The end of the season for the landscape industry in the Mid-West brings about contemplation about the season and planning for 2015. 2014 was challenging in our part of the country and many are happy its over.

Construction Forecasts

According to McGraw Hill Financial, single family housing starts took a pause this year. Not surprising to all of us! The decline of housing starts affected many in the landscape trades.

Several nonresidential construction sectors also took hits through 2014. Yet, the construction industry is forecasted to grow overall. McGraw Hill economist, Robert Murray, says even with the flat economic growth and declining construction starts in most of 2014, the construction industry is still on a long term growth curve.

The Analysis

Economist Dave Swicke presented his analysis at a recent meeting of the Associated Equipment Distributors conference. Here are some of his key points; The construction hit the recession bottom in 2011. The construction industry suffered a 38% decline led by a 73% decline in housing starts. 8.3 million Construction jobs were lost. But, the industry has grown since then and will continue to grow. Construction spending is expected to surpass the 2006 high by 2018. Private sector jobs are driving the small growth we’re now seeing. Public sector construction jobs had no growth this year, however are going to pick up in 2015. Economic growth is stagnating even though household debt is decreasing and consumer confidence is increasing. Both single family and multi-family housing starts are expected to drive to pre-recession levels in the next couple years. Non-residential construction is expected to grow 9% per year in 2015-16.

Growth in Construction

The players in the construction trades are optimistic for a happy 3 year growth cycle starting in 2015. Why, after witnessing near stagnate growth in 2014? Put simply, because of demand. The glut of housing inventories is sold through. People are looking for homes with little selection in several price ranges. Pent up demand, slightly easier loan qualifications, and low interest rates are moving many into the home buying market.

A similar situation exists with commercial properties. Any jobs connected with energy are growing at 43%. Industrial facilities are growing at 9%. Office buildings are growing at 25%. Retail facilities are growing at 17%.

Public driven construction is flat. However, the financial health of many cities and states is unleashing many projects they put on hold since 2009. Where federal funding is dropping off, local funding is starting to flow.

Bottom line, Swicke is calling for a 3 year growth period for all the construction trades.

Landscape Labor

Because so many people have left the construction industry, Swicke warns that contractors will struggle to come up with talented workers. Lack of labor will stop the growth of many contracting companies. The construction industry is now adding jobs faster than the rest of the economy.

According to the recent report in Lawn and Landscape magazine, finding reliable laborers is still difficult. In addition, finding mid-level leaders is proving down right impossible. Getting young people to look at our industry as an attractive place to earn a living has been hard.

Many reasons were given in the L&L report for this problem. explainations include: younger folks are turned off by physical labor, they all want to start at mid-level and not work their way up, they don’t see a career path in landscape, the hours are too demanding, wages are too low, etc.

According to L&L the national average hourly wage for mower operators is $9.60, lawn techs is $11.20, installation labor is $10.60, and irrigation techs are $11.00.

Landscape Profitability

L&L reports that 92% of the landscapers surveyed said they will be profitable in 2014. And the average profits rose 11%. 95% say revenue and profit will grow in 2015.

The fastest growing segments were maintenance, design-build, and lawn care. The design-build growth is related to the increase in new property construction and a loosening of the purse for major landscape renovations. Contractors across the nation said homeowners are moving ahead with larger projects and they saw more “luxury” type jobs.

Surveyed contractors said their biggest issues, in order are; finding staff, customers cancelling installations, access to growth capital, health care, followed by various economic issues.

Price increases were a major topic. As always, low price competitors keep the street prices depressed, but many contractors say they have to raise their prices to cover the increased cost of doing business. Taxes, regulations, wages, and health care are the key areas of concern followed by the cost of fuel.

Weather

Our trades were hit hard by a long cold winter, late spring, rainy summer, and early end to the fall. The annual report in Irrigation and Green Industry magazine starts off with “Many people in our industry are happy to see 2014 come to a close.”

Weather issues varied by region, in our area it was rain and cold weather. Combined caused fewer work days and depressed demand for some products and services. Some contractors said it never felt like they got ball rolling for their season. One 35 year veteran irrigation contractor told me it was his worst residential year ever.

One off-shoot is the growing use of water conserving irrigation product. Consumers can save water if it’s too dry or too wet so Smart Controllers are picking up steam everywhere.
Landscape Growth

Even with the challenges of staffing, weather, economic difficulties the landscape industry grew in 2014. The IGIN report says they believe the trades will grow each year over the next decade. But landscapers must be altering their operations to take advantage of it.

The recession forged by fire many innovations and improvements among landscape companies. Most who made it through are much better companies now. Advancement in marketing and sales ability is the big one most landscapers are now focused on.

IGIN forecasts the landscape industry will grow 8 to 11% in 2015.

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Comments

  1. It is interesting to note that for the next three years we will be in a growth cycle for all construction industries including landscaping. I have worked in landscaping on and off since high school and thoroughly enjoy the work. This will be good news for landscaping contractors. I wonder if the rise in demand will bring about a rise in supply of landscaping contractors.

    1. Landscapers I talk with say they have plenty of work and opportunities. What seems to worry them most is finding good people to get the work done. The industry is due for a new generation of landscapers. Many of the current companies are owned by 50-60 year olds who approach the time to move on. Whether this means new companies to replace them or new owners to carry on we’ll see. As any industry grows it attracts new players. I think this economy still needs more growth before we very many new entrants doing significant business.

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