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Industry Forecast Looks Good for 2020

Avoiding Recession… for Now

It seems rumors about a pending recession were swirling as 2019 drew to a close and as forecasters gazed into their crystal balls for 2020. Those fears seem to have been held off for at least another year, according to construction industry experts and the contractor and associate members of the American Fire Sprinkler Association (AFSA).

 Dodge Data & Analytics is forecasting a 4 percent decrease in 2020, with total construction starts at $776.4 billion. The Portland Cement Association (PCA) expects overall public spending to rise 1.7 percent in 2020 and total construction put-in-place to increase 1.1 percent in 2020. It is also predicting a small 0.9 percent growth for the residential sector and a slight 0.3 percent growth for the non-residential sector in 2020.

According to the annual construction report published by Engineering News-Record’s (ENR), the Dodge Construction Outlook expects construction starts in most sectors will decline some in 2020. Housing is expected to fall 6 percent overall, with a 13 percent decrease in multi-family housing starts. The National Association of Home Builders (NAHB) has a more optimistic prediction of single-family housing starts increasing 2.2 percent in 2020 followed by a 2.3 percent climb in 2021. The NAHB expects starts in multi-family housing will stay flat in 2020. In 2021, a 3.6 percent increase is expected.

ENR also reports that FMI Corp. forecasts total construction put-in-place will increase 2.4 percent to $1.34 trillion. Total non-residential work will rise 2.7 percent by the end of 2020. Residential put-in-place is expected to increase 0.8 percent in 2020.

Read detailed reports from all sectors of the construction industry throughout this issue of Sprinkler Age, including Associated Builders and Contractors (ABC), Associated General Contractors of America (AGC), Dodge Data & Analytics, and Portland Cement Association (PCA). Sprinkler Age has also surveyed members throughout the country for a report on activity in 2019 and what’s expected for 2020.

Members from all of AFSA’s seven regions responded to the 2019 industry review and 2020 outlook survey.

Region 1

The vast majority of members in Region 1 who responded to the 2020 outlook survey saw business the same or increased in 2019 versus 2018.

“It was our best year ever!” comments Chuck Boyance with Control Fire Protection Co., Inc. in Bakersfield, California. “It looks like another outstanding year in 2020 unless the economy tanks.”

Curtis Streeter, SET, Deep Blue Integration, Inc. in San Luis Obispo, California, agrees. “Business has been steady with a high tempo of new projects available. The forecast appears to be bright with a record amount of building permits being applied/issued prior to calendar year-end.”

AFSA Region 1 Director Lyle Hall, Western Fire Protection, Poway, California also saw a good year in 2019 with “a small increase in projects.” He anticipates 2020 to be a good year as well. “We are continuing on a managed growth period,” he states. 

Steve Romp with S Fire, Inc., in Newhall, California, had a “very good year” but notes there was not enough labor force to do the work. He anticipates 2020 to be a better year. “I expect a slight decrease but not enough to call it ‘slow.’”

Terrance Wolf Fire-Matic Systems, Inc., in Fremont, California, said business in 2019 was similar to 2018 without much increase or decrease and expects 2020 to be the same. 

Jimmy Lynch, SET with Pan Pacific Mechanical in Honolulu, Hawaii, reports 2019 was similar to 2018 but with delayed starts. He says 2020 is “very promising as we are busy on bidding end at the moment” and that “commercial work is up and looks to continue to rise.”

Ken Stuart at Paramount Fire Systems, Inc., El Cajon, California, did see a decrease in 2019. “This was our slowest year since we started in 2000.”

Francisco Oilva with IESO is in Calexico, California, situated on the Mexico-United States. “The national goal in Mexico is to increase the economy by 1 or 2 percent,” Oilva notes. “Business in 2019 and 2018 were at the same levels. The non-approval of the NAFTA trade agreement can be a big problem to regional growing in 2020.”

Region 2

Four of the seven survey respondents for Region 2 reported increased business in 2019. Gordon Mull with Dynamic Fire Protection Systems, Inc., Montrose, Colorado, reported that business volume increased, and he feels positive about 2020. “The forecast for 2020 among our contractors indicates a slight increase in volume in both custom homes and commercial projects.” Mull notes that retrofit work is always a part of their business and says both have stayed steady in 2019 and going into 2020.

He continues: “The one problem we see is maintaining and developing an experienced labor force. Our area is very limited as to available and trained personnel. There is not a very large labor pool within our general area of operation. The amount of travel time to and from work and the weather are issues.”

