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Contract: State of the industry—Key end-use sectors drive specifications

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

By K.J. Quinn

 

In many ways the commercial contractor flooring market is like an onion—as you delve into each sector, one layer at a time, you start uncovering macro issues impacting flooring choices that go beyond traditional metrics. Sustainability, wellness principles and environmental impacts are among the major factors affecting facility design across the board, experts say.

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

Industry projections indicate the commercial market is on pace to experience similar growth as last year, with some segments faring much better than others. To put it in perspective, soft surfaces generated an estimated $3.6 to $4 billion in sales and upwards of 300 million square yards last year, according to industry estimates. Carpet tile claimed approximately 50% of volume and 60% of the value over broadloom—increases of 9% and 10%, respectively, over 2016.

Many trends that impacted commercial segments last year are carrying over into 2018. “I think the market for carpet will continue to lose share to hard surfaces,” said Brenda Knowles, vice president of marketing for Shaw Industries’ commercial business. “We’ll continue to see an emphasis on product design across all segments and more offerings that combine soft and hard surfaces.”

Nonetheless, there is still a good amount of broadloom being sold into commercial spaces, especially in sectors that demand a luxurious look and feel underfoot. “We still see some higher-end broadloom sold to the hospitality, legal and financial services sectors,” observed Richard French, vice president of sales, Bentley Mills. “At the high end of the spectrum, carpet tile is still not able to meet aesthetic needs.”

Hard surface seizes share

The market size for hard surfaces is nearly as much as carpet, estimated at $3.7 billion in sales. But that’s where the similarities end. Sales and volume grew by double digits, led by ceramic tile and stone ($1.45 million in 2017 sales), rubber ($650 million) and luxury vinyl tile ($600 million), according to industry estimates.

LVT is the fastest growing sector, with sales rising by double digits and usage expanding across all segments. “Hard surface growth in the commercial segment is being driven by LVT and ceramic,” Jeff Fenwick, president and COO, Tarkett North America, told FCNews. “LVT is showing up in more commercial spaces and design features of ceramic are taking it out of the ‘back of the house’ and letting it be utilized in other spaces.”

VCT, estimated at $250 million in 2017 sales, and sheet goods, which generated about $300 million, remain viable options. Healthcare and education, long strongholds of the sector, are reportedly losing market share. Hardwood, laminate flooring and linoleum are being specified for certain niches, although each category accounts for only a small percentage (less than 5% apiece) of the overall commercial market, statistics show. “For people who want that visual a little different and want to make more of a statement than a neutral gray floor, then linoleum is your answer,” said Denis Darragh, vice president, North America, Forbo Flooring.

While LVT dominates the headlines, one category maintaining steady growth is ceramic. While it’s difficult to determine sales and volume due to fragmented distribution channels, anecdotal research indicates tile commands approximately 15% of total commercial flooring sales and volume, with specified contract accounting for about 70% of the business. Growth rates are projected to mirror last year, when the category grew an estimated 6% in sales and 5% in square footage.

End-use activity

There are diverse applications for flooring within the five major sectors of the commercial business, the majority of which (an estimated 70% to 75%) is specified contract and the remainder Main Street commercial applications. Each has its own set of issues, trends and requirements which, in some cases, are unique to specific areas. As such, flooring choices and volume are expected to vary this year in some segments while remaining constant in others, industry watchers say.

“Traditional hard surface markets like retail and healthcare still are very strong, and non-traditional markets such as offices and hospitality are shifting toward hard surfaces in many areas they did not consider before,” said Robert Brockman, segment marketing manager, commercial, Armstrong Flooring.

The largest sector remains corporate/offices, representing roughly 40% of commercial flooring sales. Design strategies have traditionally centered on integrating natural elements into work spaces that help energize employees, encourage collaboration and make them feel more at home. “The goal is to leave work at the end of the day feeling recharged,” said Sharon Steinberg, AIA, LEEP AP, a principal architect at Stantec’s Houston office. “The design of the space, including flooring materials, can contribute to these feelings.”

