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2005 Forecast -
Steady Growth, Solid Industry, Stable Economy

Construction has been the cornerstone of the economic recovery and in 2004 this certainly was the case. In the upcoming year the outlook is good, if not great, as the nation settles into a smooth, post-election rhythm. With the building industry leading the way again, slow but solid growth will be the norm. If the Fed can keep inflation under control while keeping interest low enough for investment, 2005 will be another year to remember for the construction industry.



Industry Leaders Look to 2005

Written and compiled by Stephen Kelly, regional editor

When the December issue rolls around, it's time for forecasts. So, here goes. I contacted seven leading landscape firms/companies/organizations, two building groups (Del Webb and the National Association of Home Builders), two nurseries (Shemin Nurseries and ValleyCrest Companies), and the Brick Industry Association. Here were the questions:

  • What's the outlook for your industry/firm for 2005?
  • Where's the growth in your firm/business?
  • Where's the growth in your industry?
  • What are the new trends?


ValleyCrest Companies
Calabasa, Calif.
www.valleycrest.com
Burton Sperber, chairman, CEO
Richard Sperber, president








Burton Sperber started a landscape nursery business in 1949 with a wheelbarrow, some tools and about $700. In the '60s, '70s and '80s, Valley Crest Landscape Nurseries acquired a number of landscape companies and by 1998 was the largest landscape contractor in the country. From a $700 company to well over $700 million, VallleyCrest has five business divisions and employs over 8,000 people. On Oct. 5, 2004 the company acquired the Omni Landscape Group, which will add 700 people to the team and some $50 million in revenue. This year, ValleyCrest moved into its new three-story, 80,000-square-foot office complex (with a 273-space garage).

ValleyCrest Companies
by Richard Sperber, president

ValleyCrest continues to grow in all areas, but especially in landscape maintenance services. We see great opportunities for career growth in our company over the next several years and are actively hiring at all levels to support our expansion in new and existing markets. We will grow by dedicating ourselves to creating completely satisfied customers, by committing ourselves to our employees, and by adhering to the highest standards of operational and professional excellence. As a service company, our success will depend on us making ourselves as important to our customers as they are to us and by remaining landscapers at heart.



Shemin Nurseries, Inc
Danbury, Connecticut
www.sheminnurseries.com
Steffan Burns, president, CEO








Shemin Nurseries, Inc., began in 1955 when Emanuel (Manny) Shemin converted his family's retail greenhouse and nursery center into a wholesale horticultural distributor. In 1967, Shemin relocated from the Bronx to Greenwich, Conn. and began to develop a one-stop horticultural distribution center for landscape professionals. Today, Shemin is one of the largest wholesale distributors of nursery products in the U.S., and holds seminars on all aspects of landscape contracting at its 31 centers.

I spoke with Donald Smedberg, vice-president of sales and marketing for Shemin Nurseries. Mr. Smedberg has been in management with Shemin Nurseries over 25 years.

Shemin Nurseries, Inc
by Donald Smedberg

Mr. Smedberg noted that the housing and commercial starts have been strong over the last three years, which is indicative of robust business for landscape professionals, and therefore for Shemin. The growth in new commercial and residential starts building this year has been in the double digits, and Shemin expects that growth to continue to be strong in 2005.

The commercial market has been strong, with new "big boxes," hotels and building continuing to be built. Mr. Smedberg notes an increase in the demand for larger caliber trees, a sign that customers are seeking "instant landscaping," i.e., a landscape that is already grown. "Green" is the largest aspect of Shemin's business, but the company is selling more hard materials and lighting, the result of a strong trend in outdoor entertainment building.



Del Webb
Bloomfield Hills, Michigan
www.delwebb.com
Richard Dugas Jr., president, CEO








Since 1960, Del Webb has sold almost 80,000 homes for the "active adult buyer," the fastest-growing demographic segment of the market. Del Webb's large-scale communities are located in Arizona, California, Florida, Illinois, Nevada, New Jersey, South Carolina, Texas and Virginia.

Del Webb
by Mark Marymee, director of corporate communications

The Number of Active Adult Communities in the U.S. Will Grow Substantially in 2005 and Beyond.

As America's Baby Boomers, the generation born between 1949 and 1964, continue to age, the prospects are tremendous for homebuilders focusing on this major home buying demographic. Del Webb, a brand of Pulte Homes, Inc., plans to substantially increase the number of active adult communities it opens throughout the United States in 2005.

