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©2019 Gail Doby Coaching & Consulting | gaildoby.com | [email protected] | 720.477.0379
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2019 State of the Interior Design Industry Gail Doby, ASID
Slide 1 – Cover Slide
Slide 2 – 7 Themes for 2019
1. Economic Forecast - what will growth be like in the future
and what is your strategy?
2. Caution - what do you need to know and prepare for?
3. Wildcards - what are the unpredictable influences on the
industry?
4. Disruption - what's changed in the last few year?
5. Client Behavior - what's different and what should you do to adapt?
6. Trends - what are the big trends that you need to know about?
7. Your Strategies - how do you win in a turbulent industry and world?
Slide 3 - Quote
"Those who cannot remember the past are condemned to repeat
it." ~ George Santayana
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Slide 4 – Economic Forecast
Slide 5 - Jobs
□ The official jobless rate fell to 3.8 percent, from 4 percent
in January.
□ 20,000 jobs added in February 2019 – slowest growth in
over a year
□ 3.4 percent year-over-year wage growth, the strongest in a
decade.
- NY Times – March 8, 2019
Slide 6 – Outlook for the Interior Design Industry (Principally
Residential)
According to recent forecasts of the global economy, national
economy, and construction and remodeling industries:
□ Growth will remain positive but at a slower pace than in
recent years.
□ If the U.S. economy experiences the start of a recession in 2023, as some experts
predict, expect demand for interior design services to decline in 2023 and 2024.
©2019 Gail Doby Coaching & Consulting | gaildoby.com | [email protected] | 720.477.0379
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Slide 7 – Prediction for Remodeling Industry
The following chart shows the projected trend line for
remodeling spending through 2021. [Note the shift in 2020 and
2021 toward slower growth and smaller projects.]
- Source: John Burns Real Estate Consulting, 2018.
Slide 8 – Remodeling Market Forecast
Metrostudy’s latest forecast calls
□ Continued growth in the Residential Remodeling Index
over the next several years
□ 2019 and 2020 are expected to see slower growth rates
compared to the last few years of booming business.
□ The moderation of gains over the next 24 months will be
mostly tied to maturation of the housing cycle.
- (Released Feb. 19, 2019)
Slide 9 – Mark Boud, Chief Economist at Metrostudy on
Remodeling Market
“The remodeling market remains busy as the nation continues
to see strong job growth and record levels of home equity,
especially in equity rich coastal markets. We expect continued
growth for the industry in 2019, with some stabilization, mostly
due to the slowing in existing home sales, which will sap some
potential,” said Mark Boud, Chief Economist at Metrostudy. “The housing cycle is
running in the late innings as prospective homebuyers began to show sensitivity to
higher mortgage rates in 2018. Rising mortgage rates over the next few years will
continue to dampen home sales, but will also persuade more Americans to stay-put in
their current homes and renovate there. An aging housing stock exacerbated by low
levels of new home construction are additional factors that we believe will allow the
remodeling cycle to extend into ‘extra’ innings,” says Boud.
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Slide 10 – Projections From Other Sources
These projections are more or less in line with those from ASID,
Houzz, the National Association of Realtors, and the Joint
Center for Housing Studies at Harvard University. For example,
the Houzz 2019 Q1 Renovation Barometer found interior
designers’ ratings of current and future activity to be about the
same as in the fourth quarter of 2018. Business growth expected around 9.4% for 2019.
Slide 11 – Designer’s Predictions for Growth In Design Services
More than two-thirds (68%) of designers participating in the
Houzz survey said they believe demand for services would
increase this year.
Slide 12 – Migration Trend Affecting Overheated Markets
[Buildium.com]
Residents in expensive, overheated primary markets have their
eye on thriving secondary markets—and some are making the
move to these small cities and satellite towns.