Carpet tile has emerged as the top flooring choice, representing an estimated 55% to 60% share of the segment. “Carpet tile reduces sound transmission and provides underfoot comfort,” Interface’s Miller stated. “Carpet tile is also easy to upkeep and maintain—and since it is modular, it can easily be replaced or redesigned, providing the flexibility to update or refresh flooring as needed.”

Industry observers report the use of hard surfaces such as LVT, hardwood, porcelain tile and polished concrete is expanding beyond coffee and bar/break areas and into more diverse office environments. “While tile usage is typically limited to areas such as lobbies, bathrooms and kitchenettes, we predict there will be more tile being used in traditionally unexpected spaces,” said Gianni Mattioli, executive vice president, product and marketing, Dal-Tile. He cited advancements in the tile printing technology space as one of the primary reasons.

Another sector to watch is healthcare, which some believe represent the greatest growth potential for LVT. “Slip/fall issues help LVT vs. other hard surface options as well as infection control,” said Paul Eanes, vice president of new business development, Metroflor. “The segment is now more receptive to LVT in most places except operating rooms.”

Ceramic, porcelain and terrazzo tile are commonly found in hallways, making it easier to maneuver rolling equipment and mobile aids. “The health benefits and low maintenance of tile makes it ideal for this space, and our advancements in manufacturing have allowed us to make tile slip resistant through our proprietary StepWise technology, catering to residents’ safety needs,” Dal-Tile’s Mattioli said.

Fashion and function are paramount in hospitality, an industry reportedly investing millions of dollars to remodel their properties. It is expected to remain a bedrock segment for broadloom in particular as high-end products are the norm for guest rooms and public areas. “People still want to feel a soft surface when they hit the floor,” Shaw’s Knowles pointed out. “So even though the trend is towards hard surface, we’re seeing a combination of the two—and we’re providing solutions for that.”

LVT is reportedly growing at a faster rate than broadloom as the product gains wider acceptance, especially in guest rooms. “Most of these hospitality end users are also looking to make a change to something more timeless in terms of pattern and color,” observed Al Boulogne, vice president, commercial resilient business, Mannington Commercial. “That, coupled with the easier maintenance requirements, make it an ideal product for these environments.”

Further fueling usage is hotel owners’ interest in switching to interior decorating products that blend with the latest design styles and last longer—a big reason why ceramic is making inroads. “Designers in the hospitality space demand unique designs, and we are taking style and design to the next level through our latest introductions,” Dal-Tile’s Mattioli said.

One segment at the forefront of design is retail as end users not only seek products that are trendy, but also address performance/functional issues.

“You can create a pattern in a hardwood or stone look that leads you into different departments of the retail store,” noted Milton Goodwin, vice president of commercial sales, Karndean Designflooring. “There’s a lot of mixing and matching of SKUs.”

Even the education sector is getting a little more sophisticated in terms of the design aesthetic, observers report. “It’s copying what we’ve seen in other public segments by trying to become a little more trendy with their looks,” Mannington’s Boulogne stated. “So that pushes more and more business to the LVT category, where there are more design opportunities.”

R&D efforts center on beefing up performance levels to ensure flooring meets the varying needs of each space. “Designers can take LVT into places that maybe they hadn’t considered before,” added Melissa Quick, product and marketing manager, AVA by Novalis Innovative Flooring. “All of this has contributed to more confidence in the use of LVT in Main Street and specified spaces.”

 

 

 

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NeoCon 2017: Exhibitors report uptick in attendee quantity, quality

July 3/10: Volume 32, Issue 2

By Steven Feldman

 

Screen Shot 2017-07-10 at 2.34.43 PMChicago—NeoCon 2017 played to rave reviews last month, with just about every flooring supplier extolling the virtues of a show that saw increased traffic from 2016, matched only by the quality of those visiting their spaces. Their sentiments were confirmed by show management which reported an uptick of 7% in attendance shortly after the close of the event.

