The Economy
This is the first of a series of articles on the present state of the economic climate existing in the fire sprinkler industry that will enable our readers to “blog” a response.
Reports from the field are not encouraging and paint a very bleak picture going forward. The results of the contractor survey suggest that the present recession may be prolonged. The large inventory of residential and non-residential buildings may contribute significantly to the duration of this downturn. While most economists suggest that the general recession has bottomed out the recovery may be lengthy. Backlogs are being “chewed up” and new bookings in some areas are off dramatically from a year ago. Many jobs have been put on hold or canceled due to a lack of financing. Hopefully the six and half billion dollars in the latest federal stimulus package for school construction may help in the near term; however, the long range prospects for new non-residential construction are not good. Architects and specifying engineers have very little on the “boards” according to some of the “field” feedback we are receiving. Please take a few minutes to let us know if you are seeing anything that differs from this information.
John A. Viniello, President NFSA
good stuff
We are getting some scattered reports that some jobs put on hold are receiving financing…can anyone confirm…also any infux of schools being built?
My sense is that developers (both residential and commercial) will have difficulty for some time in getting financing for anything other than genuine demand-driven projects. This is in contrast to much of the development we serviced over the past few years which appears to have been largely speculative, as can be evidenced by the relatively high commercial and residential vacancy rates across many parts of the country today.
Absent a speculative development market, our best prospects probably will be commercial property owners who can fund legitimate projects. In the ‘old days’ we sold sprinklers on economic value. Maybe a hardening insurance market will increase the value of fire protection in unsprinklered or less-than-adequately sprinklered buildings to a point where economic value will once again become a selling point. Note that this will require different selling tactics than those many of us have deployed over the past several years.
The single family market will no-doubt offer opportunity as well. However, there is a significant difference between a lot of $3 thousand jobs and one $100 thousand project! The net result is that many of us may be hard-pressed to be both competitive and profitable in this market.
From another perspective, great successes we have achieved in getting fire sprinklers into building codes can still be further advanced, as can efforts to demonstrate the ‘green’ benefits of sprinklers. Perhaps these could become two strategic initiatives in an effort to place more fire protection in existing commerical and multifamily buildings.
We predicted 6 months ago that the insurance market would harden…we need to develop a “captive” for our industry and the sooner the better…Best Practice’s should also be part of every contractor’s inventory…tough to convince when contractors think “they have all the anwsers”