remodeling industry structure & labor trends · • remodeling contractors are rebounding...

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Remodeling Industry Structure & Labor Trends

Abbe H. Will

Remodeling Futures ConferenceMarch 17, 2015


Research Overview

• Remodeling contractors are rebounding strongly from the downturn, especially larger-scale firms

• The industry remains fragmented, but specialty contractors have been particularly successful in achieving scale economies

• Employment is still well below market peak, the construction workforce is aging, and shortages continue to be concerning

2


The Number of General Remodelers Is Growing Steadily Overall

79.9

84.4

86.9 86.4

82.5

80.3 79.6 79.980.8

83.2

70.0

75.0

80.0

85.0

90.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:2

Number of Establishments with Payrolls (Thousands)

Note: Estimate for 2014:2 is preliminary.Source: US Department of Labor, Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

3


Payroll Employment Is Climbing Back Even More Quickly

289

310 306

284

248

235241

252

266

282

200

220

240

260

280

300

320

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Number of Payroll Employees at General Residential Remodeling Firms (Thousands)

Source: US Department of Labor, Bureau of Labor Statistics, Current Employment Statistics.

4


Typical Firm Size is Once Again Above Decade Average

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Size of Firm Decade Average = 3.3

Average Number of Payroll Employees at General Residential Remodeling Firms

Sources: US Department of Labor, Bureau of Labor Statistics, Quarterly Census of Employment and Wages and Current Employment Statistics.

5


Industry Became More Fragmented During Downturn

80.5

19.5

81.7

18.3

83.6

16.4

84.2

15.8

84.4

15.6

84.3

15.7

0102030405060708090

<5 5+Number of Employees

2007 2008 2009 2010 2011 2012

6

Share of General Residential Remodeling Establishments by Employment Size (Percent)

Source: US Census Bureau, County Business Patterns.


Homebuilders Have Contributed to Growing Fragmentation in the Remodeling Market

44.0

45.3

50.5 50.750.1

40

42

44

46

48

50

52

2008 2009 2010 2011 2012

Share of NAHB Single Family Homebuilders Reporting Residential Remodeling as a Secondary Activity (Percent)

Source: National Association of Home Builders Annual Member Censuses.

7


Revenue Growth Among Larger Remodeling Firms Has Rebounded Strongly

-15

-10

-5

0

5

10

15

2005 2006 2007 2008 2009 2010 2011 2012 2013

Median Annual Change in Revenue for Qualified Remodeler Top 500 Firms (Percent)

Notes: Companies qualifying for the Qualified Remodeler Top 500 list typically generate annual revenues of $1 million or more. Analysis includes remodelers reporting revenue in any two consecutive years and ranking in the top 400 in at least one of those years.Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 Remodelers.

8


Average Job Size is Also Edging Back Up Toward Pre-Recession Levels

15.716.3

16.915.7

12.0 11.9 11.512.6

13.2

02468

1012141618

2005 2006 2007 2008 2009 2010 2011 2012 2013

9

Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 Remodelers.

Median Average Job Size for Qualified Remodeler Top 500 Firms (Thousands of dollars)


The Very Largest Firms Typically Outperform the Rest of the Top 500 By a Considerable Margin

3.9

0.72.1

-4.5-6.7

5.13.7

7.4

11.9

8.6

5.33.0

-4.8

-11.9

5.03.3

5.8

10.5

-15

-10

-5

0

5

10

15

2005 2006 2007 2008 2009 2010 2011 2012 2013

Top 100 Rest of Top 500

Median Annual Change in Revenue for Qualified Remodeler Top 500 Firms (Percent)

Notes: Companies qualifying for the Qualified Remodeler Top 500 list typically generate annual revenues of $1 million or more. Analysis includes firms reporting revenue in any two consecutive years. Top 100 (Rest of Top 500) firms were ranked 1-100 (101-500) in the first of those years.Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 lists.

10


Over Half of Top 100 Firms are Specialty Replacement Contractors

Top 100 Rank 101-500Average 2013 revenue (Millions) $45.4 $4.1Median 2013 revenue (Millions) $17.7 $3.5Median annual revenue growth 2012-13 (Percent) 11.9 10.5Share of specialty firms (Percent) 53.7 27.4Median number of jobs 1,664 245Median average job size (Thousands) $10.5 $13.4

11

Comparison of Top 100 vs. Rest of Top 500 for Qualified Remodeler Top 500 Firms in 2012

Notes: Companies qualifying for the Qualified Remodeler Top 500 list typically generate annual revenues of $1 million or more. Analysis includes firms reporting revenue in 2012 and 2013. Top 100 (Rest of Top 500) firms were ranked 1-100 (101-500) in 2012.Source: JCHS tabulations of Qualified Remodeler magazine’s Top 500 lists.


