they are having to reconfigure spaces. “The result is the low end is being deferred and the high end is being pushed to the middle. People are being more responsible about their spending than coming out of past recessions.” He said the drivers are value, performance and environmental responsibility. That means more carpet tile. “It’s a way to have a custom floor with standard materials.”

Interface’s Wells believes corporate is no longer shrinking, but as it comes back, you will see smarter design. “Value and performance is going to have a much higher premium.” He also noted that any growth is coming in the form of tile. “Carpet tile is still a trend, with a variation in texture and complexity of pattern, especially large-scale pattern.”

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