ECONOMIC WATCH
fdmonline.com
Kim Kennedy
Economics editor
Office furniture
demand to slow
Spending for new office construction is typically an excellent indicator of the future
demand for office furniture for the
simple reason that new space coming into the office real estate market
will require furniture and fixtures
to fill it.
As spending for office construction increases, office furniture and
fixture manufacturers typically know
that demand for their product will be
increasing in the near future as this
space comes on line.
●
Supply vs. demand
The one complicating factor lies
with the demand side of this equation
— the new space coming into the market must be absorbed (rented or sold)
or it will lie vacant. Space absorption is
heavily dependent on the job market.
As jobs (particularly office jobs) increase, so will the absorption of office
space. Conversely, as jobs decline so
will the demand for space.
Unfortunately for the office furniture industry, the market’s supply and
demand factors moved in opposite directions in 2008: Supply (construction)
continued to grow at a healthy pace,
but demand (the job market) declined
precipitously — and that bodes poorly
for office furniture manufacturers in
2009.
Spending for office construction
Office
construction
spending is
expected to pull
back 16 percent
in 2009 to $61.1
billion.
Office Construction Spending Put in Place (Billions of Dollars)
Forecast
2009
2003
2004
2005
2006
2007
2008
Total Office
39. 4
42. 4
45.8
54.2
64.7
72.7
61.1
-11%
8%
8%
18%
19%
12%
-16%
Private Office 30. 6
32. 9
37. 3
45.7
53.4
57.9
47.0
-13%
8%
13%
23%
17%
8%
-19%
Public Office
8. 8
9. 5
8. 5
8. 5
11. 4
14. 8
14. 2
●
-2%
8%
-11%
0%
33%
30%
-4%
Source: US Census Bureau; Forecast: FDM magazine
Unfortunately for the office furniture industry, the market’s supply and demand factors moved in
opposite directions in 2008: Supply (construction) continued to grow at a healthy pace, but demand
(the job market) declined precipitously.
