Sprinkler Age A Publication of the American Fire Sprinkler Association
Economists, Contractors, Manufacturers and Suppliers Report on 2015 and Forecast 2016
After a year of finally seeing signs of recovery and growth in 2015, the construction and fire protection industries seem to be at the same pace or better for 2016. Dodge Data & Analytics forecasts that overall U.S. construction starts for 2016 will climb 6 percent, following gains of 9 percent in 2014 and an estimated 13 percent in 2015. FMI Corp., Raleigh, North Carolina, focuses on construction put-in-place and calls for 7 percent growth in 2016. Finally, Associated Builders and Contractors (ABC), Washington, D.C., is forecasting growth in nonresidential construction spending of 7.4 percent next year along with growth in employment and backlog.
According to Engineering News Record (ENR), FMI also reports that manufacturing should come in at 18 percent growth for 2015 with a 5-7 percent growth for 2016 through 2019. Lodging increased 15 percent in 2015 and should increase 12 percent in 2016. FMI also forecasts the retail sector to increase 10 percent in 2016. Dodge is predicting a strong non-residential building market, forecasting a further 6 percent increase in total growth for construction starts for 2016. It is also predicting commercial buildings will grow 11 percent and the institutional building market will increase 9 percent. Four out of five U.S. regions are forecast to grow in 2016, ENR reports. The strongest growth will be in the South Atlantic region, which is projected to increase 12 percent in 2016.
For its annual fire sprinkler industry review and forecast, Sprinkler Age surveyed several AFSA members across the country, gathering reports on 2015 and forecasts for 2016. Most respondents had a good year and anticipate continued or stronger growth in 2016.
The Year in Review and Ahead
For 2015, most contractors interviewed stated they had a strong year and were very busy. Some contractor members reported less work, but it was still steady. Overall, AFSA members seem to agree with forecasters that 2016 will continue with the steady recovery begun in 2015.
In California, one contractor reports: “our volume is off by about 10 percent, but we should be on pace to do the same volume as last year [2015].”
In the Northwest, Tiffany Moore, director of operations for Moore Fire Protection, Issaquah, Washington, says that business was “fantastic” in 2015 with a profit increase of 23 percent.
“The increase was due to a large influx of available construction work in our area,” comments Moore. “Business looks steady for 2016, with the potential for more growth in 2016 if we can make internal improvements to increase our work capacity.”
Greg Patrick, vice president of sales and operations for Treasure Valley Fire Protection, Boise, Idaho, says business in 2015 was “strong with market pricing still recovering.”
“Business for this year looks positive. Local architects and engineers appear to be busy with a large amount of project development that will start in 2016 and the current backlog of projects looks strong,” states Patrick.
AFSA Region 3 Director Rod DiBona, Rapid Fire Protection in Rapid City, South Dakota, also reports a “very good” 2015 with the same outlook for 2016.
AFSA’s Immediate Past Chairman of the Board Joe Heinrich, president of Bamford Fire Sprinkler Company, Salina, Kansas, tells Sprinkler Age, “Our business volume for 2015 increased from 2014 as we projected. There was very solid improvement in both the private and public sector. In general, I believe the entire construction industry in this area experienced similar increases. A very key element of the increase was due to private sector investment, which is very encouraging.”
Heinrich continues: “Our backlog is robust and we are aware of significant projects on the horizon so we are anticipating a very solid increase in business for 2016. This continues a trend that began in 2012 and we anticipate remaining for the foreseeable future. Many government-funded projects, mostly educational (elementary, high school and university), have been placed, or are ready to be placed in the competitive bid process. Private sector work throughout the area also has many relevant projects nearing the bid proposal and construction stage.”
AFSA At-Large Director and Board Secretary Linda Biernacki, president of Fire Tech Systems, Shreveport, Louisiana, reports that, “We were fortunate this year to have had a healthy backlog coming into 2015, which helped us overcome some of the significant downturn in construction due to the oil and gas industry.”
But she comments that 2016 looks to be “very challenging.”
“Most of our work comes from the oil and gas states like Louisiana, Texas and Oklahoma, and these states have been hit the hardest with the drop in oil prices,” Biernacki states. “But we never back down from a challenge so we are concentrating on other growth markets for our company. Since we are a full-service life-safety company, which includes sprinklers and alarms, we have opportunities to grow other departments like our fire alarm and special hazards department, inspection and maintenance departments, as well as extinguishers and small pre-engineered systems.”
AFSA’s Mid-Atlantic Chapter Vice Chair and Next Generation Workgroup Chair Meaghen Wills, purchasing manager, Anchor Fire Protection, Perkiomenville, Pennsylvania, comments, “The work in southeastern Pennsylvania has increased immensely over the last year.
“The renovation work has been steady, but there has been an increase in new buildings and privately funded projects,” she reports. “We expect to see this trend continue into 2016.”
Dan Laird, construction manager at Commonwealth Fire Protection, Leela, Pennsylvania, concurs. “Business was very successful in 2015,” Laird reports. “We are starting out with a similar backlog of work for 2016. It’s very positive.”
AFSA Region 7 Director Paul DeLorie, vice president, Hampshire Fire Protection Company, Londonderry, New Hampshire, comments, “We had growth in sales volume and profit. Our summer was extremely busy and we had a very difficult time meeting job schedules.
“We are optimistic for 2016, but we expect our sprinkler contract business to decline,” DeLorie continues. “Hopefully that will be offset with more profitable service type work.”
Potential Problems
While the construction industry appears to be steady into 2016, there is always the potential for problems. What are some areas of concerns for our members?
“The only problem I can foresee is a lack of manpower and the ability to grow as fast as the growing economy is demanding,” says Moore.