Baby Boomers account for approximately 77 million Americans, or nearly 25 percent of the entire U.S. population. They have an annual estimated spending power of approximately $2.1 trillion and the total number of Boomer households is 45.8 million. The financial wherewithal of this generation of consumers is impressive. Pulte estimates that close to 50 percent of homebuyers in its active adult communities pay cash, making them less susceptible to interest rate swings.

Del Webb, which started building active adult communities in the Phoenix area in 1960, is the nation's leading builder in this booming market for adults age 55 and older. The company currently has 33 active adult communities open for sale in 13 states across the United States.

In 2005, the company plans to open as many as 10 new communities throughout the country, including developments in northern and central California, Colorado, Florida, Michigan, Ohio, South Carolina, Texas and Virginia.

Several trends continue to develop in the active adult community market. First, while the number of actual retirees buying homes in active adult communities remains high, the number of people between the ages of 55 and 65 moving in to Del Webb communities is growing. Many of these people are years away from retirement, and they plan to either continue commuting to work in a major metropolitan area or shifting gears and starting a new career from home. A large component of these people are empty nesters, parents who have watched their last child head off to college or to start a career and who now find themselves ready to try something new. Many want to sell the big house they raised their children in and downsize into a smaller home with less maintenance. At the same time, however, they want homes that reflect their new found freedom to socialize with friends and colleagues. Many want single-family detached homes with a master bedroom suite on the ground floor. The kitchen in the home is spacious and generally opens directly into an adjacent living space, so the homeowner can prepare meals and socialize with friends easily.

One changing recreational trend at today's active adult community is less demand for golf and a far greater demand for other outdoor activities. Many Del Webb active adult communities now offer outdoor walking and biking trails, jogging paths and nature areas. One planned community in northern California will offer a dog walking park for residents, while another earmarked for South Carolina plans to offer residents canoeing and kayaking along a river that runs adjacent to the development.



Nat'l Assoc of Home Builders
Washington, D.C.
www.nahb.com
Jerry Howard, executive VP, CEO
Bobby Rayburn, president








The National Association of Home Builders (NAHB), founded in 1942, is a federation of more than 800 state and local associations. About one-third of NAHB's 215,000 members are home builders and/or remodelers. In 2004, NAHB's builder members will construct about 80 percent of all new housing in the U.S.

National Association of Home Builders

Builder Confidence Rebounds Strongly In October

The NAHB report of October 18, 2004, finds a robust buyer demand brought on by improving economic conditions, low mortgage rates, and strong house-price performance.

"Rates on long-term mortgages have averaged well below six percent for many weeks now, and adjustable-rate loans have been around four percent, providing a powerful incentive to buy a home," noted Bobby Rayburn, NAHB president and a home and apartment builder from Jackson, Miss.

The NAHB/Wells Fargo HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes, and prospects for sales activity in the next six months. Each of the HMI's component indexes rose in October, with the largest gains registered for current sales activity (up five points to 78) and expected sales in the next six months (up a remarkable nine points to 84). The component gauging traffic of prospective buyers rose two points to 54.

"We're headed for another record year for new-home sales in 2004, and the long-term outlook is still very encouraging," said Seiders. "Most builders are looking forward to a healthy marketplace moving into 2005."



Brick Industry Association
Reston, Vir.
www.gobrick.com
Richard Jennison, president, CEO








The Brick Industry Association is involved in a broad range of technical, research, marketing, government relations and communications activities. BIA provides members with monthly data on new and existing market potential and penetration, monitors brick sales and inventories.

BIA hosts the annual Brick Show each spring, and offers courses in selling skills and technical competence for member companies and their employees through the Brick University.

Brick Industry Association

Builder Confidence Rebounds Strongly In October

The NAHB report of Oct. 18, 2004 finds a robust buyer demand brought on by improving economic conditions, low mortgage rates, and strong house-price performance.

"Rates on long-term mortgages have averaged well below six percent for many weeks now, and adjustable-rate loans have been around four percent, providing a powerful incentive to buy a home," noted Bobby Rayburn, NAHB president and a home and apartment builder from Jackson, Miss.

The NAHB/Wells Fargo HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes, and prospects for sales activity in the next six months. Each of the HMI's component indexes rose in October, with the largest gains registered for current sales activity (up five points to 78) and expected sales in the next six months (up a remarkable nine points to 84). The component gauging traffic of prospective buyers rose two points to 54.

