Sprinkler Industry 2016 Review and 2017 Forecast
What a year 2016 turned out to be! With the presidential election result, some are wondering what does the New Year hold for the economy, and in particular, the fire sprinkler industry? However, market forecasters are holding onto their initial forecasts, saying foundations put in place in 2016 will continue to grow in 2017, and predicting that 2018 is the year to really expect big growth.
Dodge Data & Analytics predicts that total U.S. construction starts for 2017 will advance 5 percent to $713 billion, following gains of 11 percent in 2015 and an estimated 1 percent in 2016. FMI Corp., Raleigh, North Carolina, focuses on construction put-in-place and calls for 3.9 percent growth in 2017.
Dodge is predicting a strong non-residential building market, forecasting a 7.9 percent increase in total growth for construction starts for 2017, after a predicted 17.6 percent increase in 2016. Finally, the Associated Builders and Contractors (ABC), Washington, D.C., forecasts non-residential spending should expand 3.5 percent in 2017.
Four out of five U.S. regions are forecast to grow again in 2017, ENR reports. The strongest growth will be in the western South Atlantic regions, which is projected to increase 9 percent in 2017.
For its annual fire sprinkler industry review and forecast, Sprinkler Age surveyed several AFSA members across the country. Most respondents had a good, or even great, year and anticipate continued or stronger growth in 2017.
Year in Review and Ahead
For 2016, most AFSA contractors interviewed stated they had a good year and were busy. Overall, AFSA members seem to agree that 2017 will be another good year.
AFSA’s Mid-Atlantic Chapter Executive Director and Next Gen Initiative Workgroup Chair Meaghen Wills, purchasing manager, Anchor Fire Protection, Perkiomenville, Pennsylvania, comments, “I think we just had one of the busiest years on record. It’s been nonstop for most of the year. The bad thing is we don’t have enough fitters; the plus side is there won’t be any layoffs.”
She continues: “We expect this trend to continue for us into 2017 with another year of tremendous sales.”
Joshua Leonhardt, vice president of outside sales and business development, Leonhardt Pipe & Supply, Inc., Huntersville, North Carolina, reports: “the growth in the fire sprinkler industry in 2016 was tremendous. Our best customers saw higher than expected growth in 2017 and they saw their ‘backlogs’ extend further out than before. As a result of the ideal market conditions and our expansion into the Atlanta marketplace, our company saw double-digital growth again for the third year in a row.”
Looking to 2017, Leonhardt states, “The result of the recent election will affect our industry, but we think the effects will be positive. Spending on public infrastructure seems to be a priority for the incoming administration and we believe that will lead to additional growth in the fire sprinkler industry.”
As he states in this issue’s Chairman’s Message, AFSA Chairman of the Board Mike Meehan, president, VSC Corporation, Virginia Beach, Virginia, saw solid growth in 2016 with “particular strength in multi-family residential construction and commercial construction.” He reports that there was also an increase in the inspection, testing and maintenance and service sides of the industry, and that the West and Northeast portions of the country saw noticeably strong growth. Meehan also states that even business with soft growth last year should see “more of a pick up in activity in 2017.”
AFSA Region 3 Director Rod DiBona, Rapid Fire Protection in Rapid City, South Dakota, also reports that for 2016 “we were down in areas that rely on oil and coal, but up where we serve the larger metropolitan areas.” Looking into the new year, DiBona says, ”overall, we are expecting an increase in business.”
AFSA’s Immediate Past Chairman of the Board Joe Heinrich, president, Bamford Fire Sprinkler Company, Salina, Kansas, tells Sprinkler Age, “Business volume and quality was excellent again this year – an increase from 2015 as we had anticipated. Both the public and private sectors are currently strong and we were able to take advantage of each area.”
Heinrich continues: “From the regional construction forecasts I see from ABC and other local associations, it appears new construction should remain very solid. We currently have a very healthy backlog and the architects and engineers report being very busy so future prospects look good at this point. However, I believe the percentage of growth will be less than what we have experienced the past three to four years.”
