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Commercial: Corporate, hospitality specifications drive sales

June 26-July 2, 2018: Volume 34, Issue 1

 

By K.J. Quinn

 

A flurry of activity in key end-use sectors—corporate, hospitality and education, among them—drove the bulk of commercial flooring specifications in 2017. FCNews research shows total specified commercial flooring sales grew to $6.62 billion in 2017, a 3.5% increase over 2016’s $6.396 billion.

Performance of the respective product categories varied widely, as each sector encountered macro issues impacting demand. Sales of hard surface products such as resilient and ceramic tile continued to surge, while carpet tile increased its share of the total soft surface pie. Designers cited access to a plethora of products to meet a variety of end-user needs ranging from function to price to sustainability requirements.

“To meet these needs, manufacturers have increased focus on the impacts of their products on occupant well-being and productivity,” observed Matthew Miller, president, Interface Americas, “offering a wider range of aesthetic and functional solutions to deliver against the requests of designers’ clients.”

Carpet, while it has lost share to hard surface, remains king of the hill in commercial spaces, generating approximately $3.8 billion in sales, according to FCNews research. Specified contract represents nearly 80% of carpet sales with the remainder utilized in Main Street commercial applications. As in years past, carpet tile consumption outpaced broadloom, claiming about half the volume and 60% of dollars. “This is due to two main factors—cost improvements, as additional options at the low-end range are continuously being added, making carpet tile a more competitive, appealing alternative to low-end commodity broadloom,” Interface’s Miller noted. “Second, carpet tile has added design elements, thanks to enhanced tufting technology that has come to market over the last five years at the mid- and high- end levels, expanding the settings where broadloom is traditionally used.”
Surprisingly, a fair amount of broadloom was consumed in commercial applications last year as the product remains a viable option for commercial spaces requiring a luxurious look and feel. “A lot of low-end broadloom is being sold for Main Street applications,” said Richard French, vice president of sales, Bentley Mills. “We still see some higher-end broadloom sold to the hospitality, legal and financial services sectors.”

But carpet continues to lose market share to hard surfaces. Soft surface saw its share of the commercial sector slide from 61.3% in 2016 to about 57.4%, FCNews research shows. Meanwhile, resilient grew its share of commercial sales from roughly 19.8% of the business in 2016 to about 21.3% last year. Ceramic tile’s share also grew slightly during the period, inching up from 12.9% to 14.1% of commercial sales. And while wood grew its share of the specified contract pie to 3.5%, up from 2.8% in 2016, laminates’ share fell to just under 0.4%.

Resilient is the leading hard surface, posting approximately $1.407 billion in commercial sales last year, according to FCNews research. Proponents cite its installer-friendly attributes as well as its track record in the market. “It has the advantage of comfort and flexibility when compared to unforgiving hard surface flooring like ceramic or terrazzo,” noted Robert Brockman, segment marketing manager, commercial, Armstrong Flooring. “Compared to carpet, it is more durable, has less concern around dust, moisture, bacteria and virus harboring. It also offers an ease of maintenance that costs less to keep looking newer longer.”

LVT and WPC accounted for about 39% of square footage and 49% of dollars sold in commercial resilient flooring last year, research shows, as the category expanded dramatically into areas traditionally dominated by carpet. These include hospitality, multi-family, senior living and retail sectors. Sales and volume grew by double digits—an indication average selling prices held firm. “LVT has certainly taken some share from other resilient products and it is also likely taking share from soft surfaces as well,” said Jeff Fenwick, president and COO, Tarkett North America.

VCT remains a fixture in many commercial environments, experts say, but no longer is it considered a low-cost option due to high maintenance over the life of the floor. Rubber and linoleum are positioned as healthy flooring choices and maintain strongholds in healthcare and education settings. “I do think there is a big opportunity for linoleum in Main Street commercial, which is about getting the right product there,” said Denis Darragh, vice president, North America, Forbo Flooring. “I think people are looking for a floor that’s healthy, installs easily and maybe has a bit of unique flair.”

