Contract: State of the industry

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Carpet tile, lvt are the sector’s shining stars

May 23/30, 2016; Volume 30, Number 24

By K.J. Quinn

If the flooring industry were a motion picture, the commercial market is starring in two major box office attractions and features a supporting cast that plays a key role in its success. Carpet tile and LVT are the headliners reportedly capturing the attention of the A&D community and replacing broadloom and other hard surfaces in major end-use sectors, observers report.

“LVT is a great solution for many applications in commercial spaces,” noted Marlene Manzella, account executive, flooring specialist, A&D consultant, at Consolidated Carpet, a New York-based flooring contractor. “The durability and resilience of the product makes it a suitable choice as an easily maintainable option that is flexible in design and price point yet still can perform in tough, high-traffic environments.”

Through the first two quarters of 2016 flooring maintained the 3% to 5% growth rate experienced last year, according to industry analysts. While specified contract represents the lion’s share of sales—an estimated 80%—Main Street commercial is expected to increase as more local businesses and retail chains carry out capital investments and renovation plans.

Looking beyond the numbers, key economic indicators such as inflation, consumer confidence, lending rates and the new construction market are positively affecting demand. Meanwhile, on the product front, concerns over sustainability have been greatly reduced—or exaggerated—depending on the different perspectives. “There is certainly a whole push toward transparency,” said Jeff Krejsa, senior vice president, Tarkett North America. “I think the resilient category has been more forthcoming and comfortable in talking about that because of the number of changes made in the development of these products.”Flooring producers have put effort into providing evidence their products not only contain environmentally friendly materials but also comply with LEED requirements. Similar to a nutrition label, environmental and health data are provided for each flooring type, so product claims are transparent and verifiable. Tools such as Environmental Product Declarations (EPD), Health Product Declarations (HPD), Declare labels and the Cradle-to-Cradle Certified Product standard are the primary certifications or tools listed as requirements for commercial projects. “Although it requires extensive commitment and investment, the Cradle to Cradle Certified standard ensures a product meets stringent certification criteria and is continually evaluated and optimized to meet or exceed future sustainable requirements,” noted John Stephens, vice president of marketing at Shaw Contract Group.

Taking it one step further, manufacturers have invested millions of dollars to upgrade their production facilities to minimize their environmental footprint. “All of our products are certified climate neutral and are over 50% bio-based or recycled-content based,” said Chip DeGrace, executive creative director, Interface. “Our products are also certified with EPDs, HPDs, NSF sustainable Assessment for Carpet and CRI Green Label Plus.”

 

What’s trending

Flooring companies report making additional investments to develop better performing and higher styled products that meet the varying needs of commercial customers. For example, ceramic tile producers increased usage of cutting-edge digital printing technologies, expanding the spectrum of colors and realistic graphics that can be achieved on surfaces. “These technologies allow us to leverage different types of glazes, resulting in unique and appealing visual combinations, such as concrete, veining and metallic [tones], as well as textured highs and lows in graphics or subtle patterns,” said Danielle Hunsicker, general manager, commercial and national account sales, Dal-Tile.

End users apparently like what they see, as ceramic is the largest hard surface category accounting for approximately 40% of commercial flooring sales, with most business coming from specified contract, according industry estimates. The most popular designs for commercial spaces are large-format wall and floor tile, wood-look planks and intricate mosaics. “From really convincing natural looks to porcelain tile panels, which many refer to as ‘thin tile,’ we now provide surfacing solutions that go beyond just floor and wall tile,” noted Mark Shannon, executive vice president of sales, Crossville. “There’s opportunity to take the tile category further by competing against—and earning specifications over—traditional slab, sheet and panel products.”Quality visuals, high-performance and sustainable attributes are among the major selling points for commercial broadloom and carpet tile, which are running neck and neck in volume, observers note. A similar scenario is playing out in resilient, where LVT and vinyl composition tile (VCT) sales are fairly close, although VCT is rapidly losing share to LVT. The entry of major mills such as Mohawk and, later this year, Interface, into LVT is expected to not only create more flooring choices but also increase awareness within the A&D community.

LVT’s increasing popularity and value proposition have a direct impact on hard surfaces utilized in niche applications, such as laminate, as luxury vinyl is considered a more durable flooring option. Still, there remains a place for workhorse products like rubber, linoleum and VCT, which have carved out a space in healthcare and educational settings. “The different sizes of LVT, VCT and rubber give designers more options and enable them to create unique environments and wayfinding within a space,” Krejsa explained. Hardwood and laminate combine to represent about 5% of hard surface commercial sales, although wood accounts for nearly twice as much revenue and offers significantly higher value and performance.

 

Changing market dynamics

While carpet tile and LVT remain the fastest growing commercial floor categories, they are not the ideal solutions for every commercial space. The dynamics of the major commercial sectors are ever changing and end-user design preferences continue to evolve. “This year, there has not been a significant difference in sector performance for the first five months,” Shaw’s Stephens said. “Hospitality and healthcare are still robust; the office sector may be slightly stronger.”

