Commercial Sector Update: Retail - January 2009

By Brian Hamilton

While it’s too early to tell what will happen this year in construction and renovation of retail space given the ever-changing economic conditions, there are a few signs that the floorcovering industry might not suffer as badly in this segment as in others. This huge segment of commercial construction covers everything from tiny boutiques in lifestyle centers and specialty stores along the Miracle Mile in Chicago to major department stores, mass retailers, strip malls, and all the tenants in destinations like Mall of America.

More than other commercial segments, success in retail comes in large part from projecting the right image and playing on emotions. Flooring can play a role in achieving those goals.

Unfortunately, most of the forecasts for retail construction are fairly grim. Retail and similar commercial contract awards are projected to fall this year by 5%, after falling in 2008 by more than 16% from the $37.5 billion in projects in 2007, according to McGraw Hill Construction. However, with consumer sentiment at record low levels at the end of 2008, and unemployment approaching 7% and likely to go higher, which are both likely to affect consumer spending—and retail business spending—in a big way, projections for this year could be inaccurate.

The health of the home building sector is also a leading indicator for commercial construction, and that industry is in the worst shape in more than 25 years. At the end of October, there were 381,000 new homes for sale, according to the National Association of Homebuilders, and many of those homes will have to be sold before the homebuilding industry can start building again.

However, there’s plenty of retail property around to be renovated and updated, which is where much of the activity is likely to be in the near term. Retail construction has experienced a bull market over the last few decades. According to Kelly Peterson of Hearst Integrated Media, there were 11,000 shopping centers in 1970, or seven square feet per U.S. citizen. By 2004 that number ballooned to 47,000 shopping centers, or 20 square feet per person.

“Everybody is slowing down the opening of new stores and trying to get out of leases,” says Richard Goodman of contract dealer Associated/ACC International of Millburn, New Jersey. “Every retailer is reducing capital expenditures for remodels but keeping it for maintenance and upkeep.”

Nevertheless, many of the designers we spoke to who specialize in retail projects, particularly for chain operations, say they are still staying fairly busy and are keeping their fingers crossed for the remainder of the year. For the most part, they say their clients are building fewer new stores, as Goodman suggested, especially in small and mid-size markets, but aren’t holding back significantly on scheduled renovations of older properties because they know they have to compete for customers and can’t afford to have their stores look either worn or outdated.

“Materials tend to wear out more slowly than styles change,” says designer Bill Commer of Franklin Lakes, New Jersey design firm WJCA Inc., which has worked with retailers such as men’s clothier Kenneth Cole. “We do replace worn materials but most of the time it is in conjunction with a shift in look.”

There’s also another intriguing nugget: A couple of designers say that when retailers are deciding to cut costs, it’s usually not with the floorcovering, it’s with other elements, such as wallcoverings. That’s partly because flooring for retail projects has to be durable and easy to maintain since it will get more use than any other design element and it has to last for many years.

Flooring Can’t Distract from Product
In most cases, floorcovering in retail projects is not a visual focal point as it might be in an airport or a public space because the idea is to focus shoppers’ attention on the products in the store. There are exceptions to that general rule, and entrepreneurs who are just getting started are more likely to be more expressive with their flooring. In fact, the retail design winners almost all come from these one of a kind stores. Also, specialty stores catering to children are likely to be more adventurous. However, in all cases, it’s important that flooring makes a shopper feel at home and adds to the image the store is trying to project.

“You want the flooring to be attractive and fit in but you don’t want someone to see that first when they walk in the door,” says designer Kiku Obata of St. Louis based Kiku Obata & Co., who has worked with specialty footwear company Wild Pair, among other clients. “It’s nice when you walk in and there’s carpet with extra padding, or there’s the sound of wood. It’s really important what flooring sounds like and how it feels.”

The sound, look, and feel of the flooring should match the mood the store wants to create. Obata says a feeling of elegance might call for high end carpet or luxury vinyl that is softer underfoot and relatively silent. However, for a coffee shop like Starbucks, a porcelain tile will give off just enough sound to convey the feeling of activity and provide plenty of durability and ease of maintenance. A store specializing in custom cowboy boots might want to use rustic reclaimed wood or distressed woods, with a definite creak to lend a feel of authenticity.

Aesthetics, Performance Affect Choices
While floorcovering for retail projects has to perform, no matter whether it’s going into a high-end jewelry store or a big box electronics store, the criteria for performance vary considerably from project to project because each installation has a different image to project, different levels of traffic, and different goals to achieve.

