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Where’s the Glass Going

Glass Shops Respond to Residential Construction Demand
by Megan Headley

During a Construction Outlook Conference last year, Robert Murray, vice president of economic affairs for McGraw Hill Construction, forecasted that total construction would rise 11 percent in 2010, partly buoyed by a 32-percent increase in single-family housing construction starts (see December 2009 USGlass, page 28). Meanwhile, this month the American Institute of Architects released its semi-annual Consensus Construction Forecast, which reported that nonresidential construction spending is expected to decrease by 13.4 percent in 2010.

“When economies emerge from this prolonged recession, recovery for nonresidential construction activity typically takes longer,” says AIA chief economist Kermit Baker in the report. “Hardest hit will be the commercial and industrial sectors, with projected declines in the 20-percent range for 2010 in most building categories.”

So where once the commercial glazing industry worried over the small and residential contractors taking on jobs beyond their capabilities (see February 2009 USGlass, page 30) in 2010 this movement may be reversed.

Optimism Rebounds
With the start of 2010, Aaron Day, president of American Glass Inc. in Springfield, Mo., has seen an optimism return to construction professionals in his region. “I know a lot of our local builders are fairly optimistic about the new year,” he says. “I think demand, at least in our area, is increasing and the supply is decreasing. It seems as though the builders I’ve talked to all have a few things to look forward to in the new year.”

That increase, and optimism, refers specifically to the area’s residential projects.

“I think we’ve definitely seen the bottom of the residential [downturn] and it’s very slowly increasing,” Day says. Local commercial construction, he says, is “definitely” on the decline.

Day adds, “We’ve been a little bit immune to some of the national ups and downs over the years … but this has been a little different.”

The Glass Doctor franchises provide commercial as well as residential glass replacement across the country, offering them an overview of across-the-board demand. Its president, Mark Dawson, says the company, overall, “projects market growth to be between 4 to 5 percent a year over the next three years. Demand should continue to outpace the gross domestic product. Even though remodeling activity has been declining, we should see the first signs of recovery beginning the first half of 2010.”

Paul J. Rowan, vice-president and Midwest regional manager for Trainor Glass Co. in Alsip, Ill., says that demand is not there yet, for either residential or commercial glass, but it’s coming. “They are both down right now, but we have seen some movement.”

Rowan sees variances by region, in two ways: “both volume and price. We have a couple areas where we are getting a lot of traffic and others where it is a little slower,” he reports. “In addition, what you sell for in one region may be high or low in another area. You need to make sure your pricing structure works for the area you are in,” Rowan advises.

Solar Innovations of Pine Grove, Pa., a manufacturer of products ranging from greenhouses to curtainwall, is seeing regional variances in demand as well.

“Pockets of customers in the retirement areas of the country and those areas that provide more economical living and energy costs also appear to have higher demand,” says Greg Header, president of Solar Innovations. “There are also pockets of customers who aspire to live ‘greener’ lifestyles, in terms of natural daylighting and passive solar, who provide greater demand to our industry”

As construction—and, by extension” glass demand—begins to slowly seesaw away from commercial glazing to residential glass products, those shops that offer full-service glass needs are uniquely situated to observe changing demand. For example, Day has watched commercial work drop off as some residential demand returned.

“Probably as early as last summer the amount of work to bid really dropped off,” he says. “I have seen a number of commercial remodels, replacement windows, that sort of thing.”

Header says that contractors are moving forward with projects that were previously planned but put on hold for financial reasons. Those commercial projects are changing, though, as demand for “smart” glass products grows.

“Commercial glass has moved away from the ‘chocolate and vanilla’ flavors of yesteryear and has moved into more specialty types of glass. Triple-pane, high-performance, low-E and other blended types of glass are now of greater demand,” he says. “Those jobs which require only middle-of-the-road glass seem to be working with narrow margins, making them less desirable to some glaziers and manufacturers.”

Products in Demand
Although Glass Doctor has seen remodeling drop, others say that renovation projects are still more common than new construction.

“We are seeing some changes,” Rowan says. “There is a lot more going into renovation instead of new construction. It is taking a little time to get rolling because we have to educate our customers on what you can do with glass these days.”

In areas where residential glass sales are picking up, shower doors sales are among those showing some signs of growth.

“There seems to be a lot of shower doors going out, a lot of bathroom remodeling going on,” Rowan says. He offers a word of advice to promote those sales: “They key is to get the customer in our store so we can really show them what the uses are for glass now; they are amazed but very interested.”

Header has seen increased interest in skylights for daylighting, as well as high-performance door and window systems. Greenhouse product sales, too, are reportedly on the rise. He speculates that this is due to green trends, such as interest in growing locally and controlling the food source. “We attribute part of the growth in the glass structures segment to that increasing awareness of health benefits related to exposure to sunlight,” says Header.

