Construction Outlook: Suppliers' Perspectives

Ulf Wolf / September 2016

As you know, we normally turn to our member contractors for feedback and views on various issues regarding our industry.
    
This month, however, we turn to our member suppliers (as well as one or two manufacturers) to hear how they view our industry these days, and what their take is on the construction market and its future.

Material Trends
Our first question was, “Today, what building material trends do you see?”
    
Bryan Olsen, regional manager at NexGen Building Supply in Illinois, says that in his commercial construction market, “we see drywall, metal studs and structural steel in high demand.”
    
On the other hand, Tim Rogan, owner of Coastal Plaster Supply in Texas, sees “some share of the stucco market being lost to cement board siding due to stucco problems with quality [applications] and water intrusion.”
    
Kraig Ward, sales manager at Longhorn Building Materials in Texas, notices that buildings are being better built. “When I first started in this business,” he says, “many walls were built with 25-gauge studs. These days, it’s mostly 20-gauge studs for interior walls. Also, there’s a call for more specialized products, such as soundproof drywall and higher-end ceiling-tile products.”
    
Frank Bremer, branch manager at Kamco Supply Corp. in New York, observes, “We see more mold- and mildew-resistant drywall.”
    
Kevin Dunwoodie, manager at L&W Supply in New York, concurs: “We see more mold protection. Also, better barriers for building envelopes and innovative ways to control air transmission.”
    
Building even greener buildings is another trend being seen in many parts of the country. In North Carolina, John Kindt, president at Delta Gypsum, notes that “the first two decades of the 21st century have ushered in green, eco-friendly and recycled products.”
    
In Wisconsin, Mark G. Alan, senior vice president at Inpro, says, “Our most significant material trend is the increase in green, healthy and sustainable materials.”
    
The same from Vermont, where John Scott, branch manager at Kamco Supply (of Boston) also sees “more green material jobs. Add to that, more higher-end quality acoustic ceiling tiles.”
    
At Negwer Materials, Inc. in Missouri, Scott Negwer (CEO/president), Peter G. Wilhelms (vice president of marketing and product development) and Seth Joy (vice president of sales) are seeing a high demand for energy efficient exterior envelopes, whether EIFS, rain screen or others. They are seeing a very strong focus on continuous insulation.”
    
Allen Fisher, regional manager; and Chuck Hall, sales manager, at Foundation Building Materials in Texas, see more specialist ACT products, as well as a call for more specialist architectural special designs. They are also seeing an increased demand for mold- and water-resistant drywall.
    
On the other hand, Shane Huempfner, director of operations at Dakota Wall Systems, Inc. in Montana, observes a lot of material mixing. “Where 10 to 15 years ago it was all EIFS,” he says, “now there can be a mix of EIFS, brick and stone, as owners and architects are becoming more creative with textures and colors.”
    
From Florida, Greg Kovacs, area sales manager at USG Florida/Gulf, sees a demand for lighter building materials, as well as “glass-mat material within gypsum and more specialty type ceiling tiles.”
    
Kim Gonzalez, technical sales representative at L&W Supply in California sees a “continued focus on the building envelope. There is also more productivity innovation these days: lighter materials that are easier to install, as well as more sustainability and more specialty ceilings. We also see more pre-fabrication.”
    
From a manufacturer’s perspective, Greg Salah, senior vice president and general manager, North America, at USG Corporation in Illinois observes that “sustainability remains a key trend. Both owners and architects look for cost-effective ways to build more sustainable buildings.”

Contractors’ Outlook
Then we asked the suppliers what they are hearing from contractors regarding future business. For the most part, their answers are positive.
    
Johnny Aldy, vice president of operations at Pyramid Interiors in Tennessee, says that it varies from contractor to contractor. “Some have work booked through mid-2017,” he says, “while others are still working to secure work for next year.”
    
But from Olsen’s perspective, things are good and looking up, and contractors are cautiously optimistic.
    
Kindt shares that “GCs have mentioned that owners are often caught off guard when told there is now a lead-time to get a project underway.”
    
Alan adds that in Wisconsin “business conditions are currently robust, and we see an increase in the number of commercial construction projects.”
    
