- The Washington Times - Friday, August 23, 2002

For office furniture manufacturers, it's almost like the technology boom never happened.
Sales and revenues for these companies are reaching their lowest levels since 1994, because of a lack of new office space and corporate cost-cutting.
"It's been dramatic, it's been painful and really unprecedented," said Tom Reardon, executive director of the Business and Institutional Furniture Manufacturers Association. "We're backpedaling eight years."
The technology boom of the late 1990s created a furious demand for new office space and, as a result, furniture. But the trend reversed after the bubble burst.
Last year, the furniture industry had one of its worst years ever, when the value of U.S. shipments fell from $13.3 billion to $11 billion. This year, the value is expected to fall below $9 billion. The potential 37 percent drop marks the largest two-year decline on record, according to association statistics.
Consider the net income and sales figures for top office furniture manufacturers in the last few months alone: Herman Miller Inc. lost $18.8 million (25 cents per share) in the most recent financial quarter, compared with earnings of $32.8 million (44 cents) last year. Sales fell from $511 million to $322.6 million. Steelcase Inc. lost $7 million (5 cents) in the most recent quarter compared with earnings of $28.3 million last year. Sales fell from $540 million to $410 million.
The industry decline stems not only from a lack of new office space, but economizing by office tenants. In the Washington area, many young tech companies abandoned their offices and left them furnished when they dissolved, analysts said. These furnished offices were attractive finds for groups looking to save money as they moved into new digs. Meanwhile, sublease space has been popping up all over and often is left furnished.
"A lot of people think, 'Why spend money on new furniture?'" said Keith Lavey, research director in the D.C. office of Grubb & Ellis.
Mr. Reardon agreed that excess sublease space was having a negative effect, but said he was optimistic that it could help increase sales for furniture makers. He theorizes that companies moving into cheaper sublease space may be inclined to spend part of their savings on furniture.

More space available
A hefty report by PNC Real Estate Finance and Grubb and Ellis shows that the amount of available sublease space in the Washington region is larger than the national average.
About 142 million square feet are available on the sublease market nationally, comprising about 24 percent of all space. The District shows a sublease rate of 28 percent. Suburban Maryland has a rate of about 25 percent and Northern Virginia leads the way with a sublease rate of 34 percent.

In other news …
The Anne Arundel County Council passed a bill allowing a former Navy research lab to be redeveloped into a high-tech business park on the Severn River's north shore. The bill's passage ended nearly two years of hot debate. Project opponents, including a vocal group of residents from the Broadneck Peninsula, contend the project will create heavy traffic on the two-lane road leading to the site and the intersection of Maryland Routes 648 and 450.
Clark Construction finished building three new dorms at Georgetown University. The $136 million project, called the Southwest Quadrangle, includes a dining hall, a parking garage, a fuel-cell maintenance facility and a Jesuit Community Residence.
Tim Lemke can be reached at [email protected] or 202/636-4836.


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