June 20/27, 2016; Volume 30, Number 26
By K.J. Quinn
A gradually improving economy combined with a rise in permits for building renovations, chiefly in the corporate office sector, contributed to an increase of 3% to 5% in the commercial flooring arena in 2015, FCNews research shows.
True to form, the carpet category remained king as sales reached roughly $3.95 billion despite the ongoing encroachment of hard surfaces on carpet’s turf. Estimates indicate that as much as 80% of carpet sales were generated by specified contract market with the remainder coming from Main Street applications. Within the soft surface segment, modular tile has emerged as the pacesetter, growing at a 10% clip year over year and now commanding about 55% of soft surface sales.
Among the primary drivers contributing to the success of carpet tile, industry watchers say, is the product’s portability and assortment of sizes, colors and textures. Plus, the A&D community craves the product’s sustainability as it is much easier to take up and recycle than broadloom. “The styling for carpet tile continues to improve,” said Ralph Grogan, president and CEO, Bentley Mills. “Some of the long-term holdouts were law firms and accounting firms, and even they are switching to carpet tile for the same reason everyone else: ease of installation and recyclability.”
Experts estimate that broadloom still represents about 56% of soft surface volume. In high-end applications—where broadloom is often considered the better solution because of its ability to create custom looks and finishes—innovation is enabling modular carpet to expand.
“We came to NeoCon last year with a heavy weight, high-end, luxurious product not common to [carpet] tile,” noted Mike Gallman, senior vice president of product management, Mohawk. “We [brought] some innovation to our cutting and tufting processes to be able to do that.”
Hard surface activity
Although carpet maintains a dominant share of the commercial market, several hard surfaces categories have been growing at a faster rate than carpet in some sectors. Observers say sustainability concerns have turned into a selling point as more flooring producers list environmental and health data to help make products transparent and verifiable. Case in point: Armstrong provides a broad portfolio of sustainable hard surfaces such as VCT featuring high recycled content, Bio-Floor (BBT), linoleum sheet and tile goods.
“Our investment in our luxury flooring plant in Lancaster, Pa., will yield product with recycled content as we phase our launch into commercial,” said Dominic Rice, senior vice president, North America commercial, Armstrong Flooring. “Further, with domestic production we reduce our environmental footprint related to transportation for delivery and reclamation of the product.”
Resilient, a stalwart category in the commercial arena, generated $1.188 billion in commercial sales, FCNews research shows. LVT is now 29.4% of the commercial market, while sheet is now just 13.1% of the commercial market, down 1.4% in dollars in 2015.
“LVT continues to be the fastest growing product across a broad array of commercial segments,” said David Sheehan, vice president, commercial hard surface, Mannington. “Both the aesthetic and performance properties of commercial LVT provide the end user the perfect price and performance value.”
While LVT is the headliner, other hard surfaces are carving a niche in various segments. For instance, sheet goods retain a strong position in healthcare, where it is predominantly used in operating and emergency rooms. “We still see VCT from a volume standpoint as the largest [hard surface] category,” said Jeff Krejsa, senior vice president at Tarkett, noting its strong performance characteristics make it suitable for hospitals, schools and retail environments. “LVT has taken over from a dollar standpoint and has grown significantly.”
With respect to ceramic tile, analysts estimate that between 70% and 75% of category sales can be attributed to specified contract.
While statistics are hard to pin down because distribution is fragmented, ceramic trails only vinyl as the leading commercial hard surface, tallying an estimated $750 million in 2015.
Rubber remains a workhorse product for healthcare and education settings, although the category exhibited a modest sales hike last year according to industry estimates. Linoleum remains a viable choice for these environments with sales reportedly picking up in the second half of 2015. “Linoleum is a value proposition sale that makes economic sense in facilities that demand low cost of ownership and high durability,” said Denis Darragh, general manager, North America, Forbo Flooring. “As a result, it has a very strong and growing presence in education and healthcare and a solid position in retail.” Approximately 85% of linoleum sales are derived from specified contract, experts said, although Main Street remains a growth opportunity.
Rounding out the hard surface categories are hardwood and laminate, which collectively combined to represent roughly 4.2% of the total commercial flooring business, FCNews research found. Hardwood accounted for nearly four times as much revenue as laminate and was typically specified for higher-end applications. Laminate, meanwhile, has primarily been relegated to retail spaces with light foot traffic. Observers point to shortcomings related to performance as a reason for the lack of large-scale specifications.
“I think laminates are declining because of their susceptibility to moisture,” said Jack Ganley, president, Mannington Commercial. “There is a lot of new construction in retail, and laminates are being used less.”
The office sector remains the largest of the five major commercial markets, representing about 45% of flooring sales, FCNews research shows. Carpet tile emerged as the top flooring choice for office interiors, boasting 55% to 60% market share. “The modular nature of carpet tiles allows for more flexibility in design and installation methods,” said Betsey Friedman, workplace designer, CallisonRTKL Architects, New York. “Organizations are constantly changing, and carpet tiles can be arranged to quickly reconfigure a space.”