“Our take is that NeoCon is busier this year,” said Michel Vermette, president, The Mohawk Group, whose third floor space was bustling from start to finish over the first two days. “This year there are more end users. Major players. A lot of tech companies and financials—major groups that have big projects,” and it all has to do with the economy. “There are substantial projects out there. I think everyone wants to take advantage of these better economic times to catch up on some things they may have left behind for some time.”

Ralph Grogan, president and CEO of Bentley Mills, which showed product in its 10th floor space as well as its Kinzie Street showroom located within steps of the Merchandise Mart, went so far as to say this was the “best show ever for us.” Or at least since Grogan took the helm four years ago. “The traffic has been great. It seems like we’ve seen more people than we have had in years past. We definitely have seen more end users come by who are working on big RFPs.”

Even exhibitors on the 7th floor, which houses the temporary space, were pleased. Milton Goodwin, vice president of commercial sales for Karndean, agreed the show was busier than last year. “We looked at leads generated over the first two days, and they were significantly more than last year. That’s how we initially gauge it, and down the road how much business we got.” He added that Karndean saw a blend of attendees. “You have people coming with projects as well as some tire kickers. We love the ones who are doing the immediate-gratification jobs.”

What bodes well for the contract side of the flooring business is the fact that projects are coming from all segments. “Corporate was a bit soft last year but seems to have rebounded a good bit this year,” said David Jolly, CEO, J+J Flooring Group. “We are still very strong with our Kinetex product as well as carpet in both education and healthcare. Those are the three segments we focus on and this year they all seem to be pretty robust. It’s especially nice to have more interest and energy in corporate because that is 50% of what we do.”

Screen Shot 2017-07-10 at 2.35.24 PMBentley’s Grogan also welcomes the corporate rebound, which he attributes to greater profits. “We are bigger into the corporate market vs. some others. We have always thought corporate profits are the biggest indicator as far as how people are spending money. Most companies over the last two quarters have been doing really well. Stock prices are up for a lot of companies. So we are seeing people spend money. Millennials want good workstations, so people are investing in that.”

Russ Rogg, president of Metroflor—which markets its Aspecta brand to this audience—told FCNews every commercial segment in which the company plays has been positive. “Certainly retail has been a big part of our success. Healthcare and hospitality are growing very fast, maybe a little less on the corporate and education sides.”

Mohawk’s Vermette has seen strong demand in corporate and hospitality thus far in 2017. “But education this summer should be strong with the extra bond money in Texas and California, among others. We are very optimistic.”

What specifiers want

Designers come to NeoCon seeking, well, good design. Of course, service and price are also key components. But the good news is price, while still important, is less of a driver than it was coming out of the economic downturn. But there are other hot buttons for this audience on which manufacturers must deliver.

“You are seeing more projects with multiple SKUs on it,” Vermette said. “You see some custom projects, but less and less. You see more designers using multiple components to create a custom layout or custom office space or hospitality area, so they are very creative with your running-line pieces.”

He added that it’s not just carpet anymore; rather, it’s a hard/soft combo. “We make sure we can meet that requirement across the board. That gives us an edge over some of the carpet-only mills. It’s something we have been doing for over four years now, where our carpet tile matches up to our resilient tile. You don’t need a transition of any type. We make sure we have some products that color coordinate and also complement each other in size. We also make sure the life cycle of our products match up. If we decide to do something with a particular carpet tile or resilient tile, we still make sure there’s a coordinate that replaces it with a fresher, newer look.” As for price, Vermette said you always have to be relevant, “but it’s definitely not the concern it was during the downturn.”

