Navigating the ever-shifting landscape of the contract commercial business is much like riding a roller coaster—thrilling and, at times, unsettling. Economic uncertainty, supply chain disruptions, labor shortages and surging construction costs continue to weigh heavily in a post-COVID-19 world.
“Economic uncertainty will be a significant factor, encompassing concerns such as tariffs, potential government and corporate downsizing and the possibility of a recession,” said Jeff Galloway, vice president, product management, Mohawk Group. “Corporate and institutional investment in people and property will play a crucial role in shaping market dynamics.”
Just as an amusement park ride climbs with steady anticipation before plunging into sharp drops and unexpected twists, the industry is bracing for new challenges in the second half. U.S. tariff changes are driving up costs for many imported materials, especially from China, Vietnam and Brazil, leading to pricing challenges and supply chain shifts. Persistent inflation in raw material costs contributes to price hikes across multiple product categories, making it harder for flooring contractors to maintain competitive bids without eroding margins.
Further compounding matters is a shortage of qualified installers, an industry bugaboo that is reportedly delaying project completions. “Commercial tile installation requires specialized expertise that’s becoming scarcer, driving up labor costs and sometimes compromising installation quality,” Rocamador Rubio, director, Trade Commission of Spain, observed.
At the same time, the commercial flooring sector has held up well in spite of the challenges. “While there is unpredictability around tariffs and supply chain issues, we haven’t seen any signs of businesses locking up or putting projects on hold,” noted Yon Hinkle, AHF’s vice president of product management – resilient.
In fact, those on the “glass-half-full” side of things say there is cause for optimism in the near term. “We’re seeing strong signs of momentum and innovation driving the industry forward,” Rusty Joyce, president, Tarkett Commercial, told FCNews. “While sectors like office and retail have faced some headwinds, we’ve also seen growth in healthcare, education and multifamily housing, where the need for durable, sustainable and aesthetically flexible flooring continues to rise.”
Soft vs. hard surface activity
Preliminary FCNews research shows resilient flooring accounts for nearly 50% of the contract business and remains the preferred option for retail, office and healthcare environments. While LVT represents nearly two-thirds of category sales, saturation in certain commercial spaces is reportedly slowing down as specifiers rediscover cost-effective solutions like VCT. “When you get into really high-traffic environments, the folks that went with LVT a few years ago are going back to VCT in those spaces,” said Catherine Del Vecchio, vice president of marketing, AHF Products. “They’ve tried other products, but nothing else held up.”
Ceramic tile remains a major player in the commercial contract flooring market. Innovation played a major role in tile’s growing presence, as evidenced by demand for large-format and gauged porcelain tiles in commercial projects. Technology advances also paved the way for enhancements in ceramic designs, with many Spanish tile makers experimenting with new glazing and printing techniques across multiple formats.
“While digital printing initially required significant investment, the technology has become more accessible and cost effective over time,” Trade Commission of Spain’s Rubio said. “This has made high-quality, digitally printed tiles more affordable for commercial projects.”
Soft surfaces are expected to post modest sales growth in specified contract work this year, according to industry observers. Approximately two-thirds of commercial carpet sales are generated from this segment, FCNews research found, with Main Street applications accounting for the remainder. “Remodels are outpacing new construction, favoring carpet tile due to its minimal installation disruption,” said Carrie Edwards Issac, vice president of marketing, Shaw Contract.
Carpet tile remains the top soft surface in commercial spaces while broadloom remains a staple in hospitality and retail spaces. “We continued to see a strong preference for carpet tile across most commercial sectors, driven by its modularity, ease of installation and alignment with sustainability goals,” Issac reports. “Broadloom remains relevant, particularly in hospitality and senior living, where its aesthetic and acoustic qualities are highly valued.”
Office space
Changing macroeconomic conditions within the five major market sectors stand to influence growth rates and flooring choices in the second half of 2025. A case in point is the corporate/office sector, which has seen its share of commercial flooring sales plummet significantly from pre-COVID-19 levels to an estimated 15% last year, according to FCNews research. Office vacancy rates reached a record high of nearly 21% in the 2025 first quarter, Moody’s reports, highlighting the sector’s struggle to adapt to hybrid work models and evolving tenant needs.
“Corporate and offices, in general, really have just been impacted more by hybrid work schedules,” said Hilary Frank, Dal-Tile’s vice president of commercial sales and business development. “People are not all working five days a week in an office.”
Some markets, however, demonstrated resilience. In New York City, for example, the overall availability rate fell to 17.3% —the lowest in five years—and was fueled by strong demand for trophy properties. It’s also indicative of the movement by corporate America to bring employees back to the office. “This push influenced efforts to make the physical workplace more appealing to attract the best talent and clients,” said Mark Bischoff, president and CEO, Starnet Worldwide Commercial Flooring Partnership.
The shift toward hybrid workspaces is influencing flooring choices, with modular and adaptable designs allowing businesses to reconfigure spaces easily. Soft surfaces, led by carpet tile, are among the most widely utilized surfaces in the workplace, research shows. LVT, engineered hardwood, porcelain tile and polished concrete are among the options specified to accommodate interest in high-design, sustainable flooring options that promote collaboration and well-being in these spaces. “The return-to-office movement, though still evolving, has sparked a renewed focus on workplace design, particularly around collaboration, wellness and flexibility,” Shaw’s Issac noted.
