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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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State of the Industry: The builder business is back

January 2/9, 2017: Volume 31, Number 15
By K.J. Quinn

Fueled by significant gains in single- and multi-family units, the new housing market skyrocketed by 25.5% in October, an indication one of the major drivers of the U.S. economy and flooring industry is moving full steam ahead.

screen-shot-2017-01-09-at-2-24-55-pm“The builder market is showing improvement,” observed Dawn McElfresh, builder channel marketing manager, Armstrong Flooring. “The variety of homes in production is helping our mix. Single-family price ranges, both high and low, are selling, as are condos and new multi-family buildings.”

Housing starts reached a seasonally adjusted annual rate of approximately 1.3 million in October, the highest pace in nine years, according to the U.S. Department of Housing and Urban Development and the Commerce Department. Multi-family production rebounded, as starts in buildings with five or more units—such as condos and apartments—climbed almost 69% in October to reach 454,000 units, an indication developers continue hedging their bets on this segment. “2016 marked the first year since the Great Recession that single-family construction grew faster than multi-family,” said Robert Dietz, chief economist at the National Association of Home Builders (NAHB).

Single-family starts rose nearly 11% in October, reaching a nine-year high with a rate of 869,000, gains which confirm economic forecasts that the housing market will steadily improve into 2017, according to published reports. “The single-family channel was also very strong for FEI Group members,” David Gheesling, CEO, said. “We expect to see it grow as much as 10% nationally going into 2017.” The group is a network of flooring contractors, cabinetry and countertop dealers, and decorative hardware and plumbing businesses.

Housing permits—which provide a snapshot of pending new construction—grew at a much slower pace. Nonetheless, the 0.3% increase over September for privately owned housing units boosted the seasonally adjusted rate to 1.23 million in October, a new high water mark for 2016. Ground is usually broken within 30 to 60 days after a permit is issued. The builder market is significant to the flooring industry, as approximately one-third of total flooring sales are generated from this segment and a similar percentage of dealers service this business. A firming job market, growing U.S. economy and rising household formations are expected to keep the housing recovery on track into 2017. “Despite rising interest rates, wage gains and job growth are supporting housing demand,” NAHB’s Dietz said. “The industry continues to rebuild its infrastructure, including land and workers, following the Great Recession.”

 

Issues stunting long-term growth
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Further evidence the housing market will sustain growth into next year is provided by the Architecture Billings Index (ABI), whose October score indicated a modestly larger share of architecture firms reporting an increase in their billings, according to the American Institute of Architects (AIA). However, fewer firms reported a bump in inquiries for new projects in November, and firms also cited declining value of new design contracts signed in October. While none of these indicators signals immediate alarm, AIA stated, it is important to keep a close eye on business conditions over the coming months.

Similar sentiments were expressed in industry circles about whether the builder business can sustain growth over the long haul. Rising mortgage interest rates can quickly temper expectations. “However, rates are historically low, so that impact should be modest,” Dietz said. “The primary challenge for prospective home buyers remains saving for a down payment and qualifying for a mortgage.”

New residential construction data can be skewed by regions that enjoyed growth beyond the numbers. For example, while permit issuance rose 12.1% in the Midwest and 7.5% in the West, the Northeast and South saw this number drop by 21.1% and 2.4%, respectively, according to published reports. “We are pretty much flat in builder [market sales] so far this calendar year compared to 2015,” said Larry Barr, president and co-CEO, Floors Inc., based in Southlake, Texas. “As we have seen more starts in each of our markets, the builders are struggling to turn the houses over due to labor constraints.”

The availability of qualified labor in all trades remains a major concern for the channel and continues to limit industry output. While builders are adding jobs, attracting the next generation of construction workers remains a long-term challenge. “In most markets, builders are struggling to find workers in every area, from slab to landscaping, in the construction process,” said Jeff Ausloos, national builder manager, Mannington.

The shortage of flooring installers remains an industry bugaboo, making it difficult for builder dealers to find good help when they need it. Some regions face a shallower pool of craftsmen than others, which can directly impact flooring selections. “In Texas, for example, because of a shortage in ceramic installers, some builders are moving into LVT because they can get a sheet installer to put it in,” Armstrong’s McElfresh said.

 

Housing trends affect floor covering sales
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One trend expected to continue into the New Year is the movement toward smaller home designs, which traces its roots to around the time of the housing market downturn. As homes become smaller, flooring choices for specific areas will be impacted, in part, by how these spaces are utilized. For example, carpet is projected to remain a go-to product for living rooms although hard surfaces are growing at a much faster rate.

“The next generation of LVT [and] WPC products are rapidly gaining acceptance in the new home construction segment,” Mannington’s Ausloos said. “As the innovation in WPC continues it will become a staple product in the channel.”

Still, new home buyers are eager to choose different floors for individual rooms, industry members say. For example, resilient is often specified for a bathroom or laundry room, laminates can be found in a family room or basement, and carpet, ceramic and hardwood are selected for main living spaces and bedrooms. “Millennials who are coming into the market might be looking for smaller but nice homes,” McElfresh said. “We’re seeing a good interest in LVT products for this reason as well.”

Homebuyers still desire natural products such as ceramic tile and hardwood, and upgrades for these higher priced floors are becoming more prevalent. Most upgrade monies are allocated for kitchens and baths because both areas offer the greatest return on investment and time spent in the home. “For new homebuyers, hardwood continues to be the trophy flooring,” McElfresh said. “As the market continues to improve, we see further investments in trade-ups since homeowners are looking for homes not purely for resale value, but for their own comfort and pleasure.”