The second-largest hard surface category, ceramic tile, saw both sales and square footage rise over the prior year. FCNews research shows the category represented 14.1% of commercial sales in 2017, up from 12.9% in 2016. “We have seen positive growth in the tile segment, which can be attributed to a combination of factors, i.e., technological advancements, commercial market recovery, consumer confidence and interest rate fluctuation,” said Gianni Mattioli, executive vice president, product and marketing, Dal-Tile. “We see continued development in high tile usage segments such as hospitality, healthcare and education.”

Hardwood also saw its share of commercial sales rise, increasing from roughly 2.8% of sales to 3.5% last year. Meanwhile, laminates’ share of commercial continues to fall industry-wide, although some manufacturers report success in some niche sectors. “New improvements in laminates technology, such as waterproof cores and more water-resistant laminates, helped sales soar up a little bit,” said Al Boulogne, vice president, commercial resilient business, Mannington Commercial. “But it’s such a small share of the commercial marketplace today that it’s hard to tell if it’s way up or down.”

Corporate
The leading end-use market is corporate offices, representing roughly 48% share, according to FCNews research. The sector experienced double-digit growth over the previous year as capital budgets opened up. Demand is reportedly driven more so by renovations than new builds.

The office sector is among the most diverse segments in terms of product selection. Flooring impacts everything from the level of employee motivation and efficient workflow to employee recruitment. “This has resulted in a movement to incorporate more comfortable and fun aesthetics while creating a uniform visual throughout the office and work environment,” Armstrong’s Brockman said. “Designs that allow for an ergonomic and dynamic feel or a warm, welcoming option are favored.”

An ongoing trend is the influx of multiple flooring solutions which coordinate in design and product thickness, meaning minimal transitions from soft to hard surfaces. A case in point is the uptick of woven products in C-suite areas and conference rooms, echoing the desire for more texture and a “resimercial” feel. “We’re finding hard surface in traditional areas—some in the foyer, some in the cafeteria—but also now in office runways and corridors to help direct the flow,” noted Michel Vermette, president, Mohawk Group. “A lot of tech companies that once had stained concrete are covering those surfaces with commercial enhanced resilient tile (ERT) to help with comfort and sound.”

Carpet tile is the top flooring choice, thanks in part to evolving aesthetics and formats. The product is expanding into workstations, board rooms and privacy rooms. “Product design teams are using the modular approach to achieve new and unique pat- tern options that give interior designers a great deal of control over the finished look, making the design of each client’s space truly unique,” said Sharon Steinberg, AIA, LEEP AP, a principal architect at Stantec’s Houston office.

Resilient, hardwood, porcelain tile and polished concrete are preferred for certain areas where fashion and functionality are required. But LVT is really taking off in corporate spaces. “We’re seeing it placed in a lot of conference rooms and reception areas where end users want to highlight a high-traffic area,” said Jenne Ross, director of marketing, Karndean Designflooring.

Hospitality
Fashion and function are paramount in hospitality, an industry sector reportedly investing millions of dollars to remodel existing properties and build new ones. Flooring choices vary widely, depending on application and budget. For example, broadloom remains the surface of choice in guest rooms, hallways and certain public spaces, thanks to its plush looks and sound-deadening qualities.

Stone, marble, porcelain tile, hardwood and LVT continue gaining coverage in hospitality spaces, experts say, as specifiers seek to create modern, homey looks. “During the last 10 years, hospitality spaces started moving to hard sur- faces to replicate the look of the home,” noted Elizabeth Bonner, director of hospitality design for Mohawk’s Durkan brand. “There have been advances in the manufacturing of LVT products which give them much better looks that resemble actual wood and stone.”

Further fueling interest in hard surfaces are technological advances
that enable high-fashion designs and products to
last longer. Hospitality, considered the second-largest commercial sector for tile, represents an estimated 12% of sales. “The hospitality industry continues to grow, with much of the spaces requiring tile,” Dal-Tile’s Mattioli said. “Designers in the hospitality space demand unique designs, and we are taking style and design to the next level through our latest introductions.”