David Thompson, vice president, Encore Fire Protection, Hartford, Connecticut, reports that business is slowly improving in his area, but not at the rate advertised by the media. His anticipation for 2017 is “steady, but the election results leave guarded optimism.”
Bob Beckwith, vice president, United Sprinkler Co., Inc., Fredericksburg, Virginia, reports that “business was strong for the first three quarters and slowed down significantly in the fourth quarter of this year,” and the business outlook for 2017 is “promising based on the results of the presidential election of a business friendly administration. I am looking forward to a busy year in the D.C. metro area.”
Tad Cook, executive vice president, Chero-Key Piping Company, Houston, Texas, reports that 2016 was a “good year. We had several successful projects and maintained a steady work load.”
He says, “2017 will be off to a good start. Some big projects were put on hold in 2016 that hopefully will materialize in 2017.”
Dan Blewitt, president, ASCO Fire, Lincoln Park, New Jersey, says that “sales were up” for 2016 and it’s too early to tell for 2017.
Tom McKinnon, president of Aegis Fire Systems, Inc., Pleasanton, California, reports, “virtually every sector of the California fire sprinkler market realized solid growth in 2016. Quite simply, it was a good year to be in the fire sprinkler business.”
He continues: “By all indications (backlog, budget requests, design development consulting services, etc.) it appears 2017 will be another great year.”
While the construction industry appears to be steady into 2017, there is always the potential for problems. What are some areas of concerns for our members?
Meehan has heard about challenges in finding qualified help. DiBona echoes that sentiment when he reports “typical for a rising market, we are seeing a lack of qualified fitters and designers.”
Leonhardt notes that everyone’s struggles are different, but the only area of concern on his mind is related to hiring. “The workforce in the fire sprinkler industry is aging and we are trying to get ahead of that problem. We are very excited about AFSA’s Next Gen Initiative and we believe it will be helpful to fire sprinkler contractors and distributors.”
Wills concurs: “I think everyone is still facing the labor problems. There’s too much work and not enough fitters,” she laments.
Heinrich notes: “As is typical for a growing market, a shortage of skilled labor is always a problem. In our trade, experienced sprinkler fitters and systems designers will continue to be an issue that needs addressed. Recruitment of young people to our trade, or any construction trade, is a challenge that needs cooperative effort from all the trades.”
Meehan encourages contractors to consider recruiting some younger and less experienced people and “train them up.”
“I am often pleasantly surprised at how quickly good people can become well-trained and valuable employees,” he comments. “We at AFSA have all the tools and know how to help you and your companies.”
Those tools include apprentice correspondence courses, beginning designer training, and the new ITM program. For all the education and training opportunities AFSA has to offer, visit firesprinkler.org and click on “Education Center.”
Thompson notes that Connecticut’s “large and growing state deficit may hamper the public work market.”
Beckwith sees “gridlock in Washington, D.C., heating and fuel prices, material and labor costs going up fast with increased demand, and shrinking profits” all as potential problems for 2017.
McKinnon says that “contractors should keep a watchful eye on increased material costs. The recent flurry of steel pipe increases will certainly have an impact on profits.”
The National Association of Home Builders (NAHB) expects housing starts to increase 7.9 percent, with a slow down in multi-family starts in 2017. Dodge forecasts that single-family will rise 12 percent in dollars and 9 percent in units, with multi-family falling flat in dollars and down 2 percent in units. FMI’s construction put-in-place forecasts 4.6 percent rate of growth in single-family residential and 4.4 percent rise in multi-family residential.
DiBona states that while his company doesn’t do much NFPA 13D work, there has been a huge increase in residential activity in the larger cities around him. “The rest of our areas have held steady.”
Wills says the residential increase seen in her area is in the commercial residential arena – apartment buildings, dorms, etc. “Pennsylvania does not have a residential sprinkler mandate.”
