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Commercial: Retail sector lags behind improving economy

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

 

By Reginald Tucker

What do Sears, Kmart, J.C. Penney, Macy’s, Payless, Toys ’R Us, Walgreens, Michael Kors and Gymboree have in common? They are among the scores of big retail names that announced massive store closings last year. Sears (358 stores in 2017; 63 in January this year alone); J.C. Penney (138 stores); Macy’s (68 stores); and Payless Shoe Source (900 locations), to name a few.

According to a CNN Money report, retail outlets announced the closure of more than 6,000 stores in 2017, which beats the previous all-time high of 6,163 store closings in 2008 amidst the financial crisis. On top of that, more than 300 retailers filed for bankruptcy by mid-2017—a 31% increase over the same time in 2016. That begs the question: Why is it that the retail sector—which represented about 7% of commercial flooring activity in 2016 but only about 4% last year—is lagging behind other end-use markets that are on the rebound in an improving economy? Industry experts cite increased pressure from online operators combined with dramatic changes in brick-and-mortar retail design. A recent study from Pew Research Center found that nearly 80% of Americans do at least some shopping on the internet, with 43% shopping online weekly or a few times a month.

“Technology has accelerated the decline of retailers who have not been in touch with what their consumers wanted as much as their competitors,” said Richard Kestenbaum, contributing writer for Forbes magazine. “Technology helps consumers see more of what’s available, and that makes the comparison between brands so much more stark and apparent.”

One reason behind all the retail store vacancies—the highest they have been in six years—is the ongoing evolution of retail formats. According to Kestenbaum, the main reason why we are seeing so many vacancies (even though more stores are opening than closing) is the footprint and locations of the stores being closed aren’t suitable for the stores being opened. Simply put, the old stores’ formats can’t be transformed, and their locations don’t work for the new stores that are opening.

Outlook for remainder of 2018
Unfortunately, the trend seen in 2017 and in the years prior is expected to continue for much of 2018. According to a CNBC report, the amount of retail space “going dark” in 2018 is on pace to break a record, as companies with massive floorplans are either trimming back their store counts or liquidating altogether.

As of April, more than 90 million square feet of space is expected to be vacated, according to commercial real estate services firm CoStar Group, which closely tracks the non-residential construction market. The firm believes that’s on track to surpass a record 105 million square feet of space shuttered last year.

“I think there’s probably a couple more announcements coming,” said Suzanne Mulvee, a senior real estate strategist with CoStar, which predicts 2018 should be a peak year for the amount of retail space closing. “It wouldn’t surprise me to see a few more significant announcements from department stores, and more chains that continue to struggle.”

On the upside, observers believe property owners see the vacancies as an opportunity to fill spaces with new tenants that operate more profitable businesses. In a recent case study on U.S. malls, CoStar Group found top-tier, Class-A mall owners were more likely than other landlords to release a space within one year of a department store anchor moving out. “I think it gets harder and harder [for owners to find replacements] the more these big boxes come on the market,” Mulvee said.

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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.

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Xpress Global Systems: Going the extra mile

May 28/June 4, 2018: Volume 33, Issue 25

By Reginald Tucker

In today’s hypercompetitive distribution economy, it’s no longer enough to simply move products from point A to point B. In order to gain an advantage, wholesalers must also go above and beyond by offering value-added services to manufacturers and retailers alike.

That’s precisely the edge that Xpress Global Systems, formerly Crown Transport, claims to offer its partners across the supply chain. “We’re the largest nationwide transportation hauler for the floor covering industry,” said Darrel Harris, CEO of the Chattanooga, Tenn.-based distributor. “Xpress Global is a company that’s been around for 40 years.”

According to Harris, Xpress Global Systems’ fleet entails nearly 300 trucks, and the company owns roughly 600 pieces of trailing equipment. From a logistics standpoint, about 75% of its freight originates out of Dalton, with approximately 20% coming out of the Southern California area.

“The majority of our business that we handle is LTL—less than truckload—shipments predominantly for floor covering businesses,” Harris explained. “We also have a fair amount of our business dedicated to warehousing. We store freight for our customers, and most of the time that freight then finds its way onto our trucks for local distribution.”

Xpress Global Systems also maintains a brokerage division (XTMS) that’s able to arrange transportation, truckload brokerage and LTL if it’s outside the scope of the company’s normal activities. Operating out of Xpress Global System’s Tunnel Hill, Ga., facility, XTMS is designed to provide additional services for the company’s large customer base in the region.

