Carpet Tile's Commercial Landscape - Feb 2011
By Darius Helm
If there’s one sure thing in today’s commercial flooring business, it’s the continued rise in popularity of carpet tile. It’s been a factor in the market for less than 20 years, but in that time it has managed to find its way into every commercial sector, and it’s even making inroads on the residential side.
The big firms—Milliken, InterfaceFlor, Tandus Flooring, Shaw, Bentley Prince Street and Mohawk—have been offering tile for years, but now every single commercial carpet mill with sales over $10 million (not including those focused on the hospitality market—more on that later) has a carpet tile line. It has become a competitive necessity. The medium sized firms purchase machinery to make their own tiles while the small players source from the large players.
According to Market Insights/Torcivia, the corporate sector is by far the biggest market for carpet tile, accounting for 43% of applications. The education and institutional sectors, which include government, account for 40%. Retail accounts for about 10%, lodgings (which include hotels, motels and dorms) makes up another 4%, and at 3% healthcare makes up the balance.
Interface Inc. (including InterfaceFlor and Bentley Prince Street) is the market leader, with an estimated 31% share in dollars, followed closely by Shaw Industries (including Patcraft) at 28.9%, Tandus at 10%, Milliken at 8.3% and Mohawk at 7.7%. Mannington and J+J Invision together account for another 7%, and Beaulieu is also coming on strong. Firms like Blueridge, Dixie’s Masland, Kraus and Atlas have a small but growing share.
The U.S. is the single biggest market for carpet tile, about equivalent to Asia and Australia (and New Zealand) combined. The entire European market is only about two-thirds the size of the U.S. market.
Market Insights/Torcivia reports that in 2010 U.S. carpet tile sales totaled approximately $826 million for 433 million square feet, while commercial broadloom was just over 2.5 billion square feet at a value of about $2 billion. That gives carpet tile a 30% share of the commercial carpet market in dollars, and closer to 15% in square footage, reflecting its higher price points.
However, price points for carpet tile have been broadening to attract a wider range of clientele. While the average square yard price (mill sell) is between $17 and $18, 12% of prices are below $15.
Merits of Carpet Tile
Carpet tile started out as a utilitarian product, and it was the open office plan that led to its rapid adoption in the corporate sector. Through the ’70s, ’80s and even ’90s, that sector is where carpet tile did most of its development, as fairly unattractive tile in monolithic and quarter-turned installations.
The demand for raised access flooring for cables and HVAC has also played a role in the growth of carpet tile. Raised access flooring is common in financial institutions, technology firms and many businesses with heavy electronics usage. However, many older buildings cannot easily accommodate the new systems, limiting raised access flooring gains, and with a focus on soft upgrades during this economic slowdown, many owners have been reluctant to make the investment.
According to John Sadlon and Mark Harbick, two partners at Mancini Duffy, a leading A&D firm, more and more buildings are being constructed with raised floor systems. However, it’s still a small part of the U.S. corporate market compared to Asia and Europe, where it is practically the standard.
The practicality of carpet tile—ease of installation and removal, along with the reduced downtime and the possibility of swapping out damaged tiles instead of replacing large swathes of broadloom—has fueled its growth not just in corporate, but in education, government, healthcare and retail. Over the last decade, two more developments have helped carpet tile secure its place as the biggest share taker in the floorcovering industry—design and sustainability.
Today, carpet tile is often specified for its design. Not only has the actual design of tiles developed into an art form, garnering huge praise from the A&D community, but designers have become more conversant with the installation possibilities, including mixing and matching tiles for unique customized looks.
The greening of carpet tile has also played a huge role in its adoption. It was the first floorcovering category to embrace the march toward sustainability, and it continues to lead the way. Starting as the flooring with the greatest environmental burden, carpet tile has reduced its average environmental footprint far more than any other flooring category.
The two biggest carpet tile players, InterfaceFlor and Shaw, both have extensive programs for the recapture and reuse of the backings and face fibers of all their carpet tile, and most carpet tile producers are involved in reclamation programs. On the installation side, carpet tile already has a leg up over broadloom because it generates much less waste. New installation techniques—most notably, InterfaceFlor’s TacTiles, though many of the big players have created more efficient programs—reduce adhesive use and make installation, clean-up and removal easier than ever.
Design has not only carried carpet tiles into new commercial arenas, but it has also maximized carpet tile’s possibilities. For instance, while the swapping out of tiles has always been touted as a huge benefit, it was difficult to do with the old designs and installation patterns because the new tile could stand out like a sore thumb. However, new design subtleties, like the bio-mimicry pioneered by InterfaceFlor, create irregular, randomized effects that do everything from hiding tile edges to seamlessly absorbing swapped out tiles.