As Obata says, the choices have to match the store’s branding and help create an environment that customers can relate to. Just as an expensive porcelain in a discount store could send the wrong message, a value carpet in a high-end jewelry store is just as inappropriate because it can make a shopper wonder just how high end the store really is.

For a retailer with hundreds of locations, the wrong choice can be an extraordinarily expensive mistake.

Commer says the average retail interior lasts five to ten years, but some retailers like to change their look every few years or so. This can have a huge impact on the flooring chosen for a project. It’s not likely a retailer will want to rip out a porcelain floor after a few years, but carpet can be changed out easily and with much less cost, and even some wood users don’t mind changing out looks more often than you might think.

Carpet, wood, porcelain and resilient—laminate doesn’t yet seem to be as high on the radar for retail projects—all have their strengths and it’s not easy to generalize where each will be used in various retail settings, except perhaps in bathrooms, where porcelain tile seems to be the preferred choice. Back of house areas still see a lot of VCT and other less expensive choices, but they still need to have a relatively low lifecycle cost.

However, even fitting rooms aren’t necessarily cut and dried. Commer says he’s specified both carpet and hard surfaces, depending on whether the retailer sees those areas as an extension of the sales floor or as a more intimate part of the store.

Some of the most dramatic flooring, especially in a department store, can sometimes be found in display windows because the idea is to grab attention in any way possible. However, in many cases the windows tend to use the same flooring as the entrance areas, and that often means porcelain.

There are a few noteworthy trends, however. More stores are going to wider products, such as 18”x 24” and larger porcelain tile and 5” and wider wood planks, and the broad movement is toward hard surfaces in general.

Goodman says he’s seeing more ceramic because prices overall have fallen and the visuals have improved tremendously, giving a lot more design options. In addition, it’s the most durable product available for high traffic areas.

“Tile is still more expensive than carpet or wood going in, but it requires virtually no maintenance, except mopping and cleaning, and it will last the length of a lease,” Goodman says. He also says that clothing and shoe stores seem to be trending toward engineered wood.

Commer says that in about a quarter of his projects he uses custom materials, such as reclaimed wood or unfinished wood that can take a particular color stain. Poured in place materials, like polished concrete, are also used frequently for customization. In general, Commer says he likes polished concrete but has found that it’s not easy to replicate a look and it’s generally more expensive than most people think, often more expensive than porcelain.

Where carpet is used, designers say that carpet tile is grabbing significant share from broadloom, largely because of its versatility, maintenance and replacement characteristics, as well as the fact that there’s a huge variety of options. Carpet tile can also be used like a rug for accents. In addition, designers say retail customers are specifically asking for carpet tile.

LVT and linoleum are also gaining favor because technology has improved the looks so much and has given designers a much wider variety of choices. In the case of linoleum, new surface finishes have given it the ability to withstand higher traffic than it could just a few years ago.

You might be surprised where resilient is being used, simply because its look has improved so much. For example, specifier Stephanie Bourdon of design firm JGA of Southfield, Michigan used a bright white sheet vinyl in an upscale woman’s jewelry store.

Commer says the average specialty store has a smaller footprint than it did a few years ago, and the perception of the size of the space can be enhanced by using a simple, uniform floor. If a wood floor is, for example, broken up by areas of carpet, the space tends to look smaller.

“Ten years ago, clients might have wanted us to come up with material for the main drive aisle, then retail categories might have different flooring for different categories,” Commer says. “Now there’s more of a tendency to treat it uniformly.”

For designer Obata and others, one of the trends in retail flooring is to use warm colors wherever possible. While developing a new prototype for the Vitamin Shoppe, Obata gave the client a choice of carpet tile or porcelain tile in greens, browns and ocher to replace the blue tiles it had been using.

Growing Interest in Sustainability
There is also a burgeoning interest in using sustainable products, but “sustainable” doesn’t necessarily mean the same thing to each retail client. Some merely want a high proportion of recycled content in the products, others want low VOCs, and still others want to be able to recycle the products at the end of their life. For some stores, especially those aimed at younger consumers, sustainability is part of their brand identity, and they will often use polished concrete for a minimal, industrial look.

Even among the professionals there’s disagreement about sustainability. For example, Commer likes bamboo as a sustainable material because it’s a fast growing, renewable grass. Goodman says people are being greenwashed if they think bamboo is a green product because it takes a lot of energy to produce and it has to be shipped overseas.

As Floor Focus’s survey of designers last October showed, it can be a real chore to figure out just how different floorcoverings stack up when it comes to sustainability. Bourdon says she uses information from manufacturers, Internet research, seminars, and her sales reps.

“When we were doing The North Face, we had to look for adhesives, grouts, and other products and it was a real challenge for us,” Bourdon says.