Harris cites additional competitive advantages. “By far it’s our expertise in handling floor covering, specifically rolled goods. Our employees are very well trained, experts in their field. It’s a type of product that requires special handling. You hear so many different stories in the industry about carpet being damaged when shipped using general commodity carriers. It’s not that we never had that problem, but it’s a very low claims percentage. Less than half of 1% of our shipments result in a claim, because we take great care of our equipment. Plus, our network is set up to make sure the carpet is handled properly.”

But it’s not just soft goods. Xpress Global is also equipped to handle pallets of hard surface products such as LVT. “We really put a big focus on the hard surface of segment of the business,” Harris said. “What’s really good about it from a transportation perspective is those goods commingle well in a transportation mode. Over the past few years we have really put a focus on exploring those opportunities with our customers.”

Creative solutions 

Xpress Global Systems also excels in what Harris refers to as “reverse logistics.” For example, if freight is delivered to a retailer but the shipment is rejected, Xpress can arrange to send it back to the originating mill. “We can assist the retailer for any reason that might create a scenario where they would need to return the product,” Harris explained.

Another competitive advantage Xpress Global Systems offers is its sheer size and scale. “There’s no one that has the broad coverage area to match our 33 facilities across the country,” Harris said. “That is something that’s very unique and special in this particular space focused on floor covering.”

So why would a retailer prefer to have Xpress Global ship their products from a mill as opposed to just paying the mill to have the product shipped to them? Harris explains the thought process. “What we find is many retailers don’t always take the time to really understand their overall freight costs or the logistics behind it. So there could be significant cost savings with us. Also, we have capabilities in so many different areas that are all built around floor covering, which translates into other solutions we could bring to the table that they might not even be aware of. For example, we can store goods for clients in various parts of the country without them having to spend the extra funds to basically put brick-and-mortar facilities in. In essence, they can use our facilities as an opportunity to position their freight for their customers, and we can  handle shipping it out for them. So there’s just a lot of creative things we can do by opening up those discussions directly with the retailers.”

Robbie White, senior manager of distribution and logistics for Beauflor, is a believer. “Xpress Global has given us a lot of capacity that we didn’t have. But they have also worked with us on drop trailers, especially on nationwide coverage of rolled goods. With the proactive reporting they provide, we don’t have to wait on exceptions to come up. They’re really good at managing those exceptions for us.”

Other Xpress Global Systems customers attest to the distributor’s high level of service. Jared Warnack, vice president of Lowe’s division for Phenix Flooring, has been a client for more than 15 years—and for good reason. “They are a very integral part of our company. They service the majority of the nation for us, and they do a wonderful job.”

Warnack attributes that track record to the leadership at Xpress Global Systems. “When Darrel Harris [CEO] came on board, he changed some of the policies to help improve customer focus. For example, he created a customer advisory board comprising logistics personnel from most of their major manufacturer customers, and we talk about issues we face every day in the industry. Xpress Global Systems then uses that feedback to improve their service and offerings. That’s why so many specialty retailers and big box stores use them as their preferred carrier.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Retailers recall top intros of 2017

November 27-December 11, 2017: Volume 32, Issue 13

By Lindsay Baillie

 

FCNews asked retailers to name the top flooring introductions of 2017. It should come as no surprise that the responses covered a broad range of products across the spectrum—LVT/WPC, wood, laminate and carpet. Some of the products identified were updated designs and looks from intros of 2016, while others were completely new launches.

Following is an overview of the new products that stood out in 2017:

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Commercial sector stalls, then rebounds, in 2016

July 3/10: Volume 32, Issue 2

By Reginald Tucker

 

Screen Shot 2017-07-10 at 2.44.33 PMThe U.S. non-residential construction industry finished strong in 2016, with key end-use segments posting some of the highest numbers since the market began to rebound in the spring of 2015. That’s according to newly released U.S. Department of Commerce figures that show non-residential construction spending reached a seasonally adjusted annual value of $430.1 billion in December, nearly the same as November 2016 but up 9.2% compared to December 2015.

With respect to private construction, most segments were up during the period, with the exception of lodging and education, where spending was down 4.4% and 2.1% in December, respectively. Meanwhile, office construction spending was up 2% with commercial and healthcare rising 0.7% and 1.2%, respectively, during the final month of the year.