"We're headed for another record year for new-home sales in 2004, and the long-term outlook is still very encouraging," said Seiders. "Most builders are looking forward to a healthy marketplace moving into 2005."













Associations Look Forward to 2005

As 2004 drew to a close, LCN asked associations across the country and their leaders to analyze the market trends affecting their industries. They took a long look at what has been accomplished, what still needs work, how far they've come and what issues have reared their heads. As the keepers of their members, their member's businesses and employees, and the profession in general, their thoughts give everyone concerned a way to check their own progess and plan for the year ahead.

The Associated Landscape Contractors of America (ALCA)

ALCA and PLCAA Merge

The association's biggest change in 2004 was the merger of the ALCA and the Professional Lawn Care Association of America (PLCAA). "The new merger creates a powerful new association formed to address our members mutual needs and concerns and to serve as the voice of the green industry," said ALCA president Kurt Kluznik. "It allows for greater synergy while increasing our members' networking capabilities and providing enhanced member services and benefits. This is an exciting time for the green industry and a major step toward unification."

Debra Holder Resigns as Chief Operating Officer

In late 2004, Debra Holder resigned as chief operating officer to devote more of her time to her homebuilding project in Delaware and her family in Atlanta. As the ALCA moves forward in 2005 they are in good hands with Tanya Tolpegin, their chief operating officer, who will become the interim CEO, while a nationwide search is conducted for that position.

Renaissance Park Moves Forward

During 2004 the ALCA continued fund-raising for their $2.5 million Renaissance Park, a living "green" memorial park dedicated to the heroes of Sept. 11. The park was proposed, planned and funded by the ALCA under the guidance of the City of New York. Renaissance Park will be constructed on a small half-acre lot in Tribeca, N.Y., just blocks from the site of the World Trade Center. Immediately after Sept. 11, this site was a staging area that was home for many rescue workers during the months of recovery and cleanup work ahead.

In late 2004, New York-based artist Elyn Zimmerman was selected as the park's design consultant. Zimmerman will focus primarily on the fountain/sculpture that will fit into the overall park plan. For more information about the park and how you can help contribute to the park's development and maintenance, log on to the ALCA website at www.alca.org.

Annual Green Industry Conference & GIE

On November 3 to 6, 2004, the ALCA held their annual Green Industry Conference & GIE in Charlotte, N.C.

Highlights of the conference included:

The keynote address-"Driving the Gardening Explosion-A Refocus on Home and Garden" given by speaker: Robert Tillman, CEO, Lowe's Companies, Inc. of Mooresville, North Carolina.

Great educational sessions focused on labor and business issues like "Working with the Hispanic Workforce" by Dr. Judith Gordon of Champaign, Ill., and "Top 10 Things You Should Know About Insurance To Make It Through Turbulent Times" by David Snodgrass, CLP/STARS member, Dennis' Seven Dees Landscaping, Inc. of Portland Oregon and Joel Applebaum, ARM, CAN of Chicago, Ill.

Certification

The Certified Landscape Professional designation is the certification mark awarded by the ALCA and represents evidence of the industry's highest standards of landscape professionalism. Less than one percent of all landscape professionals have achieved this designation.

Professional Lawn Care Association of America (PLCA)

Organized in 1979, the Professional Lawn Care Association of America (PLCAA) represents approximately 1,200 members nationwide, including its core membership of professional lawn care operators and suppliers. They define industry standards, offer workshops, national turf and ornamental certification programs, public awareness campaigns, publications, a management conference, and their annual the Green Industry Conference at GIE and Legislative Day on the Hill.

PLCAA president, Jim Campanella

"This [merge] is an exciting strategic direction for the lawn and landscape industry. By pooling resources, we advance our opportunities to ensure the future of the industry and to have a greater lobbying impact on Capitol Hill. We will work to ensure that the transition effectively addresses the needs of our collective memberships and boards. The combined talent of both associations will enable us to offer our members better opportunities for business growth and development and to address challenges as we move forward in an effort to shape the face of the lawn and landscape industry."

Professional Grounds Management Society (PGMS)






The 2004 annual PGMS GIE booth in Orlando, Florida was well-manned and served as a valuable opportunity to educate those in the green industry about the Society.


The PGMS is a professional society with the purpose of education and professional advancement. The majority of members are institutional grounds managers who work for organizations such as colleges and universities, municipalities, park and recreation facilities, office parks, apartment complexes, hotels/motels, cemeteries and theme parks.