Modular carpet, however, is not the optimum solution for all workplace spaces. For example, LVT is increasingly being specified in entryways, hallways, cafeterias and lunch rooms due to maintenance requirements. Furthermore, the functionality and design versatility of other hard surface products, namely rubber and linoleum, are leading to specifications in some areas.
“I think you are seeing some increased variation in flooring types used in the office—probably a little more hard surfaces,” said John Stephens, vice president of marketing at Shaw Contract Group.
As the workplace becomes more collaborative and open, flooring is playing a larger role in office design, experts say. “A sense of place is increasingly important to all individuals,” Stephens added. “And now more than ever employers are prioritizing workspaces that fit the lifestyles and enhance the productivity of their employees.”
To that end, more companies are creating environments that provide flexibility and choices for how and where to work. “Contemporary offices are complex spaces that now support a multi-demographic, multi-ethnic and multi-disciplined workforce,” Chip DeGrace, executive creative director, Interface, explained. “The most effective offices support business success by providing specific environments for specific people and their specific activities.”
Hospitality is fast becoming a more lucrative sector as hotel brands are continuing to invest millions of dollars to renovate existing locations and build new properties. “In terms of design, many facilities are striving to create an atmosphere that’s more like home,” said Danielle Hunsicker, general manager, commercial sales, Dal-Tile.
In terms of product type, broadloom remains the preferred option for guest rooms, hallways and some public areas, designers say. Proponents say the product is considered a luxury item, offering design capabilities that are not easily duplicated in carpet tile. However, increased options in colors, textures and formats—such as planks, hexagon shapes and larger sizes—are helping carpet tile expand at a faster rate than broadloom. “[Carpet tile] can uniquely provide a design language to support any design criteria,” Interface’s DeGrace said. “It can support a need for hard surface, soft surface and even plush material.”
Hard surfaces such as resilient offerings are used in low-end and mid-range applications while hardwood, porcelain and ceramic are preferred for more luxurious settings due to their durability and natural visuals.
An increasing blend of soft and hard surfaces are specified in these spaces as hotels attempt to incorporate residential design with high-performance, easy-to-maintain products capable of standing up to heavy traffic demands. With a wealth of selections from which to choose, designers find that combining both types of flooring creates practical solutions for building owners. “It’s early in the trend, but we are seeing [a movement] toward the use of hard surfaces, specifically LVT, in both public spaces and guest rooms,” Mannington’s Ganley said.
This sector continues to flourish as college environments are being redesigned to attract more students while public schools are seeing increased investments from local and state governments to accommodate growing enrollment numbers.
The two segments that make up the education sector—grades K to 12 and colleges/universities—have distinct needs when it comes to flooring. In higher learning environments, flooring specs run the gamut due to the vast amount of varied spaces on campus, ranging from dormitories, athletic facilities and classrooms to administrative offices and retail stores. For example, modular carpet is expanding coverage into classrooms and administrative offices while resilient, linoleum, ceramic and wood are found in common areas such as corridors, entryways and classrooms.
Flooring choices in K to 12 are more utilitarian in scope, specifiers say, as public school systems are more budget sensitive. Carpet and resilient are often utilized for adding warmth and comfort underfoot in classrooms, media centers, offices and collaborative learning spaces. VCT remains a valued product for these applications as well thanks to its durability and low installed cost in addition to its designs. “We’re also seeing a lot of rubber being used in K to 12,” said Natalie Jones, vice president of brand development, Mannington.
Beyond meeting infection control standards, the primary aim in healthcare design is to help improve patient care and enhance medical outcomes. To that end, many facilities are striving to create environments that are more comfortable. “When you have a senior housing development it’s more like assisted living where spaces are becoming more hospitality driven,” Krejsa explained. “So you’re seeing looks that are softer and keep in touch with a residential space.”
The sector maintains a broad flooring need as healthcare is spread across assisted living facilities, hospitals/clinics and medical office buildings. For instance, resilient, rubber and linoleum flooring are valued for their durability, maintenance and hygienic and slip-resistant attributes. On the other hand, low-density carpet and ceramic, porcelain and terrazzo are specified for hallways to make it easier to maneuver rolling equipment and mobile aids.
Then there’s LVT, which is reportedly gaining traction in waiting rooms and outpatient areas at the expense of VCT and sheet vinyl. “We’re seeing LVT being more accepted in parts of healthcare such as elder care and ambulatory [applications],” Krejsa added.
Assisted and senior living communities show the most promise for growth, observers say, driven largely by an aging population. For these applications, designers are fusing form and function to create environments designed for comfort, convenience and safety.
“We also see it as a growth area for broadloom as well as LVT and carpet tile,” Mannington’s Ganley said. Modular carpet is specifically considered an appropriate choice in these spaces due to its sound control and hygienic properties.
