MillworkTrends 10. What s Inside. 1 Joint Quality Standards 2 LEED. 3 Sustainability. 4 Diversification. 5 Finishing. 6 Indoor Air Quality

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1 MARKET & ATTRIBUTE TRENDS MILLWORK MillworkTrends 10 What s Inside 1 Joint Quality Standards 2 LEED 3 Sustainability 4 Diversification 5 Finishing 6 Indoor Air Quality 7 What Are Architects Thinking About? This report was produced as part of the Value to Wood Program, funded by Natural Resources Canada Canadian Forest Service. FPInnovations expresses its thanks to Natural Resources Canada Canadian Forest Service for their financial suppoert for this research project. Trendspotting is an important tool for enabling manufacturers to be proactive rather than reactive in their business. In this report, we looked at trends shaping the millwork sector. A multidisciplinary team summarized a list of trends that are currently or imminently going to affect this sector. Trends revolved around common standards, green building design and LEED certification, product line diversification, environmental issues, and trends influenced by architects and designers.

2 1 Joint Quality Standards Elimination of multistandard grey areas There are three major millwork associations in North America: AWMAC Architectural Woodwork Manufacturers of Canada AWI Architectural Woodwork Institute WI Woodwork Institute. In 2003 AWMAC and AWI merged their standards to create the Quality Standards Illustrated (QSI), but at that time the Woodwork Institute retained its own Manual of Millwork (MM). As the Woodwork Institute covers California and much of the West, the market was still operating under two standards. In 2007 the three associations formed a joint standards committee, and as a result, the new Architectural Woodworking Standard (AWS Edition 1) was developed and came into effect for North America in October of Guarantee and Inspection Service The Guarantee and Inspection Service (GIS) is an integral part of AWMAC s ongoing effort and commitment to a credible and prosperous architectural woodwork industry. After the implementation of the AWMAC Quality Standards manual, the architectural woodwork industry identified a need for a tool to monitor projects and assure that the woodwork supplied and/or installed would be in accordance with the Quality Standards. As a result, in the mid 1990 s the AWMAC Guarantee and Inspection Service (GIS) program was developed and adopted as a national program. The AWMAC GIS program, through its manufacturer members in good standing, offers a two year AWMAC Guarantee Certificate on projects which have the recommended GIS wording specified in the tender documents. For information on manuals, contact What does one standard mean for North America? For Clients: Knowledge of only one standard required Ease of preparing tenders Ease of comparing bids Ease of quality assurance For Millwork Shops: Comparable and competitive bidding Geographic competitiveness Elimination of multi-standard grey areas

3 2 LEED LEED LEED AP USGBC CAGBC FSC SFI CARB SAW Leadership in Energy and Environmental Design LEED Accredited Professional US Green Building Council Canadian Green Building Council Forest Stewardship Council Sustainable Forest Initiative California Air Resource Board Sustainable Architectural Woodwork Green building design LEED accreditation is quite thorough and requires direct involvement in past LEED projects. Therefore, few product manufacturers or suppliers have in-house or even practical access to LEED AP s. This often makes supplying to LEED projects more difficult and uncertain than it needs to be. Recognizing this the USGBC and CAGBC have created a lower level introductory credential aimed at product manufacturers, suppliers, administrators and others that play a support role in green building design. The LEED Green Associate credential denotes basic knowledge of green building principles and practices and LEED. Source: USGBC The Green Associate program fills a knowledge gap in the millwork industry, as millwork companies with a Green Associate on staff will be able to supply LEED compliant products to projects with more certainty. Having a LEED Green Associate on staff is also a way to prove to potential clients that a company is LEED-ready. Certified wood is another area of interest for woodworkers. At the time of writing no changes to the certified wood credit have been passed by the USGBC. There is currently a proposal to revise the certified wood credit to recognize certified wood mechanisms beyond Forest Stewardship Council (FSC). This proposal has been revised three times and the fourth round of public comment wrapped up in July Under the current proposal a partial credit would be made available for systems such as Sustainable Forest Initiative (SFI) and FSC.

4 3 Sustainability Company certification can indicate sustainable practices Having established stronger ties through the creation of the AWS quality standards, AWMAC and the WI are now working together on a voluntary sustainability standard for millworkers. The current working name for the project is Sustainable Architectural Woodwork (SAW). There are two aspects of SAW company certification and project certification. At this point the associations are putting their efforts into establishing the company certification program. Within the company certification the three areas are products, processes and people, with several metrics under each. The idea is to have manufacturers, and later suppliers, obtain a green certification indicating that they are following LEED-similar protocolsand are thus minimizing their environmental footprint. There are multiple goals of the SAW project. At a basic level there is the understanding that it is the right thing to do. From a business perspective SAW is seen as a way to show potential clients that products and operations are sustainable. Members using SAW will also find it much easier to respond to certification system requests from LEED, Green Globes, CARB, or others, as much of the information requested will already be tracked by SAW users. Phase one of SAW is projected to launch in mid-2011.