In addition, many independent landscape contractors are also in membership. The Society will be offering several exciting programs in 2005 highlighted by its School of Professional Grounds & GIE taking place Nov. 2 to 5 in Orlando. Several of its regional branches also offer Summer Field Days and winter seminars featuring a valuable blend of educational programs and trade show opportunities.

Lawn & Garden Marketing and Distribution Association (LGMDA)

This is an exciting time for the Lawn & Garden Marketing and Distribution Association, or LGMDA. The association has made significant changes based on members' input during our July meeting in Orlando, Fla.

Annual Meeting

First we moved the timing of our annual meeting from July to Jan. 13 through 15, 2005. It will be known as "The Summit." These changes were precipitated by a new dynamic in the lawn and garden industry. As you know, previously there was one hardware show in August. After the split between the American Hardware Manufacturers Association and their show company, Reed Exhibitions, there are now two hardware shows, and both will occur earlier in the year, in April and May, respectively.

Over the years, the LGMDA, for a variety of reasons, morphed into a trade show, when in reality it was a trade association. As we look back at our history, we can see clearly that the LGMDA was formed to bring people together in a casual atmosphere to permit one-on-one interaction. We have now returned to our roots.

Education

Second, we changed the content and the format of the meeting in direct response to what the members so clearly stated at the Orlando meeting. Members want practical, educational, take-home value that they can apply immediately to their own businesses. In addition, they want more direct face-to-face time to network with their peers. They want to learn what others are doing. They want to know what worked and what did not. They all crave the camaraderie of old friends and new business opportunities.

At The Summit, members will be able to contribute ideas on all aspects of the industry. It will be the premier industry event. Show information is available at www.lgmda.org.

Finally, I want to thank the board, the executive committee and the marketing committee for all of their hard work in developing an exceptionally dynamic program that will be relevant to all members' needs.

Association of Equipment Manufacturers (AEM)

The construction machinery manufacturing industry is anticipated to close out 2004 with robust growth, followed by more moderate gains in 2005, according to the just-released annual outlook forecast of the Association of Equipment Manufacturers (AEM). Gains are expected to be strongest for U.S. markets, both in 2004 and 2005.

Each year the North American-based AEM trade group polls its manufacturer members about expected sales of the construction-related machines which build and maintain America's and the world's roads, bridges, dams, houses, offices, schools and other public and private infrastructure.

Manufacturers participating in the latest AEM outlook survey expect construction equipment markets to close out 2004 with double-digit gains in the U.S. (16.1 percent) and Canada (14.3 percent) and an increase of 8.8 percent in other worldwide business.

Continued Growth Forecast

For 2005, market growth is predicted to continue but at a slower pace: an 8.4 percent increase in the U.S., a gain of 6.6 percent for Canada and a 7.0 percent jump in other worldwide markets.

"Optimism is definitely the mood as our industry continues to recover from the business slump of the past few years," stated AEM Chairman Charles Stamp, Vice President Public Affairs Worldwide for Deere & Company, Moline, Illinois.






Just as LCN predicted, the Dow fluctuated between 9,500 and 10,500 throughout 2005. Pre-election jitters and the war kept stocks and the whole economy from accelerated growth, but there was steady growth in almost every market. Construction kept the country rolling with record starts and sales throughout the year. The Landscape Communications Stock Index hit the predicted 1,500 mark in April but stayed stagnant throughout the summer. In the first 12 days from the election the LCSI has grown by more the 100 points to 1613.21. Watch the Dow hit and stay above 11,000 and the LCSI to reach above 1,700 in 2005. Source: NYSE, NASDAQ, Landscapeonline.com







Inflation is going to be the main topic of 2005. The Fed will try to curb inflation by raising interest rates by as much as one full point to 5.75%. This will continue to slow the increase in housing's appraisal value, which will be offset by higher interest payments, so housing will remain steady. LCN predicted 2004 inflation at 2.7% but as of September has averaged only 2.46%. Still, watch for inflation reaching 3.2% or better in 2005 as oil, steel, lumber and water compete as the hot commodities of 2005. Source: www.moneyfarm.com, www.inflationdata.com, www.freddiemac.com







Single-family housing has been one of the main participants in the economic recovery and should remain stable for the next few years at least. As interest rates increase, slowing the appraisal value of existing homes, fewer resales will occur opening the door for greater demand of economically priced new homes. From 09/03 to 09/04, permits for SFH's are up 10.4% and starts are up 10.4% while projects not started are up 23.6% enabling a backlog of projects. LCN predicts new SFH starts will continue to increase by 6-8% in 2005 and 2006, fueled by population growth and a lower number of existing resales. Source: US Census Bureau