The value of private construction in 2016 was $876.3 billion, a 6.4% increase over 2015. Total non-residential private construction reached $420.1 billion, a 7.8% uptick over 2015.

In terms of public non-residential construction spending, the picture was vastly different. Spending across virtually all categories was down, led by office (off 7%) followed by education (down 2.1%). Public commercial and healthcare construction spending fell 1.1% and 1.5%, respectively, during the month of December.

Looking at 2016 as a whole, the value of public construction was $286 billion, a tad below 2015’s $288.9 billion. Total educational construction spending in 2016 was $69.7 billion, a 4.7% increase over 2015.

Screen Shot 2017-07-10 at 2.44.59 PM“2016 was a chaotic year for non-residential building activity,” said Kermit Baker, chief economist for the American Institute of Architects (AIA), Washington, D.C. “For most serving this market, it turned out to be a successful year—construction spending in this sector rose almost 8%, according to current estimates—even as challenges to the industry were continually emerging.”

Anika Khan, senior economist with Wells Fargo, said lodging, office and amusement-related construction spending on the whole registered solid gains in 2016. She expects this trend to continue throughout 2017. “These outlays will likely advance as builders construct so-called ‘integrated’ resorts that include lodging, gaming and meeting spaces. Office activity is also expected to continue to post strong gains with the construction of large-scale projects. However, overall office operating fundamentals suggest some moderation in activity is in store.”

Experts believe rising construction costs will also play a role in slowing overall activity during 2017. “Costs have been muted in recent years, largely due to weak global demand and the strong dollar,” Khan stated. “However, the overall cost of materials and components for construction, including gypsum, ready-mix concrete and steel, is expected to see some upward pressure in 2017. Moreover, labor costs could also rise further as construction firms continue to report a shortage of skilled workers.”

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Commercial sector stalls, then rebounds, in 2016

July 3/10: Volume 32, Issue 2

By Reginald Tucker

 

Screen Shot 2017-07-10 at 2.44.33 PMThe U.S. non-residential construction industry finished strong in 2016, with key end-use segments posting some of the highest numbers since the market began to rebound in the spring of 2015. That’s according to newly released U.S. Department of Commerce figures that show non-residential construction spending reached a seasonally adjusted annual value of $430.1 billion in December, nearly the same as November 2016 but up 9.2% compared to December 2015.

With respect to private construction, most segments were up during the period, with the exception of lodging and education, where spending was down 4.4% and 2.1% in December, respectively. Meanwhile, office construction spending was up 2% with commercial and healthcare rising 0.7% and 1.2%, respectively, during the final month of the year.

The value of private construction in 2016 was $876.3 billion, a 6.4% increase over 2015. Total non-residential private construction reached $420.1 billion, a 7.8% uptick over 2015.

In terms of public non-residential construction spending, the picture was vastly different. Spending across virtually all categories was down, led by office (off 7%) followed by education (down 2.1%). Public commercial and healthcare construction spending fell 1.1% and 1.5%, respectively, during the month of December.

Looking at 2016 as a whole, the value of public construction was $286 billion, a tad below 2015’s $288.9 billion. Total educational construction spending in 2016 was $69.7 billion, a 4.7% increase over 2015.

Screen Shot 2017-07-10 at 2.44.59 PM“2016 was a chaotic year for non-residential building activity,” said Kermit Baker, chief economist for the American Institute of Architects (AIA), Washington, D.C. “For most serving this market, it turned out to be a successful year—construction spending in this sector rose almost 8%, according to current estimates—even as challenges to the industry were continually emerging.”

Anika Khan, senior economist with Wells Fargo, said lodging, office and amusement-related construction spending on the whole registered solid gains in 2016. She expects this trend to continue throughout 2017. “These outlays will likely advance as builders construct so-called ‘integrated’ resorts that include lodging, gaming and meeting spaces. Office activity is also expected to continue to post strong gains with the construction of large-scale projects. However, overall office operating fundamentals suggest some moderation in activity is in store.”

Experts believe rising construction costs will also play a role in slowing overall activity during 2017. “Costs have been muted in recent years, largely due to weak global demand and the strong dollar,” Khan stated. “However, the overall cost of materials and components for construction, including gypsum, ready-mix concrete and steel, is expected to see some upward pressure in 2017. Moreover, labor costs could also rise further as construction firms continue to report a shortage of skilled workers.”