Over the next 5 years, PwC projects that the populations of New York City, Chicago, and Los
Angeles will grow at a rate of just 0.2%
Much of the migration is from the coasts to the middle of the country, where job and
population growth are booming, and a lower cost of living means that residents’ and investors’
dollars go significantly farther.
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Slide 13 – What Are Tier 1 Cities?
□ Gaining residents twice as fast
□ Gaining jobs more than twice as fast
□ 4 years younger on average
□ Seeing home values grow 50% faster
□ Staying affordable for residents—the average cost of living
index is on par with the national average
□ Seeing 20% faster rent growth than the rest of the country—enough to help property
managers and owners turn a profit, but not enough to scare renters into moving or
buying homes at a faster rate than usual
□ Located largely in the southern half of the country, particularly Florida and Texas
Slide 14 – Tier 1 Cities
Atlanta, GA | Austin, TX | Boise, ID | Charlotte, NC Clearwater, FL | Columbus, OH | Dallas, TX | Denver, CO Fort Worth, TX | Las Vegas, NV | Nashville, TN | Orlando, FL | Phoenix, AZ | Sacramento, CA | Salt Lake City, UT | San Antonio, TX |San Diego, CA | San Jose, CA | St. Petersburg, FL | Tampa, FL
Slide 15– What Are Tier 2 Cities?
Tier II cities are slightly less proven than Tier I cities, but they
show highly promising signs of growth for the year ahead.
These emerging real estate markets may present an excellent
opportunity for investors and homebuyers to get in on the
ground floor of next year’s Tier I picks.
□ Growing 41% faster than the rest of the country—slower than Tier I cities, but still
ahead of the rest of the U.S.
□ 4 years younger than the rest of the U.S.—the same as Tier I cities
□ Gaining jobs 50% faster than the rest of the country—slower than Tier I cities, but
still ahead of the rest of the U.S.
□ Seeing home prices grow 20% faster than the rest of the country
□ Staying affordable for residents—the average cost of living index is on par with the
national average
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□ Seeing 7% slower rent growth than the national average and 22% slower than Tier I
cities, but rents will grow faster as these markets become more established
□ Located in the Great Lakes, Pacific Coast, South Atlantic, and Southwestern regions
of the country
Slide 16 – Tier 2 Cities
Anaheim, CA | Arlington, TX | Charleston, SC | Cincinnati, OH| Colorado Springs, CO | Detroit, MI | Durham, NC | Fort Lauderdale, FL | Grand Rapids, MI | Henderson, NV | Houston, TX | Indianapolis, IN | Jacksonville, FL | Kansas City, MO | Long Beach, CA | Louisville, KY | Madison, WI | Miami, FL | Minneapolis,
MN | Oakland, CA| Pittsburgh, PA | Portland, OR | Raleigh, NC | Reno, NV | Richmond, VA Riverside, CA | Scottsdale, AZ | Seattle, WA
Slide 17 – Primary Markets In Real Estate Per Buildium
□ New York City
□ Boston
□ Washington, D.C.
□ Chicago
□ San Francisco
□ Los Angeles
Slide 18 – Secondary Markets
□ Cities in secondary markets – commanding presence in
the U.S. real estate market in terms of the volume of real estate
transactions and their influence on the economy.
□ Some secondary markets have larger populations than
primary markets—for example, Boston (a primary market with
less than 700,000 residents) and Houston (a secondary market with 2.3 million
residents).
□ The large cities on Buildium’s list balance powerhouse economies with a more
affordable cost of living than primary markets, making them highly attractive to both
prospective residents and investors.
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□ Houston—the fourth-largest U.S. city—has a cost of living index of 94: 6 points
cheaper than the national average, and over 70 points cheaper than New York, the
largest U.S. city.
