Brrrrr! It was -3 degrees when I drove to work this morning. Appears we are paying the price for our non-winter of 2012. Hang in their, spring is just weeks away!
Certainly you have heard much about what to expect for this new season. Generally, economists are saying this year will have about the same performance as last. Good news in that we’re not declining, but frustrating that we are not growing significantly.
Bill Conerly, economist writing for Lawn and Landscape Magazine, made a very important comment. He said, “The economy will provide enough support for them (landscapers) to make progress, but 2014 will not be strong enough to bail out poorly managed operations.”
And 2015 or 2016 isn’t going to be much different and some are predicting a soft downturn fairly soon. Which means companies finding it hard to make a profit now are in for a long period of the same. Unless they can change their operation survival is questionable.
Fortunately the vast majority of landscapers reported being profitable last year. For them it’s a matter of doing more of what helped their profitability and less of what didn’t. This recession has built by fire a generation of landscapers who are better business people.
Officially our nation is out of recession. Problem is growth is coming slow and hard. Very unlike almost all previous recessions on record where growth was fast and sustainable. Nobody feels good about the economy right now. Consumers are spending more depending on their income growth. Yes, most people are suffering from declining or stagnant incomes. However, there are enough folks doing a little better each year to drive increased landscape services.
Housing starts crossed a mile marker last year by getting over 1 million. At the height of the economy we had about 2 million starts per year, which then plummeted to about 500,000. So housing starts have doubled since the bottom of the recession, but are still only half of what they were. Expectations are for additional growth this year in the 5-10% range. Good for our industry.
Side note; nationally, homeownership remains at an 18 year low. Some claim this is unacceptable. Others say we are at the natural ownership level. Our government promoted that everyone should own a home regardless of financial status. We saw what that got us. Can you say “housing bubble”? Some people are just not ready to be homeowners. Let the ownership level be what it will be.
Commercial construction is not increasing much. There are some government driven projects in the pipeline right now, but they drop off later this year. Private construction is picking up in some cities, not so much in others. Depends on the city’s economic situation.
Good news for commercial property owners is the vacancy rates are coming down and they’ve been able to raise their rents a bit without a corresponding increase in maintenance costs. Which means they are making decent money. Some owners are starting to upgrade their properties to be more competitive which will benefit landscapers.
Construction employment continues to grow. We lost 715,000 construction jobs with the recession. So far we have regained 320,000. Still a long way to go.
You’d think with so many unemployed construction workers that contractors would have no problem finding staff. But, you’d be wrong. Construction contractors of all types are saying they cannot locate good people. Worse, the skilled trades (plumbing, electrical, carpentry, etc) have an ageing workforce with few younger people coming in. Lack of construction workers will be an impediment to economic growth for another generation. If you get good people, work to keep them!
Hot Buttons
Obamacare– Tops the concerns list for most businesses. With all the changes it’s hard to understand what you’re suppose to do and when. Fact is the program is in shambles, as expected. Hang loose and talk with knowledgeable professionals. What you see on TV is not exactly accurate or complete. Because the administration arbitrarily changes the program, nobody knows what exactly you must do.
Elections– Politics will be in full heat this year as we roll into the mid-term elections. Control of the House and Senate could change, so this is a big deal. Get ready for another big spending contested election cycle!
Immigration Reform– So out of the 210 million employable adults in the U.S. we have 72 million who don’t have jobs (37%). Yet we want to import 20 million new citizens? I say lets get the business community moving again then worry about 20 million new voters. But, the politicians see it differently. The Democrats want 20 million new voters, the Republicans want to grab some of those for themselves. Bottom line, we’ll likely see immigration reform that is really just amnesty for illegal immigrants. The root failures of the immigration system may not even be addressed.
Backflow– The lead-free regulations kick in this year. Any pipe or fitting that touches potable water is now to lead-free. This affects irrigation because of backflow preventers. Implementation includes some interpretation by the states and then local governments. For example, California went lead-free 4 years ago. The State is OK with irrigation backflows being leaded bronze. Some cities are not. We’ll have to wait and see what is implemented throughout our region. The lead-free backflows cost on average 12% more than typical old bronze ones.
Planting Beds– Perennials are growing in popularity over annuals because they require less work and don’t have to replanted every year. Irrigated perennials produce flowers earlier and last longer. The best way to irrigate perennials is micro line-source tubing. This also fits into the water conservation trend.
LED Lighting– It’s official, LED is now the majority of new landscape lighting installations. And that’s good news. The benefits to contractors and property owners are amazing and obvious. Use integrated LED fixtures for new installs. The insert lamps are Ok for renovating existing incandescent fixtures to LED.
Water Conservation– Which is really “money conservation”! Saving irrigation water saves a property owner serious money. Enough that the improvements to the irrigation system are usually paid back within 2 years. A water saving system has DU rates above 0.65, pressure regulated sprinklers, micro in the beds, and a Smart controller. I believe this is the beginning of a new business cycle for the landscape irrigation industry. Either slug it out selling traditional irrigation in the price slosh-pits, or make a good margin selling water saving systems and renovations.
Have a great 2014!
