A year ago, after four years of recession, the office furniture market showed clear signs of twitching back into life in the US. No-one was getting too carried away, but there was a definite indication that the pulses of office furniture senior executives were returning to some sort of normality after a traumatic spell.
Twelve months on from that first flicker of a rebirth in the industry, the office furniture makers have been reporting improved results.
Herman Miller swung to a profit in Q4, citing increased demand and an improving economy, while Steelcase narrowed its loss in Q1 and HNI Corporation posted a rise in sales and profit. Wholesaler United Stationers also reported that the benefit of the apparent upturn in the office furniture market had helped it to record profit in Q2.
Herman Miller spokesman Mark Shurman says his firm has shown encouraging signs in the past two fiscal quarters including improved orders, backlog and general customer activity.
Explaining the reason for the improvement, Shurman says: "I think it is down to generally improved economic outlook, including a modest uptick in white collar job growth, construction activity and stronger corporate earnings. Further improvements in hiring and sustained profitability are key to building on the momentum.
"We have focused on containing costs while continuing to invest in new innovations," Shurman explains. "We’ve benefited from our less vertically integrated business structure going into the downturn, and our success with lean manufacturing implementation, which has enabled us to reduce manufacturing square footage by roughly 1 million feet, while maintaining capacity.
"But key and central to our strategy is to attain profitability during the downturn and sustain critical investments in new innovations. We’ve been able to do that over the last two to three years."
Looking ahead, Shurman believes that the future for his company holds "great potential for new growth and prosperity", a healthy dose of optimism after so long in the doldrums, and he sees innovation as the key word for all office furniture makers.
"We’ll continue to develop the products and capabilities that create new benchmarks for problem-solving, high value design and performance," Shurman adds. "For the contract office industry as a whole, drivers are corporate profitability, job growth and commercial construction. Other issues to watch are greater international competition in North America, commodity prices (steel the leading example today) and greater integration of the global workplace (work styles, technology, etc.)."
The Business and Institutional Furniture Manufacturers Association (BIFMA) believes that the next 12 months will be a crucial time for the industry in North America and remains optimistic.
BIFMA statistical information manager Mike Reagan said: "The US market for office furniture has been improving over the last few months. An improving economy and demand are the basic reasons. The year ahead is important to get an idea of the strength of continued improvement of market conditions for US manufacturers.
"Companies have substantially tailored their operations to accommodate actual demand, and cut costs and improved productivity as part of their strategies. We expect the industry drivers to remain approximately the same, being new commercial and office building construction, the existing net stock of commercial buildings, continued adequate corporate profits, consumer demand for office furniture, continued improvement in service sector employment, and the impact of imports into the US."
The latest BIFMA forecast for the office furniture market shows positive signs with production for 2004 estimated to rise 5.7 per cent per cent on 2003’s figure to reach $8.99 billion with consumption lifting 5.6 per cent to reach $10.63 billion. For 2005, production is forecast to rise 11.5 per cent year-on-year to hit $10.02 billion with consumption up 12.4 per cent to reach $11.94 billion.
In Europe, the UK-based Arenson Group also sees a key year ahead with strong anticipation of an upturn.
Managing director John Sacks says: "The next year will be of vital importance to the industry as a whole. It is essential that the decline is halted and put into reverse. However, we as an industry have to be aware of other external factors that can and will affect us. Energy prices such as oil are already adding inflationary pressure and there is uncertainty over steel pricing. On the upside however, there is an upturn in the commercial appetite for office furniture, which will eventually translate into increased demand."
Sacks is phlegmatic when it comes to the subject of the ups and downs of the office furniture market and believes that firms should be conditioned to be able to battle the market when problems come.
He explains: "The market has been cyclical for at least the last 40 years with the cycle running between seven and ten years. We have to recognise as an industry that we cannot simply buck the trend, but have to administer costs in order to survive when demand declines."
Looking ahead, Sacks believes changes in everyday technology used in the office will have a direct impact on the design, form and function of workstations and should drive demand.
He adds: "We would love to see further changes in technology, requiring a rethink in the way offices work and the way the requirements of furniture are perceived. We want to see an improvement in demand and a realisation that the quality of the working environment does indeed improve the efficiency and smooth running of an organisation."
The past 12 months have seen the office furniture market gently fan the flames of recovery but the next year is likely to play a vital role in deciding whether the recovery fully catches fire or is doused out.