Screen Shot 2017-07-10 at 2.35.09 PMRandy Merritt, president of Shaw Industries, noted that designers want product, service, innovation and, yes, price. “Is price the most important thing? Probably not. But everybody has a budget. There are a lot of projects where the design firm specifies one thing and when it is time to start doing the project they talk about value engineering. That’s the big term. That means lower price for a cheaper product.”

Jolly believes the big focus at NeoCon is always design. “That’s where it always starts, but every designer will tell you his or her project budgets matter. So I’ll still argue it’s design, but it’s design with value. It doesn’t just mean low-end pricing. Also, knowing what will enhance their customer’s brand or work experience.”

Karndean’s Goodwin is finding visitors want testimonials, like where a particular product is being used and whether they have peers using it as well. As for cost, “In this arena, price is important, but they are usually talking in terms of a general price. For the audience here, it is predominantly design that is the driver.”

Positive pulse

Ask any executive about business in the first half of the year, and most will agree it has been good, not great. J+J’s Jolly called the first six months of the year “very good” driven by product design. “We introduced 36 products last year, which is a lot for us. We really worked hard on corporate and education and it’s paying off for us this year. Those segments are still very strong.”

At Shaw Contract, Merritt was a little less bullish. “Healthcare has been pretty good still. Hospitality has been pretty good. Retail is a battle, and corporate is OK, not great.”

Screen Shot 2017-07-10 at 2.35.16 PMKarndean’s business is up in every commercial category, according to Goodwin, but multi-family is what’s really driving the success. “Healthcare is also a great category; there is lots of upheaval in that marketplace. And with education, colleges just let out and have a three-month window to get the business done.”

The numbers also bode well for Metroflor, but Rogg cautioned that Aspecta is a relatively new brand so posting high-percentage gains is easier at this stage. “We created this Aspecta brand to go specifically after contract opportunities only four years ago. So when a brand and a collection is this new for a manufacturer, incrementally our percentage of increase year over year is pretty nice. The first quarter was good, April and May a little slower, but we have seen orders in late May and June pick up.” He cited Iscocore as driving the lion’s share of the brand’s growth.

Meanwhile, over at Bentley, the company is enjoying a good first half but still is trying to overcome the perception the company is strictly high-end, expensive broadloom. “We completely reinvented the company the last four years, but we still need to educate our customers that we can compete with anybody in terms of styling, product pricing and just making sure people are aware we are big players in the carpet tile market,” Grogan explained. “We have doubled our carpet tile business in the last three years. We are doing a $2.5 million expansion to double the capacity on our tile line. We need to educate our customers on what Bentley has to offer.”

 

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NeoCon East: New innovations, sustainability define the agenda

December 5/12, 2016; Volume 31, Number 13

By Sarah Bousquet

screen-shot-2016-12-16-at-9-05-53-amPhiladelphia—In keeping with its Midwest counterpart, NeoCon East—which took place here recently at the Pennsylvania Convention Center for the second year in a row—drew thousands of influential design professionals from the Northeast corridor. The two-day conference and exhibition also provided a platform for roughly 200 exhibitors to showcase their latest products, services and commercial flooring solutions.

“NeoCon East delivered on many fronts, but most importantly it connected the key players in our industry interested in expanding their knowledge and business opportunities,” said Julie Kohl, vice president of exhibitor sales for NeoCon Shows. “With thousands of new products on display, it is in these connections that business happens and market share is won. These relationships are vital to our industry dynamic, and for this reason NeoCon East will continue to gain momentum.”

Exhibitors and attendees alike agreed that relationship building and knowledge sharing continue to be the linchpins of regional shows such as this.

Ralph Grogan, president and CEO of Bentley Mills, explained that the company’s goals this year were two-fold: Highlight new product and network with an entirely new demographic of attendees. “Yes, we are showcasing Lost Angeles as we did at NeoCon earlier this year, but most people here were not in Chicago,” he said. “Philadelphia has a lot going on, and the people here are excited about business and education. I don’t think we lost anyone from Baltimore—NeoCon East’s previous home—and we’ve definitely increased conversations with people from New York, Pennsylvania and New Jersey.”