Gordon Marx with Ace Fire Systems in Las Vegas report business in 2019 was “brisk” and expects 2020 to be “equally brisk” with retrofit work increasing.

Russ Leavitt with Telgian Corporation is based in Mesa, Arizona, but works nationally with employees in 30 states. He reports that they experienced “significant growth, which was planned” in 2019, and Telgian’s revenues increased over 2018. Continued growth is expected for 2020. “We expect that the overall economy will slow some,” Leavitt notes, “but barring a significant unforeseen geopolitical event, we do not forecast hitting a wall such as that which occurred in 2008-2009.” Telgian mainly focuses on inspection, testing, and maintenance (ITM) and manages new and retrofit projects for customers.

Business “stayed steady” in 2019 for Ben Dominguez with Valley Fire Protection in Albuquerque, New Mexico, and he says business for 2020 looks to stay steady or possibly increase.

In Santa Fe, New Mexico, business decreased for Scott Chapman of Fire Safety Sales Co., Inc., and he expects 2020 to be similar. 

Moving to the northern parts of Region 2, most of the year “seemed to be “sluggish” for Sprinx Fire Protection, Inc., in Gig Harbor, Washington, but Joseph Faulkner reports that they had a “slight increase in sales from 2018.” He also notes that they are booked solid for 2020. Regarding retrofit work, Faulkner says the company does perform this type of work in his area, but it has decreased from past years.

Maintaining and developing an experienced workforce, both in the installation and design fields, was the number one problem reported for the region. Mull notes, “With the forecast of an increase in work there will be a shortage of manpower. This generally occurs with all construction. The most important aspect related to the increase is the required training that goes along with this needed manpower. Training is a necessity.”

Region 3

Rick Jackson, Jackson Associates, Inc., Walled Lake, Michigan, says 2019 was “fantastic” and he expects 2020 to be great. “We have a large backlog and can be selective on what we bid.”

Doug Scott with Dependable Fire Protection in Cedar Springs, Michigan, has been busy as well. “2019 was busy, but also streaky. 2020 looks to be another busy year with construction in apartments, schools, medical, mixed group, hotels, and light manufacturing. The only thing questionable will be retail.”

In Kansas, Mark McKenzie with Bamford Fire Sprinkler Co., Inc., in Shawnee Mission, says business was good with plenty of work in 2019 and the 2020 outlook is good.

Ron Caplinger with Craynon Fire Protection, Inc., in Dayton, Ohio, says business in 2019 was very good with overall revenue equal to 2018. “We expect another good year in 2020,” he comments.

In Cincinnati, business was steady in 2019 for Dorn Fire Protection, LLC, but Christopher Dorn notes that it tailed off “right before Thanksgiving.” However, he didn’t see any effective change in business. He also thinks 2020 will be slower with smaller projects dropping off and the market being “saturated with contractors.” He also notes that retrofit work is a “mainstay” of his company but it has “definitely dropped off.”

Adam Shaffer with Ozark Fire Sprinkler in Columbia, Missouri, reported 2019 was an “okay” year and 2020 looks to be “better.”

Region 4

Overall, reports from Region 3 were positive. Contractors noted “record revenue,” “increase over 2018,” and “best year ever!” Even contractors who saw a slow start in 2019 ended the year on a high note.

“The year started off slow for us; however, as the year progressed, we saw a marked uptick in projects,” reports David Rudd with Rudd Fire Protection, Inc., in Tyler, Texas. “Our service side has been brisk all year. We are working to grow that sector of our business. All in all, we had an increase in revenue in 2019 over 2018. We are optimistic about 2020. We are entering the New Year with a good backlog of work. We believe that if the economy continues to hold its own here in Texas we will see growth again in 2020.”

Most of the residential work Rudd does is more related to board and care facilities. “The laws in our state do not encourage homebuilders to install systems in the houses that they build.”

Rudd also notes that local AHJs in Texas seem to be requiring larger permit fees. “We are also seeing an increase in the enforcement of things like locking FDC caps and plugs and five-year obstruction investigations. We have had at least one inspector who has dedicated the better part of the year on five-year inspections. This was very good for us, as we witnessed an increase in inspection revenue,” Rudd states

David Stone with American Fire Systems, Inc., in Houston, saw growth in 2019, compared to 2018, and thinks 2020 will be even busier.

