As the housing market goes from boom to bust, business is anything but usual.
In spite of this housing slump, designers and architects are using more wood products and as our infrastructure continue to deteriorate, the demand for construction remains strong, says Richard Ungerbuehler Sr., president, Federal Millwork Corp., Fort Lauderdale, Fla. and current president of the Architectural Woodworking Institute.
"The millwork industry is in a state of flux and those who make the proper adjustments will not only survive, but prosper," says Ungerbuehler. "We are seeing firms geared to supplying the housing segment with cabinetry moving into the traditional custom' market, which previously had been the core business of our member firms."
While some parts of the United States are unaffected by the housing decline, sub-prime interest rates, foreclosures, tightening money supply and imports have forced some millwork companies to close their doors, comments Ungerbuehler.
"The commercial market will continue to be strong because of a constant need for secondary and post-education construction, hospitals and nursing homes," says Ungerbuehler. "The high-end residential market also remains strong. We are seeing homes with 6,500 square feet up to 65,000 square feet."
"There are some indications that 2007 may end much as it began, stronger because of a healthy backlog of work at the front end and an increasing backlog as the year ends," says Ungerbuehler. "I don't foresee the end of the downward spiral in housing until as early as the fourth quarter of 2008."
As imported millwork and cabinetry increases from Europe and Asia, firms need to find a niche market, build relationships, increase production and shorten lead times, comments Ungerbuehler.
New building codes require more attention to safety, which is translating into innovations in construction techniques, new types of materials, and a more sophisticated team effort between the general contractor, his subcontractors and their suppliers, comments Ungerbuehler. "Firms that are able to build relationships with their contracting partners will be the winners in the days and years ahead."
Residential millwork outlook
"Because of the housing glut, residential will lag commercial levels for a while," says Whitney Coombs co-owner and president, Ivan C. Dutterer Inc., Hanover, Pa., a high-end millwork company. "The residential market will be very flat into 2009. We haven't been affected yet, but I suspect before 2009 we'll feel it like everyone else."
Right now Ivan C. Dutterer is doing more remodeling and additions, according to Coombs, noting that "more expensive jumbo loans and slow housing starts may dampen the new construction market."
While high-end demand remains strong, lower to middle end non-custom work is weak. "Anything that can be mass-produced is susceptible to offshore production," says Coombs. "The more of a unique niche a manufacturer is filling, the more they're protected for the moment. As long as we can provide the custom work people want and in the timeframe they want it, we have a competitive advantage over the offshore markets."
Besides a slumping housing market, Coombs is having trouble obtaining certain lumber species such as mahogany and mahogany replacements.
According to Coombs, as the residential side slows, more companies are moving into other industry segments, such as commercial millwork and store fixtures.
Commercial millwork outlook
Commercial millwork is booming in Las Vegas and Phoenix, but if you live in the upper Midwest the industry is as cold as a Minnesota winter.
"The residential side had a 10 percent decrease in 2007 and many are predicting an 18 percent decrease in 2008," says Marc Sanderson, owner and president, Wilkie Sanderson, Sauk Rapids, Minn., a commercial millwork company. "It's not that hard to find out what is publicly bid for commercial projects. General contractors, for the most part, choose a firm based on price. It's easy for a residential firm to move into another market as there are declines."
"I'm concerned with what's going to happen in the next year or two," says Sanderson. "I wish I had a crystal ball. It's not clear which way we're going to fall on the fence."
To be as recession resistant as possible, Sanderson is diversifying into other markets. "We've been gearing ourselves so geography is not a part of our industry and for most millworkers that defines who you are," says Sanderson. "We can serve an area bigger than 90 miles from our facility."
Wilkie Sanderson recently completed a stadium in the Kansas City area and is bidding on other stadium projects around the country. "Now that we have one under our belt, we are refining processes and hope to make it our niche," says Sanderson.
"Companies that can chase the cost game and (become) lean will excel," says Sanderson. "The firms that still do things the way they did 10 years ago will be hurting."
Have something to say? Share your thoughts with us in the comments below.