Healthcare
Healthcare experienced a spike in refresh construction projects and cosmetic remodeling last year, as the business expanded to accommodate the needs of an aging U.S. population and rebranding efforts stemming from corporate takeovers, according to published reports. One of the fastest growing subsegments is assisted living, as facility managers are creating more “homey” environments for residents. “We’ve seen a lot of living spaces, kitchenettes and common areas going to hard surfaces,” Mannington’s Boulogne said.

While the A&D community utilizes green building programs and rating systems as a general guide, experts say, they’re finding there is much more to the equation than simply performance and cost. “Healthcare-built environments are demanding, non-stop living entities that require Lean Six Sigma methods of operational management,” noted Cynthia Hubbell, vice president of healthcare and senior living segments, Mohawk Group. “So not only do products have to be sustainable in their material construction, but they also have to be sustainable in terms of how they are maintained, cared for and replaced over the years.”

Fortunately, there are commercial floors with a proven track record, experts say, helping ease the minds of designers during the specification process. Resilient sheet goods and tile, rubber and linoleum are valued for their durability, hygienic and slip-resistant qualities. LVT is expanding into many healthcare areas while modular carpet, ceramic, porcelain and terrazzo tile are commonly found in hallways, making it easier to maneuver rolling equipment and mobile aids.

“We’re seeing more demand for carpet tile and hard surfaces in healthcare, whether that is in patient rooms, mini corridors or operating rooms,” said Brenda Knowles, vice president of marketing for Shaw Industries’ commercial business.

Retail
The retail business experienced its share of ups and downs last year, which impacted flooring sales. For example, hundreds of retail locations closed their doors in 2017 and more shutdowns are expected this year. Mall vacancies, in fact, are at a six-year high.

But on the flip side, new construction and remodeling plans were announced by several major chain stores, and the new stores that are opening are adopting much smaller footprints. For instance, supermarkets are honing their layouts and remodeling to improve the in-store experience for customers, and eateries are making investments to renovate, creating interior design around a common theme.

Like hospitality and education spaces, flooring types run the gamut. Traditionally, carpet tile and LVT are among the leading flooring choices at retail, experts say. Broadloom, ceramic and hardwood are usually found in high-end spaces, while resilient, laminates and rubber are utilized in public areas. “Advancements in digital printing technology allow us to offer what this segment really needs—beautiful tile that can withstand high foot traffic,” Dal-Tile’s Mattioli said.

The environmental movement is reportedly helping stimulate demand for natural materials such as ceramic, reclaimed wood and linoleum. Wood-grain tile planks, large-format tiles and patterned tile accents are among the most popular looks and formats, according to Nicole Rehfuss, senior associate, retail, at Little. “Existing subfloor in retail up-fits may dictate the kinds of flooring we can install,” she stated. “That means instead of hardwood, we are required to use LVT due to floor leveling.”

Education
The fourth-largest commercial segment, education, exhibited growth across the board last year, industry members say. The amount of flooring sold for K-12 applications was aided, in part, by the passage of funding to support school construction and renovation. Meanwhile, higher education invested money to renovate existing facilities and build new ones, as recruiting and retaining students often hinges on the quality of academic and living facilities. Flooring types vary, as campuses encompass a wide range of applications, such as dormitories, athletic facilities, class rooms and retail spaces. “The schools are looking for flooring that supports future ready goals, requires less maintenance, will have a timeless aesthetic, have competitive upfront costs and are in need of quick delivery for the short window to complete replacements,” Shaw’s Knowles explained.

Across the board, the needs of the education sector are changing, in part, to adapt to the new design of school-learning environments. For example, flooring is being used to create a space within a space to identify collaborative or breakout areas for small group discussions. In some areas, design preferences are shifting toward non-PVC-based products, which observers say has contributed to an uptick in rubber floors. As schools move away from mundane looks, it’s opening up opportunities for stylish products, such as LVT and carpet tile, to be specified in place of VCT.