Others agreed. Karen Ostromecki, interior designer, IIDA, LEED GA, from Rochester, N.Y., thinks of NeoCon East as a “hub for collaboration and learning and a great place to network for future project opportunities.” Being able to view the latest products and trends while conversing with other professionals in the field is critical, she added.

screen-shot-2016-12-16-at-9-06-30-amIn line with the collaborative theme of this year’s NeoCon East, it was apparent that manufacturers were looking to answer attendees’ requests for new and different solutions. For instance, Procedo Floorings’ Loom+, which is produced by infusing a durable fabric top layer with an LVT bottom layer, received a lot of attention from booth visitors, thanks to its versatility. “Everybody is interested in our loom-woven vinyl flooring because it’s a different product,” said Brent Fike, sales manager. “It looks like—and has—the unlimited design capabilities of a soft surface but provides the durability of an LVT, which has gained interest from the hospitality, corporate and retail segments.”

Patcraft’s Mixed Materials collection drew similar notoriety for its ability to seamlessly use hard and soft surface flooring side-by-side, alone or in multiple combinations. Tara Currier, communications manager, noted the new product is part of a bigger conversation. “We’ve been meeting with the team to talk about well building,” she noted, explaining that designers are increasingly asking how the products they specify effect the way people work, live and interact. “As a manufacturer, we want to be in pace with designers and even ahead of the curve to help them answer these questions with new solutions.”

Several manufacturers also utilized their booth spaces highlight sustainable design options. For example, Shaw Contract discussed big-picture ideas around diversity in design, sustainable processes and healthy living.

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Bentley reports successful NeoCon 2016

image002Los Angeles—In addition to bringing home several honors from NeoCon 2016, including four recognitions from Interior Design’s HiP Awards and a #MetropolisLikes product prize, Bentley also drew in record numbers of design-savvy showgoers to its two showrooms (at the Merchandise Mart and Kinzie Design Center)—spreading its (los)t angeles story throughout Chicago.

“Every year, NeoCon offers a unique opportunity for designers and specifiers to discover what’s new and hot in contract finishes and furnishings,” said Sherry Dreger, Bentley’s vice president of marketing. “Likewise for manufacturers, it’s our chance to wow—to dig deep and reveal our best and boldest in product design. This year did not disappoint. At Bentley, we shared the next chapter of our brand narrative told through the lens of (los)t angeles. The design community loved it, and we were rewarded for our forward-thinking, cool style and innovative approach to product and marketing.”

The (los)t angeles collection won an Interior Design HiP award in the workplace flooring category. In its third year, HiP honors distinguished industry individuals and products.

Bentley’s Rocket Science and Impasto products, which also debuted at the show, were HiP finalists in the education, institutional and government and healthcare categories, respectively. Impasto, an artisan tile and broadloom collection designed to promote health and wellness through color and texture, captured one of just 35 #MetropolisLikes honors, as well. Hosted by Metropolis magazine, the social media-driven award program recognizes emerging design trends and innovation at design industry events including NeoCon.

Products weren’t the only Bentley honorees at NeoCon this year. Cameron Grimsley, Bentley’s 2015 Account Executive of the Year, was a HiP finalist too, in the HiP Seller category.

For more about Bentley at NeoCon 2016, read this recap on its Julian Road blog. If you missed Bentley’s Mart showroom experience at NeoCon—or want to explore (los)t angeles again—take a virtual tour.

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Bentley joins U.S. Department of Energy's Better Plants Challenge

Screen Shot 2015-10-14 at 4.50.54 PMCity of Industry, Calif.—Bentley Mills, a partner in the U.S. Department of Energy’s Better Buildings, Better Plants Program, recently signed on for the Better Plants Challenge, setting a new goal to achieve an additional 25% improvement in energy intensity over the next 10 years while also pledging to be transparent in its energy performance data and energy-efficiency solutions.