With online shopping expected to double over the next three years, there is more pressure on brick-and-mortar businesses to enhance the consumer shopping experience. The emphasis on aesthetics and branding is providing specifiers with more latitude for flooring choices in their efforts to help retailers boost store traffic while differentiating shopping environments from competitors. “That’s where flexibility or customization comes into play,” Krejsa said.
Many names in retail are making sustainability or authenticity of materials a major component of their store design concepts. To that end, there is pent-up demand for natural materials and textures, or a natural theme for design concepts found at specialty retail and F&D chains. “Activity in this segment has been strong in recent years, fueled in part by increased activity in the residential building sector,” Hunsicker observed. With new homes comes interior design needs, the thinking goes.
This opens up opportunities for flooring in general. “Retail is still a combination of carpet and hard surfaces,” Ganley added. “But I think LVT is replacing wood and in some instances porcelain as well [due to] ease of installation, cost and easy maintenance.”
Indeed, the segment is a mixed bag. Ceramic and carpet are often specified in high-end spaces while resilient and rubber flooring are considered ideal choices in other public areas. VCT has traditionally fared well in retail stores, although the product is losing ground to LVT in some applications.
“Retail is one [segment] that is rapidly becoming an LVT market,” Mohawk’s Gallman said. “But you’re also seeing a lot of carpet tile. Sometimes it’s mixed; they’ll use soft goods for areas like apparel and hard surfaces in areas with other goods.”
Main Street opportunities
Unlike the typical commercial segment, Main Street is fragmented with many different venues requiring a diverse product assortment. For many manufacturers, that represents a golden opportunity to fill a niche in the marketplace. At the same time, servicing the Main Street sector—which often consists of small retail spaces, doctor’s offices, hair salons and boutiques—requires that retailers develop the necessary technical product knowledge to respond to clients’ expectations and needs with the correct specifications.
“Commercial environments require high-performance products that will withstand foot traffic,” said Quentin Quathamer, commercial brand and marketing manager for Shaw’s Philadelphia Commercial division. “The Main Street commercial market is very diverse, and Shaw provides a wide array of choices to meet those varied end-user needs.”
Quathamer cited Shaw’s 5th & Main LVT collection as a good example of a fashionable product engineered to withstand the rigors of any commercial environment—including New York City’s Grand Central Station, where it was first installed. Today it is found in commercial areas such as churches, boutiques, barber shops, banks, schools and hospitals—150 styles and colors in all.
As is the case with the residential sector, luxury vinyl tile has found a home in Main Street. In fact, notes Keith Wiethe, channel manager, Main Street, Mannington, LVT is on the verge of taking over the segment on the strength of its easy installation, striking visuals, flexibility and durability that lends itself to so many commercial applications. “There will be a changing of the guard where LVT will be the chosen product, and we expect this growth to continue for the next few years,” he said.
If LVT is choice No. 1, carpet tile is 1A in Main Street applications. According to Chris Post, director of sales operations, Aladdin Commercial/Mohawk Industries, the company expects double-digit growth in Main Street, with a 25% growth rate in carpet tile—a subcategory that is often be paired with LVT for maximum flexibility. “Carpet tile and LVT work together because probably every application will have both of those products,” Post explained.
In yet another pairing, Mohawk is adding LVT and resilient sheet to its existing Aladdin Commercial Display. Mohawk is also launching resilient sheet manufactured through IVC via the Visionary Collection. The line features five soft, organic visuals that are textile-inspired along with natural wood grain looks that create a warm and comforting environment, Mohawk stated. The collection is constructed for light commercial and residential spaces and offers excellent performance, durability as well as resistance to wearing and staining by virtue of the company’s M-Force enhanced urethane finish. Post said Mohawk will sample these in rack cards to go in its commercial display and in architect folders along with room scene photography to show how well the product coordinates with its carpet tile and broadloom products.
Another new entry is EnviroStrand, a 100% solution-dyed PET fiber made with Mohawk’s Continuum process that uses the highest grade FDA-approved PET bottle resins and requires less energy to produce. Among its many benefits, Post said, EnviroStrand SD has a Class I rating for improved flammability and smoke density.
Mannington plans to implement a new premium product it believes will open new end use applications within the channel. “Primarily we have effectively communicated our Quantum Guard HP message, and schools are now seeing the benefits of reduced long-term life cycle costs compared to other resilient products,” Wiethe said. “Interestingly, we actually have seen residential interest in our commercial LVT products. Most of that boils down to visuals.”
Mannington is capitalizing on Main Street growth through its Madison, Ga., manufacturing facility, which has been expanded three times with the potential for additional space. “Our Amtico acquisition brought us 50 years of manufacturing experience—and there is no substitution for experience,” Wiethe said. “Our combination of manufacturing expertise and our domestic facility will provide us the opportunity to continue to lead.”