Rex Schwendiman with The Reliable Automatic Sprinkler Co. in Dallas reports that “business, in general, was good in 2019 but more flat than strong.” He says 2020 is hard to call. “It’s an election year, the economy, the weather, they all are factors. Right now I am confident there will not be a retraction but growth is a question mark. The residential market will be a strong indicator of the year.”

In Oklahoma City, Oklahoma, Bill Kroeger with Control Fire Systems had a “very good” 2019 with record revenue. He foresees 2020 to be good but down from 2019. Retrofit work in his area has decreased and residential sprinkler activity has remained flat.

There was an increase in business for Norred Fire Systems in Monroe, Louisiana, in 2019 and 2020 looks to be “good and strong,” per Clayton Norred, Jr. Retrofit work and residential sprinkler activity have increased.

Region 5

Georgia appeared to have a steady year but about the same as 2018, according to survey respondents. Jeffery Dennis with U.S. Sprinkler, Inc., in McDonough, Georgia, said 2019 business was similar to 2018 and that he expects business to be good in 2020. “We have a lower-than-average backlog but a lot of projects are being bid.” While his company doesn’t perform much retrofit work, Dennis has seen a “more-than-average amount to bid.” He’s also seen a strong multi-family residential market but single-family staying about the same as in 2018.

Cal Bruce in Augusta, Georgia, says Fire Technology, LLC saw an “increase on the fire sprinkler side and a decrease on the fire alarm side” of their business in 2019. “I’m optimistic about 2020,” he notes. We are certain that the economy is headed in the right direction.” Bruce also reports a decrease in retrofit work and an increase in NFPA 13R apartments in his area.

In Clearwater, Florida, AFSA At-Large Director Chris Johnson reports Piper Fire Protection, Inc. was “up in construction sales” and notes that they “have a 2020 backlog that is up from 2019.”

“We are seeing more and more commercial and educational retrofits,” Johnson comments. “The high-rise retrofit in Florida has been delayed by another three years. The legislation that pushed back the date also put in penalties for failing to comply with these requirements. The Tampa Bay market is also very busy with dense residential starts.”

Moving on to South Carolina, overall business was up in 2019. Kari Miller with Alarm, Fire & Security, LLC on Hilton Head Island reports that “business was strong. We saw an increase in sales, inspections, and service.” She anticipates that “business will grow in 2020 with contract sales and inspections. The only thing lacking is growing the workforce and finding reliable employees who want to grow and build a career whether in the field or in the office.”

Retrofit work has increased, slowly being enforced bringing systems up to current code.

“The only areas affecting our business, in particular, is the lack of enforcement for fire protection in the state of South Carolina. You do not have to have any training or certifications to inspect fire sprinkler systems. Also hiring long-term employees is always an issue,” says Miller.

In Spartanburg, South Carolina, Kevin Wilson with Johnson Controls saw a decrease in business in the beginning of 2019 with an increase toward the end of the year. “It looks like things will be picking up even more in 2020,” he comments.

AFSA Manufacturer & Suppler (M/S) Council Chairman Chris Stason with Victaulic in Lake Wylie, South Carolina, has seen a “very strong increase” in business in 2019 and he projects business in 2020 to be “fair.”

Region 6

Most of the surveys received from Region 6 reported an increase in business for 2019 with high expectations for 2020. Belinda Arthur with Hiller Systems, Chesapeake, Virginia, saw an “increase in projects, especially in the residential market” and says they are “entering 2020 with the highest sprinkler backlog that we have ever had and do not see it letting up.” Retrofit work has stayed the same yet residential activity has “increased dramatically.”

Local legislation included Virginia adopting a requirement for NICET Level II for all inspectors that will go into effect in 2021. “We see that as a positive sign,” Arthur comments.

Griffith Brinkley, also in Chesapeake with Fire Tech Services, Inc., saw similar results in 2019. He reports an increase in 2019 with a healthy backlog for the first quarter of 2020.

Both surveys received for the Richmond, Virginia, were positive. Robert Dunn with Fire & Life Safety America reports an increase in business in 2019 with 2020 “slightly trending up.” Pat Sigmon with eTEc Fire Protection saw an “increase in projects to bid and revenue,” reporting that the market in Central Virginia is “strong.” They also have a good backlog heading into 2020. The company’s small contracts/tenant side is “exceeding forecast and turning down work.”

