Commercial Market 2006 - June 2006


By Darius Helm

Well, it’s officially happened: the long awaited comeback of the hospitality market has arrived, and the numbers back it up. Virtually all the top commercial players who serve that market showed stellar double digit growth in that sector for 2005, and there are signs the upturn will continue at a fast pace this year.

The hospitality business, which fell into an unprecedented slump after 9/11, as Americans and overseas tourists became temporarily paralyzed with the fear of more terrorist attacks, has really begun to boom again. Big and small chains are building new locations and restyling existing facilities to keep up with the increasing demand and new design trends.

Meanwhile, the corporate market—which had already been crippled before 9/11 by the crash of the dot.com business, and was dealt a crushing blow after the terrorist attacks—also showed strong and steady growth in 2005. The healthcare market, too, continued strong, as aging Americans place increasing demands on the healthcare system.

The one dark cloud over the commercial flooring landscape in the past year has been the high cost of raw materials. Specified carpet sales were up over 10% in 2005, but volume grew at half that pace, reflecting prices driven up by raw material and energy cost increases. Specified carpet sales totaled $3.166 billion last year, which is 10.2% over 2004 sales of $2.87 billion.

Those numbers would have been even stronger, but three manufacturers shifted production outside the U.S. last year. Most notably, C&A’s Monterey brand moved from California to Nova Scotia, to the Crossley manufacturing plant. Also, Brintons USA, a major supplier of Axminster carpets for the high end hospitality market, stopped making carpets in its Mississippi plant in December 2004, and moved all its production overseas. The firm’s facilities are now in the U.K., Portugal, India and Australia. Edward Fields, the New York boutique manufacturer, was purchased by Hong Kong’s Tai Ping Carpet last April, and all of its commercial carpet is now produced in China. White Oak, a small Tai Ping subsidiary in North Carolina, will continue to make tufted products for the high end residential market. Tai Ping is a publicly traded firm with sales of $100 million.

Most commercial carpet sectors performed well in 2005, with the exception of the retail store planning sector, which was somewhat soft, as well as the public school segment of the education sector, which has been impacted by tight government budgets in some states.

The big mover and shaker has definitely been the hospitality sector, with sales driven both by pent-up demand and by the impact of an increase in business and leisure travel. Many of the large hotel chains are renovating and building new locations, and major tourist destinations like Las Vegas are adding rooms at a staggering pace.

Another surprising driver in the hospitality sector has been the growth of upscale urban condos and apartments. Manufacturers serving this market have been categorizing these jobs as hospitality, since they’re often designer driven, custom projects which demand the high end styling made by commercial manufacturers. It’s still a small category, but several manufacturers have seen good growth in this sub-sector.

The growing assisted and independent living market is categorized by some under the hospitality sector and by others under healthcare, but no matter how you look at it, it’s a growth sector and will likely remain that way for at least a decade or two. That sector is driven by the first of the baby boomers moving into retirement, coupled with a population that lives longer, so there’s no reason to expect growth to slow any time soon.

Healthcare has also benefited from some growth in the acute care sector. Manufacturers who target that market have seen years of steady growth, even through the recession.

Most manufacturers report that the corporate market has remained strong, though growth has not been at the same pace as 2004, when pent up demand created very strong sales growth. That market first came back with a flurry of new tenant improvement jobs, and the sector continued to grow last year. But the strength of the sector now seems to have shifted to corporate work, which is good news for the A&D community.

Another big growth area has been in carpet tile, where sales continue to grow faster than the overall commercial market. Growth of that product has been so spectacular in recent years, it’s no longer considered a niche product: total carpet tile sales now approach $1 billion. While sales continue to be very strong in the corporate sector, carpet tiles are also making inroads into other markets, particularly education, retail and healthcare. Most carpet manufacturers now sell carpet tile, and if they can’t produce it themselves, they have it commissioned for them.

Carpet tile has also been doing well in the government sector, in part due to sustainability standards. Tiles made of backings with high recycled content—like Shaw’s EcoWorx and EcoLogix, Interface Flooring’s GlasBac RE and Beaulieu’s Nexterra, to name a few—have been leading the way in the greening of the carpet industry and in contributing to LEED points for green buildings.

Commercial broadloom and six foot goods have also been making inroads in environmental sustainability. From C&A’s ethos, a non PVC backing for six foot goods, to broadloom backings like Unibond RE from Lees and UPS RE for Mohawk Group’s other brands, virtually every carpet manufacturer seems committed to diluting the environmental impact of carpet. Fiber producers are doing their share too, offering products with post industrial and post consumer recycled content.

The commercial carpet industry has always been one of the leaders in environmental efforts among American industry, and there are no signs that it’s about to relinquish that leadership role. Last year, Shaw Industries bought Honeywell’s huge Evergreen nylon recycling plant, which was closed three years ago, and plans are to re-open it by the end of 2007. Interface Inc. has also started producing its GlasBac RE backings on a new $9 million backing line that will ultimately be able to create new backings from a wide variety of waste plastics, not only from the carpet industry, but also from other industries.

Though some carpet production was shifted from U.S. soil last year, there are no signs that commercial carpet manufacturing will ultimately be outsourced to China or other Asian countries, like we’ve seen in the hardwood, ceramic and laminate manufacturing sectors.

For a close look at the top 15 specified carpet manufacturers, see the June 2006 issue of Floor Focus Magazine.

Copyright 2006 Floor Focus Inc

TOTAL COMMERCIAL CARPET SALES

There are 24 commercial carpet manufacturers producing carpet in the U.S., compared to twice that number just a decade ago. The numbers below reflect both specified and Main Street carpet sales for all U.S. commercial carpet producers.

    2004 2003
   

$$ millions

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.

SHAW
MOHAWK
INTERFACE
BEAULIEU
C&A FLOORCOVERINGS
MILLIKEN
J&J INDUSTRIES
MANNINGTON
THE DIXIE GROUP
ATLAS CARPET
BLUE RIDGE
CONSTANTINE

ROYALTY
TEMPLETON
LEXMARK
BARRETT
CLAYTON MILLER
BLOOMSBURG
NORTHWEST
GULISTAN
BURTCO
FORTUNE
CHEROKEE
C.W. INDUSTRIES

1,172
923
428
306
199
199
157
120
88
71
63
50
47
41
40
31
28
25
24
20
18
15
10
7

* Revised Estimate

1,076
847
369
294
269
177
140
114
76
67
57
43
43
33
25
27
20
23
21
19
14
14
10
6

*


Related Topics:Shaw Industries Group, Inc., Mohawk Industries, Mannington Mills, Coverings, The Dixie Group, Beaulieu International Group, Interface