Healthcare pulse
Demand remains robust in this bellwether sector given its rapid replacement cycles and investment on expansion. An aging population is fueling demand for healthcare services, construction and renovation of assisted-living facilities, while clinics and urgent care centers are increasing nationwide. “The medical office building sector is growing rapidly, driven by demographics and dramatic increases in outpatient procedures and ambulatory care,” Starnet’s Bischoff observed.
No surprise that resilient continues to be a preferred solution here, especially in areas demanding strict sanitary standards, such as emergency rooms, triage departments and treatment rooms. “Healthcare is the biggest segment for sheet vinyl,” said Geoff Gordon, executive director, Fuse Commercial Flooring Alliance. “But we continue to see LVT, ceramic tile and rubber.”
Homogeneous sheet vinyl is preferred for areas requiring seamless flooring, which is easy to clean and resistant to bacteria. Ceramic, rubber and linoleum remain popular options for public areas within healthcare facilities, due largely to the products’ durability and health-conscious properties. Meanwhile, waiting areas and offices frequently specify LVT and carpet tiles. “Carpet tile is growing in medical office buildings and outpatient facilities, where performance and comfort are key,” Shaw’s Issac said. “Broadloom still plays a role in specialized areas.”
As healthcare spaces evolve, facility managers and designers are reimagining interior environments to enhance patient experiences. Many design strategies are reportedly integrating virtual and in-person care models while incorporating home-like elements to create a welcoming environment. “Our differentiated portfolio continues to meet the evolving needs of aging populations, technological advancements and a growing emphasis on preventative care,” said Jim McKeon, vice president of sales, Interface.
Education
Much like healthcare, the education sector—which consists of K-12 and higher institutions—values safety, durability and low maintenance. These requirements are evident in interior design, from classroom upgrades to newly built campuses as institutions seek to foster flexible, blended learning environments that empower students to take an active role in their education.
“Education is another growing sector, influenced by K-12 population growth, aging infrastructure requiring updates, increased college enrollment and a rising demand for highly skilled employees,” Mohawk’s Galloway said.
K-12 dominates education-related construction, accounting for roughly 75% of total sales, estimates show, with higher education making up the remaining portion. Government bonds and public funding continue to drive diversification in flooring specifications for learning spaces, shaping material choices to meet the evolving needs of K-12.
By comparison, enrollment growth and substantial endowments have prompted universities to continue healthy spending on campus buildings and student housing, industry experts say. “Investments in student housing remain popular as alternatives for investors chased out of offices, searching for recession-resistant rents and high occupancy,” Starnet’s Bischoff explained.
Schools prioritize low-maintenance, slip-resistant materials and bio-based alternatives to withstand heavy foot traffic and help ensure student safety. To that end, resilient flooring is often specified in hallways, common areas and gyms, while restrooms and cafeterias specify porcelain tile and epoxy flooring for their durability and maintenance properties, according to published reports. “We’re seeing a move back to certain products like VCT where performance excels in very heavy commercial usage,” AHF’s Hinkle said.
No surprise that education ranks as the second-largest commercial segment for soft surfaces, with nearly one-third of sales attributed to carpet products, FCNews preliminary research found.
Hospitality
The hospitality sector is experiencing a surge in demand as restaurants, travel and tourism, lodging and recreation businesses are reportedly rebounding to pre-pandemic levels. As Mohawk’s Galloway noted: “Hospitality is growing, fueled by an increased desire for travel, leisure and vacations, coupled with a rise in international tourism and relatively high disposable income.”
As hospitality businesses evolve, flooring manufacturers are expected to continue innovating, balancing durability, performance and design to meet specifiers’ needs. Some of the most impressive entries in the Starnet Design Awards (see pages 20-21), according to Bischoff, were from hospitality projects. “The budgets and the demand seem to be holding well again this year,” he added.
Hospitality is a stronghold for carpet. A big chunk of this business comes from broadloom, which is finding usage across multiple applications. “Broadloom remains strong in guest rooms and corridors while carpet tile is gaining ground in public spaces,” Shaw’s Issac said.
Hard surfaces find many uses in hospitality environments, driven, in part, by growing interest in products made from or resembling natural materials. Ceramic tile is among the most popular floors, accounting for approximately 50% of commercial sales within the sector, FCNews preliminary research found. Meanwhile, LVT and porcelain tile are specified in hotel lobbies and guest rooms while hardwood and textured tile are prevalent in restaurants and bars.
Retail
There is some crossover between hospitality and retail, as both segments offer public spaces where people congregate, eat and shop. Retail spaces, a segment renowned for staying on top of interior design trends, is emphasizing style and fashion to enhance the shopping experience for consumers. “We have not seen a retail super cycle in many years, so Starnet members are hoping that one of the big retail chains makes a design rebrand part of their long-term effort to compete with online sales,” Bischoff said.
Retail is still recovering from COVID-19, as the number of businesses shrunk considerably. But the segment shows signs of a turnaround. Retail and food sales were up slightly in April from the previous month and increased 5.2% over April 2024, the U.S. Census Bureau reported. The data is an indication that shoppers remained engaged in April amid continued concern over tariffs on imported merchandise, according to the National Retail Federation (NRF).
“Consumers are still spending despite widespread pessimism fueled by rising tariffs,” NRF chief economist Jack Kleinhenz stated in a release. “While tariffs may have weighed on spending decisions, growth is coming at a moderate pace and consumer spending remains steady, reflecting a resilient economy.”
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