Aktrin: Rising Canadian office furniture sales to ease in 2005
By Michael J. Knell -- Furniture Today, January 23, 2005
Oakville, Ontario — Canadian demand for office furniture was up a healthy 8.8% in 2004 and should continue to grow this year, albeit at a more modest pace, according to Aktrin Furniture Information Center here.
However, Stefan Wille, president of the private research company, cautions that business spending will be affected by shifts in key economic factors such as interest rates and the value of the Canadian dollar.
Canadian business profits — the key factor in office furniture spending — rose by 10.3% in 2003 and by a more modest 8.5% in 2004.
"It is not likely that the growth rate will remain at such a high level," Wille warned. "Corporate profitability may come under renewed pressure if the value of the Canadian dollar remains strong and if interest rates continue to rise. Due to Canada's heavy export reliance, any currency shifts will immediately be reflected in the bottom line of corporations."
Wille pointed out that investments in machinery and equipment rose by only 4.5% in 2003, although weak private sector investments were offset by relatively strong government expenditures.
"Due to the general improvements in the economy, investment growth is likely to advance by a healthy 8.0% (in 2004) and probably even better in 2005 — in spite of slowing corporate profits. This, however, is dependent on only moderate increases of interest rates," Wille said.
Another factor helping to spark office furniture sales was growth in the employment market, which advanced by 2.2% or about 600,000 new jobs in 2003.
"Employment growth is likely to moderate a bit during the remainder of 2004 and in 2005, when it will probably drop below the 2% mark," Wille said last month.
Also favoring office furniture sales is the abundance of vacant office space throughout Canada. Vacancies remain high despite a marked slowdown in new office building construction over the past few years. The demand for office space should grow over the near term with advances in employment and continuing investments by the corporate sector relating to business expansion.
Wille forecasts an uptick of 5.3% in commercial construction in 2005, after zero growth in 2004.
Average annual retail office furniture sales in Canada, including recycled furniture, has showed continuous growth throughout this decade.
"(In 2003), growth stood at 6.5%, lifting the market to a value of C$4.86 billion," Wille said. "The projected growth rate for 2004 may be even faster, at an estimated 8.8%. However, for 2005, we predict a lower rate but believe that it will remain above the 6% mark. This will lift the market valuation to C$5.3 billion this year and to approximately C$5.6 billion next year."
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