Now that the baby-boomers' kids are moving to apartments and big houses mean more work, growth will occur in the multi-family housing market. As the boomers move to town homes and condos, permits for developments of 2-4 units is up by 11.7%. Added to 2003's growth of 16.8% the condo market is expanding. With some 45 million boomers coming of age, demand and growth will continue in double digits for the next several years. Still, the lion's share of the MFH market will be in the 5+ unit construction. While growth is only 4.2% for 5+ unit developments sheer numbers are 4 times that of the 2-4 unit category. Source: US Census Bureau







With the appraisal values of existing homes beginning to decline, fewer existing homes will hit the market and thus we should see small but steady growth in the renovations, replacements and additions segment. Refinanced homes poured capital into this segment resulting in strong gains throughout 2003 and 2004. As interest rates increase the motovation will shift to raising book value and improving conditions as opposed to enhancements for sale and cheap money. Watch for more essentials and less frills in the next couple of years with growth dropping from 10.6% in Q1'04 to around 4% in 2005. Source: US Census Bureau







At the recent ASLA Annual meeting LCN spoke to a landscape architect who said the greatest challenge to the highway development segment is to get Congress to release the funds for development. Now that the election is over and political maneuvering is not election-oriented, highway funds should become more accessible. During the Clinton years of ISTEA, highway development was a cornerstone of the economy. With real growth of 6.2% through Sept. '04, highway development will remain strong. When coupled with transportation spending this is the largest and strongest segment of the industry. Source: US Census Bureau







As the boomers' babies are now beginning to boom themselves watch for more demand for classroom seats across the nation. Educational development is the single largest segment of the non-residential construction industry generating more than $77 billion in put-in-place value in 2004. Public education is seeing the greatest growth at 7.2% while private development is staying about even. Overall demand should continue to increase at a 5-6% rate for at least six or seven more years, so make plans to work in this segment as much as you can. Source: US Census Bureau







Healthcare development for both the body and the soul will be strong in 2005 and 2006 as population growth drives demand in these segments. Healthcare facilities construction should end up growing by about 12.5% to a seasonally adjusted rate of $33.2 billion in 2004, with $26.5 billion being private development. This segment looks to remain healthy throughout the next several years. Religious construction will grow modestly at less than 1% in 2004 with most of the construction being new facilities rather than improvement development. Source: US Census Bureau







As grows the economy so grows commercial developments across the country. A true sign that the recovery is in full swing is real growth in this segment of the industry for the first time since Y2K. Up 4.1% for office developments and 6.8% in commercial developments, these two categories will account for more than $110 billion in put-in-place value in 2004. Even manufacturing grew by about a half a point this year. Look for steady growth for the next couple of years as job creation usually follows recovery by about three years. Source: US Census Bureau












As the travel industry continues to rebound, development of lodging facilities grew more than 22% in 2004. After dropping some 40% from an all time high of $16.3 billion in Y2K to a low of $9.9 billion in 2003, spending in this segment grew to better than $13.5 billion in 2004 and looks to grow at a double digit pace for the next three to four years. Watch for developers to group resort hotels with residential communities as destinations, complete with golf courses, strip malls and quick access to either metropolitan centers or natural resources. Source: US Census Bureau







Like virtually every category of development, the amusement and recreation segment shows steady growth in 2004, especially in the private sector. While public value of put-in-place development of things like stadiums, museums, state parks, etc., dropped by 1/2 a percent (but still accounts for more than half the categories $20.1 billion), private expenditures grew by more than 9%. As the travel industry continues to gain strength, this segment will also grow. As unemployment stays below 5.4% more discretionary funds will be available to take advantage of the American amusement industries. Source: US Census Bureau


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Laughable Predictions
"Louis Pasteur's theory of germs is ridiculous fiction."
-Pierre Pachet, professor of physiology, Toulouse, 1872

Laughable Predictions
"Stocks have reached what looks like a permanently high plateau."
-Irving Fisher, Yale University economics professor, 1929 (the year of the "crash," for those who didn't pay attention during American history class).

Laughable Predictions
"We don't like their sound, and guitar music is on the way out."
-Decca Recording's reason for not signing the Beatles to a record contract, 1962.

Laughable Predictions
"640K ought to be enough for anybody."
-Bill Gates, 1981



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