Pace of Market Growth Seen Cooling After Strong 2021 Gains
HACKETTSTOWN, NJ — Ongoing supply-chain disruptions coupled with labor shortages, higher material costs and emerging uncertainties wrought by COVID-19 are cooling the pace of kitchen and bath market growth in the wake of an exceptionally strong year in 2021.
According to the latest Market Forecast Report issued in recent weeks by the National Kitchen & Bath Association, the 2021 kitchen and bath industry posted healthy, double-digit gains over 2020, although growth projections were “pared back a bit” compared to the NKBA’s previous (July 2021) forecast, “as lingering issues caused by the pandemic seem to be catching up to consumer sentiment.”
The NKBA projected total 2021 revenues of $167 billion, a 19% increase over the $141 billion that was posted in 2020, but lower than earlier forecasts, which predicted that full-year revenue totals would reach $171 billion.
“2021 has been like none other for our industry, as strong growth across virtually every sector led to record revenues,” said Bill Darcy, CEO of the Hackettstown, NJ-based NKBA. However, some homeowners, faced with price increases related to supply chain disruptions, “are deferring projects until they’ve enough saved to get exactly what they want, or in the hope that costs will come down,” Darcy added.
The NKBA reported a nearly 10% year-over-year growth in the kitchen and bath remodeling sector in 2021, and a 26% growth in the new construction sector. Premium projects were up by more than 22%, while low-end projects grew about 11%, “suggesting a cooling of the DIY trend,” the NKBA said.
“These findings are very encouraging and indicate that…growth should be sustained into 2022,” Darcy said.
In related news, the latest NKBA/John Burns Real Estate Consulting “Kitchen & Bath Market Index,” issued in December, remained in “solidly expanding territory,” but cooled from the record number posted in the previous quarter. Expected future activity “also tailed off a bit,” having peaked in the first quarter of 2021, reported the NKBA and John Burns.
“In relative terms, the outlook remains quite positive,” with association members projecting about a 9% sales gain in 2022 – “impressive if it holds true, given 2021’s strong growth,” said the NKBA, adding that supply chain disruptions, cost of materials and availability of skilled labor are hampering the industry’s ability to take full advantage of strong demand…as NKBA members scramble to meet client needs, with most resorting to brands they’ve never previously used.”
Other findings of the NKBA/John Burns Report were as follows:
n The challenging business environment has forced the industry to become “supplier/vendor agnostic” – prioritizing product availability above other factors. The industry has also moved toward sourcing more domestic-based products in an attempt to circumvent global supply chain issues. Manufacturers are prioritizing high-value products to protect profit margins while stockpiling excess materials to help ease lead times and overall constraints.
n The kitchen and bath industry continues to feel the pains of ongoing supply chain challenges. Port congestion is further compounding strained supply chains that are still recovering from the effects of Winter Storm Uri and Hurricane Ida, while labor shortages are causing delays in the trucking industry. Meanwhile, lead times for domestic and foreign raw materials are well over 6+ weeks and has many within the sector struggling to keep up with demand in today’s economy. As a result, product backlogs extend well into 2022 as these difficulties prevent those in the industry from staffing full production schedules.
n Even in the face of ongoing challenges, the industry remains cautiously optimistic about the health of the sector. Despite projects being pushed into 2022, the industry is continuing to see demand for building and construction projects as 84% of firms report low postponement rates and 90% report low cancellation rates relative to their overall project volume.
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