Commercial Market 2024: Following a subpar 2023, the U.S. commercial flooring market made marginal gains last year - June 2025

Introduction by Darius Helm; Statistics by Market Insights

Despite significant headwinds, including elevated interest rates, still-high inflation and a polarizing election cycle, the commercial market managed 0.5% growth last year, mostly driven by the continued strength of the education, healthcare and hospitality segments. Total commercial revenues climbed to $6.624 billion, according to Market Insights estimates. Specified commercial revenues were about flat at $4.965 billion.

There were several geopolitical factors that caused hesitation in the market last year. Russia’s 2022 invasion of Ukraine and the conflict that erupted between Israel and Palestinians in October 2023 have both had wide-ranging impacts, from material supplies and transportation to fractured partnerships to a generalized anxiety about global stability, holding back the pace of growth in the industrialized world. And across the world, there was a wave of national elections and the ousting of incumbent parties. According to a World Economic Forum report on the global economy in 2024, “GDP growth, unemployment rates and inflation proved to be less indicative of [election] outcomes than fears of what might come next.”

Nevertheless, industry experts from both the manufacturer and contract dealer communities report that backlogs helped drive business last year. Both the Starnet and Fuse contract dealer networks also indicate that backlogs are looking good for 2025, with activity expected to be higher in the second half. Several commercial segments are well-positioned for gains this year, but a lot rides on the performance of the biggest sector, corporate.

MARKET SEGMENT UPDATE
Corporate/workplace has been in the doldrums since the pandemic, and it’s a big part of the reason that commercial gains have been subpar in recent years. The consensus is that Class A properties are doing better than Class B and Class C, but they’re not quite what they used to be. And in general, business has shifted more toward renovations than new builds. Most industry leaders feel that the segment has already weathered the worst of the storm, and the need for improvement, redesign and refurbishment is only going to grow. Zack Adamson, Engineered Floors’ vice president of commercial, notes that flooring producers are well positioned to perform in the segment, “Flooring continues to be among the least expensive corporate interior finishes for its outsized impacts.”

In terms of workplace design, Carrie Edwards Isaac, vice president of marketing for Shaw Contract, reports that the wellness approach-including collaborative spaces, quiet zones, etc.-is extending beyond the better properties or owner-occupied space to include tenant improvement, as well.

There’s also been talk about the conversion of unoccupied office buildings, particularly in metro markets, into multifamily and mixed-use space. For now, though, it’s not much of a trend-more anecdotal than measurable.

This year, like last year, manufacturers reported that the education segment was robust. In terms of higher education, a slowdown in renovation and new construction during the pandemic has given the segment a good head of steam over the last couple of years. K-12 and community colleges-collectively, K-14-is heavily driven by funding from bonds, and there remains a good deal of bond activity that came out of the last couple of voting cycles. In 2022, a massive $97 billion in school bond issues was approved, followed by $80 billion in 2023,

according to EducationWeek. Some bonds are for specific renovations that can be fulfilled in a matter of months, but many are huge and complex and can take years before the projects are actually completed, which is why the segment has stayed so active.

Bonds passed during last year’s voting cycle should help keep this segment healthy for the next couple of years.

Also strong last year was the hospitality segment. While there’s still pent-up demand accumulated during Covid, with a huge volume of rooms in need of renovation. According to Lodging Econometrics, the global hotel construction pipeline reached an all-time high in project count last year to nearly 16,000 projects and over 2.4 million rooms, and the U.S. represents 40% of total global projects.

In addition, hospitality products are increasingly specified outside of the hotel and resort market, including in senior living, education and even healthcare.

Healthcare also grew last year. Manufacturers report that most of the activity has been in the medical office building market, which has grown so much in square footage in recent years that it is virtually the size of acute care, reports Shaw’s Isaac. Specialty clinics are in high demand, partly driven by health insurance companies requiring various procedures be conducted in clinics rather than in hospitals.

Life sciences is another growth market. Both healthcare and life sciences have a lot of specialized needs and exacting performance requirements from components like flooring. Sterile settings and intense cleaning protocols favor hard surface flooring, often sheet vinyl or other impermeable products. Also, the timeline can be prolonged for these projects.

Senior living, a segment in growth mode as the final waves of the Baby Boomer generation head for retirement, uses more soft surface than does healthcare, including broadloom, with resimercial designs in rooms and hospitality design in public space.

One segment with some bright spots last year was retail. Several manufacturers, including Interface, Engineered Floors and Bentley, report that retail was up last year, as well as restaurant projects. Higher-end retail was notably robust.

FLOORING CATEGORY UPDATE
Commercial carpet fell about 1.5% last year down to an estimated $2.918 billion in specified sales and $3.403 billion in total commercial sales (including mainstreet). Activity in the generally healthy hospitality market, which is the segment where broadloom has the strongest position, held back share gains by carpet tile.