 

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Commercial: Strong end-use sector activity drives contract flooring purchases

June 26: Volume 32, Issue 1

By K.J. Quinn

 

Screen Shot 2017-07-05 at 9.42.05 AMA continued increase in hard surface consumption led to another year of growth in the commercial market sector in 2016.

FCNews research showed the commercial market sector generated $6.396 billion in flooring sales—down slightly from 2015 but up nearly 20% from 2011. Tipping the scales is carpet, which generated roughly $3.923 billion in sales, accounting for just over 61% of the commercial market. Observers estimate more than 80% of the business is generated from specified contract with the remainder coming from Main Street applications. By comparison, carpet accounted for roughly 58% of the commercial market five years ago.

While carpet’s share of the commercial market hasn’t changed appreciably since 2011, the industry is seeing a shift in the overall product mix. “Carpet tile is claiming share from broadloom,” stated Matt Miller, president, Interface Americas, citing two main factors. “Cost improvements and added options at the low end make it a more competitive, appealing alternative to low-end commodity broadloom, and added design at the high end expands the settings in which it is used and provides wayfinding and purposeful space through design.”

Broadloom remains ahead in volume with an estimated 55% to 60% share, a number that decreased from the prior year as hard surfaces and carpet tile gained coverage in the hospitality business. Still, broadloom remains a viable option for commercial applications requiring a luxurious look and feel. “You can also get many different looks and can easily customize color options if you have enough square footage,” said Carla Remenschneider, RID, IIDA, director of interiors, Fanning Howey, an architecture and engineering firm based in Indianapolis. “You can also use the tiles to create wayfinding elements.”

The commercial hard surface segment put in a respectable performance as well, reaching approximately $2.473 billion in sales, FCNews estimates show. Much like soft goods, hard surface commercial activity is also up from five years ago. Back then, resilient, ceramic, wood and laminate combined to represent $2.2 billion. Industry observers cite a broader shift in the types of materials being specified for commercial applications.

“We believe the movement from soft surface to hard surfaces, as seen in the residential category, is also working its way into certain commercial segments, such as hospitality and corporate,” said Jamey Block, Armstrong’s vice president, resilient product management. “Spaces that traditionally had been dominated by carpet, such as public lobbies and guest rooms, are now being covered by attractive, durable resilient products like LVT.”

Indeed, innovation is the name of the game in hard surfaces. Ongoing advancements have enabled products such as LVT and ceramic tile to penetrate all market sectors and grow significantly faster than tried-and-true products such as vinyl composition tile (VCT) and rubber. Resilient is the top seller, representing roughly 19.8% of total commercial sales (doesn’t include commercial WPC) in terms of dollars but nearly 50% of the commercial hard surface market,

estimates show. Leading the charge is LVT, which maintained double-digit growth and accounts for about 51.3% of commercial resilient sales and 31.4% of volume.

“The ongoing preference for designing commercial spaces—whether in education, healthcare or senior living—to look more residential in nature has brought popular, proven hard surface products into the commercial arena, as much for the realistic designs as for the durability and ease of maintenance,” Armstrong’s Block said.

Screen Shot 2017-07-05 at 9.42.19 AMOther hard surface categories are growing their share of the market. Research shows ceramic grew its share of the total commercial market to 12.9% in 2016. With respect to commercial hard surfaces, ceramic increased its share of the market from 27.1% in 2015 to nearly 35% in 2016.

Observers say the specified contract market generated the vast majority—70%—of the tile business. “The greatest impact on the ceramic commercial market is the continued development of segments that use a lot of tile in their structures, such as hospitality and education,” noted Gianni Mattioli, executive vice president, product marketing, Dal-Tile.

Manufacturing advances have enabled tile to enter commercial segments previously reserved for carpet and other hard surfaces. For example, there is an influx of unique decorative facings, textures and modular formats. Digital printing technologies are allowing vendors to create 3D visuals that closely resemble wood, stone and concrete looks and apply different gloss levels of glaze, metallic and even texture.

“We’re seeing more and more installations using gauged porcelain tile panels,” said Lindsey Waldrep, vice president, marketing, Crossville. “Because these products can be installed directly over existing surfaces such as old tile and stone, they offer exceptional installation advantages in terms of cost, labor and time savings.”

