2021 - A Rising Tide May Not Lift All Boats - Floor Covering News Part I
Commercial outlook: A mixed bag
February 23, 2021
Home Al’s Column Commercial outlook: A mixed bag
(First of two parts) By Mark Nestler A rising tide may not lift all boats after all. That’s the prevailing wisdom when it comes to the outlook for the U.S. commercial flooring market in 2021.
I believe there are three major drivers that will impact the level of commercial furnishings activity for 2021 and beyond. They are as follows:
The pandemic—How it changed behaviors and are the changes permanent or transient?
Technology—How will the continuing progress of technology impact work and lifestyle?
Demographics—What will the trend of population growth be, along with its makeup, and how will that impact the different commercial segments?
Here’s my view on the drivers that will impact the main commercial flooring segments.
Corporate/workspace. The pandemic has limited the use of offices. As companies discover they are able to manage effectively and productively with fewer people in the office on a regular basis, their evaluation of the amount of office space square footage required to accomplish their business has (and will) change. The magnitude of the change will be impacted by the workplace population growth and technology improvements that enhance the work away from the office experience.
The workplace population’s size prior to the pandemic was already being negatively impacted by lower overall population growth and very low immigration. Due to the pandemic, it appears that many companies have permanently eliminated positions. This may be due to lower expectations for top-line revenue and/or to technology thrust on the company by the pandemic that showed there were tools that lessened the requirements for headcount.
Technology improvements are impossible to know, except that they are sure to continue. These thoughts lead me to believe that overall workspace square footage requirements will shrink. The outlook for 2021 business for the workspace segment would seem to be challenging. While 2020 business was hit by the pandemic, the negative factors were offset to varying degrees by a pipeline of back orders, which have likely been significantly depleted going into 2021. Also, most companies may wish to restore their financial footing before spending on non-essential outlays, such as refurbishing an office. A possible offset may be office reconfigurations to accommodate new workspace protocols; however, that would not seem to be a sufficient offset. Due to the trends outlined, the growth thereafter may be limited and likely take many years to return to pre-pandemic levels. Nonetheless corporate will remain the largest commercial furnishings segment.
Government. The broad government segment is best separated between federal and state/local. The overall pandemic impact would seem to be similar to that on corporate/workspace. On the demographic side, government is an area that seems to always be on an upward trend in terms of number of people on the payroll. Technology will also impact this area, but more than likely it will be a segment that is slower to adopt labor-saving technologies. While state/local governments may wish to increase expenditures to stimulate their economies, many will be constrained by revenue shortfalls due to the pandemic. While 2021 may be constrained, this seems like a growth segment over time.
In the next installment of this two-part series, I will delve into the hospitality, retail, health care and multi-family sectors.
Mark Nestler is president of Nestler Strategies, a firm that provides go-to-market strategies for manufacturers and distributors of commercial interior products.
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Events
- Oct 31, 2019 The Green New Deal: Visionary or Misguided Oct 31, 2019
- Nov 13, 2019 BDNY 2019 - Trade show ROI Nov 13, 2019
- Nov 15, 2019 Finding Your Voice Nov 15, 2019
- Feb 10, 2020 Columbia Private Equity Conference Feb 10, 2020
- Feb 28, 2020 Fordham Real Estate Institute PropTech Conference Feb 28, 2020
- Apr 14, 2020 Thompson Research Group’s 2020 C&I Virtual Conference Apr 14, 2020
- May 13, 2020 SBID Digital Discussions Part 1: Humans and Business May 13, 2020
- May 13, 2020 SBID Digital Discussions Part 2: Adapting Our Practice May 13, 2020
- May 13, 2020 SBID Digital Discussions Part 3: Adapting Our Industry May 13, 2020
- May 13, 2020 SBID Digital Discussions Part 4: Adapting Our Designs May 13, 2020
- Dec 21, 2020 Marquardt+ Case Study on Nestler Strategies Graphic Communications Dec 21, 2020
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Writings
- Mar 10, 2020 Changes and Challenges in the Commercial Built Environment - Floor Focus Magazine - February 2020 Issue Mar 10, 2020
- Mar 25, 2020 Work From Home - Go To Market Strategy - A Few Thoughts - LinkedIn Post Mar 25, 2020
- Mar 3, 2021 2021 - A Rising Tide May Not Lift All Boats - Floor Covering News Part I Mar 3, 2021