Most commercial carpet consumed in the U.S. market is produced domestically-it’s the flooring category with the strongest domestic position. One carpet category that continues to be imported and is used primarily in the hospitality sector is Axminster-the only domestic producer of Axminster is Bloomsburg-as well as higher-end carpet with handmade constructions.

In the last two years, while commercial carpet has fallen in value by about 5%, its volume decline has been far greater-around 13.5%-which means that average price points have increased. Over the last couple of decades, this delta has been driven by the shift from broadloom to carpet tile. This time around, other factors have amplified the gap, industry experts report. Perhaps the biggest factor is that, when the scales tip more toward renovation than new construction, like in the current market, volumes of lower-priced products tend to drop. Also, similar to what we see in the residential market, gains in hard surface drive the use of carpet in more elevated expressions, adding not just softness and acoustic mitigation but also accenting the space with contrast, color and pattern with better goods.

Resilient flooring revenues grew 3.5% last year to an estimated $1.897 billion in total commercial sales. The bulk of commercial resilient flooring is LVT, but there’s still a lot of sheet vinyl specified, particularly for specialized applications in healthcare and life sciences where it’s hard to find products offering the same performance. VCT, though a much smaller category than it used to be, seems to be holding its own. AHF, the only domestic producer of VCT, contends that many end users that had switched from VCT to LVT in recent years have been disappointed with its performance and returned to VCT, which might have a high-maintenance profile but also lasts almost indefinitely without uglying out.

In terms of LVT, most of what is installed in the commercial market is gluedown flex, and there’s also thicker LVT, often called looselay even though it’s generally installed with full-spread adhesive and is sometimes perimeter-glued, which is typically 5mm thick and is ideal for applications with carpet tile without the use of transition strips.

The other significant commercial flooring category is ceramic tile. Last year, ceramic tile grew by about 2% in the commercial market to an estimated $1.135 billion. Ceramic tile is used in just about every commercial setting for wet environments, from restrooms to commercial kitchens, as well as other high-performance utilitarian applications. In addition, higher-end tile is used as statement pieces in lobbies and other prominent spaces.

Over the last decade or so, the ceramic tile industry has come together to broaden ceramic’s use in the built environment, most notably for wall applications. The use of gauged panels and advancements in design have enabled specifiers to install ceramics instead of marble and stone at a fraction of the price. Also on the rise is the use of ceramic pavers for outdoor applications-a growing application in both the residential and commercial markets.

Together, carpet, resilient flooring (including rubber and linoleum) and ceramic make up over 97% of all commercial applications. Occasionally, laminate is used for lower-traffic environments. And while designers always want to use natural materials like hardwood, it can’t handle the performance requirements. However, introductions over the last few years by Bjelin and AHF Products that involve compressing and stabilizing real wood veneers may be opening the door for the use of this revered material in the commercial market.

LOOKING AHEAD
It turns out that 2025 is not a year that lends itself to prognostication. That’s why large numbers of public firms are not giving or have withdrawn their guidance for the second half of the year. Among the more prominent firms cutting their guidance are UPS, GM, Proctor & Gamble, United Airlines, American Airlines, Mercedes, Ford and American Eagle. For the last few months, businesses have taken a wait-and-see approach, focusing on being poised to pivot and maneuver as conditions dictate.

As with every concept in the 21st century, there’s an acronym for that, VUCA. It stands for volatility, uncertainty, complexity and ambiguity-a daunting collection of conditions that make it hard for firms to maneuver. According to one commercial carpet leader, “This is what we’re living right now.”

“If we can engineer out as much uncertainty as possible, we can move toward some success,” says Engineered’s Adamson, noting that uncertainty keeps investors scared.

The American Institute of Architects’ Architecture Billings Index (ABI) does not paint the rosiest picture. While the ABI was in positive territory for the first nine months of 2022, it has been negative since then, only managing four months in positive territory in 2023 and only one in 2024-with the exception for October 2024, when the ABI briefly passed into positive territory with a reading of 50.3, every month has been negative since August 2023.

When it comes to its impact on commercial flooring, the ABI tends to indicate conditions nine months to a year down the road, and often beyond that, depending on the types of projects and market conditions, which can slow the completion of projects. So, while the positive ABI numbers through July 2023 have largely been realized, there remains by all accounts a substantial backlog, which could yield some positive results in 2025. Activity in the corporate segment would go a long way toward helping boost the market.

For a close look at the Top 15 Specified Carpet manufacturers and Commercial Hard Surface manufacturers, see the June 2025 issue of Floor Focus Magazine. 

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