Designers are finding usage for other hard surfaces, industry members say, although sales of traditional vinyl sheet and floor tile were impacted by softening market conditions last year. VCT remains a fixture in many commercial environments but is no longer considered a low-cost option due to high maintenance over the life of the floor. Workhorse products such as rubber and linoleum are positioned as healthy flooring choices for healthcare and education settings. Estimates show linoleum sales grew between 2% and 4% in 2016, with roughly 90% of sales coming from specified contract.

“Performance encompasses all aspects of linoleum, from durability through being the best product for a healthy indoor environment,” said Denis Darragh, Forbo’s vice president, North America. “The value is simply the lowest cost of ownership of any flooring product.”

Meanwhile, hardwood and laminates—which combined represent roughly 3.2% of total commercial sales—continue to carve a niche in certain retail and hospitality applications. “Laminate has a small share of the commercial market, although it is more popular in Main Street settings,” Block said.

Overall, laminates’ share of the commercial market has been falling over the years. In 2011, the category represented just under 1% of commercial flooring sales; in 2016 that number fell to about 0.4%. Likewise, wood’s share of the commercial market slipped slightly from 5.5% of sales in 2011 to just under 3% last year.

Education
These qualities are welcome in educational facilities, where the passage of school construction bond measures are supporting K-12 school construction, according to published reports. Dodge Data & Analytics predicts institutional building will advance 10% this year, resuming its expansion after pausing the previous two years. “We see an improvement in the overall business conditions in education, which fueled significant growth in that segment,” Forbo’s Darragh stated.

Screen Shot 2017-07-05 at 9.41.56 AMFlooring needs are changing, in part, to adapt to the new design of school learning environments, which are moving away from traditional mundane looks. This is a major reason why products such as LVT, rubber and carpet tile are being specified in K-12 facilities at the expense of VCT. “Carpet tile is overtaking broadloom in education because of design trends and the ability to do selective replacement,” said Mike Gallman, senior vice president, commercial product, Mohawk Group.

Keeping up appearances is especially important in higher education, where recruiting and retaining students often hinges on the quality of academic and living facilities, plus amenities. Industry studies have shown that even sustainability can be a deal breaker. “We are seeing an increased focus on sustainability in designs, which is impacting the decisions of designers,” Dal-Tile’s Mattioli said.

Premium flooring tends to be specified more in higher education, as private schools do not face the same spending restrictions enforced by tighter state budgets. Flooring types vary, as campuses encompass a wide range of end uses, such as dormitories, athletic facilities, class rooms and retail spaces. “Education is shifting from traditional products like VCT into more style forward products like LVT,” said Al Boulogne, vice president of Mannington’s commercial resilient business. “Life-cycle costs are starting to impact purchase decisions.”

Healthcare
Similar to education, healthcare is experiencing a spike in new facilities—specifically clinics, assisted-living communities and urgent care centers—as the business expands to accommodate the needs of an aging U.S. population. While durability, maintenance and budget are still important considerations for flooring, experts say, interior finishes are changing as many healthcare providers strive to create more “homey” environments. “In senior living residences, for example, social and programmatic areas can no longer be institutional, but rather must reflect the needs of the residents,” noted Carol Tobin, principal, Tobin Parnes Design, New York.

Research studies provide evidence that interior design can help influence medical outcomes. “Designing and building healthcare spaces to provide a soothing, quiet healing environment has proven to help patients heal quicker,” noted Jim Bistolas, national healthcare segment director, Gerflor USA. “This results in better (patient review) scores for a facility, which directly impacts their bottom line.”

There are commercial floors with a proven track record in healthcare, which help ease the minds of designers during the specification process, industry watchers say. For instance, resilient, rubber and linoleum are valued for their durability, maintenance, hygienic and slip-resistant qualities. Modular carpet, ceramic, porcelain and terrazzo tile are commonly found in hallways, making it easier to maneuver rolling equipment and mobile aids.

Healthcare is among the strongest markets for homogeneous and heterogeneous sheet goods, where it is used largely in operating and emergency rooms, areas which require floors with little to no seams. “Commercial sheet flooring showed some gains last year, and some of that was due to growth in the healthcare market,” Armstrong’s Block said.

Corporate
Flexibility is a common theme for flooring laid in corporate environments, the largest segment of the commercial market, representing about 48% of the business, according to FCNews research. Sales grew between 10% and 13% last year as an uptick in new construction, expansions and renovations along with Screen Shot 2017-07-05 at 9.42.24 AMrising corporate profits stimulated demand. Similar to healthcare, a major trend driving interior design in office spaces is creating an environment that makes occupants feel at home.

