Housing sales gain ground and green construction continues to grow.
Respondents to this year’s Pipe Trades Giants’ survey are staying positive - 58% expect their workload to increase for the remainder of this year and more than half (56%) expect 2012 revenues to increase from 2011 by about 14%. Commercial and industrial projects comprised a good portion of construction work last year (41% for respondents) as the residential new construction market still struggled.
Construction spending in May 2012 totaled $830 billion at a seasonally adjusted annual rate, a 29-month high and a 7% increase from last May. During the first five months of 2012, construction spending rose 9.4% from 2011. In nonresidential construction, lodging, power and manufacturing had double-digit increases from last May, while commercial and health-care construction also saw increases.
Robert Murray, vice president of economic affairs at McGraw Hill Construction, notes in the 2012 Dodge Construction Outlook Midyear Update that overall new construction starts are predicted to rise 2% this year. Weaker performance by the institutional sector - namely education and health-care building - is offset by the “strong but steady gain in single-family housing over the last year.” Home building is expected to see steep increases in 2014.
New home sales have been rising about 20% this year, the National Association of Realtors reports, and may reach 600,000 by 2013, doubling the 2011 figure of 300,000. In contrast, 1.2 million homes were sold at the height of the real estate bubble in 2005.
While figures have been mixed this year, the U.S. Commerce Department notes housing starts in June 2012 rose 6.9% from the previous month and 23.6% from the same period in 2011. June building permits saw a decrease of 3.7% from May, but a 19.3% increase from June of last year. The National Association of Home Builders reports gains in multifamily contruction as its Multifamily Production Index rose for the seventh straight quarter to its highest level since 2005. Builders see a higher increase in rental units over for-sale units, but the for-sale indicator also is rising.
Green construction growth
When it comes to building or remodeling green, 36% of our survey respondents say that up to 25% of their business is from sustainable building projects, and 11% say a quarter to half of their business is green-related. Almost three-quarters (73%) have at least one LEED-certified person on their staff. And 49% belong to a green-related organization such as GreenPlumbers USA, the U.S. Green Building Council and MSCA GreenStar.
Just over half of PM’s survey respondents (55%) recommend Energy Star and WaterSense products to their customers. Some of the sustainable products/systems used by respondents include graywater or recycled water systems (35%), solar thermal systems (45%), geothermal (36%) and residential touch-free faucets (25%).
Those plumbing and mechanical contractors entrenched in the green construction movement have reason to be hopeful. The green share of new single-family construction - “a bright spot in an otherwise dismal market” - was 17% in 2011 ($17 billion), doubling from 8% in 2008, notes the McGraw Hill Construction SmartMarket Report “New and Remodeled Green Homes: Transforming the Residential Marketplace.”
“Market conditions suggest that green homes will continue to grow share over the next five years,” the report says. “We expect a five-fold increase between 2011 and 2016 to comprise a 29% to 38% market share - potentially a $87 billion to $114 billion opportunity.”
Green remodeling also is on the rise and may even surpass new green homes, the report notes, as homeowners begin to reap the benefits of lower bills and higher home values.
The latest Leading Indicator of Remodeling Activity from the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University states that U.S. remodeling activity “is in a position to see accelerated growth by the end of this year and into 2013.”
“Home improvement activity has been bouncing around the bottom of this cycle for almost three years now, waiting for the industry to get some traction,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “Now, the combination of low financing costs, stronger consumer confidence, improving home sales and the perception that home prices have stabilized in most markets across the country are encouraging owners to start working on the list of home improvement projects they have been putting off.”
Other survey trends
While building information technology used to be the purview of engineers, more plumbing and mechanical contractors are taking advantage of the efficiencies BIM creates. And our survey respondents are no exception - 60% say they now use BIM in their companies.
Safety programs, social media, direct-mail advertising, expanded training opportunities, targeting new markets, measuring productivity, networking through local business groups, increasing marketing budgets and campaigns and opening new divisions are some of the other measures contractors have taken in the last year to keep their companies profitable.
“Operationally, we have developed behavior-based safety systems that have increased overall safety performance,” says John Manta, vice president of marketing and sales at Munster, Ind.-based BMW Constructors. “We also have re-emphasized lean construction across the company.”
Kenneth A. Durr, president of New York City-based Durr Mechanical Construction, states: “We have placed more emphasis on marketing our performance record regarding quality of our work and our emphasis on safety in our workplace.”
(Editor’s note: The Pipe Trades Giants are not ranked on total sales volume, but what we call “pipe trades volume” - the percentage of a company’s revenue that comes from plumbing, piping, hydronics, fire protection and water/wastewater treatment. HVAC, electrical and other revenue is not included in our computations.)
