August 3, 2015
Kellen has a long history of working with client associations in the building & construction trade. The team includes former manufacturers, writers, editors, engineers and seasoned construction association managers who all fully understand the building industry, its marketplace, distribution channels and regulatory challenges. One of its very first clients, which is still a client today, was the Asphalt Roofing Manufacturers Association (ARMA). ARMA is a trade association representing the majority of asphalt roofing manufacturing companies, plus their raw material suppliers. The association includes almost 95 percent of the nation’s manufacturers of bituminous-based roofing products.
Reed Hitchcock, a Kellen Vice President, serves as the Executive Vice President of ARMA. “We’re seeing that money is getting easier to get and equity is growing, so home and building owners seem to be moving more and more towards a mentality of preventative maintenance as opposed to crisis management. Improvement jobs that were put off due to lack of funds or concern about the economy are now being completed. Speaking for the roofing market, we are seeing investment where there was little to none during the recession, which is a positive not only for the manufacturers but for labor as well, and all of that works to more jobs in the industry.”
The State of California has just approved their latest energy code under Title 24, Part 6 which ratchets up the energy efficiency requirements for both residential and commercial buildings effective January 1, 2017. Hitchcock reminds us that from experience what starts in California subsequently permeates building codes throughout the rest of the country, often resulting in code requirements that do not make sense for other climates and jurisdictions around the country. He says his industry is focused on collecting real-world data that shows the durability and relative value of energy-saving measures that relate to their products over the life cycle of the products.
Hitchcock also notes about the housing market, “While retrofits and reroofing have increased substantially, new construction is nowhere near pre-recession levels. Part of the issue is that the housing infrastructure was so overbuilt during the last few pre-recession years, that in many areas inventory remains high. Additionally, we still see that barriers to entering the housing market for first-time buyers are still high.” Hitchcock adds that although money is freeing up for those already in the market and who have equity in their properties, banks are still not loaning money to new buyers like they did before, making it harder for folks to get into houses without substantial down payments.
According to Louis J. Coletti, President and CEO of the NYC-based Building Trades Employers’ Association (BTEA) and speaker at Kellen’s Associations 2020 and Beyond Conference, “the market in New York City will grow to $32-34 billion over the next 2 years, exceeding the historical market high during 2006-2007. Growth is being led by continued strength in the residential market, along with the commencement of major commercial projects that were approved several years ago, i.e. Hudson Yards and Brookfield development on the West Side.” As explained by Coletti, BTEA members are losing sleep over the lack of both project management personnel and trade labor workforce. Even with the expansion of certain markets in the non-union sector, there is tremendous competition for personnel and companies who are stealing from each other and driving up overhead costs.
From a regulatory standpoint, Coletti sees the enforcement of unrealistic 30% minority and women-owned business requirements, and the penalties for not attaining those goals, as the single biggest regulatory challenge in the industry. The cost of general liability insurance and the failure to reform the 240 Scaffold Law is also contributing to the rising costs with insurance companies withdrawing from the NY market.
Ralph Vasami, Group Vice President of Kellen serves as the Executive Director of the Builders Hardware Manufacturers Association (BHMA), a client of Kellen’s since the 1980’s. When asked about construction and hardware in general, Vasami noted “the overall construction market is expanding, but it is still far below pre-recession levels. The recession forced a number of product manufacturers to scale back, consolidate or close down. As far as the hardware market is concerned, growth has been steady. The healthcare and school construction markets have been the strongest, but residential construction and renovations have been growing steadily since 2011.”
Adler Windows has been a supplier and expert installer of custom replacement windows and doors for over 25 years. Also serving as Treasurer of Kellen-client, the Executives’ Association of New York, Adler shares a positive outlook when it comes to the industry. “Construction in NYC is booming and so are all the specialty trades. The window and door market is extremely busy, and current demand is outpacing production capacity. Material lead times are longer, and backlogs are larger as compared to last year. Projects are being booked well into 2016. The next 12 to 24 months will remain extremely strong.” When asked what he’s losing sleep over Adler added, “A booming market brings its own set of challenges. Material lead times are continually being extended due to shortages in production capacity. This makes planning a construction schedule extremely difficult. We are also experiencing difficulty expanding our workforce as there is a shortage of qualified technicians. It’s also easy to lose sight of major business threats, so continuing to focus on safety, quality control, and receivables are of paramount importance.”
In general, the outlook for both 2015 and 2016 is extremely positive with work being slated for 2017 already. High demand is causing longer lead times, and poor access to qualified labor. Owners, developers, architects, and general contractors must plan accordingly.
What are the implications for associations in the building and construction market?
All of this activity creates opportunities for associations. Membership development programs need to be enhanced to attract new entrants to the industry; educational programs can be added to meet the member companies’ needs for better-trained workers and codes, and standards and regulatory efforts need to be expanded as owners and contractors demand higher performance from the products and systems selected.
Keeping up with the trends and activities of the building and construction market is no easy feat. Kellen continues to monitor and participate in industry coalitions, on committees and working groups, delivering testimony and speeches and exhibiting at trade shows.