“For design firms like us, a principal driver is to work with products that push the envelope of sustainability and design creativity,” said Montserrat Aguilar, CID, LEED AP ID+C, an interior project designer at Perkins + Will in New York. “We look to enhance the interior environments we design through the use of healthy materials.”

Corporate offices is probably the most diverse in terms of product selection, observers say, as specs are based on the functional and design needs of the space. “We are seeing carpet tile going into some corporate areas that have had hard surfaces due to the noise factor and discomfort underfoot,” Ralph Grogan, president and CEO, Bentley Mills, explained.

Retail
Durability and style are prerequisites for flooring inside retail stores, a sector where sales and consumer spending drive nearly 70% of economic growth. Despite the fact that store construction was subdued and brick-and-mortar footprints shrank last year, interior redesign was quite common as retailers searched for new ways to attract and engage with customers. “A desire by customers for more authentic, sensory and tactile experiences in retail stores has fueled the trend towards natural, reclaimed and artisanal materials that add character and warmth to the shopping environment,” said James Farnell, RDI, international president, Retail Design Institute. “We have witnessed a departure from the classic cost engineered, mass rollout ‘cookie-cutter’ prototype model of the previous decade toward more localized design solutions that connect brands with the neighborhoods in which they are located.”

Carpet tile and LVT are among the leading flooring choices for retail spaces, experts say. Broadloom, ceramic tile and hardwood are being specified in high-end spaces, while resilient, laminates and rubber flooring are utilized in other public areas. Niche, alternative floors—such as reclaimed wood and polished concrete—are finding their way into a number of major store chains as they offer a different twist to products specified in contemporary design.

Hospitality
Renovation was rampant in the hospitality business last year, as the major hotel brands invested millions of dollars to redecorate existing properties and build new ones. “All major hotel chains are continuing to grow, with new builds steadily occurring,” Dal-Tile’s Mattioli said. “Additionally, we have seen incremental new business from boutique hotels.”

Flooring choices vary widely, depending on application and client. Broadloom remains the surface of choice in guest rooms, hallways and certain public spaces, thanks to its plush looks and sound deadening qualities. “There are patterned goods you can do with broadloom that you can’t do with carpet tile,” Bentley’s Grogan pointed out. “The bigger patterns are more difficult to achieve.”

Nature remains a powerful influence in interior design and there is pent-up demand for flooring that replicates elements of the great outdoors. Hard surfaces such as stone, marble, porcelain tile, hardwood and LVT are on the radar, observers say, as designers seek to create modern, residential type looks in spaces which traditionally specified broadloom.

 

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Armstrong realigns commercial, residential sales management operations

March 13/20, 2017: Volume 31, Issue 20
By Reginald Tucker

 

Joe Bondi
Joe Bondi

Armstrong Flooring has initiated the process of uniting its commercial and residential business operations. Specifically, the realignment entails the integration of the company’s residential and commercial sales, marketing and product management teams. The move also combines the resilient and wood manufacturing operations.

Under the new structure, several key executive positions have changed. Joe Bondi, formerly senior vice president—North America Residential, will now serve as senior vice president, chief product officer. In this role, Bondi will have responsibility for R&D, design, resilient and wood product management, marketing, customer service and pricing.

Dominic Rice, formerly senior vice president—commercial, will now serve as senior vice president, global operations and manufacturing. Rice will oversee resilient and wood manufacturing, environmental health and safety, quality, engineering, procurement, demand and supply planning, as well as Armstrong Flooring’s Asia and Australia businesses. Lastly, Brent Flaharty, formerly vice president of residential sales, becomes senior vice president, North America Sales. He will oversee sales and sales operations.

Don Maier, Armstrong Flooring president and CEO, said the new structure will provide enhanced support and greater alignment with Armstrong’s customers and distributors. “We’re very excited about what we believe this is going to be able to do—make us quicker in the marketplace, more responsive to our retailers’ needs and make it much easier for both our retailers and distributors to do business with us. That’s the genesis of it.”

Don Maier
Don Maier

According to Maier, the realignment of the commercial and residential sales operations has been in the works since Armstrong Flooring officially separated from Armstrong World Industries in April 2016. “It’s really about trying to understand what the end markets are looking for and how we could structure ourselves to better serve those needs and deliver on our growth objectives. We started at the very end, with the customer, and then worked our way backward through distribution and back through Armstrong to look at how we could better structure things.”

