Retail Top 100: Buoyed by strong demand and despite myriad challenges, the top 100 residential dealerships continue to post strong gains
By Darius Helm
The 2020 residential flooring market, defined by spring shutdowns and surging second-half business, has given rise to a complex set of challenges this year, and the residential dealers best able to pivot, s adapting and navigating through these volatile market conditions has managed substantial gains.
It would be hard to look back and find a time when this industry was plagued with so much adversity: congested ports, rising material costs, travel restrictions, supply limitations, labor shortages , domestic transport problems. All of these issues are tied to each other and getting worse in many ways, but much of it dates back to the early summer of 2020 and demand for flooring products is coming back faster than growers anticipated. . Coupled with disruptions to manufacturing from the pandemic itself, the ensuing waves of product to market have caused ripples across all manner of markets, services, and industries, including residential construction.
The sheer volume of this surge in demand has driven gains in the residential flooring market, although the pace of those gains has been tempered by various bottlenecks, including slowing home construction cycles and sales – the upside being that this volume of demand will expand and should keep the market strong in 2022.
In fact, many retailers and industry experts contacted by Floor Focus for this report believe that this slowdown is not necessarily negative, not only because of the prospects for continued growth, but also because, even if residential dealers and the home builders had everything they needed when they needed it, they wouldn’t have the manpower to put it up.
Attracting leads in the flooring industry, especially flooring installation, was a problem long before the pandemic. When it comes to trades, flooring installers rank at the bottom of the pay scale. In order to keep up with demand, many flooring retailers have raised the salaries of their installers. And while this has kept many installation teams intact, experienced and skilled installers leaving the company are not being replaced at a sufficient rate.
The cost of doing business during this time of volatility and uncertainty is also impacting residential dealerships. Price increases – several over the past year – have hurt margins, even though the bulk of those price increases are passed down the line. Another cost that many retailers have had to bear is additional storage. Many of the larger operations have invested in new warehouses to build and maintain the stock needed to fulfill orders at relatively short notice. And there’s also the cost of labor to keep the flow of sourcing meetings with key vendors, finding and vetting other vendors to meet demand, adjusting lead times, and doing more troubleshooting than never. Additionally, Covid precautions have impacted efficiency in countless ways.
Retailers report that home improvement activity has been strong all year, with some reporting a lull in the summer, possibly reflecting a return to holiday spending. Business is up in all regions, but some of the hottest markets seem to be in the Midwest and West. And most dealers believe next year will also bring growth, albeit at a more moderate pace.
In the first half of the year, the single-family homebuilder segment grew in the 15% range, by most estimates, and since then the pace of activity has slowed in some markets, depending on supply and weather problems. longer cycles. In Colorado, for example, the surge in the builder’s market has pushed up prices and, at the same time, builders are slowing home sales to more in sync with slower construction cycles.
On the multi-family side, apartment rotations, which had stagnated since the start of the pandemic, are resuming. The end of the national eviction moratorium on August 26 could add some activity to this category, and only a few states – Minnesota, Washington, New York, New Mexico and New Jersey – and the District of Columbia have extended protections against evictions. evictions.
Rental rates are rising at record speed. According to Yardi Matrix, a commercial real estate data company, year-over-year asking rents from August 2020 to August 2021 rose by double digits (10.5%) for the first time ever. Single-family rentals continue to grow at a faster rate than multi-family dwellings, reflecting demand for suburban living, although at the same time urban markets are also gaining.
New multi-family construction is also picking up. According to the National Association of Realtors, multi-family permits gained faster than single-family during the summer months, and dealers in the multi-family market are also reporting an increase in projects.
New home sales have been up and down throughout the year. Until May, year-over-year figures showed gains, but in recent months, year-over-year figures have fallen below the blistering pace of 2020 – with August 2021 24.3% below August 2020. In terms of existing home sales, the year-over-year figures peaked in May, 44.65% above May 2020, but the rate has slowed in recent months, falling behind year-over-year rates in August.
The pending home sales index rose 8.1% in August, although new signings year-over-year fell 8.3%. And housing starts in September slipped 1.6% from August, at a seasonally adjusted annual rate, and rose 7.4% year-over-year.
For the full story of the Top 100 retailers, check out the November 2021 issue of Floor Focus Magazine.
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