ANTICIPATED UPDATES FROM 2012 ECONOMIC CENSUS RELEASE

12


Benchmark Total Number of Contractors Serving the Remodeling Industry

Number of Remodelers Percent Change 2002 2007 2012 2002-07 2007-12

General ContractorsPayroll 82,900 77,900 -6.0 -8-11%?Self-Employed 127,200 156,700 23.2 -50%?

Subtotal 210,100 234,600 150,000? 11.7 -35%?Special Trade Contractors

Payroll 117, 200 139,500 19.0 -15-18%?Self-Employed 202,900 278,100 37.1 -50%?

Subtotal 320,100 417,600 250,000? 30.5 -40?Total 530,200 652,200 400,000? 23.0 -35-40%?

13

Note: Includes self-employed remodeling contractors with annual revenues of at least $25,000. Source: JCHS estimates using unpublished tabulations from US Census Bureau, 2002 and 2007 Economic Census of Construction and NonemployerStatistics.


Increased Concentration of the Remodeling Industry

1.42.1

3.3

5.2

2.53.4

5.2

7.9

012345678

Top 4 Top 8 Top 20 Top 50Remodeling Contractors

2002 2007 2012

Share of industry receipts for largest remodeling contractors (Percent)

Source: JCHS estimates using unpublished tabulations from the 2002 and 2007 Economic Census of Construction, US Census Bureau.

14


Annual Failure Rates During Downturn & Recovery

17.419.8

17.2

11.1 11.8 10.7 10.4

0

5

10

15

20

25

2007-08 2008-09 2009-10 2010-11 2011-12

General Remodelers All Businesses

Share of Payroll Establishments No Longer in Operation (Percent)

Source: U.S. Census Bureau, Business Information Tracking Series.

15


LABOR FORCE TRENDS

16


Nearly a Third of Occupations in the Construction Industry are Not in Construction Trades

Construction Trades67.8%

Installation/ Maint. & Repair5.2%

Management11.5%

Office/ Admin Support5.4%

Transportation2.8%

Business/ Finance Operations

1.9%

Architecture/ Engineering1.3%

Sales1.0%

All Other3.0%

17

Notes: The number of employed and unemployed workers in the construction industry was 10.0 million in 2013. Construction also includes extraction occupations.Source: JCHS tabulations of US Census Bureau, American Community Surveys.

Share of Construction Industry Labor Force


The Construction Trades Workforce Differs from the Overall Labor Force in Several Key Areas

47.3

63.8

16.6

2.5

30.9 27.9

0

10

20

30

40

50

60

70

Women More than High SchoolEducation

Foreign-born

All Industries Construction Trades

Share of Labor Force in 2013 (Percent)

Notes: Data include all workers age 16 and over housed in non-group quarters who are employed or unemployed but available for and seeking work. The construction labor force includes workers with construction and extraction occupations in the construction industry.Source: JCHS tabulations of US Census Bureau, American Community Survey.

18


The Construction Labor Force Lost 1.5 Million Workers

8,263

6,764

01,0002,0003,0004,0005,0006,0007,0008,0009,000

2007 2013

Employed Unemployed

Number of Persons in the Construction Trades Labor Force (Thousands)

Notes: Data include all workers age 16 and over housed in non-group quarters. The construction labor force includes workers with construction and extraction occupations in the construction industry.Source: JCHS tabulations of US Census Bureau, American Community Survey.

19


After the Downturn, the Construction Trades Included a Much Smaller Share of Younger Workers

44.2

22.3

2.8

42.9

27.9

2.6

34.8

27.9

2.5

05

101520253035404550

Under Age 35 Foreign-Born Women

200220072013

Share of Construction Trades Labor Force (Percent)

Note: The number of employed and unemployed workers in the construction industry fell from 8.3 million in 2007 to 6.8 million in 2013. The construction labor force includes workers with construction and extraction occupations in the construction industry.Source: JCHS tabulations of US Census Bureau, American Community Surveys.