In Maryland, Richard Kozel with Livingston Fire Protection in Hyattsville says they finished 2019 with an increase in revenue and they have a “strong, hard backlog entering the first two quarters of 2020 with a good outlook for capturing a soft backlog moving forward. Our markets remain strong.” Kozel also notes that retrofit work hasn’t noticeably changed in the area and that the residential market is strong but it’s difficult to pinpoint an increase.

Christopher Ribando with Approve Fire Prevention Corp. in Babylon, New York, says “new projects were at a 10-year high while maintenance and inspection/testing stalled” in 2019. The New Year looks to be “steady.” He also notes that “New York state is trying to enact legislation that is similar to California’s fitter licensing, and that could be a problem in 2020. Also, the New York City council is sponsoring a bill to retrofit residential buildings over 40 feet. It’s unclear if that will pass.”

Business in New Jersey stayed steady in 2019 and going into 2020, according to Gary Allemand with WJ Malone Associates, Inc. in Totowa, and Craig Chiarello with Mercer Fire Protection in Hamilton.

In Pennsylvania, Donald Rowe with Penn Fire Protection, Inc., in Selinsgrove saw an increase in 2019 and looks for the same in 2020.

Region 7

Everyone in the region who responded to this year’s survey reported an increase in 2019. “We had a banner year,” reports Thomas Whalen with Fire Systems, Inc. in Dartmouth, Massachusetts. “We saw a huge increase in sprinkler division sales. 2019 will be tough to beat, but we’re off to a decent start [in 2020].”

Michael Gannon with Massachusetts Fire Prevention, Inc. in Rockland also saw an increase in 2019 and looks for 2020 to be “very good.” Retrofit and residential work have slightly increased, with “a lot of retrofits in multi-family housing.”

In Connecticut, business was good in 2019 and is forecasted to stay the same in 2020, according to David Thompson with Encore Fire Protection in Middletown and Steve Colapietro with Absolute Fire Sprinklers, Inc. in Bristol.

“We increased business last year and should sustain that in 2020,” comments Thompson. “We’ve had a slight increase in retrofit projects and in large multi-family housing developments.”

Colapietro reports an increase in 2019 and he’s expecting business to stay the same in the New Year. “We’ve noticed an increase in new apartment buildings in the state.”

Chris McGadden with Xcel Fire Protection, Inc. in Salem, New Hampshire also saw an increase in 2019. “We expect another good year,” he comments. “The last couple of years have been good. We’re hoping it continues for the next few years.”

Workforce Woes Continue

Almost every member from every region reported on one common problem: workforce. The lack of skilled workers and retaining a good workforce was a common thread among all contractors across the country.

“The biggest issue I see is that our industry keeps progressing at an amazing rate technologically, but the workforce is not keeping up,” says Dorn in Cincinnati.

“It is difficult in our market area to find good, experienced foremen to lead a crew,” notes Sigmon in Richmond, Virginia.

Gannon says there is “a continuous labor shortage to keep up with the demand of the construction industry in Massachusetts.”

Streeter says that “the need for skilled workforce has been and continues to be the number one hurdle that our industry needs to overcome.”

Once a workforce is hired and retained, training is always an important issue. “Safety training is an ongoing pursuit as is new product training,” comments Scott in Cedar Springs, Michigan.

Conclusion

Overall, the New Year looks to be another good year for business, but past that, it’s not as clear. As Faulkner notes: “2020 looks to be great; however, beyond 2020 is questionable.”

Rudd notes that a presidential election year carries with it “a certain amount of angst on the part of business owners.”

“We do not want to see anything happen that would thwart the economic expansion that we have been blessed with this year. Finding good help is extremely difficult, so we are concentrating our efforts on training the next generation,” he states.

Preparation and planning are important to long-term success. AFSA has the training programs, education materials, and tools to help members prosper in the New Year and prepare for any uncertain times ahead. Embracing other revenue streams such as ITM could help when a downturn approaches. And no other industry provides the same “feel good” reaction as fire protection, assuring life safety!

Johnson notes that he is proud to be in “such an amazing industry” and Kozel sees good things ahead.

“Automatic fire sprinkler protection, in conjunction with the life-safety community, has provided tremendous opportunities and definitely has a bright outlook for the foreseeable future,” he concludes.

Experts and other members seem to agree. Embrace 2020 to grow your business, invest in your people, and plan for the future. AFSA has all the tools you need to succeed. For all the details on AFSA programs and services, visit firesprinkler.org or call (214) 349-5965.

ABOUT THE AUTHOR: D’Arcy Montalvo is public relations manager for the American Fire Sprinkler Association.


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