NeoCon Shows Robust Commercial Demand
Chicago, IL, June 15, 2011 -- Overall demand for commercial interiors remains robust despite the lack of new commercial construction and recent signs of slowing economic activity, according to flooring industry analyst John Baugh of Stifel Nicolaus, commenting on his impression from the NeoCon show.
He said attendance at the show was quite good and attitudes were better. "The tone of this marketplace is very different from the tone in the residential marketplace," Baugh said.
He noted that the corporate market remains robust, driven by tenant build-out allowances and the relatively high levels of corporate profitability and cash balances.
"Activity from technology companies and financial services firms remains robust although the latter could well slow in the second half of 2011," Baugh said.
"Higher education is also strong, while K-12 education is weak. Hospitality is expected to begin improving as hotel rates rise. Assisted living is also showing strength. Government is generally softening."
Baugh said that residential flooring demand remains anemic. The combination of lower house prices and very weak single family build is weighing heavily on the sector which shows no signs of a current rebound.
Also, he said that carpet raw material costs appear to have peaked and may come down slightly in the second half of 2011. Price increases have been passed through, but margins will be under pressure to some degree in the June and September quarters in this segment.
Carpet tile demand remains strong, he said, and share penetration will ultimately get closer to 70% from around half today.
He said Interface continues to push the edge of style and design by incorporating some of its residential tile looks into its commercial line-up and the company is very on increasing its penetration of the hospitality marketplace.
Mohawk, he said, appears to have regained its footing in the carpet tile segment after stumbling a couple of years ago.
Related Topics:Mohawk Industries, Interface