MCN: The economy is growing but sluggish. What kind of growth do you see for the
construction market in 2013? What will be the bright spots?
Jim Bush: I think moderate growth will occur in certain construction segments. Metal will also continue to gain in market share for both roofing and wall applications.
Bernard Markstein: Overall, construction will grow this year, mainly powered by residential construction. Construction spending is forecast to increase 7.5 percent in 2013. Residential construction activity will be the bright spot, with new residential construction spending increasing 22 percent. The outlook for the construction of manufacturing facilities also looks good.
Mark Dobbins: The forecasting experts for the construction markets continue to put together very strong growth expectations and follow up with downward revisions. I believe the past few years of construction levels, which have been well below any historic lows, has created a pent-up demand. However, unlike previous cycles of lowered construction levels followed by spikes in construction,
I believe we will experience a more gradual improvement in construction levels over the next few years.
Geoff Stone: 2013 will be somewhat of a repeat of 2012 with perhaps a little better performance out of the residential market. I don’t see any major return to commercial construction without a reduction in unemployment.
I don’t see much of a return in institutional spending, although there does seem to be some improvement in tax receipts at the state and local level, and that could have an impact. I guess I’m cautiously optimistic for a relatively low rate of growth.
The bright spots continue to be spots where energy production is under way. The energy boom is creating construction opportunities where it’s occurring, especially in states like North Dakota, Montana, and so on, and Canada, particularly Alberta and Saskatchewan.
MCN: In 2012, the residential market began to come back. What kind of growth (or not) do
you anticipate from the residential market?
Bush: I believe we will see growth in the metal reroof and renovation markets. The key is to identify contractors who will promote the use of metal in this market. Home repairs have lagged somewhat, but many opportunities exist due to homeowners staying in their present home versus relocating or moving up.
Markstein: Good growth. Twenty-two percent increase in construction spending for single-family and multifamily new construction.
Dobbins: We are expecting growth in the residential markets, but similar to the nonresidential construction levels, we do not expect a large spike in residential construction.
Stone: What could help in the residential market is an increasing market share for metal. Having said that, metal is used more on upscale homes than on less expensive homes, and the jumbo mortgage market has not really loosened up like it should, and of course major tax increases on the wealthy could impact the opportunity. In general, residential construction lifts roofing contractors. As roofing contractors are lifted, they spend more money on equipment. An increase in residential construction could have a minor impact on my business.
MCN: What are the major threats you see to the growth and profitability of the industry
today?
Bush: The sluggish economy continues to affect the profitability of the metal industry. A large number of competitors are involved in all projects, and the key to profitability for the manufacturer is to be able to properly identify differences to the customer with the proposal. ATAS sets itself apart with every proposal because of its quality products, variety, customization and customer service.
Markstein: Major risks include:
- Washington failing to deal with the rest of the fiscal cliff issues-settling on a budget and raising the debt ceiling
- Near-term draconian cuts in federal spending
- Debt default by a European country (a debt default by Greece alone would not prove overly serious, but might precipitate defaults by other countries, with Spain the prime next candidate)
- Dissolution of the Euro; this might help the United States in the short run, but hurt the European economies and exports to Europe
- A long, prolonged spike in oil prices-an increase of 50 percent or more for several months
One potential threat to industry profitability is a shortage of skilled construction workers if construction ramps up too rapidly. Residential construction is likely to feel the pinch more than nonresidential construction.
Dobbins: The major threat to growth and profitability in this industry today is quite simply the economy. More specifically, there is a lack of confidence that our current administration and legislative bodies will create an environment that is conducive to capital investment and expansion by business. Many businesses have the desire and need to invest in and expand their operations, but the decisions are being delayed due to this concern.
Brad Robeson: One of the greatest challenges that hinder the profitability potential of our industry is a lack of focus on selling the value of steel buildings over price. There are so many marketable attributes, such as energy code compliance, and the speed and flexibility of our products in the field, which we can effectively apply to position steel as a premier building solution over conventional options. If our industry takes a stronger and more consistent approach to promoting the inherent advantages of our offerings, the outcome will be more business and increased profitability for our work.
