MILAN — The macroeconomic situation remained sluggish over the course of 2024, a year marked by geopolitical conflict, high interest rates, inflation, rising shipping costs and a housing slowdown.
Furnishings, decor and lighting companies persevered through the post-COVID-19 pandemic downturn, banking on the resilience of the high-end consumer and investing in growing markets like Riyadh, Saudi Arabia, and second-tier cities in China.
As companies across the globe look ahead to the New Year, here are some of the top themes to watch.
Trump Tariffs
Now that furniture industry leaders have worked their way around rising shipping costs due to the disruptions in the Suez Canal, President-elect Donald Trump’s future trade policy may very well be the next storm to pass. With his Jan. 20 inauguration on the horizon, industry watchers are bracing themselves for tariff increases on all goods entering the U.S. from Mexico, Canada and China.
Companies like California-based luxury firm RH said it has been diversifying its sourcing for some time. “We do not expect a negative impact to margins as a result of the most recent communications regarding the potential for increased tariffs in 2025. We have been proactively moving sourcing away from China over the past several years with the expectation of fully exiting the country by the end of the second quarter. We are also transitioning products manufactured in Mexico and believe we can successfully reposition our sourcing with no disruption to the supply chain,” RH chief executive officer Gary Friedman said in the firm’s third quarter conference call earlier this month.
The Contract Business
In Europe, the contract business has been a main driver for high-end furniture firms like B&B Italia, Meridiani and Molteni&C. According to Technavio, a leading market research company, the region’s contract furniture and furnishing market is expected to grow at a capital annual growth rate of 5.1 percent between 2024 and 2028, as high-end companies across the board continue to embrace and evolve sustainable design practices that are in-line with new properties.
Worldwide, the contracts generated from the hospitality industry is also expected to be a major catalyst. In August, a study by PwC said demand for extended stay facilities is surging. “Insiders expect this trend to persist, and not only in the U.S. Some estimate the global extended-stay market at $300 billion,” it said. This year alone, annual occupancy for U.S. hotels is expected to rise to 63.6 percent.
Luxury furniture maker B&B Italia, which has been at the forefront of the rising demand for tailor-made projects for luxury residences, retail and hotels, said contract is one of its key drivers.
“The brands of the B&B Italia Group [which include upscale furniture brand Maxalto and kitchens brand Arclinea] are characterized by a strong complementarity, and we will continue to exhibit our brands’ collections together.…This works particularly well in the contract business, where many of the projects are realized with custom-made products from B&B Italia and Maxalto, along with Arclinea kitchens,” B&B Italia Group CEO Demetrio Apolloni told WWD in December.
Waldorf Astoria Residences New York on Park Avenue with B&B Italia furnishings
Michael Biondo
Interest Rates
Next year, monetary policy is expected to remain varied worldwide. The European Central Bank, for example, is expected to cut rates further in 2025, especially in light of trade risks and global instability.
In December, the ECB cut interest rates by a quarter point to 3 percent. In the U.S., financial markets were hit by a Federal Reserve policy statement that forecasted just two interest rate cuts in 2025, versus a previously forecasted four.
According to the November update by the American Institute of Architects, one-third of leading architecture firms listed increasing profitability and project financing among their top concerns for 2025. Rising interest rates remained a top concern for just 7 percent of the firms polled.
“Financing issues also significantly decreased in level of concern for 2025, as interest rates decline and inflation wanes. While 15 percent of firm leaders rated client challenges in the availability of project financing and higher interest rates as a top concern for 2024, just 7 percent selected it for 2025,” the report said.
Market watchers will turn to the first FOMC (Federal Open Market Committee) of the second Trump presidency, scheduled for Jan. 28 to 29, with the rate decision set for Jan. 29.
Home Sales
According to the National Association of Realtors in the U.S., the housing market is showing signs of improvement. In its November report, existing-home sales rose to a seasonally adjusted rate of 4.2 million in November, its fastest pace since March. The organization’s positive outlook for 2025 was influenced by the likelihood that the Federal Reserve’s monetary policy will ease in 2025 and mortgage rates will stabilize around 6 percent next year.
“While concerns about federal deficits and rising public debt may cap the extent of those rate cuts, borrowing costs are anticipated to stabilize overall, offering some relief to prospective buyers. NAR forecasts that mortgage rates will stabilize near 6 percent in 2025, likely establishing a new normal. At this rate, more buyers are expected to come back to the market, boosting activity, and the association projects 4.5 million existing-home sales in 2025,” the report said.
According to Freddie Mac’s Jan 2 report, 30-year fixed mortgage rates in the U.S. hovered at 6.91 percent, compared to 3.72 percent on the same date in 2020.
Home prices, however, will continue to increase in 2025, but at a slower pace compared to previous years — with increases likely to be around 2 percent — reaching a $410,700 median existing-home price, it said.
“Home buyers will have more success next year,” said NAR’s chief economist Lawrence Yun. “The worst of the affordability challenges are over as more inventory, stable mortgage rates and continued job and income growth pave the way for more Americans to achieve home ownership.”
Affordable Housing
In the EU housing prices continue to burden residents across the region. In the second quarter of 2024, housing prices were up by 2.9 percent in the European Union, versus the same period in 2023, according to EU statistics office Eurostat’s October report.
Last year in the EU, 10.6 percent of households in cities and 7 percent of households in rural areas reported that their housing costs exceeded 40 percent of their disposable income. Member states are working on tackling the need for sustainable, dignified and affordable housing across the Union. In December, Parliament approved the establishment of a special committee that is expected to propose solutions for more affordable housing after the new year.
Molteni&C’s Shanghai store.
Jonathan Leijonhufvud
China
China, a key market for luxury home brands, remains a top concern for European companies, though they continue to invest in hopes that the Chinese consumer is immune to economic headwinds. The Chinese economy slowed in the third quarter of this year, its property market remains in a fragile state and consumer confidence hasn’t quite recovered since the COVID-19 pandemic.
Versace Home, for example, currently has 10 retail locations in China, comprising both monobrand stores in Shanghai, Hangzhou, Zhengzhou and, most recently, Xi’an. Its licensee, Luxury Living group, said over the next three years its plan is to strengthen Versace Home’s presence, expanding with additional monobrand stores in key first-tier cities such as Beijing, Chengdu and Shenzhen, and introducing more multibrand locations in select second-tier cities.
In June, Italy’s Molteni&C opened its largest flagship in the world in Shanghai with local partner Domus Tiandi.
Since September, the Chinese government has unveiled stimulus measures such as monetary policy easing policies and plans to counteract the property market’s decline. Analysts at Nomura’s economics team maintained its 2025 GDP growth forecast at 4 percent, in its 2025 Asia Macro Outlook report. “Beijing is expected to ramp up its fiscal stimulus, focused on transfers to local governments, spending on social security for low-income households, funding for trade-in programs and spending on the property sector,” the report said.
