Kitchen and bathroom market index hits all-time high
The National Kitchen & Bath Association (NKBA) and John Burns Real Estate Consulting (JBREC) reported that their first quarter 2021 Kitchen and Bath Market Index (KBMI) (KBMI) had climbed to 79.8 , its highest score since the index was created.
KBMI measures the current strength of the industry, expectations and challenges facing four major industries – design, manufacturing, retail and construction – with scores above 50 indicating expansion and scores below 50, a contraction. The current rating marks an increase of 14.8 points from last quarter alone and an improvement of 38.8 points from the same period last year.
Significantly, one in three designers noted that customers are now asking for more expensive products and finishes. Retailers are experiencing the same customer change. The trend is likely due to quick, pandemic-focused DIY projects running their course and being replaced with serious makeovers to accommodate new lifestyles.
âThere is continued optimism in the industry with COVID-19 becoming less of a barrier due to the rapid deployment of the vaccine,â said NKBA CEO Bill Darcy. “We are encouraged to see the index reach an all-time high and look forward to continued industry growth as homeowners move on to larger, more upscale renovations.”
âAs consumers enjoy greater flexibility in their working conditions, there is an increased need for total reconfigurations of their spaces,â notes Todd Tomalak, director of JBREC. âAnd from an economic standpoint, we’ve seen Americans using their stimulus checks and savings on canceled vacations or other activations – which have been largely on hold over the last year – for these plans. home renovation. ”
Overall, demand is at an all-time high as immunization rates rise, and for some permanent and hybrid lifestyles, working from home is prompting consumers to reconfigure their homes. As the impact of the pandemic on the market begins to wane and previously postponed projects resume, project backlogs reach over three to six months. Ongoing supply chain disruptions from COVID-fueled demand and factory closures at the start of the pandemic are further affected by the Suez Canal incident and overall port congestion, but members of the the NKBA remain confident in the outlook for the industry with sales expected to be significantly higher in the second quarter of 2021..
As members see less negative impact of COVID-19 on their business, they reported almost double-digit sales growth of 9.7% on average in the first quarter of 2021, compared to the same period in 2020.
When it comes to future sales and the overall health of the industry, bullish demand and consumer confidence continue to fuel a positive outlook. Design firms have the lowest score in the entire industry at 76.1, while building and construction, retail sales and manufacturing segments soar to 83.8 , 82.2 and 86.7, respectively.
And overall, the industry increased its forecast for full-year sales growth to 13.4% in 2021, from 10.7% in the fourth quarter of 2020.
The following trends are expected to impact homeowners and the industry through 2021:
- Members see bigger projects as owners invest in whole-home reconfigurations and luxury finishes.
- Designers also cite permanent work-from-home lifestyles as a catalyst for consumers’ shift to higher-end and more expensive materials and finishes, with designer firms reporting a 61% increase in average project size.
- The main obstacle for members is to obtain affordable materials, as delays and price increases make it difficult to maintain profit margins. US-based sourcing may be more likely as import delays and prices become more severe and companies source outside of their approved supplier list to accommodate.
- Home appliances were the hardest products to find, with 51% of designers reporting difficulties in procuring refrigerators, ranges / stoves and dishwashers.
- The majority of companies are increasing labor rates to maintain current staffing levels and bolster recruiting efforts, but these increased costs should not deter demand as consumers are eager to remodel their main bathroom spaces. and kitchen.
Notable challenges and opportunities for the kitchen and bathroom market include:
- More than half of designers (55%) report no project cancellations or postponements in the first quarter, but 45% note that the shortage of materials and product prices are starting to affect project timelines.
- As vaccination rates rise, consumers are more comfortable buying items in person, with more than 50% of retailers reporting growth in foot traffic in Q1 2021 (up from 35% in Q4 2020).
- 45% of retailers continue to report a price change, with 70% moving to higher prices, and despite price spikes for some products, consumers still choose to pay for premium products and finishes. Refrigerators and stoves / stoves experience the highest price increase with 12% and 11% respectively.
- 60% of manufacturing companies report average delays of more than 6 weeks in the first quarter of 2021, a drastic increase compared to the fourth quarter of 2020 (36% reporting delays of 6 weeks and more). 78% of manufacturers are currently reporting severe capacity constraints, an increase from the previous quarter (23%) due to longer delivery times on raw materials and significant freight delays.
- With the soaring demand for renovations, 67% of building and construction companies report a backlog of more than 3 months and of that, 21% have a backlog going until 2021.
- With the pandemic affecting many industry professionals, the already tight labor market has continued to shrink. In response, over 60% of companies report an increase in labor rates to retain current staff and among businesses reporting increases in labor rates, almost half indicate an increase in rates. of labor from 10 to 19%.