In addition, homebuyers planning to be long-term occupants are willing to invest in better quality products. “They realize the long-term value of upgrading to better looking, better performing products,” Mannington’s Ausloos said. “We are seeing trends that verify this in our upper-end hardwood lines Maison and Antigua.”

Ceramic as a percentage of total flooring in new homes continues to rise as it finds more applications in spaces such as patios, garages and basements. “We have also seen more tile sales compared to carpet, for the first time,” Floor Inc.’s Barr said. “I believe this is because there are an abundance of lower priced, good looking tiles that buyers find attractive.”

Industry members cite the importance of educating new homebuyers about the features/benefits of flooring so they can make informed purchasing decisions. Products which provide a logical “trade up” story can have a real impact on upgrade sales.

“If there’s true differentiation from one level to the next, it’s likely that a consumer will choose the upgrade,” Ausloos said. “One builder that Mannington does business with in the Northeast has seen homebuyers selecting upgraded Maison and Antigua hardwood collections 44% of the time.”

As the housing market continues to grow, multiple flooring choices are expected to reap the benefits. Considerations such as budget, styling and value play a major role in determining which products are chosen for different areas inside the home. “We address each of these needs in a big way, with the broadest collection of products for every type of home, in every region of the country,” McElfresh explained.

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Tile & stone show set to make Atlanta debut

By Louis Iannaco

Volume 26/Number 24; April 15/22, 2013

Coverings 2013 is sure to be the most exciting tile and stone super show ever, noted show director Karin Fendrich of National Trade Productions (NTP), the management company for Coverings, as the biggest tile and stone market in the U.S. comes to Atlanta for the first time in its 20-plus year history.

Coverings is on track to have more than 900 exhibitors from over 50 countries when it opens at the Georgia World Congress Center on April 29, running through May 2. “There is no fee to visit the show,” she explained. “And unlike many other events, there is no charge to attend the nearly 70 educational sessions, either. Continue reading Tile & stone show set to make Atlanta debut

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Surfaces expands education options for A&D community

FCNews to again sponsor floor covering tracks

Volume 26/Number 16; Dec. 17/24, 2012

Dallas—As designers and architects prepare to make the trek next month to Las Vegas for S² Surfaces|StonExpo/Marmomacc Americas 2013, show officials announced attendees will be met with an expanded offering of complementary education customized to meet their specific demands.

Scheduled to take place at the Mandalay Bay Convention Center from Jan. 28 to Jan. 31, more than 700 manufacturers and suppliers will be displaying their newest products, tools, services and technologies. Continue reading Surfaces expands education options for A&D community

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Expanded education at Surfaces | StonExpo/Marmomacc Americas 2013

Designers and architects looking to see the largest assortment of floor covering, natural stone products, and the latest trends should not look any further. With an expanded offering of complementary education customized to meet the specific demands of designers and architects, S² Surfaces | StonExpo/Marmomacc Americas is the place to be. S² will be held Jan. 28 to 31, 2013 at the Mandalay Bay Convention Center in Las Vegas. Continue reading Expanded education at Surfaces | StonExpo/Marmomacc Americas 2013

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Surfaces | StonExpo/Marmomacc Americas to offer diverse education

Floor covering and stone industry professionals seeking a cutting-edge, multi-track educational program to enrich their business development should register today for Surfaces | StonExpo/Marmomacc Americas while the conference program is still free with exhibits registration. These leading industry events are scheduled for January 28-31, 2013 at the Mandalay Bay Convention Center.

More than 70 business, installation, technical and “hot topic” sessions representing the newest ideas on every challenge from sealing stone to avoiding problems with floor covering to effective time management skills will be offered over four days. Topics are designed specifically for floor covering and stone industry professionals wishing to increase their level of expertise in their field. Continue reading Surfaces | StonExpo/Marmomacc Americas to offer diverse education

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noraplan sentica promotes a soothing, healing environment

Salem, N.H. — nora systems is proud to introduce noraplan sentica, the latest high-performance floor covering from nora that offers versatility for healthcare applications.

“We brought together designers from across North America to drive the design and the color selection for noraplan sentica,” explained Andreas Mueller, president, nora systems, Inc. “Our goal was to have this group develop a product that provides more options for our customers, and that‘s exactly what they did.” Continue reading noraplan sentica promotes a soothing, healing environment

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Nora launches Revit materials library for 3D projects

Salem, N.H.– Designed to help architects and designers create more detailed, accurate renderings, the new Autodesk Revit Architecture materials library from nora systems makes it possible to incorporate nora flooring into their 3D designs.

“Our new Revit flooring library allows designers to insert nora flooring into their designs to bring their vision to life long before installation happens,” explained Amy Bostock, manager, marketing and creative services, nora North America. “In developing this resource, we worked together with architects and designers to ensure that it would address their needs and help them achieve the details in their projects that make them feel comfortable and prepared.” Continue reading Nora launches Revit materials library for 3D projects

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CBC Flooring offering CEU course on polyolefin

Commack, Ny. — CBC Flooring is now offering an AIA- and USGBC-certified continuing education unit (CEU) course on the benefits of polyolefin and PVC/Halogen-free flooring for architects, designers and specifiers.

The hour-long course has been presented to over 600 professionals in the A&D community this year alone in markets across the U.S., and is the first of several planned courses CBC Flooring will present. Continue reading CBC Flooring offering CEU course on polyolefin