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It’s the time of year for the parade of the prognosticators. With housing making the long-expected turn downward after such a prolonged boom – the Portland Cement Association says it expects housing starts to dip to 1.76 million next year, down from this year’s anticipated 1.9 million – the question quickly becomes, “how will 2007 fare?”
The answer I’m hearing from all quarters is “decent.” While it won’t come near what we’ve experienced this year, neither is the R-word anywhere on the horizon. Non-residential construction will be 2007’s shining star, particularly anything to do with energy, such as refinery rebuilds, power plant construction and transmission lines.
But, as Ken Simonson, economist with the Associated General Contractors of America, told me, “Next year, the world will look much different to a subdivision site developer than it will to an industrial contractor.”
That’s borne out by a sampling of about 20 contractors I surveyed last month. Here’s what they’re saying on the front lines:
“There’s tremendous opportunity for many contractors in the coming year, especially those in the public work sector. Our experience has been when the residential or private market begins to dip, the public works sector begins to climb. We are fortunate enough to work in both sectors.” – George Forni, Aquatic Environments, Alamo, California
“The market seems to be stressing under the housing slow down and high energy prices. I don’t have a doomed attitude, but there are concerns of a larger slowdown.” – Gerald Roberts, Roberts Excavation, Berthold, Colorado
“Our local governments have actually cancelled their annual resurfacing contracts to see what asphalt prices will do.” – Tim Phillips, P&S Paving, Daytona Beach, Florida
“While the housing market has slowed a bit, the commercial market is going nuts. We have a group of loyal clients so our workload just gets busier.” – Ryan Beckley, Beckley Excavation and Utility, Winchester, Oregon
“The water market will remain strong as long as Houston keeps growing. The cost of materials, though is going through the roof and we’re using all kinds of new techniques to find good labor.” – Jim Schier, Schier Construction, Houston, Texas
“Fuel prices are a double effect on our industry since asphalt is petroleum based. An asphalt plant burner can drink up to 2 gallons per ton produced. We are looking at other industries to help us grow since our main specialty business (asphalt plant erection and construction) could be looking at tough times.” – Rich and Cindy Stichter, R & C Heavy Mechanical, Reading, Pennsylvania
I think Rich and Cindy are on to something there. While there are few indications of something deep and dark lurking around the next bend, these pauses are a good time to do a 360-degree review of your company, to examine whether your present list of skills and equipment could be better put to use in another construction market. Doors open and close all the time in construction, and this just might be the time to go through one that’s opening a bit wider than the others.