Corporate remains the largest commercial sector for flooring. Following a slow start this year, the market is beginning to grow as evidenced by an uptick in new office construction and renovations from landlord dollars. “The office market slowed down in the early third and fourth quarters last year,” said Jay Gould, president and COO, Interface. “Now we’re seeing the beginning of that turnaround in offices.”

While carpet tile is the dominant flooring solution in the workplace, broadloom remains coveted for its acoustical properties, durability and providing comfort underfoot. Yet hard surfaces such as resilient, hardwood, porcelain tile and even polished concrete are gaining traction within certain parts of the office, industry experts said. These products are utilized for their durability in high-traffic areas and diversity of design and color options.

“Tile demand in the commercial market is spurred by office construction and an increased use of tile as a low-maintenance and sustainable flooring option,” Dal-Tile’s Hunsicker said.

Healthcare maintains a broad flooring need as it is spread across assisted-living facilities, hospitals and clinics as well as medical office buildings. Facility managers are said to be striving to create an atmosphere that’s more home-like or similar to high-end hospitality settings. “These types of design choices allow patients to feel more comfortable and out of the mindset of a clinical environment,” she explained. “Also driving growth in this category is the increasing development of extended stay rooms.”

Resilient, rubber, LVT and linoleum are valued in healthcare applications for their durability and easy maintenance in addition to their hygienic and slip-resistant attributes. Carpet and LVT are primarily specified for non-patient areas like waiting rooms and medical offices. “Sheet goods are still being used in operating and emergency rooms where you want a product that doesn’t have a lot of seams,” Tarkett’s Krejsa noted.

Education remains a mixed bag for commercial flooring as college campuses encompass a wide range of applications—such as dormitories, athletic facilities and classrooms—while K to 12 settings are more utilitarian by nature. Plus, each segment faces its own set of issues impacting specifications. For example, as the economy gets better, state governments and counties are reportedly making more funds available for renovation of public schools. “That seasonability really picks up in late May and June,” Interface’s Gould said. “We’re starting to see good work orders come in.”

Carpet tile is finding expanded usage into classrooms and administrative offices, while VCT is prominently utilized in lower education as it serves as a low-cost solution. “There is still a lot of carpet tile and broadloom being used,” observed Mike Gallman, senior vice president of product management, Mohawk Group.

By comparison, private schools can afford to be more selective as they do not face the same spending restrictions enforced by tighter state budgets. That being said, design trends in higher education tend to emulate corporate and hospitality environments. “Schools have become more competitive and use space as a marketing tool,” Krejsa said. “So they do spend more in higher finishes.”

Retail stores are also looking for attractive, functional floors that can last for years. The segment is fairly fragmented, ranging from mom-and-pop shops and grocery stores to restaurants, retail chains and other establishments. These projects are largely governed by aesthetics and branding, which give designers more latitude and a greater selection of product choices. “We are seeing growth specifically in the Class A retail space, where tile and stone are serving as a premium finish,” Hunsicker noted.

Overall, ceramic, wood and carpet are often specified in high-end spaces—especially inside major retail chains—while resilient, VCT and rubber flooring are recommended for other public spaces. Retailers who specify carpet are doing so largely because of its value proposition, including sound-deadening and low-maintenance qualities. “More and more retail [applications] are using hard surfaces,” said Ralph Grogan, president and CEO, Bentley. “As more retail moves toward hard surfaces, we’re seeing some successes with area rugs there.”

There is an increasing blend of soft and hard surfaces specified in hospitality spaces as well as hotels attempt to incorporate residential design with high performing and easily maintained products that stand up to heavy traffic demands. With a wealth of selections from which to choose, designers find combining both types of flooring creates practical solutions for building owners. “The hospitality sector has led in all categories in terms of commercial sales growth,” Hunsicker said. “Within the category, we’ve seen the demand for value-priced products has remained strong and will likely continue into next year.”

Hospitality is among the faster growing segments as an improving economy is helping drive business and leisure travel back to pre-recession levels. As such, mid-range and upscale hotel brands have many projects in the pipeline, according to published reports. “We love hospitality as an opportunity,” Interface’s Gould said. “Globally, the hospitality segment still purchases $1.3 billion worth of broadloom carpet and we’re seeing massive growth in that segment now.”

While broadloom remains the preferred flooring for guest rooms, hallways and certain public areas due largely to its luxurious look and feel, other solutions are under consideration, experts said. Vendors report an increasing number of major hotel chains using hard surfaces as an alternative to carpet. “Motel 6, for example, is going to use LVT in almost all guest rooms,” Shaw’s Stephens noted.

Designers report seeing a rise in usage of natural and reclaimed materials in hospitality spaces, as well. Many commercial customers are moving toward using more texture in their flooring and away from pattern, which spells good news for manufacturers of both products. “Carpet tile continues to make inroads in that market, both in guest rooms and public spaces,” Mohawk’s Gallman said. “LVT and carpet tile are both growing in that market at the expense of broadloom.”

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