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©iStockphoto.com/Konstantin Inozemtsev
In 2007, total private nonresidential construction spending rose 18.3 percent from 2006, reports the Department of Labor’s Bureau of Labor Statistics. The areas with the biggest increases in spending were lodging (a 68.4 percent increase), power plant construction, communication, manufacturing and education.
Public nonresidential construction last year saw construction spending increases in healthcare (25.1 percent), public safety, conservation and development, transportation and office space. Spending on building schools rose a modest 9.4 percent, sewage and waste disposal rose 7.8 percent, and water supply construction dipped 0.8 percent.
The residential new construction market continued to slide last year (spending on residential new construction fell 18.3 percent in 2007) and some residential contractors attempted to make the switch to nonresidential construction or remodeling to keep afloat.
Of course, the construction industry differs from region to region, state to state, city to city. Some areas, such as the metro Dallas region, are seeing quite a bit of residential and retail construction, while others (Michigan and Pennsylvania) have high unemployment due to the downturn of the auto and food manufacturing industries.
As the building slump continued last year, many construction companies were forced to layoff employees. The construction industry had the second largest increase in mass-layoff-related unemployment insurance claims in 2007 - 26,335 more claims than in 2006, due to more layoff activity in specialty trade contractors (up 11,445), heavy civil engineering and construction of buildings. Jobs in the residential construction sector have fallen by 291,000 from peak conditions in 2005.
“Despite the slowdown, the housing sector contributed nearly $2.1 trillion to the national economy in 2007, accounting for 15 percent of overall activity,” notes the National Association of Realtors, adding that commercial real estate added $483 billion to the economy last year.
The group also notes that 2007 is the fifth best year for housing on record; it’s just that the public’s perception is different, with the rise in sub-prime mortgage foreclosures diminishing consumer confidence in the real estate market.
Green Building
Green building technologies remained popular last year and will continue to grow in the market. The residential green building market is expected to be worth $12 billion to $20 billion in 2008 (about 6 percent to 10 percent of the market) and doubling in five years, according to research from McGraw-Hill Construction and the NAHB. And 40 percent of builders surveyed believe that green building helps them market their homes in a down real estate market.Companies surveyed this year for Plumbing & Mechanical’s Pipe Trades Giants listing also realize the importance of sustainable construction to their businesses - 62 percent of respondents have taken part in constructing a LEED-certified building, and 48 percent have a LEED-accredited professional on staff.
Positive Outlook For Pipe Trades
Plumbing and mechanical companies we surveyed this year still have an upbeat attitude about their businesses; 62 percent said they expect next year’s sales to increase by an average of 13 percent. That could be because about 84 percent of their work in 2007 was industrial/commercial rather than residential. Almost half (45 percent) said they anticipate their workload for the rest of 2008 to increase; only 4 percent said they expect work to decrease, and 51 percent anticipate work will remain the same.Eleven percent of respondent said they have more work than they can handle with the present labor force, 10 percent said they have less work needed to keep the present labor force busy, and 79 percent said they have a balance between workload and workers.
And even though work began slowing last year, 52 percent of our respondents reported an increase in profitability, with 35 percent the same from the year before.
So what did those companies do to increase profitability, grow their markets or get new work? Some have added new divisions (service, rehab/renovation, fabrication, energy solutions, design-build), implemented new technologies (building information modeling (BIM)), invested in more training for their employees, emphasized preplanning on jobs, expanded relationships with general contractors and other specialty trade contractors, calling up old customers, using lean construction techniques or quality control processes to increase productivity, expanded geographical area, and hired more staff.
These are only a few things that plumbing, piping and hydronic contractors are doing across the country to keep their businesses healthy and profitable.