Thompson reports that NFPA 13D work is extremely limited in Connecticut, due to local and state limited requirements. However, “the large multi-family market has been strong for the past three to four years and every indicator leads to that continuing.”
Cook notes that Chero-Key Piping does not market for NFPA 13D projects. However, he does state that the Houston market has maintained strong single-family housing; however, “the multi-family is over built and will see some slacking off” in 2017.
McKinnon states: “The residential market has been strong for the past three years and is expected to stay on the same pace for the new year.”
Although Leonhardt Piping & Supply, Inc. started offering CPVC and residential fire sprinkler products during the last 18 months, he notes that they experienced “tremendous growth” in this area in 2016. “Based on feedback from our best customers, the residential ‘space’ of the fire sprinkler industry is as healthy as it has ever been.”
Beckwith notes that the D.C.-metro area has been “booming with residential apartments and condominiums for the last two years. A lot of work is being done by companies subcontracting the installation labor, making it tough to complete on large plastic jobs.”
Blewitt states that there has been an increase in residential activity in his area.
Heinrich comments that “one- and two-family residential work is essentially non-existent in this area. And state legislation prohibiting cities or counties from adopting regulations that would require sprinkler protection in new construction will continue to suppress NFPA 13D work.
“A very few municipalities are promoting NFPA 13D systems in exchange for reduced infrastructure requirements (water main sizes, street widths, distance between fire hydrants, etc.) in new housing developments. However, this has yet to have a measurable effect,” Heinrich says.
Retrofit work appears to have fluctuated last year and going into 2017, depending on the region. DiBona reports that in South Dakota retrofit work has been declining. Wills states that “we are starting to see a big increase in new construction and major renovations.”
Blewitt and Cook say that retrofit work has been steady in their areas. Cook notes that they do not pursue that market, however. “We do projects for existing customers,” Cook comments.
Beckwith states that retrofit work has been a small percentage of their work in the last year.
McKinnon notes that the “retrofit market spiked in 2016, likely due to the high cost of land. I expect the retrofit market to hold through 2017.”
Heinrich notes that “retrofit work has been very good in recent years and continues to be relatively strong. However, the increase in new construction has reduced the investment in retrofit work.”
Most respondents didn’t have activity in the legislative arena for their area, but a few reported on some action.
DiBona did note that in South Dakota, “In Rapid City where our corporate office is located, we have maintained common sense amendments that are friendly to fire sprinkles. We are working with a fire marshal and legislators to put a bill on the floor to strike the amendment to the International Building Code that our state adopted.”
McKinnon says that “it appears inevitable that the California State Fire Marshal will enact fitter licensing regulations January 2017.”
Manufacturer/Supplier Outlook Tim Freiner, vice president of North American sales, Potter Electric Signal Company, St. Louis, Missouri, and chairman of AFSA’s Manufacturers/Suppliers (M/S) Council, notes that “overall the year  started slow and picked up through Quarter 2 and remained strong throughout the year.”
He continues: “According to the American Institute of Architects, they are forecasting a 4.2 percent construction growth for non-residential in 2017. In the residential arena we have seen a slowdown in the Northern California market.
“The majority of contractors have stated that their retrofit work is still strong and should continue through 2017.”
Finally, Freiner doesn’t foresee any problem areas at this time.
Although ENR says 2017 will be a time of a gaining strength and that 2018 is the “year to watch,” most AFSA members seem to be expecting both years to be good.
As Thompson puts it: “Fingers crossed that improvements and a positive economic upturn is coming soon.”
Looking to 2017, Leonhardt states, “Our best customers are indicating that their ‘backlogs’ have them positioned for another good year in 2017.
“We are looking forward to another successful year in 2017!” comments Wills.
Happy New Year and “Cheers!” to Sprinkler Age readers and the entire fire sprinkler industry. Here’s to a busy and fulfilling 2017!