Slide 19 – Secondary Cities
1. Houston, TX – 2,312,717 residents (4ᵗʰ largest U.S. city)
2. Phoenix, AZ – 1,626,078 (5ᵗʰ largest U.S. city)
3. San Antonio, TX – 1,511,946 (7ᵗʰ largest U.S. city)
4. San Diego, CA – 1,419,516 (8ᵗʰ largest U.S. city)
5. Dallas, TX – 1,341,075 (9ᵗʰ largest U.S. city)
6. San Jose, CA – 1,035,317 (10ᵗʰ largest U.S. city)
7. Austin, TX – 950,715 (11ᵗʰ largest U.S. city)
8. Jacksonville, FL – 892,062 (12ᵗʰ largest U.S. city)
9. Columbus, OH – 879,170 (14ᵗʰ largest U.S. city)
10. Fort Worth, TX – 874,168 (15ᵗʰ largest U.S. city)
Slide 20 – Smaller Cities
In stark contrast to the cities on Buildium’s list with millions of
residents are those with just-barely-six-digit populations. In
spite of their size, however, small cities with thriving economies
can be very appealing to prospective residents with their
balance of employment growth, an affordable cost of living, and
small-town charm—and they can offer strong rent growth and property values to investors as
well.
Slide 21 – Top 10 Smaller Cities [Buildium]
1. Clearwater, FL – 115,513 residents (245ᵗʰ largest U.S. city)
2. Charleston, SC – 134,875 (201st largest U.S. city)
3. Fort Lauderdale, FL – 180,072 (138ᵗʰ largest U.S. city)
4. Grand Rapids, MI – 198,829 (119ᵗʰ largest U.S. city)
5. Salt Lake City, UT – 200,544 (116ᵗʰ largest U.S. city)
6. Boise, ID – 226,570 (98ᵗʰ largest U.S. city)
7. Richmond, VA – 227,032 (97ᵗʰ largest U.S. city)
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8. Reno, NV – 248,853 (86ᵗʰ largest U.S. city)
9. Scottsdale, AZ – 249,950 (85ᵗʰ largest U.S. city)
10. Madison, WI – 255,214 (82nd largest U.S. city)
Slide 22 – Caution
Slide 23 – Luxury Market Slowing Down
Another factor to consider is the recent slowdown in luxury
home sales. The Institute for Luxury Home Marketing’s
February 2019 Luxury Market Report states it continues to be a
“buyer’s market” for luxury homes, with both the number of
sales and median sale prices declining month over month—
although sales remain strong in some areas with high demand. As home prices in some areas
escalate to $1 million or more on average, the notion of what constitutes a luxury home is
changing. This trend, of course, could turn around depending on other trends in the housing
markets, economy and stock market
Slide 24 - Economic Challenges For Affluent Consumers.
However, perhaps the most important trend for interior design
businesses is the continued widening of the gap between the
extremely wealthy and the rest of the population (New York
Times, February 24, 2019).
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Slide 25 – Rich Are Richer, Upper Middle Class Pacing Economy,
Middle Class & Poor are Poorer
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Slide 26 – Who Will Buy Interior Design Services?
□ Upper middle (or, affluent) class is just treading water
financially, barely keeping up with the pace of inflation. These
are the folks who have traditionally engaged more affordable
designers and who have been undertaking more expensive
home remodeling in recent years. As their financial situation
stagnates and the cost of other expenses increases, they will have less money to
spend on design services.
Slide 27 – Demand For Design Services
□ Demand for design services iceberg by the ultra-rich will
grow for a small elite group of designers
□ Middle Income demand for design services will shrink
□ The base of those who cannot afford services will get
bigger
Slide 28 – Other Challenges Cited By Interior Designers
□ Houzz 2019 State of the Industry report:
□ Rise in business costs
□ Increased labor costs
□ Shortage of available labor - especially among skilled
contractors.
Slide 29 – Economic Factors
□ Tariffs increase cost of goods from overseas resources
make foreign products less affordable.
□ There have been no noted benefits to designers from the
tax reform bill. Reducing the amount homeowners in some
states can claim for their property and state taxes, which
affects those with higher home values, could have a negative impact, but it’s too
early to tell.