In 2010, Bentley pledged to improve energy intensity by 25% at its City of Industry, Calif., mill by 2020. It successfully realized this reduction in 2014—six years ahead of schedule. The company was recently recognized by the Department of Energy for its energy savings accomplishments, according to the DOE’s Fall Progress Update report.

“Bentley’s sustainability program is rooted in a strong culture of environmental stewardship and social responsibility,” said Maya Henderson, sustainability manager for Bentley. “Each day we work to meet a challenge—not only to provide quality carpet products, but to also take innovative steps to aid in the resiliency of the built environment and regeneration of the natural world.”

 

 

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Carpet tile blends style, substance and practicality

May 26/June 2, 2014; Volume 27/Number 28

By Ken Ryan

Screen Shot 2014-06-17 at 11.48.54 AMModular carpet is quickly becoming the go-to choice in commercial applications as specifiers leverage the product’s attractive styling and multiple format options along with ease of installation and maintenance benefits.

According to flooring executives, carpet tile now represents about 60% of the total revenue—and 50% of volume—in the commercial carpet market, a percentage that has only increased in recent years.

“I think the looks today in modular carpet are far superior to what they were a few years ago,” said Dan Frierson, CEO, The Dixie Group. “People have found ways to develop styling that is really attractive; at the upper end of the business, beautiful products is what it is about and I think that can be accomplished with broadloom as well as modular, which gives customers a choice.”

Natalie Jones, vice president, commercial brand development and creative product, Mannington Commercial, said carpet tile is clearly a design element in today’s commercial interiors. “Advancements in tufting technology, unique yarn processing capabilities and the introduction of different size formats are all creating looks we have never seen before. The result is a portfolio of design components with complex textures, rich aesthetics and colors, as well as formats that allow the designer to combine elements in ways that are tailored to the unique needs of each project.”

The functionality and maintenance benefits that modular carpet offers are among the factors that have fueled growth in the corporate, K-12 and higher education markets. But there is also cost to consider; in sectors where budgets are tight, carpet tile has fared well because it is a lower-cost alternative in comparison to products such as marble or tile.

Bill Blackstock, regional vice president of sales in the Americas for Milliken, said designers are elevating the flexibility of modular carpet and creating large patterns—in addition to original carpet design—by using color and strategically placing carpet tile in a space. “Gradations of color with an ombré [shaded or graduated in tone] effect are very popular, as well as expansive patterns, like the argyle design displayed with our recent Inis Mór collection.

“In today’s world, with information readily available on a global scale, design trends are happening quicker than ever, and that is influencing carpet tile trends,” Blackstock continued. “Another great thing about carpet tile is that collections can be easily switched for a different pattern or color, affording designers and end users greater flexibility to update office spaces easily over time.”

The benefits of carpet tile are applicable across all markets. Modular is easier to install than broadloom and requires less space for keeping extra product, which is especially important in challenging projects such as high-rise buildings. The use of carpet tile allows facility managers to easily keep inventory and simply replace individual tiles as needed.

John Stephens, vice president of marketing for Shaw Contract Group, said carpet tile continues to increase its share in sectors like hospitality and healthcare, in large part because of the product’s versatility and multiple format options. The variety of sizes available with modular carpet tile ranges from squares to rectangles, with the most common choices being 24 x 24 and 18 x 36.Screen Shot 2014-06-17 at 11.50.33 AM

“We will continue to play with tile sizes and innovations,” Stephens said. “Our Hexagon tile has been a strong success.”

Jones said she is seeing a great deal of interest in the rectangular plank format; to serve that market opportunity, Mannington will introduce several new collections in the 18 x 36 format. “We also have seen a significant trend back to texture as a key design differentiator—we like to say that ‘texture is the new pattern.’ And there has been a wonderful return to color. Neutrals are warming up and customers are specifying vibrant, saturated colors to pair with those neutrals.”