In recent years, design, price points and sustainability have had the biggest impact on carpet tile’s continued share gains, as the product finds its way into more and more markets.
The Corporate Sector
Traditionally, corporate has been the biggest market for carpet tile, and even as it gains in other sectors, it seems to strengthen its position and expand its role in corporate. Open workstations, which helped cement carpet tile’s position, are now evolving into open, collaborative spaces, and as employees come and go, the environment changes—making modular products like carpet tile more essential than ever.
Victor Ermoli, dean of Savannah College of Art and Design’s school of design, estimates that the next generation of workers will hold an average of at least 15 jobs during their lifetimes. That trend is already well under way, and people moving more frequently from job to job is changing the way interior environments are designed. Being able to readily replace carpet tile installations, or at the very least to swap out accent tiles for a new look, gives designers an efficient way to refresh and reorganize an interior environment without having to shut down the space for an extended period.
Many manufacturers report that carpet tile has made gains in tenant improvement over the last few years. Mohawk reports that property management companies are much more aware of carpet tile and they want to try it, but they still want some broadloom options in the space—making coordination between broadloom and tile increasingly important. These days it’s fairly common to see mills coming out with designs in both broadloom and tile.
According to Mancini Duffy’s Sadlon and Harbick, another trend in the office market, though it’s likely short-term, is the increasing willingness of landlords to pre-build spaces to attract smaller tenants—much of this is driven by downsizing, leaving large firms with a floor or two of vacant office space—and many of them are using carpet tile. Also, larger companies, particularly in the financial sector, have been spinning off smaller entities, and that has led to a lot of opportunities as well.
Sadlon also reports that law firms, which have traditionally leaned heavily toward broadloom, have been taking a second look at carpet tile in recent years, as designs have evolved. These days they’re more likely to use it when renovating secretarial spaces and other functional, non-showcase environments. However, high profile spaces like boardrooms and partners’ offices remain the domain of broadloom. And that’s not likely to change anytime soon, because the one advantage broadloom has over carpet tile is luxe—soft and opulent cut pile will always have a place.
The Government Sector
Several firms, including Bentley Prince Street and Mohawk, report that the fastest growing segment for carpet tile over the last couple of years is government. Part of that is driven by federal government business through the GSA (General Services Administration), which sets procurement standards. The GSA has a significant green mandate, and that gives carpet tile an advantage over broadloom.
However, there’s also a lot of work at the state and regional government level, and some of that is driven by a shift from owning space to leasing space, which turns out to be cost effective, given the regular upheavals in government programs. It’s a trend at the federal level as well.
New administrations bring new government work, and that’s a big part of why the last two years have been so strong in this sector. The recent power shift in the House of Representatives may well lead to another flurry of regional activity before the sector settles down.
The Education Sector
Another sector with a lot of activity is education, where carpet tile has been making huge gains. One of the biggest players in that sector is Tandus Flooring, which has traditionally served both the K-12 and higher education markets with its Powerbond six-foot goods. While Tandus believes that Powerbond, with its sealed seams and waterproof barrier, is the best choice for both education and healthcare, it sees growing demand for its carpet tile in those sectors.
In education, and particularly in K-12, carpet tile competes against VCT in corridors and even classrooms. One of the reasons carpet tile has gained such a foothold in this market is because of its acoustical properties—one can only imagine the surplus of serenity generated in frazzled teachers by having kids run down corridors of carpet rather than VCT. And in the face of the boundless ability of school children to wreak havoc on their environment, the swapping out of damaged tiles is also a boon in this sector.
K-12 tends to have tighter budgets than higher education, so the tile found in schools tends to be more utilitarian than in colleges and universities. In higher education, where competition for students is fierce, high design carpet tile can have a transformative effect on the built environment.
Bentley Prince Street reports that it’s even making inroads in dormitories, where lower end broadlooms are ceding ground to increasingly affordable carpet tiles.
The education sector is predicted to remain relatively strong for several years as schools upgrade from obsolete facilities and reorganize their spaces to accommodate the 21st century learning environments. Immigration and organic growth are also driving both renovation and new construction in this sector.
Unfortunately, state budgets are under siege and the education portion of the current administration’s stimulus package did not set aside funds for construction and renovation, so the pace of K-12 business has faltered. Nevertheless, there’s no way around aging facilities and the demands of a growing student population, so renovations will continue, one way or another.
Higher education budgets have also tightened as endowments have receded, but government data indicates that 2010 was a good year for the richest Americans, driven by a reinvigorated Wall Street, and that’s the sector of the population that drives endowment funds.