©2019 Gail Doby Coaching & Consulting | gaildoby.com | [email protected] | 720.477.0379
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Slide 30 – Impact of Economy On Interior Design?
□ The ASID 2019 Outlook and State of the Industry report
economic analysis concludes:
□ The U.S. economy is likely to turn in an acceptable
performance in 2019 and 2020. The possibility of a large,
negative shock from trade disputes, tariffs, higher energy
prices, higher interest rates or another unanticipated event could push the nation’s
economy into recession.
□ The risk of recession due to trade issues, slower world growth, and higher interest
rates may rise starting in the second half of 2019 and continue to increase in 2020.
Positive resolution of these trade issues would reduce the recession risk
considerably and raise the economy’s growth prospects. At this point, the likely
result is that both the economy and the construction industry will advance at a
reasonable, though not spectacular, rate in 2019 and 2020.
Slide 31– Stock Market
□ Recent data shows that much of the stock market rally in
the early part of 2018 was caused not by investor enthusiasm
but by companies buying back their stocks with money from
the tax reform bill. That bump is not going to happen again.
It’s possible the market could experience one or more
corrections, like the one in December, this year, which would
likely affect designers, who reported in December clients deciding to put projects on
hold or to cancel them due to market volatility.
Slide 32 – Wildcard
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Slide 33 – Election
Business is often optimistic during election years (will 2020 be
the same?) Fiscal policy during election years often supports the
incumbents so the market could be optimistic… we hope the
2020 election could be a wildcard. However, depending on who
/ which party dominates the election, the wealthy could get hit
with new taxes. That also would likely have a dampening effect on the demand for
design products and services.
Slide 34 – Disruptive Players – Beginning Of Shake-Out?
□ https://businessofhome.com/articles/laurel-wolf-goes-dark?fbclid=IwAR3WeZEc5NVih6N-zeAtFPB55buConBxzrDLK6TpebIZ2GHL6gVN2vw9nV8
□ Homepolish, Havenly, Modsy, Decorist
□ Although the number of design online services continues
to grow. most of these firms cater to customers with small budgets.
□ Project size $500 - $3,000
□ Pay “designers” $80 - $500 per project (Cappella Kincheloe, “E-Design Companies
Exposed,” blog, no date given).
□ Décor vs. design
□ Celebrities continuing to enter the market
Slide 35 – Client Behavior
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Slide 36 – Client demand. Good News For Designers:
A survey of consumers conducted by Furniture, Lighting &
Decor magazine, and reported in their January 2019 issue,
found 45% say they would hire an interior designer now, and
63% said they planned to hire an interior designer within the
next five to ten years. The average age of respondents was 34.
Although 45% seems high, based on historical data, studies conducted by the U.S. Census
Bureau, Houzz, the National Association of Home Builders, the National Association of
Realtors, and the National Kitchen and Bath Association all show that a large majority of
homeowners hire professionals for costly or large-scale remodeling and renovation
projects, such as kitchen and bath projects or multiple-room redesigns.
Slide 37 – Reality Haves VS. Have-Nots
The future scenario for the interior design industry is shaping
up to be one of “bifurcated services” (as stated in the ASID 2019
Outlook and State of the Industry report). Consumers of
modest means (by far the majority) will opt for DIY or low-cost
turnkey or design online services, while wealthy consumers will
want bespoke services, with an emphasis on high-touch and high quality.
Slide 38 – Designers Are Perceived To Be Unaffordable
This perception is still the biggest deterrent to consumers
engaging with designers. In the magazine survey cited above,
half of the respondents said they could not afford a designer,
and of those 25% reported they currently are earning $75,000 a
year or more.
Slide 39 – Clients | Consumers Are Emotional Decision-Makers
Marketing organizations are now discovering a longer and
deeper customer cycle that centers around the customer
experience (CX) and lifetime value by strengthening and
retaining existing relationships. IBM Study.
