President's
Message

The Calendar Changed, Should Your Business Change Too?

In the last four years, the world of construction has made significant shifts in several areas. The economy is a prevalent concern for businesses, households and government. Finite natural resources are more costly than ever before, and the population is shifting — away from the Baby Boomers and to Generations X and Y. In fact, by 2015, these two generations will hold the majority of the consumer spending influence, as 10,000 Baby Boomers retire every day.

These are just a few of the changes that will continue to affect the construction industry, and it is up to us, as business owners, to think about how we prepare for them.

In the residential market, today's young adults are witnessing their parents (and others) being held captive by their mortgages. Hard-working families chased the American Dream of homeownership and took on big mortgages with small down payments; now these families are finding themselves in upside-down mortgages. This prevents them from selling their homes and moving to areas where better-paying jobs are available.

What does this mean for the construction industry? Young adults are steering away from single-family homes and instead are opting for multi-family homes, as evident in the double-digit increases to the multi-family residential market. It appears as though their "American Dream" looks much different than their parents' dream did, and only time will tell whether or not this is a long-term trend.

To compound the residential market issue, during the past decade, housing was overbuilt and many of those houses were sold to people who weren't able to afford them — leading to an overabundance of foreclosures. By some estimates, it will take banks between 8 and 10 years to unload foreclosed homes (or homes that should be foreclosed on) at the current rate in certain markets.

With all of these realities in the residential arena, we need to prepare for the types and locations of projects we, as businesses in the construction industry, take on in the future. What relationships or skills do we need to be building? How will our mix of equipment need to change?

We are seeing the effect of a changing world in the commercial sector, too. Every year, more and more people are shopping online (a 15% increase in 2011) as opposed to brick-and-mortar retail shops. What does that mean for the future of new commercial construction, and how might those less-than-ideal locations be transformed into other usable and desirable venues? We are already seeing early signs of this with golf courses — the hot building trend of the 1990s. Today, once-trendy golf courses are being looked at for alternative development purposes. Could the same thing happen in the commercial sector?

Similarly, the amount of office space needed may grow at a slower pace as more people are telecommuting, office sharing and freelancing from their homes. Thanks to technology, these new trends could also impact how quickly office vacancy rates return to normal.

As government agencies continue to be strapped fiscally, so too will publicly funded projects. Whether it is public highway projects, higher education or other subsidized projects (such as solar or conservation), those projects depend heavily on federal subsidies — which simply aren't readily available anymore. As we move toward the future, how will the construction industry confront the continued necessity for those projects, yet under different funding arrangements? Many other countries have already explored and tested various funding and revenue-generating arrangements that need to be considered here in the U.S. as part of a long-term solution.

Finally, there is the business consolidation movement that has led to a dramatic shift in what construction clients "look like." Instead of working mostly for larger developers and owners, many contractors now find themselves working with a team of consultants who represent an investment group or an individual landowner.

Although these may not be the most pressing issues our industry is facing in this first quarter of 2012, they are trends that we must be thinking about and taking appropriate measures to plan accordingly.

Brubacher Excavating, Inc. continues to develop a diversified business model. Our mission is to ensure that the relationships, skills and competencies we are developing in 2012 will meet the changing needs of our society in years ahead. We believe construction and rehabilitation projects that conserve resources while improving the quality of life will provide excellent opportunities for us in the coming years.