Stone: The federal government is our enemy. Increase in taxes on S corporations- and many construction companies are S corporations and LLCs-that will have a negative impact. The extraordinary amount of OSHA regulations that are being promulgated that are not very well thought out, the EPA’s naming silica as a carcinogen and asphalt as a potential carcinogen, those are issues. We could see class action lawsuits against roofers that could cause problems. The fact is right now the federal government poses the biggest threat to growth.
MCN: Is green building still the wave
of the future?
Bush: Building green needs to stop being a trend and needs to be thought of as smart construction. Some negative publicity has recently occurred with the various building rating systems, but green consciousness in building will continue.
Markstein: Green building (an amorphous concept if ever there was one) is not only the wave of the future, but firmly entrenched in the present. The real question is how much more will green building be adopted as part of normal design and construction? The answer depends on cost. However, as architects, developers and builders have become more comfortable with/better educated about/more skilled in green building (reducing energy use, improving interior air quality, controlling water run-off, limiting water use, using recycled materials in construction, etc.) the cost of implementing green building has fallen.
The development of software to assist in green building from the planning stage through systems that control building functions has reduced the cost of green building. The software tools will continue to improve and fall in cost. Also, various manufactured green building products are being improved and are becoming more cost effective.
Dobbins: I expect the term green building will be in our vocabulary for a long time, as municipalities, government agencies and code bodies have evolved their requirements. The euphoria over the term green has abated somewhat and is being replaced by more realistic energy-efficient and cost-effective solutions that many of the products used in the metal construction industry provide.
Stone: Metal is a very green material, and we think the interest in green building will grow. Because it is totally recyclable, metal is one of the greenest products used in construction. And now we have these cool roof coatings that bounce off UV rays and heat from the building. This will continue to be very good for the metal portion of the construction marketplace.
MCN: Over the last couple of years, access to capital has been a major issue slowing
construction. How much is access to capital
constraining business now?
Bush: Lending has eased up somewhat, but the flow of cash is still affecting the construction markets. This hopefully will only improve with time.
Markstein: Large developers and national homebuilders do not have a problem. They have ready access to capital from various non-bank sources. Although improving, smaller operations still have difficulty obtaining financing, particularly from banks. Also, while improving as well, it is still difficult for homebuyers to obtain a mortgage unless they have excellent credit and a large down payment.
Dobbins: Access to capital appears to be improving according to many reports available today; however, this capital often comes with more restrictions than in previous years, which continues to constrain construction in many instances.
Robeson: Generally speaking, lending practices have become less stringent than they were in the years directly following the sub-prime mortgage crisis. However, it is unlikely that the commercial lending environment will ever return to the way it was pre-2008. While capital does exist, the process to acquire it has become much more challenging-this is one reason why we have instituted specialized resources and strategies to assist our customers in finding finance solutions to move projects through the pipeline. Business owners just need to exercise patience and planning when seeking project funds, understanding that processes are different today, but still manageable with a little extra effort on their behalf.
Stone: This was a massive issue in our business from the point of view of being able to get capital to buy machinery. The last several years it was virtually impossible. But in the last few months, that has loosened up considerably. Leasing companies are becoming much more flexible and aggressive, and we think that is a real positive thing. I think in general, banks and lending institutions are beginning to loosen up.
MCN: The employment numbers for construction are slowly rising. Is there anything
keeping them artificially low? Can we expect more robust growth in 2013?
Bush: Although construction employment remains low, qualified workers are still hard to find in the industry. As a whole, the metal community must develop training programs to ensure the availability of qualified workers moving forward. Quality products that aren’t installed properly can fail, and we all want to avoid this.
Markstein: More construction will mean more employment. Demand for construction workers is being limited by cutbacks in funding for government infrastructure projects.
Dobbins: Continuing to subsidize unemployment benefits for extended periods of time certainly do not help. Many of our customers struggle to find capable and willing employees to work in the construction industry even in this period of high unemployment.
Stone: Yes, the federal government of the United States … And, I think when construction does pick up we will have a very significant problem in that there will not be enough skilled workers. Many of the skilled construction workers in North America were not from North America, and they are now gone. They have gone home. Even if that wasn’t the problem, the construction industry does not readily attract a lot of people. It’s a complex and dangerous profession, and a lot of people would rather do easier things. The fact of the matter is that automation will have to happen.