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Slide 40 – In The Emotion Economy, Purpose Creates Loyalty –
What Have You Done For Others Lately?
Today's marketers are shifting from the attention economy to
the emotion economy. It isn't simply enough to catch the eyes
of customers; it's also important to deliver happiness and win
their hearts. Buying is often an emotional decision,
and customer experiences have to trigger the right emotions to get them to buy — and keep
buying. When customers are engaged emotionally, they are much more compelled to take the
actions that drive business. If a brand wants to sustain that growth, it must pull these
emotional triggers again and again. IBM Study.
Slide 41 – Listen To Your Clients | Diversify
In an interview conducted recently at the DACOTA mart for The
Business of Home, famed British interior designer Nina
Campbell commented that the most important thing is to “listen
to the client.” “By listening to the client, you learn,” she said,
adding “you are editing their dreams.” She also suggested
diversifying by partnering with a business-oriented colleague and licensing designs of product
lines with manufacturers.
Slide 42 – Trends
Slide 43 – Health & Wellness
□ Biggest, most important trend for interior designers is the
increased interest in wellness and healthy homes.
□ While it’s true that at present aging Baby Boomers are
designers’ best clients, and that demand for aging-related
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remodeling and renovation will continue for the next five to ten years, there are a
lot of players in that space.
□ Designers have an opportunity to get out in front of the healthy homes trend but
need to be aware that others will be trying to get a piece of that market with lighting
solutions, technology, and non-traditional solutions, such as Feng Shui and
Ayurveda practices.
Slide 44 – Majority Of US Consumers Would Pay…
According to the Global Wellness Institute, 60% of U.S.
consumers say they would pay for a healthier home. Notes
Fashion Snoops, people are increasingly regarding their homes
not just as havens from the hectic outside world but also as a
holistic place to nurture mind and body.
Slide 45– Fashion Snoops Trends
Slide 46 – Fashion Snoops 2019
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Slide 47– Macro Theme 1
□ Emotional Capacity
Slide 48– Macro Theme 2
□ Woman Unleashed
Slide 49– Macro Theme 3
□ New Creative
Slide 50 - Macro Theme 4
□ New Local
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Slide 51 – Fashion Snoops 2020
Slide 52– Macro Theme 5
□ All In
Slide 53– Macro Theme 6
□ Selfishly Aware
Slide 54– Macro Theme 7
□ Wow
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Slide 55– Macro Theme 8
□ Universal Design
Slide 56 – Fashion Snoops 2021
Slide 57– Macro Theme 9
□ Betterment
Slide 58– Macro Theme 10
□ Human Level
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Slide 59– Macro Theme 11
□ One-to-One
Slide 60– Macro Theme 12
□ Belonging
Slide 61 – Your Strategies
Slide 62 – Brand Experience Strategy
□ Clear Brand Message
□ Emotional Connection
□ Giving back
□ Storytelling
□ Ultimate Client Service – Processes, Thoughtful Delivery
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Slide 63 – Diversification
□ Innovation
□ Bespoke Product Design
Slide 64 - Opportunities
□ Kitchens & Baths (remodel)
□ Renovation
□ Wellness
□ Large Home Projects
Slide 65 – Use Comparison To Spur Creativity
Slide 66 – Profit Maximizer Tool Kit
Download your Profit Maximizer Tool Kit including our Easy
Client Budget Calculator + Ideal Client Profile + Frequently
Asked Questions for your website or to give to clients + Industry
Benchmarks + State of the Industry Report. Text FEES to 38470
then then enter your email and name in the text replies so we
can deliver these tools valued at over $1,000!
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Slide 67 – Genius Exchange
Join us for the 2019 Genius Exchange at the Providence
Biltmore, Rohde Island, July 17-19. Get more information and
register at GeniusExchange.Gaildoby.com.
Slide 68 – Thank You