The Healthcare Sector
It’s almost counter-intuitive that healthcare would be one of the biggest growth sectors for carpet tile, but it is. Part of it is thanks to evidence-based design, which has finally led hospitals to realize that design has a direct impact on patient outcomes. In terms of flooring, sound abatement is a big issue, as is comfort underfoot, so, where possible, hard surface flooring is being replaced by carpet. By necessity, a lot of acute care environments, from operating rooms to nurses’ stations, need to be rapidly and easily cleanable, and that means hard surface flooring, so products like carpet are limited to areas like lounges, waiting rooms, offices, rehab centers and public corridors.
Carpet tile is also taking share from broadloom in this sector, thanks to two clear advantages. One is the ability to swap out tiles, which has huge appeal to healthcare decision makers. The other is rollability. Hard-backed carpet tile with a low loop construction can easily handle wheelchairs, gurneys and equipment carts.
Then there’s the assisted living side of healthcare, which, like acute care, is poised for strong growth for at least the next decade, thanks to the aging baby boomers. That sector has slowed a bit in the last couple of years, as investments have stalled, and many of the larger continuing care retirement communities have been scaled back. However, the long-term prospects of that sector are excellent.
Assisted living is a growth market for carpet tile, though firms like Tandus, Milliken, Mohawk and Bentley Prince Street all report that tile has been more active in acute care than in assisted living. Part of the reason is that broadloom has a strong position in assisted living, where the design aesthetic is a blend of hospitality and residential—so residents can experience the comfort of home coupled with the pampered feeling of being a guest in a hotel. And when it comes to homes and hotels, that generally means broadloom.
However, the potential for carpet tile is probably greater in assisted living than in acute care, because there are minimal sterile areas that require sheet vinyl, and the warmth and cushioning of carpet is a big plus. Also, with senior issues like incontinence, the ability to swap out tiles is a real advantage. But in the end it might be design that really opens up that sector to carpet tile products, since much of the competition comes from the looks broadloom can provide.
The Retail Sector
Many carpet tile producers are seeing solid growth in retail, though one of major barriers is price. Milliken reports that the low lifecycle costs of tile compared to broadloom don’t mean as much in this sector, particularly during this slow economy, compared to aesthetics and initial costs. The fact is that the turnover in retail environments, which generally doesn’t exceed five years, makes carpet tile’s long lifespan irrelevant.
Carpet tile design, however, is well suited to this sector. That modular look works well with trendy retailers catering to young adults, and there are plenty of more sophisticated designs for upscale retailers.
One of carpet tile’s biggest advantages for retail, though, is in installation. The floor of a retail space is revenue generating, and that means that downtime directly impacts revenues. Not only is carpet tile installation much cleaner, faster and easier than broadloom installation, but, for those on tight budgets, store looks can be updated by switching out part of the floor—accent tiles, for instance—with negligible cost and disruption.
The Hospitality Sector
Hospitality probably offers more barriers to carpet tile than any other sector, for two main reasons. On the public space side, Axminsters or printed carpets offer the traditional look of super large scale designs, which carpet tile can’t really compete with. And on the guest room side of the business, the problem is price, because they generally use broadlooms at price points that carpet tile can’t touch—though that’s not as much of a barrier at high end hotels.
Most of the inroads being made by firms like InterfaceFlor, Milliken and Bentley Prince Street have been on the public space side of the business. Even though public space is traditionally the domain of the Axminster carpet, aesthetics are shifting and there’s increasing demand, mostly among boutique hotels and those catering to younger generations, for the modular patterns of carpet tile.
On the guest room side, despite the price issue, carpet tile brings a number of advantages. For one, guest rooms, like retail spaces, are revenue generating, so installing carpet tile instead of broadloom keeps that room open for paying customers. Also, swapping out tile seems almost tailor made for hotel rooms, where all it takes to trash an entire broadloom installation is a single iron burn or wine stain.
In addition, guest room designs have fixed positions for furniture, which doesn’t change how broadloom is installed—the same carpet that’s in the open spaces will also run under the bed—but impacts carpet tile in both installation and design. For instance, the carpet under the bed doesn’t have to match the visible carpet, or if it does, it can be used as an endless source for tile swapping. And in terms of design, there are plenty of opportunities for customization without adding cost, like by using a different style to border the bed or to set off the foyer from the rest of the room.
Last year was a rough one for the hospitality industry, which had its worst results in decades, and this year isn’t expected to be much better. However, pent-up demand should lead a recovery next year. It’s worth noting that the market is overbuilt, so a lot of the work coming up will likely be in renovation and soft upgrades, and that provides good carpet tile opportunities.
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