Prior to the realignment, Armstrong Flooring ran two fairly autonomous business units—one focused on its commercial clients and one targeting residential end users. Under this structure, each had dedicated selling, product management/marketing and manufacturing resources. Bringing these two businesses together and putting them under common leadership reach of those functional capabilities, according to Maier, will allow Armstrong to be much more coordinated and more efficient in delivering its solutions and services to the market.

FCNews spoke with Maier about the specifics of the realignment and what it means to Armstrong’s retailer and distributor partners across the chain:

 

Q: Traditionally speaking, the commercial and residential marketplaces are different in terms of how the respective products go to market, how they are specified, etc. Seemingly they are two different creatures. Can you provide specific examples of how this realignment will benefit Armstrong’s customers?
Maier: Probably the best example I can give you is LVT. We found our customers or end users were not viewing products as commercially oriented or residentially oriented, but rather a continuum of performance characteristics and application requirements to fit a specific need. So what you’re seeing is the best of both worlds where we still have the dedicated resources on the street working the A&D community as well as Main Street and other retail end users, but we’ll have a consolidated offering and no artificial walls built between our various product lines. Our selling resources will have the entire bag of the portfolio to serve the particular needs of the specific application.

Brent Flaharty
Brent Flaharty

Q: The second component of the realignment entails the unification of the resilient manufacturing and wood manufacturing operations. Can you give us concrete examples of how that will benefit customers and end users down the supply chain?
Maier: At the highest level we are able to consolidate centers of excellence to support both our wood and resilient businesses. We’ll have common leadership across those categories, and we’ll be able to take best practices and benchmarking across the divisions at a much quicker pace. I have spent quite a bit of time not just with customers but also with employees in our manufacturing facilities to see just how creative they can be in their individual facilities. I have found that sharing of best practices across plants has not been fully leveraged. That’s just one example of being very coordinated under one set of leadership to facilitate the transfer of knowledge.

There are many other benefits—i.e., demand planning, logistics—that can be realized by being able to combine our collective businesses to serve our distributors, and hopefully that will translate into an improvement in terms of working capital necessary to provide the exceptional service levels they offer.

Q: Aside from the new positions for Joe Bondi, Dominic Rice and Brent Flaharty, do you anticipate the creation of new positions, staff reductions, etc.?

Dominic Rice
Dominic Rice

Maier: As we combine the two businesses—and this is really spread across our sales leadership teams, product management, marketing and manufacturing—we found we had about 40 redundant positions. Unfortunately this will result in a slight modification in our head count. We are in the process of getting all of those changes communicated this week, and our goal is to have the organization fully in place and up and running by the end of [March 18] so the organization is well aligned and that any changes that may have happened—i.e., contact points for distributors, etc.—will be communicated quickly and effectively. But we certainly feel it’s important we treat those impacted individuals with the utmost dignity and respect, and we are providing very generous bridges for them to transition to their next positions. And we are certainly very thankful of the contributions each person has made to our company over the years.

Q: How do you foresee the market responding in the immediate term and down the road?
Maier: We really believe this is going to improve the manner in which we can react to the market and support our customers, which we ultimately believe is going to allow them to drive their businesses and ultimately ours. I have reached out to all our major retailers, and so far the response has been unanimously supportive. They all are completely aligned with the changes, and they believe we’re making the right moves. That’s been reassuring to get that vote of confidence from our distributors and customers.”

 

 

 

 

 

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Mohawk Commercial rolls through first 11 weeks of fantasy league

November 21/28, 2016: Volume 31, Number 12

Eleven weeks into the NFL season, defending champion Mohawk Commercial remains atop the FCNews’ Fanstasy Football for a Cause league standings, but the race is heating up. The MoComm Machine has lost just once and has already raised $3,500 for its cause, Susan G. Komen. The powerhouse leads FCNews in the standings by a mere half-game. It’s another three games back to Salesmaster and Coverings, which have raised $1,500 for its charities of choice, American Cancer Society and Ceramic Tile Education Foundation, respectively. FCNews has raised $2,500 for Long Island Cares. Mohawk Commercial, FCNews, DriTac and Raskin are all averaging more than 100 points a week.

Playoffs begin in week 14.

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