MCN: Where will technology influence the construction industry the most over the next
three to five years?
Bush: Technology is central to everything we do, and growing technology will continue to play a major role in construction moving forward. A more realistic and complete approach with the proper information related to the overall BIM concept will be a primary component.
Markstein: Mainly an even greater use of computer software in designing buildings and in systems to control energy and water use.
Dobbins: Advancements in modeling technology continue to push ahead allowing for simultaneous collaboration between different trades, which has potential to reduce conflicts and project delays. This type of technology will continue to develop and become less expensive. Satellite imagery along with rapidly expanding applications utilizing exacting topographic measurement capabilities will also have positive impacts on the construction industry.
Robeson: Aside from BIM technologies that will serve to more seamlessly integrate the application of our products into a variety of design and construction practices, I believe that the greatest concentration of technologies will be focused on solutions to support energy savings. We should see a greater number of solutions emerge for modeling energy outputs of steel and other building materials, as well as an increase in complementary products designed and marketed to optimize energy savings within various forms of construction.
Stone: I think where it’s going to affect it the most is in the factory where building components are being produced. The metal component industry in general is quite backwards compared to many other kinds of manufacturing industries. We still do too many things by hand. We still pass pieces of paper around by hand in factories. We just spent a day at an open house here talking about what the integration of hardware and firmware and software can do to incredibly increase throughput and productivity in a metal component factory. This kind of automation will have a tremendous impact as construction picks up and demand increases.
MCN: The political environment in Washington and many states is toxic. How much is that influencing the business environment?
Bush: The unknown factor, or what will the rules of the game be moving forward, continues to affect private monies being spent.
Markstein: It is a definite drag on business. Not because of the disputes themselves, but because so little is being resolved and so many issues are being kicked down the road. This makes planning for companies extremely difficult. It is adding unnecessary uncertainty to the economic environment. As a result, companies are less willing to invest in new plant and equipment or to hire additional workers.
Robeson: The lack of definitive direction in Washington is undoubtedly constricting the growth of the construction industry, as well as the U.S. economy at large. All too often, we are seeing the negative media and politics perpetuate a “wait and see” attitude that slows and delays what would otherwise be a more robust construction environment. It is my hope that 2013 will be a year in which business leaders take control of the future, in spite of unresolved tax and economic uncertainties, so that we can get back to the business of building our projects in support of our industry’s success, and our country’s forward growth and prosperity.
Stone: Washington is toxic and it is affecting not just the construction industry, but every industry in the United States. The inability of our government to make plans doesn’t allow businessmen to make plans for the future-because we have no idea what that future landscape will be. It’s a significant problem. It’s impacting investment in all kinds of things, not the least of which is facilities construction. And until there is a clear picture of what the environment is going to be, people are going to be reticent to invest. They are, they have been and they will continue to be. The inability of the government to show us a stable environment with stable regulations and stable taxation and so on is going to make it very difficult for businesses to grow.
MCN: What will the metal construction
industry-or the construction industry in general-look like 10 years from now?
Bush: Continued research and development related to green initiatives will be the focus of the metal construction industry. Metal is easily integrated into other green/sustainable technologies, such as solar and insulation. It, therefore, will continue to be the driver in energy-efficient building envelope assemblies.
Markstein: Much improved, more efficient and much happier!
Dobbins: The metal construction industry will evolve to accommodate the needs of end-users, just as it has in the past number of years. These changes will include utilizing better performing products which deliver energy efficiency and are cost effective, such as insulated metal panels, which not only serve the commercial/ industrial sectors, but will expand and become more dominant in high-rise and architectural applications.
Stone: Digital fabrication from BIM files. We’ll be able to take a BIM from an architect and use that information, along with accurate digital measurement, to fabricate any kind of building component that will fit perfectly in a building as it’s built. It’s the most significant change coming, not just for my products, but for every aspect of a building. BIM is the single biggest thing going on in the construction world today. To be able to take that digital information and change it using digital measuring and to enter it into machines that make parts that perfectly fit a roof, without people, that is absolutely where it’s going.