20


Immigrant Inflows Adjust Rapidly to the Changing Demands of the Construction Industry

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(e)

2014(e)

2015(e)

21

Annual Inflow of Immigrants to the Construction Labor Force (Thousands)

Notes: Estimated values (e) were calculated using NAHB’s regression equation based on single family housing starts. Housing starts for 2015 are a consensus average of forecasts from FannieMae, Moody’s Analytics, Mortgage Bankers Association, National Association of Home Builders, and National Association of Realtors ©.Source: NAHB Economics, Construction Immigrant Worker Flow, January 2015.


Construction Labor Shortage Headlines Abound

• Where Have All the Construction Workers Gone? – Atlantic Monthly, February 13, 2015

• Construction Companies Face Ongoing Worker Shortage– Green Bay Press Gazette, January 23, 2015

• Skilled Labor Shortage Could Cause ‘Serious Problem' for Construction Industry within 18 months

– Baltimore Business Journal, June 23, 2014

• Skilled Worker Shortage Looms for U.S. Construction Firms– Reuters, January 21, 2014

• America's Skilled Trades Dilemma: Shortages Loom As Most-In-Demand Group Of Workers Ages

– Forbes, March 7, 2013

• Economists Say Millennials Should Consider Careers In Trades– NPR, All Things Considered, February 2, 2015

22


Skilled Trades Continue to Top Most Difficult Positions to Fill in U.S.

1. Skilled Trades2. Restaurant & Hotel Staff3. Sales Representatives4. Teachers5. Drivers6. Accounting & Finance Staff7. Laborers8. IT Staff9. Engineers10. Nurses

23

Employers Reporting Most Difficult Positions to Fill in 2014

Source: ManpowerGroup, 2014 Talent Shortage Survey.


Homebuilders Overwhelmingly Report Labor Shortages as Challenge in Today’s Market

0

10

20

30

40

50

60

LaborShortages

Cost ofMaterials

ConstructionFinancing

Lack ofDeveloped

Lots

ConsumerFinancing

GovernmentRegulation

24

Share of Homebuilders Reporting Challenges

Source: HanleyWood Metrostudy, 2015 Builder Labor Study.


Construction Labor Shortage Worse Now Than During Boom

45 44

29

21

34

46

0

5

10

15

20

25

30

35

40

45

50

2004 2005 2006 2012 2013 2014

25

Share of Homebuilders Reporting Some or Serious Shortage in Labor Availability

Source: NAHB.


Framing Workers Are Most Challenging to Find

0

10

20

30

40

50

60

70

80

26

Share of Homebuilders Reporting Positions that are Most Difficult to Fill

Source: HanleyWood Metrostudy, 2015 Builder Labor Study.


Hourly Wages Are Growing Again

0

1

2

3

4

5

6

2007

03

2007

09

2008

03

2008

09

2009

03

2009

09

2010

03

2010

09

2011

03

2011

09

2012

03

2012

09

2013

03

2013

09

2014

03

2014

09

Percent Change (Same Month Year Ago) in Average Hourly Earnings of Construction Employees

Source: Bureau of Labor Statistics, Current Employment Statistics.

27


Apprenticeship Programs Have Fallen Steadily

0

5

10

15

20

25

30

35

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Fiscal Year

28

Number of Nationally Registered Active Apprenticeship Programs (Thousands)

Source: US Department of Labor, Employment and Training Administration.


Construction Occupations with Residential Application Consistently Rank as Largest Apprenticeship Programs

0

5

10

15

20

25

30

35

40

Electrician Carpenter Plumber Roofer Painter

FY 2011FY 2012FY 2013FY 2014

29

Number of Active Apprentices in Top Federally Administered Programs (Thousands)

Note: Occupations were ranked in the top 10 largest programs.Source: US Department of Labor, Employment and Training Administration.


Research Summary

• Total number of residential remodelers likely contracted significantly during the downturn, but firms are rebounding now, especially larger-scale.

• Top firms are growing about three times faster than total market spending for pro projects. Specialty contractors comprise over half of largest remodeling firms.

• The construction industry lost 1.5 million workers since the peak. Industry must look to offering better pay/benefits and training/apprenticeships to combat shortages.

30

remodeling industry structure & labor trends · • remodeling contractors are rebounding...

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