According to CSIL’s report ‘The World Office Furniture Industry‘ the office furniture industry worldwide reaches a total production value of over USD 52 billion, representing about 12% of global furniture production.

As a sector, due to global events such as the COVID-19 pandemic, the office furniture segment has been subjected to various pressures and fluctuations in recent years. After rebounding by 13% in 2021, global production at current prices decreased marginally both in 2022 and 2023. Performance does vary across regions, however, with Europe outperforming both North America and Asia-Pacific in terms of year-on-year growth.

One caveat to this analysis that must be mentioned, is the effect of exchange rate fluctuations and inflation, which conditions the relative performances of each country. In general, the office furniture industry is highly concentrated in only 8 countries, which account for nearly 80% of total output: China and the United States are the largest players, followed at a distance by Germany, India, Japan, Canada, Italy, and Poland. The top 5 producing countries are also the largest markets in the world for office furniture, though in a slightly different order: the US, China, Japan, India, and Germany. This highlights the fact that despite globalization, the office furniture sector remains a relatively local business in which most of the output is consumed where the product is manufactured. In fact, import penetration for office furniture is lower with respect to other furniture sectors.

The competitive landscape in the largest markets across the globe are also showing signs of concentration at regional levels. The North American market is concentrated around a few large US and Canadian firms, which are also major players on the world stage. The past two years saw an increase in level of concentration as 4 of the top 10 players merged into 2: Herman Miller and Knoll became MillerKnoll and in 2023 HNI International acquired Kimball. Following these brands, other important and large manufacturers include Steelcase, Haworth, KI, and Teknion. All these companies have a widespread production presence in North America and Mexico.
However, procurement from Asia (especially China) is becoming more and more relevant, particularly regarding office seating. The following largest markets, China and Japan, could not be more different in terms of competitive landscape. On the one hand, Japan’s office furniture market is one of the most concentrated, with a few companies holding the lion’s share of the market. There are 4 leading brands, the first two which control a sizeable share of the market being Kokuyo and Okamura, but Itoki and Uchida Yoko, are also important players. On the other hand, China’s office furniture sector is still highly fragmented.

The leading players have a lower turnover range compared to other regions such as North America. Not only do they control a smaller share of the domestic market, but they are followed by a vast number of small-medium companies. Moreover, while the Japanese producers mentioned above concentrate their production in Asian countries, more and more Chinese-owned factories are being bought or built in other regions. For example, UE Furniture opened a plant in Romania for its European customers, while Sunon opened a plant in Mexico dedicated to office seating for the North American market. Another Chinese segment leader, Henglin, decided to buy a Swiss manufacturer, Lista Office.

Market concentration in Europe also continues to increase. As of the end of 2023, the top 20 players represent an estimated market share of nearly 50%, which is a significant increase to 2017. Most of the market share gains in this case however are taking place through strategic M&A operations.

AN UNCERTAIN FUTURE

The office furniture market in general is marked with deep uncertainty. Since 2020, when COVID-19 brought traditional offices to a halt, no one quite knows when or if traditional offices and office practices will come back. If anything, all signs point towards the office furniture market continues to be impacted by structural and cyclical challenges, particularly regarding office occupancy.

According to JLL, quarterly gross leasing volumes around the world have yet to return to pre-pandemic levels. Moreover, the global office vacancy rate rose to a record high of 15.6% as of mid-2023, with the largest shift occurring in the US (which reached 20%). Other aspects that affect the office furniture market are rising construction costs, project delays and limited new financing, meaning that 2023 is expected to be the peak of the global development cycle.

New groundbreakings have already fallen in the US and will slow in Asia following a record level of deliveries in 2023. However, this year an intensifying demand for new or refurbished space is likely to result in a growing shortage of adequate new supply as the pipeline reduces. Looking at the long-term, a decline in construction and more stringent financing conditions will lead to supply falling below long-term averages from 2025. Combined with intensifying demand for new space, this will create a shortage of premium space as new supply vacancy reduces, encouraging greater rates of retrofits in second-generation stock to meet demand.

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Sources: CSIL’s Office Furniture Industry Reports. See at https://www.worldfurnitureonline.com/multiclient-research/office/