“One- and two-family work will remain soft in Idaho due to state legislation eliminating the requirement for sprinklers,” states Patrick. “All other areas appear to be showing signs of continued growth. The steel pipe market continues to be a problem area with shortages and unstable pricing in the northwest. With the influx of continued work, we anticipate that this will continue to be problematic in the coming year.”
DiBona, Heinrich and Laird all see field labor shortage as a problem for 2016.
Heinrich elaborates, “Attracting young people to the industry is certainly a challenge and needs the collective effort of leaders in all trades to engage in promoting construction as a career and developing recruitment methods that appeal to the late teens, early 20s population.”
DeLorie doesn’t foresee any particular problems in his area but comments, “Our challenge, like everyone else, is to secure new work with a decent margin and then execute.”
Residential Rocks
Along The National Association of Home Builders (NAHB) reports that single-family housing will “pick up steam in 2016” with a jump to 27 percent in 2016 after increasing 11 percent in 2015. The organization believes the trend will continue into 2017 with a 25 percent increase. However, multi-family housing is expected to slip 2.3 percent in 2016. Dodge forecasts that single-family will increase 20 percent in dollars and 17 percent in units, with multi-family increasing 7 percent.
In Washington State, Moore says that NFPA 13D, Standard for the Installation of Sprinkler Systems in One- and Two-Family Dwellings and Manufactured Homes, work is 30 percent of their business.
“There has actually been a decrease of residential due to the increase of commercial recently,” Moore notes, “but this is unusual as our company normally does approximately 60 percent residential and 30 percent commercial.”
In Idaho, “NFPA 13R [Standard for the Installation of Sprinkler Systems in Low-Rise Residential Occupancies] work is on the rise, but NFPA 13D is fairly slow,” comments Greg Patrick.
DiBona states that while his company doesn’t do much NFPA 13D work, there has been an increase in residential activity in his area: “There is more than ever before, but that’s still not much.”
Heinrich reports that one- and two-family dwelling projects are “essentially non-existent” in his area.
“A very few municipalities are promoting NFPA 13D systems in exchange for reduced infrastructure requirements (water main sizes and street widths, etc.) in new housing developments but this has yet to have a measurable impact,” Heinrich states.
Biernacki comments, “We are still hoping for our Louisiana State Fire Marshal Chief Butch Browning to bring up legislation giving home owners tax credits if they voluntarily install residential sprinklers.”
Laird reports that there has been some increase “in multi-unit dwellings and apartments only while single-family home starts are low.”
Retrofit Report
Retrofit work will likely fluctuate from 2015 into 2016, depending on the region. Some reports indicate that retrofit work seems to be increasing in California, as it has over the past few years.
Patrick still sees a “good market” for retrofit work in Idaho, although “new construction has the majority of the market share.” DiBona reports that in South Dakota there doesn’t seem to be as much retrofit as in years past.
Heinrich has a positive report: “Retrofit has been very solid for the past several years and remains strong. Building code updates continue to increase the number of locations where sprinkler coverage is required, so most building additions and renovations now include the addition of sprinkler protection.”
Laird comments that retrofit work is a “fairly large percentage of our backlog. This has always been our specialty.”
DeLorie states that retrofit work is “not really happening” in the New Hampshire area, as most retrofits are integrated with the renovation of the building. “Pure retrofit work is in the past,” he says.
In contrast, Moore comments that their retrofit work “decreased by 70 percent in 2015 due to the increase in new construction, limiting our capacity.”
The retrofit market in Biernacki’s area has “dwindled down to structures that can meet the federal and state historical tax credits, which we have a few of these on the books.”
Legislation
Most respondents didn’t have activity in the legislative arena for their area, but a few reported on some action.
“We have been working with the Washington State Fire Sprinkler Coalition to achieve legislation that would make it mandatory to install fire sprinklers in all new townhomes,” comments Moore. “However, this was recently voted down by the building code council so the coalition is restrategizing for the next three-year code cycle.”
DiBona noted that in South Dakota, “The state banned any local ordinance requiring sprinklers; however, our local Authority Having Jurisdiction (AHJ) has given appropriate tradeoffs that encourages sprinklers.”
Heinrich reports: “State legislation was passed prohibiting any building code authority (city or county) from adopting any statute that could require fire sprinkler system protection in one- and two-family dwellings. Therefore, very little residential sprinkler work is installed.”
Laird said attempts at legislation were made but “… the building contractors stopped the legislation in its tracks.”
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 has been surprisingly strong and looks to continue into 2016.”
He continues, “According to the American Institute of Architects, they are forecasting an 8.2 percent construction growth for non-residential in 2016. In addition, we don’t foresee any problem areas at this time.”
Freiner reports that the majority of contractors have stated that their retrofit work has remained strong and should continue through 2016.
In the residential arena, Freiner notes, “We have seen significant growth in areas such as Arizona, California and Florida.”
M/S Council Vice Chairman Randy Lane, vice president of sales, Globe Fire Sprinkler Corporation, Standish, Michigan, reports, “As 2015 was a positive year for growth in all sectors, 2016 might have some challenges.”
He continues: “If interest rates increase, that could cause a slowdown. Again, we are going into an election year. This could result in a more conservative future in spending. We are all thinking positive, but getting prepared.”
Conclusion
As ENR proclaimed “slow and modest vs. fast and furious.” That may be a good mantra for 2016. After an inaugural year of recovery, 2016 looks to continue along a similar path. And slow and steady may be the best course.
“We are staying positive, knowing this is the best industry to work in,” Biernacki says.
“The future looks bright for our industry,” comments DiBona. “We need to work hard to bring in young, bright talent,” he advises.
Moore is “excited for the future of our industry.” She concludes: “I believe that we are on the precipice of something great as long as we take the opportunity to grab it.”
