Forecast Sees Shift to Lower-Cost Kitchen & Bath Projects
GREEN BAY, WI — The kitchen and bath industry continued to grow through the second quarter, albeit at a slower-than-expected pace and amidst shifting expectations through the balance of 2019 and a decided shift to smaller, lower-priced kitchen and bath projects.
That’s the key finding of the Q2 2019 “Kitchen & Bath Market Index” (KBMI), a quarterly gauge of market conditions based on a survey of 457 recipients across four industry segments: design, building and construction, retail sales and manufacturing. Conducted jointly by the National Kitchen & Bath Association and Green Bay, WI-based John Burns Real Estate Consulting, the index examines current demand, future expectations and challenges that industry professionals are facing.
According to the latest KBMI, released this summer, industry expansion continued in this year’s second quarter, although conditions were “notably weaker” than in the previous two quarters, with industry members reporting rising costs and a shift in demand to lower-priced products.
The KBMI also found that surveyed NKBA members were more positive about future conditions than current conditions, with growth expectations moderating due to declining per-sale revenue coupled with rising material and labor costs. Survey respondents now expect 4.7% sales growth in 2019, down from the 5.4% growth rate reported in the previous quarter, the index revealed. Of the four sectors surveyed, manufacturers are the most bullish.
The KBMI also found that a “big shift is underway,” with rising material and labor costs driving a move to smaller, lower-cost projects.
The KBMI found that the industry remains challenged by the availability of skilled labor, the rising cost of materials and trade [tariff] issues. Specifically:
- Designers report that higher project costs and declining confidence are causing consumers to shift to lower-priced kitchen/bath products and finishes.
- Building/construction companies report that the lack of skilled subcontractors is preventing them from doing more projects. Remodeling companies say they are investing in project management software to create efficiencies as the availability of trades worsens.
- Retail/sales companies say that flattening real estate values, economic uncertainty and higher product costs are negatively impacting clients’ urgency and budgets.
- Brick-and-mortar retailers also report it’s increasingly more difficult to compete with “e-tailers,” which is causing many of these companies to adopt new business models that enable bundling of more value-added services like design and construction.
- Manufacturers report increasing labor and material costs are their biggest barriers to increasing capital expenditures. Many express a need to drive operating efficiencies to improve their financial position and better compete and invest in their business.