Todd van der Kruik, vice president of design at Bentley Mills, said the shape of carpet tile allows for the customization of a space in a much faster and direct way.

“The smaller size of modular means it has a mobility that

its clunkier broadloom cousin doesn’t,” van der Kruik said. “This enables easier access to hard-to-reach office space, especially in larger metropolitan areas. When all of these choices are made available with the same surface design, the specifier gains complete control of the environment and can truly design the floor that is right for [that project].”

Executives said yet more reasons for carpet tile’s growth is its ability to coordinate with hybrid resilient flooring in pattern and performance without a need for transition strips in between. There is also the flexibility of backing systems in modular carpet. Products can now be purchased with a cushion backing that quiets the space, adds comfort and saves energy in the building, thereby reducing the environmental footprint.

Innovations

Interface, the leading producer of modular carpet, this year launched interfacehospitality.com, offering the A&D community the opportunity to create unique carpet tile compositions for hospitality projects. A Design Your Floor tool on the website can be used to generate floor layouts with square and plank styles pulled from the complete product portfolio, allowing users to visualize their designs with a few clicks.

Technological advancements have also yielded hybrid or crossover products that blend soft and hard flooring surfaces. Svelte, for example, is the first product from Bolyü’s new category of precision flooring called Level, which is engineered to produce the best features and characteristics of soft and hard flooring surfaces.

In addition, FreeFit’s hi-definition carpet tile (HDCT) is suitable for situations where the familiar and comforting visual of carpet is desired but the water resistance and durability of LVT are required. Also, in environments where allergies and asthma can be an issue, HDCT is a solution because it is composed of virgin vinyl, is antibacterial by design and doesn’t trap particles the way real carpet does.

The popularity, functionality and value of carpet tile has grown to such an extent that retailers like Grigsby’s Carpet Tile & Rug in Tulsa, Okla., have created large, dedicated spaces for commercial flooring, with carpet tile as a centerpiece. “The end user likes the fact that carpet tile is easier to replace,” said David Stover, vice president at Grigsby’s. “Plus, it is not a whole lot more of an investment up front, but you are going to get a lot more life out of it.”

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Contract State of the Industry: Market improving, albeit with some rough patches

May 26/June 2, 2014; Volume 27/Number 28

By Ken Ryan

Screen Shot 2014-06-17 at 11.41.16 AMThe contract/specified market continues to shake off the effects of the recession as it returns to a more favorable pattern of slow, steady growth. Flooring executives who estimated last year’s growth in the low single digits expect 2014 to surpass 2013 levels, despite a terrible winter that hindered first-quarter activity for much of the country.

Many commercial projects that were on hold—some for several years—are now being released as a better economic picture, coupled with pent-up demand, stirs the market.

“We see the state of the contract market improving,” said Ralph Grogan, chief executive officer, Bentley Mills.

Michel Vermette, senior vice president of commercial and international business for Mohawk Industries, said those commercial customers that did not want to spend major dollars during the downturn suddenly have to compete for talent and customers, and have to present the right image. “They have to update their spaces to be relevant. Three years ago everyone was holding back.”

Still, others are more cautious about what they are predicting for the market. “Some corporations will spend money but they will tighten their budgets,” said Harold Chapman, president and CEO of Bonitz Flooring Group. “We had a good backlog going into 2013, but 2014 is a little different. Our backlog is not quite as strong and the first quarter was really slow. However, I do see the third and fourth quarters as having the potential to be very good.”

Jack Ganley, president, Mannington Commercial, added, “Economic conditions remain relatively uncertain and we see some hesitation to release capital for large projects. However, like last year, we are seeing growth in the commercial market—albeit at a slower rate than anticipated.”

Most executives told FCNews that government spending is still lagging behind on both the state and federal levels. However, the corporate market and higher education that is privately funded are among the sectors thriving.

