Big 3 In TC

Office furniture has long been big business in west Michigan. But now new faces and a construction and development boom here in northern Michigan has our region’s interiors industry reaching new levels of competition.

First Autos, Then Furniture

West Michigan’s manufacturers have dominated the global market for decades, led by the “Big Three” – Haworth (Holland), Herman Miller (Zeeland) and Steelcase (Grand Rapids). These three names stand right behind the “other” Big Three – General Motors, Ford and Chrysler in Michigan manufacturing.

In northern Michigan, we see their faces through exclusive dealers based in Traverse City – Interphase Interiors representing Haworth, MarxModa representing Herman Miller and Custer representing Steelcase. All also represent hundreds of other lines, as does locally owned Excel Interiors in Grand Rapids and Traverse City, which also specializes in refurbished office furniture.

“The (customer) market is growing so they are growing,” said Rob Kirkbride, who has covered the industry for 18 years, first for the Grand Rapids Press and the last eight as senior editor for the Monday Morning Quarterback trade publication. “Traverse City is growing as an important commercial hub so I’m not surprised at all to see more competition and more interest.”

Globally, the industry has been on a steady rise since absorbing a 29 percent dip in 2009, following the economic collapse. According to the most recent Business and Institutional Furniture Manufacturers Association outlook, production in 2015 is projected to reach $10.2 billion, a 4.3 percent increase from 2014. Projections peg 2016 production at nearly $11 billion.

Analysts also translate production into consumption using the IHS Global Insight industry forecast model to project value of the U.S. office furniture market reaching $13.2 billion for an 8.2 percent increase in 2015 and $14.5 billion for a 10 percent increase in 2016 and again nearing pre-recession levels.

A ‘CHANGING’ LANDSCAPE

The economic uptick is benefitting the northern distributors as regional businesses look to invest back into their organizations’ workspaces, many picking up plans that were put on hold during the recession.

“One advantage to being in Traverse City, or really anywhere in Michigan, is the proximity to the mothership,” added Kirkbride.

While it may seem to some that there are increased Traverse City businesses focusing on office environments, longtime industry reps disagree.

“We (the ‘Big 3’) have all have had a presence here in one fashion or another for a long time,” said MarxModa account manager Andy Batteiger, echoing Kirkbride’s observation of the region’s importance as the largest commercial hub north of highway 10, and its strategic location between the West Michigan centers and the upper peninsula.

Sales territory for each dealer extends across the entire “tip of the mitt” and beyond.

“Competition has always been here … although the landscape may have changed,” said Interphase Interiors Branch Manager Keely Eagle. Interphase has had a Traverse City base since Haworth went to a dealership model in 1981. “There’s always an element of competition with every project and every client … but that’s good because it keeps us on our toes … and very aware of how to best service our clients.”`

Steelcase and Herman Miller have had a consistent northern presence but through different storefronts and with different owners. The newest name on the street is MarxModa – the new identity for the former Work Squared, which was acquired, along with a Detroit area distributor, earlier this year by Joe Marx. Grand Rapids-based Custer has been in Traverse City for six years, including the past three years at the “Space, Powered by Custer” co-working space downtown.

Excel Interiors has a 15-year history in Traverse City and more than 30 in Grand Rapids. The locally-owned company has found steady support for its niche in refurbished, used office furniture in addition to new lines. Over half of Excel’s sales volume is in resale, with Steelcase’s Context line among the most popular lines. Many of the pieces are acquired from out of state companies that are downsizing or closing, and then refurbished in Grand Rapids for resale.

FURNITURE FUTURE BRIGHT

As far as new competitors entering the northern market, Kirkbride said that isn’t likely to happen.

“You aren’t going to see a whole lot beyond these big three manufacturers,” he said, due to the way these exclusive dealership arrangements work.

The dealers in Traverse City are known as “aligned dealers” in the industry, which means they are aligned with the major manufacturer (be it Herman Miller or Haworth) and sell that line first . They do, however, also sell other lines.

Then there are the “non-aligned dealers,” essentially conglomerates of all the other lines available.

Although the level of local competition hasn’t changed dramatically – and isn’t expected to – office environments certainly have. Gone are the days of bland colors, regimented cubicles, high partitions and solitary spaces. Today’s workspaces are smaller yet more open, collaborative, cozy and tech savvy, with attention to reflecting the businesses brand and internal work culture.

“Spaces are smaller but we’re working smarter,” said Susan Britten, who just joined Custer’s Northern Michigan business development team in April. “We’ve learned that much of our space is wasted … so there’s been a compression of real estate. Instead of multiple walls, we now have more open spaces where we can come together to talk, eat, partner and collaborate but still have private spaces for meeting and working.”

Eagle at Interphase noted the trend toward standing. “Sit to Stand desks or work surfaces are installed at counter height with stools to accommodate movement throughout the day,” she said. Others noted the focus on healthy lifestyles, worker well being and sustainability.

Technology has impacted most aspects of design. Many workplaces function in paperless environments, diminishing the need for bulky file cabinets and large desks. Yet, large server rooms are becoming staples to support IT and narrow work spaces are accommodating multiple monitors along with a laptop. Working remotely is also a force as physical offices flex to accommodate workers who may only come into an office one or two days per week and may share a work pod or mobile work space with colleagues.

All the local industry representatives commented on the role office environment plays on workforce recruitment and retention, marking a distinctive change as the baby boomers give way to millennials and Gen X who are seeking certain workplace amenities and see the office environment as a reflection of an organization and its brand.

“Workers are also shoppers,” Batteiger said. “If they walk in and see an office filled with furniture from 1970, they may just keep walking away.”

All host area showrooms put design theory into practice. Custer operates out of and has outfitted the Space co-working offices with work pods, a high tech meeting area and several “cozy spaces.” Batteiger said that MarxModa remodeled its space a year ago, making its office the showroom.

“We reflect what often goes on in northern Michigan,” he said.

A key trend during the past five years is the growing sophistication of the commercial buyer, the interest in becoming worker focused and the value placed on office environment design.

“I appreciate that companies are understanding what companies like ours can contribute,” Eagle said. “We like to see ourselves as partners to help companies achieve their goals … not just filling their space.”

As for the future of the industry, Kirkbride is nothing but positive.

“Next year certainly, even the next two years, will be really good for the office furniture industry both locally and globally,” added Kirkbride. “North America, in particular, is very strong. That’s really good news for all of Michigan.”

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