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January 11, 2010 01:00 AM

Office furniture bouncing back

Rhoda Miel
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    Think about the future for the office furniture industry as being a bit like office water-cooler gossip — there are a lot of small signs that something is about to happen, but few people are willing to go on the record and say just what that may be.

    At least this time, the signs are pointing toward the beginning of a recovery for an industry that saw production fall by more than 30 percent in 2009.

    “I'll point to the obvious truth that if recessions have a beginning, they have an end,” said Steelcase President and CEO Jim Hackett in a Dec. 18 conference call. “As a recession nears its end, there are heightened expectations from all who have struggled through it.”

    Grand Rapids, Mich.-based Steelcase and its top competitor, Herman Miller Inc., both have pointed to signs that the industry is moving back up, citing interest from large global customers, small upticks in sales and movement from companies that had delayed projects but are ready to put them back on track. That is close to the industry trade group's prediction on a slightly down year for 2010.

    The Business and Institutional Furniture Manufacturer's Association forecast — updated Nov. 16 — predicts the U.S. office furniture industry will produce $7.43 billion worth of business in 2010, down 4.8 percent from 2009's $7.79 billion. Both of those numbers are well below the 2008 production of $11.1 billion and the record of $13.2 billion in 2000.

    But industry analyst Mike Dunlap of Holland, Mich.-based Dunlap & Associates LLC said he thinks the year actually could turn into positive territory, potentially seeing an increase of between 1 percent and 2.5 percent.

    Steelcase's sales improved slowly over the course of 2009, from $545.6 million for its first quarter, which ended May 29, to $578.1 million for its second quarter and $616.1 million for the third quarter, ended Nov. 27. It also saw operating profit go from a loss of $96.8 million for the fourth quarter of its previous fiscal year to profit of $14.8 million for its third quarter of fiscal 2009.

    That shows a slow but steady improvement, said Dunlap.

    “Many of the people I've been talking to, the indications are that things are starting to pick up,” he said. “There's been a lot of courting activity with people planning projects. The obstacles seem to be clients getting the ability to finance. There are a lot of projects just sitting on the shelf and waiting to go forward.”

    While major office-furniture makers have branched out into supplying seating and desks for health care and education, the industry as a whole is reliant on the successes of individual companies, Dunlap said. So when the firms on the Fortune 500 list are doing well, then the office furniture industry does well. When those firms cut back they don't invest in new office equipment or new offices.

    The early signs from those clients seem to “suggest positive signs,” said Brian Walker, CEO of Zeeland, Mich.-based Herman Miller. But, it may be impossible to say now exactly when the industry can see real growth again.

    Copyright 2010 Crain Communications Inc. All Rights Reserved.

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