Kovacs shares, “I’ve recently traveled many parts of Florida and our commercial contractors are, as a rule, both encouraged and optimistic about the next 18 to 24 months.”
    
The same holds true for California where Gonzalez observes, “The commercial market remains fairly strong in most areas. Of course, the economic landscape/commercial lending will impact demand going forward, so need to keep an eye on interest rates.”
    
As for Missouri, Negwer, Wilhelms and Joy say the future looks good and strong. The only damper is fear of not having enough labor to deliver on schedule, so in order to maintain good customer service, they are not overcommitting.
    
Mickey Layne, branch manager at Action Gypsum in Texas, adds that “architects continue to be very busy, and that leads contractors to have a positive outlook for the future.”

Labor Shortage
We then asked how suppliers are playing a role in trying to attract new members to the construction industry.
    
Salah shares that USG is “involved with organizations that attempt to match under-employed individuals with industries that offer middle class incomes.”
    
Observes Kindt, “This is one of those ‘it takes a village’ efforts as it is expensive and requires the participation of many players. It is an issue that we as an industry must address aggressively since it is as great a threat to us as a recession or poor economy.
    
Says Ward, “Attract? More like retain, and that takes the upper end of the wage scale.”
    
Negwer, Wilhelms and Joy share that sentiment. They have been quite active trying to attract St. Louis area minorities, especially in the 18 to 28 age bracket who may or may not have finished high school.
    
Offers Huempfner, “We’re doing what we can, but how best to accomplish this is still guesswork. We haven’t seen a labor drought like this for a long time. It seems to me that many old-timers feel that their jobs are too hard and they want better things for their kids. They want them to be lawyers, doctors and so on, and pack them off to college. Some people see construction as something you can always do if you can’t find anything else. This is a very false image and we need to correct it. We need to get the point across to the younger generation that this is a great, technologically advancing industry, and that construction, with BIM and CAD/CAM and so on, is not your dad’s Oldsmobile anymore.”

Millennials
Then we asked why millennials seem to shun the construction industry as a career.
    
Olsen’s take is that “the building-bubble bust left a bad taste with many millennials whose parents perhaps lost their homes. The industry was a little tarnished by that.”
    
In Ward’s view, “They lack work ethic. The wealth and comfort of this country has now grown to the point where the millennials lack the hunger to succeed. They simply just show up and expect to be paid.”
    
In Kindt’s experience, “There is no faster way to chase a millennial away than with a long work week. As an industry, we must become very creative in our approach to this generation because in five years, they will be our workforce.”
    
Aldy’s view is that “technology has made it way too easy to make a good living sitting behind a computer all day.”
    
And Dunwoodie concurs: “I think they are raised to do everything electronically, with a computer as their mainstay. If they can’t do it with their thumbs, then for the most part they are lost.”
    
As does Scott: “They have been reared on electronic devices and have come to expect immediate reward for whatever they’re doing. Construction does not fit that model.”
    
Hall and Fisher add that the millennials are the “now” generation, and they want to start at the top as the president and work their way up from there to CEO; none of this “start from the bottom” for them.
    
Layne views the problem differently. “I don’t think they shun the industry,” he says. “They are just not well-informed.”
    
Huempfner’s sobering take is that “colleges are businesses that heavily market their products to high school graduates (and their parents).” He says that “colleges need to fill their classrooms, and they’re going flat out to grab every high school graduate they can. Skilled labor does not have a marketing department. We need to fix that.”
    
Kovacs agrees. “There are many young people who enter the workforce straight out of high school,” he says. “In order to attract these, we need to better communicate what we have to offer. I think it’s up to trade organizations and unions to engage and to better communicate what we can offer as an industry.”
    
Salah says that “our education system has created the stigma that working in the trade or construction industry is dirty work and not the work for an educated individual,” while Gonzalez adds, “The word ‘construction’ doesn’t have the glitz and glamour of some other industries.”
    
Negwer, Wilhelms and Joy observe, “Parents are pushing their kids to get a college degree. We’ve also found that high-school counselors do not, if the kid does not what to go to college, counsel them much further, and definitely not toward the construction industry. This needs to change.”