For new residential construction, custom homes are occurring regularly.

“Usually the higher-end custom homes—they’ve held up real well for us throughout the whole year,” Day says. “At least in our area, for years there were a lot of high-end ‘spec’ homes built … that’s gone and not back and probably won’t be for some time to come.” He adds, “But the real inexpensive homes, there’s still a fair amount of that going on.”

Header says many of the changes the company has seen have been in the type of customer approaching them.

“It appears that customers have become accustomed to the times we are living in and are spending on projects—oftentimes those which have been previously planned—but have become substantially more value conscious. Customers are not just signing a contract blindly; they want to be sure they need and want all the options offered to them. Customers are looking at a blend of design, purpose, form and function so they can be sure they get what they need in terms of product value. We have seen a more discriminating buyer—and fewer overall,” Header says.

Rowan adds, “[Homeowners] want to know all of their options before they purchase, so the sale may take a little work to get within a budget that is similar to the commercial side.”

Going Forward
Most experts agree that 2010 will be another year of keeping a close eye on finances.

As Day says, “I think in any business it’s a challenging time, and you really have to keep a close eye on the costs involved. The margins have really dwindled, that’s for sure. I think any business has to run much more efficiently, making the most of their time and getting the most production out of each employee.”

Header adds that companies now need to be more “customer-focused” than ever, and more willing to solve customer’s problems as relationships are paramount in generating work in this economic climate.

“Companies must partner with customers to create what they need for projects since the aesthetic and architectural desires have become more specific,” he says. And that works in both directions; he advises working more closely with suppliers and other partners to drive down costs.

If I’d Known Then What I Know Now
It’s been said time and again that no one fully expected the depths of the construction downturn faced in 2009, making it difficult to put faith in forecasts for the year ahead. Instead, USGlass asked several industry professionals to take a look back at the lessons they learned in 2009 and share what they would have done, or advised, differently if they’d had a more accurate prediction to follow.

Devin Bowman, national sales manager, Technical Glass Products
I’m sure there are a number of things we’d have all done differently if we’d had the foresight to know the depth of this economic downturn. One thing TGP has focused on is using the current lull in construction as an opportunity for improvement. Any recession is the perfect chance to slow down and really think about how to improve one’s organization and business. We’re using any extra time to better manage our inventory levels, focus on research and development initiatives and update and improve our software programs.

It’s also allowed us to get back to the basics and spend more time with architects and those in the design community. One-on-one relationships have never been more valuable. 2009 was a transitional year, and one that we hope will push us forward when the construction market rebounds.

Kelly Townsend, national sales director, Columbia Commercial Building Products
We started seeing possible issues in mid-2008 when the price of aluminum started dropping and started adjusting purchasing habits and inventory levels accordingly well before the start of 2009 and have continued to adjust as needed as 2009 has rolled on.

Obviously no one in the country knew exactly how bad the economy would slow but the only things we might have changed is how quickly we made adjustments as 2009 has continued, in terms of days or weeks not months …

We continue to work hard and have found ways to market our existing products to customers that have also been forced to downsize such as offering fabricated storefront, custom break metal and factory truck deliveries. We have worked very hard on the architectural side of the business to further develop future opportunities as well as working with our vendors to explore ways to continue to control or lower cost and maintain our lead-times so we could be and remain competitive in the current market.

Pete Chojnacki, president, Fabtech LLC
We would push harder to build backlog during the summer when we were very busy. I think we got caught up with our busy schedule and getting product out the door for customers. We ended up 2009 up about 25 percent over 2008. So, we were cranking over much of the year. However, after Thanksgiving, the visible backlog was declining. If we had concentrated more on getting our message to new prospects, we could have helped bridge the slow times better. Going forward, we established better metrics to forecast quotes and jobs earlier and react accordingly.

I would have advised others to be sure to scrutinize every expense to be sure it is truly contributing to the growth and profit of the business. I have seen numerous examples of companies continuing with optional spending well after the market was obviously slowing. We all need to make the tough decisions earlier to eliminate all unnecessary expenses.

Ron Crowl, president, FeneTech Inc.
Going into 2009 FeneTech made the decision not to participate in the industry downturn. Easy to say—much more difficult to do. We have been very successful in this endeavor as our business has grown considerably during these difficult times. Our strategy was to aggressively pursue opportunities in vertical market segments and geographical areas that we previously did limited work in. We also wanted to introduce new products to both our existing clients as well as new prospects …

My advice to other companies is to consider the proactive things that you can do to grow the revenue line—specifically marketing activities that raise awareness of your products and then providing the support and tools needed to make doing business with your company easier for your clients.

Looking back, I think I would have directed even more resources (financial and personnel) in the pursuit of new business in the vertical market segments and geographical areas we previously did limited work in before.

Megan Headley is the editor of USGlass.




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