5 4 Diversification The architectural millwork sector by definition is very custom. Millwork shops receive designs and interpret them into shop drawings. Product development, product design and product marketing are not traditional functions of millwork shops as they are not necessary in the conventional business model. However, there appears to be a trend emerging for millwork to diversify into some standard product lines. This may be into furniture, fixtures, doors or other non-custom millwork items. Millwork companies are dabbling in standard product lines to diversify their shop demand. Custom millwork demand is subject to market forces within the commercial real estate sector. This sector was late to enter the current market downturn due to an inventory of projects on the books. However, in coming out of the recession a lag in demand is being seen as projects are just now being planned. Add to this that demand for any one millwork company is subject to successful job bidding and demand cyclicality is a common feature of the sector. Diversification into standard products can provide some degree of demand smoothing. Diversification into standard products serving the non-residential sector is perhaps the easiest path as this sector is very familiar to woodworkers. Standard products can include some office furniture, fixtures and millwork such as doors that are repeated elements. Offering standard products into the non-residential market does not insulate companies from the economic cycles of the market, however, as demand for these products will mirror demand for custom work. Diversification into standard products for the residential sector can provide more effective economic buffering. Residential demand is usually the first to decrease in an economic contraction, and is the first to recover as an economy expands. Diversification into this market can smooth out demand; however, it requires design, marketing and distribution expertise that is different from custom millwork. This can be addressed by adding expertise in-house or through strategic partnerships with companies already serving the residential sector. Diversification into some standard product lines can help smooth demand

6 5 Finishing 6 Indoor Air Quality New finishes reduce VOC s Water-borne finishes With the increasing focus on volatile organic compounds (VOC s) in LEED, CARB and other standards, the shift to water-borne finishes has been expected in the millwork sector. However, most millwork manufacturers remain on the fence, using water-borne finishes when stipulated and solvent-based finishes otherwise. However, as coatings manufacturers continue to focus on water-borne finishes, the switching costs will get lower and manufacturers will begin moving over instead of maintaining two technologies in their shops. This has already begun in the kitchen cabinet sector with many shops moving entirely to water-borne finishes. This has afforded them early adopter of innovator status among green consumers. Applying water-borne finishes requires additional training as it differs from traditional solvent-based coating application. The California Air Resource Board (CARB) Phase 1 Formaldehyde Standard is now in place for all board products. The initial phase focussed on getting testing and paperwork practices in place rather insignificantly curtailing formaldehyde emissions. However, as of January 2010, Phase 2 restrictions came into place for veneer core hardwood plywood taking formaldehyde emissions down to 0.05 ppm from 0.08 ppm. In January 2011, particleboard and MDF emissions standards were cut in half from Phase 1 levels. Particleboard emissions were reduced to 0.09 ppm and MDF to Powder-coating Another way to minimize VOC emissions is through powder-coating. Powder-coating of wood has been an available technology for over a decade. However, technical improvements and the current focus on costs and VOC s has renewed interest in powdercoating. Powder-coating is very efficient in terms of paint usage as overspray is virtually eliminated. The nature of the process also means that solvents are not used and fast curing times are achieved. At this point, powder-coating of MDF is achieving the most consistent results due to the uniformity of the substrate. Powder-coating of solid wood and veneers is also possible but requires more care and precision. While millwork shops may acquire powder-coating equipment, the emerging business model appears to be to send parts out to dedicated powder-coaters. At this time, most powder-coating of wood is occurring on flat panels and ready-to-assemble (RTA) applications.

7 7 What Are Architects Thinking About? The millwork industry is a direct order taker from the architecture and interior design sector. For this reason it is important that millworkers understand some of the trends and pressures that architects are facing. Sustainability Sustainability continues to be at the forefront of architectural practice in North America. LEED registrations and certifications have reached almost 35,000 worldwide with commercial offices making up over 1/3 of all registrations. This is followed by retail projects at 10 to 15%. Wood First The Province of British Columbia has recently passed the Wood First Act. This act stipulates that wood be considered as the primary building material for provincially-funded building construction approximately $3 billion worth per year. Specific procurement guidelines are still being developed, but this Act is expected to influence both structural and visual applications for wood. From a millwork perspective this will likely spur further demand. In buildings where wood is not used structurally, there will likely be increased pressure to use wood visually. BIM Building Information Modelling (BIM) is garnering a lot of attention in the architecture world. BIM allows buildings to be modelled in 3 dimensions. This function alone has been available for many years. What is different with BIM is the integration of the systems and the information that can be generated. Structure, services, fixtures, lighting, and other features can all be integrated to BIM models. This allows builders, engineers, and architects to identify conflicts early, streamline construction, and even model energy use and the environmental footprint. BIM is being supported by large office fixture and furniture producers who are providing libraries of their products as BIM objects that can be incorporated by architects into their designs. This is a distinct advantage when it comes to the final product specifications. While it is not yet clear how millwork companies can integrate themselves into BIM it is worth keeping an eye out for opportunities as this appears to be the technical direction design and construction is going. Understand the trends and pressures that architects face Repurposing/Rehabilitating Existing Buildings Limited client budgets and a focus on sustainability have increased the interest in repurposing and rehabilitating existing buildings. Architects have seen an increase in this type of work in the past few years. In many cases all millwork is replaced. In others some millwork is rehabilitated and reused, especially in LEED renovations.

8 Further Information Other sources of information can be found at the AWMAC website, and through AWMAC s publication, The Sounding Board. Market and Attribute Trends is a series of fact sheets aimed at improving awareness and information on market trends that shape the demand for wood products. Market and Attribute Trends is complemented by a Facts on Wood series that provides technical information on the various commercial wood species in Canada. Through the Value to Wood program, Canadian wood product manufacturers have access to the expertise and information they need to extract greater value from wood resources. To download the Market and Attribute Trends, visit FPInnovations works towards optimizing the forest sector value chain. It capitalizes on Canada s fibre attributes and it develops new products and market opportunities within a framework of environmental sustainability. As a world-leading provider of technology development, application and knowledge transfer, the not-for-profit forest research institute helps implement innovative manufacturing solutions that provide the industry with long-term competitive advantage. How to contact us: Roland Baumeister 2665 East Mall, Vancouver, BC V6T 1W5 Tel: Fax: Gérald Beaulieu 319, rue Franquet, Québec, QC G1P 4R4 Tel: Fax: FPInnovations, its marks and logos are registered trademarks of FPInnovations. Photos courtesy of ThinkStock Images 2010