Issues—Helping/Hurting
Then we asked about the issues that are helping (or hurting) their business and/or the industry.
    
Says Olsen, “There is a lot of ongoing consolidation, which can be a good or bad thing depending on where you find yourself.”
    
Offers Rogan, “Developers who still want to build as cheaply as possible, disregarding material quality, hurt us. Stricter building codes help, as do craftsmen who, with pride, build quality projects.”
    
Says Kindt, “Regulatory expansion and audits are hurting us. These days, we spend too much time and money keeping up with compliance.”
    
According to Alan, “Increasing healthcare costs, taxes and government regulations are some of the biggest obstacles hurting many businesses both inside and outside our industry.”
    
From Huempfner’s standpoint, “The economy is definitely helping our business in a huge way. People are spending more on projects. Negotiated work coming back is also a good sign.” But, he says, “The labor shortage is hurting us.”
    
Bremer’s view is that our industry is hurt by labor shortages, government regulation and accompanying record keeping. Dunwoodie and Gonzalez agree that the labor shortage is hurting the industry; in fact, Dunwoodie believes it is the biggest problem facing the construction business.
    
“On the other hand,” says Gonzalez, “technology will continue to help the industry as people invest in platforms such as Building Information Modeling, Customer Relationship Management systems and CAD/CAM systems.”
    
Scott’s view from Vermont is that the “lack of good man power is definitely a hampering issue, along with young people’s reluctance to enter our industry.” But, he adds, on the good side, the economy’s bouncing back is helping. “A rising tide lifts all boats,” he says.
    
Hall and Fisher say we need a succession plan for the entire industry because our industry is aging, and we need a new generation to take over. They say that some of the things that are helping the industry include technology, innovation and new products.

Suppliers' Outlook
Then the rubber-meets-the-road question: “As for the next 12 months, what expectations or predictions do you have in terms of business?” (Keep reading; it’s good news.)
    
Most all the suppliers we interviewed are predicting good times ahead. Olsen expects a continued uptrend in sales, while Bremer expects to be busy for the next year or two. Ward predicts that commercial and single-family building will continue to grow through 2017, and multifamily will correct itself next year. Kovacs says residential will continue to improve gradually while commercial will jump more significantly. Kindt has a bullish outlook as well, and he says he is hearing the same from his counterparts across the country.
    
Negwer, Wilhelms and Joy say there will be more growth, more complexity and more opportunity. Dunwoodie, Alan, Scott, Hall, Fisher and Layne all predict upward trends for the next 12 months, some even so bold to predict it lasting another 18 to 24 months.
    
Huempfner says, “I think the strong market will continue. I think there will be a pullback as some point, but I think that will be more organic than the crash of 2008.”
    
The others weren’t quite as enthusiastic, but they are optimistic nonetheless. Gonzalez believes business will continue to grow at a slow-but-steady pace. Rogan says, “I hope it is as good or better than the first six months of 2016, but it will take another five years of a strong market to recover from the damage caused by the last eight years.”
    
Salah predicts slow to moderate growth like we have been seeing recently, and Aldy agrees that “we will continue to see a moderate increase—at least until after the election.”
    
Says Salah, “I see a bright future as economics are driving less speculative building, which will lead to more balanced construction activity.”
    
Dunwoodie adds that labor “will be a major problem going forward. Major construction associations would be prudent to spend as much time and resources as possible to get ahead of this problem.”
    
Suggests Kovacs, “I guess there might be some concerns if we look beyond two years out, and there will probably be some sort of drop, but since the growth over the last few years has been gradual and not due to a speculative boom, I believe a drop will be gradual (and manageable) as well.”
    
Negwer, Wilhelms and Joy say that just-in-time delivery has become the norm now, and it’s just a fact of life. They also noted the large number of mergers in the distribution industry and say it will be interesting to see how landscape looks in a few years.
    
By all accounts, the current uptrend will continue for at least another year, perhaps two, but the long-term prospect of the construction industry will find itself in serious trouble unless the labor issue is resolved, and unless the millennials are convinced that construction, after all, is a great career choice.

California-based Ulf Wolf is the senior writer at Words & Images.