We’re happy to report that all signs indicate a strong year ahead for the building materials industry. According to predictions from Mark Boud, Chief Economist for Hanley Wood’s Metrostudy, forecasts are positive, anticipating just under 1.3M new construction residential starts for 2018. There are expectations that the demand curve for new homes won’t begin to take a dip until around 2021. In the long-term, we’ll need to satisfy population growth but in the short-term, interest rates and home values will definitely play an impact on buyers’ appetites.
There’s also continued growth forecasted for the replace and remodel (R&R) segment fueled by an expected rise in mortgage rates along with the 1.8–2 million housing starts that happened each year in the early 2000s that are now in need of improvements. And, as value and inflation increase, people are more likely to stay put. As a result, rental rates are expected to rise, particularly in big markets experiencing current hot streaks. Eventually, these markets should experience a slow down with more moderate markets beginning to surface as the big gainers.
Multifamily will remain nearly one-third of the total residential starts. It’s a segment that isn’t getting a lot of attention from traditional building product manufacturers due to its historically “lower profit” opportunity. But, we urge you to take a look at some of the new urban designs, which indicate the products and solutions consumers expect today are dramatically different (and higher value) than just a few years ago.
IBS Show Maintains Momentum
The NAHB International Builders’ Show is the official start of a new year in the building materials world. And with a busy and hectic 2018 IBS behind us, we’re definitely inspired and excited about the possibilities ahead. Below, we highlight a few things that grabbed the attention of our team while touring the show, meeting with manufacturers, service providers and talking with builders, architects and contractors.
Tech at Every Turn
There’s no denying that technology has become an integral part of the products used to build today’s homes. This is nothing new. That said, connectivity and the Internet of Things (IoT) seem to have moved from trend to mainstream.
From mirrors with built-in Amazon Alexa capabilities, to platforms and applications that can plan and manage every aspect of the home, technology is clearly becoming engrained into the industry at a faster-than-ever pace.
Even the engagement tools exhibitors used to show off their products and keep attendees connected to their brands beyond the booth were elevated to new heights. This year’s show demonstrated that manufacturers are embracing technology big time. The only question left is, how will all these technologies in the home connect to each other to create a great user experience?
Bigger and Bolder Designs Open Up Small Spaces
With the actual square footage of homes trending downwards (smaller spaces becoming more and more desirable), manufacturers are giving builders plenty of options to help maximize the spaces they create. Bigger openings, taller features and designs that stretch the eye were present everywhere.
It seemed as though window and door manufacturers were trying to out-do one another with larger than life sliders and glazings to let the outside in. And if they weren’t showing off enormous pieces of moving glass, they were touting bold designs and pops of color.
The bigger and bolder theme was also consistent across interior products like cabinetry and surface material brands, which showcased wood grains and striking finishes to exaggerate lines and promote the feeling of limitless space and design.
Educational Sessions Full of Optimism and Change
IBS has become so much more than booth graphics and product displays. In fact, this year, after talking with attendees, arguably the most valuable aspect of attending the show revolves around experiencing the education, which includes presentations, special events and guided discussions.
Owens Corning, during its first-ever CoLab building science learning sessions, offered builders and contractors new ideas and informative discussion opportunities on topics ranging from customer experience to optimizing profitability.
Ken Manisco, Senior Cost Control Consultant at Build Intelligent, attended one of the CoLab sessions called Creating a Killer Customer Experience presented by our own Bill Rossiter, and he appreciated the perspective on the building materials industry from a leader in the marketing world.
I do believe that the experience matters and the customer, whether it's online or in person, has to have a good experience with your brand so they come back to you
Alex Krowka, Energy Analyst and Training Coordinator at Energetics, also attended Bill’s session and said, “It seems like a lot of builders are just focused on cost, cost, cost. When in reality, the most important factor is the overall value of the customer experience.”
“If they have a happy experience in the home that you’ve built, they’ll turn around and refer you to their friends,” he added.
KBIS Offers Up Grand Displays and Experiences
The KBIS exhibitors kick most of the IBS exhibitors’ collective butts when it comes to booth experiences, proving the difference in target core client and attendee, i.e., designer vs. production-focused builder.
Overall, Kohler and Miele took the cake for best overall booths on the KBIS show floor, both providing immersive, sensory experiences that were simply hard to ignore. The only downfall from Kohler is the suspected headaches experienced by their surrounding exhibitors from the thumping tech beat. But overall, the tour, lighting, sound, booth and staffing was incredible. That’s a great example of a killer customer experience. And Fabuwood showcased its new branding in a dynamic booth that won the best booth of KBIS.
Overall, at both shows, booths were enhanced from previous years. Plenty of big spaces with intriguing designs and messaging. The biggest takeaway with booth designs was the conscious stream of thought – telling a more cohesive brand story throughout the booths. We also saw more hands on experiences, allowing attendees to interact with the products.
Keep Ahead of the Pack
There is no question that competition in the building materials industry is getting tougher. We talked to several companies and PE firms looking to make acquisitions and realized that there is a lot of cash available. As large to small scale merger and acquisition (M&A) trends continue, the wins and losses of key accounts and key geographies will, no doubt, be bigger and more volatile.
And all this inertia is building fast as we hit stride for a possible cyclical dip around 2020. It’s now more important than ever for companies to be focused on long-term brand equity, tuning into the changing channel and customer needs.
We're Number 1!
Is disruption coming? Well, of the top five US industries named as “ripe for disruption” in a 2016 Fortune magazine study, guess who came in at number 1? You guessed it — the construction industry (by the way, real estate was #4).
A great place to start is by committing to creating an exceptional customer experience and rewarding loyalty with differentiating value. A recent Harris Poll indicated that 55% of customers place more value on the experience they receive over the product itself. For the brand leaders in the building materials sector, this will likely mean juggling even more priorities. It will also force you to stop doing things you thought were important.
We understand that disruption is here and that unique opportunities lie within creating killer customer experiences. We’ve tackled these same challenges with other major brands. That’s why we can help you distill your priorities and messages into a unique value proposition and brand initiatives that will drive actions of your target audiences to your brand. Find out how we can help.
Based on the energy and conversations coming out of some of the industry’s key shows, there’s a lot to look forward to for the rest of the year. First, we look at how to prepare for the inevitable ups and downs in the marketplace.