“It is very much a tale of two cities contrasting commercial vs. institutional,” said Dominic Rice, who on May 15 assumed manufacturing responsibility for North American commercial resilient products at Armstrong.

Growth segments

Bill Blackstock, regional vice president of sales in the Americas for Milliken’s global floor covering division, said a variety of factors have influenced the contract market, including the desire for end users to stay current, recruit top talent and remain competitive. “Workplaces see the value in creating a uniquely designed space that reflects their brand and corporate culture,” he noted.

Vermette said Fortune 500 companies in particular are looking for expertise, reliability, simplicity, and, most important, they are looking for a solution—not just a product. “It’s about who can hit the mark best for some of them, but more of them are looking for one go-to [supplier],” he explained. “One solution is to make their lives easier. Our approach has been resonating with them. They know they will get great value, great service; they know we can make the process easier. You have major end users that have 20 million square feet. They have projects going all the time. They get done quicker, get done with a common standard everyone is happy with, and get done more cost effectively. They also have a level of trust, a credible partner that can resolve an issue quickly and efficiently. And they don’t have to explain what they are trying to do every time. They know performance, sustainability and price point standards.”

In the hospitality sector, a brighter job picture, improved consumer confidence and a general desire to travel more have boosted the hospitality sector for both recreational and business travel, executives said. “Hospitality is in a significant state of rebound, and seems to be the top growing segment for the industry,” Blackstock said. “Our hospitality clients want to remain competitive. They’ve placed a priority on keeping their spaces updated, relevant, and welcoming to visitors, guests and employees.”

Peter Greene, vice president of marketing at Interface, also said hospitality has rebounded strongly since the recession. “There is plenty of pent-up demand, with a lot of conversion opportunities. Hospitality is showing very strong activity right now.”

The retail segment has also benefited from the improving economic climate; business owners that had tabled projects are now putting them on the front burner. The majority of the work is renovations and expansions.

For education, while state-funded programs continue to be constrained to some degree, the pace of activity at the university level—especially higher-end private institutions with large endowments—is picking up. “Higher education institutions are competing with one another to attract top-tier students, and space is a key component in how they differentiate themselves,” Blackstock explained.

Some executives said the healthcare segment came out of the downturn better than any other, as an aging population is creating a need for care facilities. However, the uncertainty of the Affordable Care Act and how it will impact capital expenditures has held down activity. Rice noted that there is a degree of caution around significant investment until there is better understanding of “what this is going to look like.”

Chapman noted that he has seen cuts to healthcare projects recently. “The budgets are not what they were in the past and the only work that will be done is out of necessity. Again, work will be out there but within smaller or tighter budgets. The uncertainty in how Obamacare is going to shake out has facilities managers in an indecision mode as well.”

Overall, 2014 is shaping up to be stronger than 2013, with the expectation of a fairly robust second half. Rob Cushman, vice president of marketing at Beaulieu Commercial, said that while the harsh weather in January and February constricted activity, the market has since rebounded. “We are seeing a lot of activity right now,” he said. “It feels like it is picking up all over, every segment.”

Rice said a return to “more normal growth” might not be realized until 2015 and 2016. “It is simply a matter of timing. Companies deciding to do work now have to go through the process of finding designers, specifiers … the flooring part comes in later.”

Product trends

To no one’s surprise, LVT and modular carpet are the products most likely to be specified for commercial projects. However, higher-end broadloom “seems to have gained some momentum,” Chapman said, “especially with companies like Bentley and Atlas.”

He praised several other companies and products, including Tandus Centiva, which Chapman said “is doing a very good job with styling and performance backings. LVT continues to gain some market share and more companies are introducing new products in this category. The 28 mil products are the ones performing the best. FloorFolio and Tandus Centiva seem to be leading the way here. Hard surface continues to gain momentum and more people are going to hard tile, in some cases over carpet.”