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US business furniture executives say demand is still subdued

Tuesday 24 August 2010

U.S. commercial furniture manufacturers said second-quarter business was somewhat higher than anticipated but warned that the industry\'s recovery pace may not be sustainable, given expectations of a painfully slow revival in corporate spending and the broader economy.
Office furniture makers said sales are for the most part repairing from recession-devastated year-ago figures, led by government and higher education orders. They cheered higher demand in the second quarter, but offered mostly moderated forecasts for the balance of the year. Corporate sales are largely limited to space-saving, open-plan designs for smaller square footage, as firms continue to downsize in a still-uncertain economy. List prices are steady with last year, office outfitters said.
\"I\'m sensing a bit more apprehension now than two months ago,\" said Tom Reardon, executive director of the Business and Institutional Furniture Manufacturers Association, a trade group based in Grand Rapids, Mich. \"The slow recovery in employment, the ongoing high office vacancy rates, stifled new construction spending -- all are constraining furniture shipments.\"
June orders for business furniture climbed 16% vs. 2009, the fourth consecutive year-over-year increase, according to BIFMA data gathered from 32 manufacturers whose aggregate sales comprise about 73% of total industry business. Across the second quarter, orders grew 13% vs. 2009, reversing a 5% decline in the first quarter. The forecast is for moderated gains going forward, however. Third-quarter orders are seen rising only 6%, slowing to just 1% growth in the last three months of the year.
\"It\'s a deep hole we fell into, and it\'s going to take a while to dig ourselves out,\" Reardon said, and noted that both orders and shipments plunged 30% in 2009.
At Knoll, a leading high-end U.S. furniture manufacturer based in East Greenville, Penn., the outlook is a little more optimistic.
\"We feel like our momentum in the back half of 2010 is building, given the awards of business we\'ve had,\" said Knoll chief executive Andrew Cogan. \"I think people are beginning to free up capital for these types of projects, and are justifying them by making spaces more efficient.\"
Positive signs from a more-buoyant-than-forecast second quarter -- including increased dealer commerce, restarted projects and greenlit larger ventures -- seem to be continuing into the third quarter, Cogan said. Knoll\'s strongest sector is the federal government, including military realignment undertakings. Financial services orders have started to improve, and Cogan said the New York market has grown \"nicely this year\" from a very weak 2009. Healthcare, accounting and legal have also performed well.
But while business confidence has certainly improved from 2009 levels, it remains inconsistent, much like recent economic data, he noted.
Knoll\'s second quarter financial results revealed still-negative year-on-year sales comparisons. Cogan said that\'s because high-end furniture and large project sales lagged the downturn, yielding carry-through business through much of 2009.
Rick Glasser, vice president of marketing and product management for Michigan-based Izzy+ and its six brands of office furniture, said second-quarter, July and August-to-date business has been \"surprisingly strong,\" but that may be due in large part to increased market share rather than industry growth.
\"We\'re not going to rely upon the economy to lift our business over the next 18 months,\" said Glasser, who is based at company headquarters in Spring Lake. Higher-education orders have been relatively healthy, lifted by continued new construction and renovation in that market.
Demand from community colleges has been particularly good, as adult learners look to boost their qualifications in a weak labour market. Federal government-linked business has also been solid. Healthcare sales are up vs. 2009, but corporate commerce remains below year-ago levels. The quest for space maximization has juiced what corporate sales there are, he said.
Glasser said Izzy+ sales representatives describe their pipelines as continuing a modest uptrend through the third quarter, led by higher education and government.
In all, Izzy+ year-to-date sales are slightly ahead of 2009 but a good 30% below pre-recession levels of 2008, Glasser said. Prices have held steady this year.
For Arnold Reception Desks, an Irvington, NJ-based maker of reception desks, work stations and courtroom Furniture, 2010 sales have been disappointing at levels only a little ahead of 2009, and the outlook is similar through year-end.
\"It will take us through the better part of next year to pick up,\" said ARD general manager Ben Kolax. \"Every sector is bumpy. Everyone is slow in paying, except the government. And a lot of firms are getting real estate leases with furniture included.\"
He suspects that many corporations\' furnishing plans are on hold till the November midterm congressional elections.
\"The Chicago market is dead. The Boston market has been dead,\" he said. His backlog has shrunk to six weeks from 10 or more before the recession.

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