Volume 40, Issue 10 October 2005
Midwest Market Update
Glass Professionals in the Midwest Seem to Agree:
Overall, Business is Good
by Peggy Georgi
Charlie Condit, vice president of construction for Thomas Glass Co. in Columbus, Ohio, has seen or experienced just about everything imaginable in his more than 33 years in the industry. But, Condit prefers times like these where there is an abundance of opportunity close to home.
“Business has been good of late,” Condit says. “We’ve just come off a low-margin, recessionary down cycle. The cycle is on the upswing with increasing demand being seen in the public arena and the private markets are starting to rebound.”
Condit oversees the company’s contract glazing division that handles large, complicated contract work. Thomas Glass is a mid-sized glazing contractor that has enjoyed steady success over the past three decades. “Our primary market is Columbus and the greater central Ohio area,” explains Condit. “During down cycles we are prepared to expand our area of operation and we have. During the up cycles, like now, there are more opportunities presented to us and more work closer to home.”
“While we have had our share of challenges over the past two decades, business has been fairly steady recently and, in fact, it’s pretty darn good right now,” says Jim Conley of Accent Glass & Mirror, a small glass company also in Columbus, which focuses on renovation and rehabilitation throughout the state of Ohio and contiguous states.
“The first and second quarter of this year were soft due to a wet winter and spring,” says Conley. “But the third quarter has picked up immensely and I expect the fourth quarter to end strong for us based on the fact that we have a large backlog of work that needs to be completed by the end of the year.”
He continues, “Work was slow up to 9/11 and when that hit, the bottom fell out of the market completely.”
Conley credits a number of factors for his company’s survival and prosperity even during such lean times. First, he and his partner, Lenny Doyle, are working owners and when they fall upon hard times, they can cut back on the workforce and still maintain until conditions improve to bring on additional help. Second, the city of Columbus is traditionally a strong market. As a large educational community with a viable downtown business district, the area seems to weather recessionary issues better than most.
Business in the Midwest has also been good for Harmon Inc., one of the country’s largest contract glazing companies. Doug Renninger, sales manager for the company’s Ohio, western Pennsylvania, Tennessee, Kentucky and southern Indiana territory, describes the availability of work in the Midwest as “steady.” This steady flow of business, he says, has enabled his territory to grow from Harmon’s smallest division to one of its largest.
“The Midwest market is steady and getting stronger and has definitely picked up over the past year,” says Steve Gernes, sales manager for Enclos Corp., another large glazing contractor based in Eagan, Minn. “There is a lot of work going on in the Midwest and while we are not as busy as we would like to be I have a sense that will be changing. We have enjoyed much success in our east and west coast markets, but there is a great deal of opportunity across the board in the Midwest that we want to vie for,” says Gernes. “We are re-emphasizing our commitment in the Midwest market as a specialty subcontractor in the design, engineering, fabrication and installation of a building’s exterior wall system. There was a time we tried to be everything to everyone and we’ve come full circle to keep our focus on large scale, high-end custom, curtainwall projects (i.e. high rise buildings, condominiums, office towers, hospitals and universities).”
While companies in the Midwest are enjoying a steady surge of business, with the increase in work comes an increase in competition, as well.
Steve Barber, vice president of operations for Arcadia Products, a privately-held company serving the greater Chicagoland market for more than two decades, says he has seen this take effect.
“We are seeing new faces entering our market or existing companies that are coming in from other areas of all sizes,” Barber explains. “There is a fair amount of growth in the institutional and higher education arenas, but we are still waiting for the suburban office market to rebound after a lull over the past five years. The lackluster performance in this market stems from high vacancy rates, excess capacity and potential that remains untapped from the client-specific market of the early 1990s. I think that is going to be changing in the near future as communities work to revitalize these segments of their communities.
“What remains a constant,” Barber continues, “ is price pressure in glass prices as well as other products utilized on the job in our market. While there continues to be more opportunities as the market grows, the pricing has not reflected the growth. We must be very conscientious to be efficient and lean in every aspect of our operation to produce a higher profit margin.”
Slow Pay, Labor Shortages
Despite the many ups Midwest glass companies are enjoying, there are still challenges to be faced each day.
One problem faced by Conley and many of his counterparts is slow payment by general contractors and owners after the work is completed. Conley says legislation has yielded some improvement in speeding up the process. However, there is simply not enough enforcement and payment tends to remain slow.
“To combat this problem, we screen potential customers carefully and try to be selective,” says Conley. “This isn’t foolproof but it does cut down on time and energy spent collecting receivables. Other challenges here are poor margins, architects holding their specifications and being misled by skewed data and untrained labor—but that’s not news to anyone in this business in our area or across the country.”
Finding and keeping good employees certainly has been a long-time challenge for glazing contractors, nationwide. It continues to be an issue for companies in the Midwest.
“An issue that has plagued our industry for years, and one that I see as our single biggest problem, is the shortage of qualified and capable young people entering our industry in both management and the field,” says Condit. “This is a dangerous issue for our industry and could be a very serious problem in the long run. As I see it right now, the biggest potential in terms of a workforce in our industry is coming from outside our country.”
Conley agrees. “Finding good people is a constant challenge,” he says. “Ours is a specialized trade and the people aren’t there now nor are they being trained to enter this field in the future.”
“We are a people-poor industry,” adds Renninger. “Good people are really hard to find, and when you do find them you want to hang on to them.”
From Concept to Reality
“Another issue that can impact the bottom line is the time span between the job concept and the job reality,” adds Gernes. “This can be frustrating, especially when you invest so much time, resources and energy into a potential project and then the job does not materialize—sometimes very late in the cycle. Being in a position to be more selective in terms of projects and serving your long-standing customers for the higher likelihood of repeat jobs can significantly reduce problems associated with this issue.”
“One area we are bracing for is the increase in fuel charges. This is taking place across the entire spectrum of the energy market,” says Conley. “For example, gasoline prices have hit record highs, natural gas is expected to jump an estimated 70 percent in this part of the country and costs associated with producing electricity are rising as well. This impacts production and ultimately drives up our costs for materials, (i.e., glass, aluminum, etc.). We are seeing these increases in every project across the board. Right now we are absorbing the costs because the work is under contract. We’ll have no choice but to pass these costs along to our customers as new contracts arise.”
Gernes agrees. “With the costs of energy on the rise, fuel surcharges are simply becoming a given in our line of work and we have to pass those costs along to our customers,” he adds.
“With the impact of the two major hurricanes along our Gulf Coast, I anticipate these costs rising even more.”
Up with the Trends
Midwest glass companies are also staying up-to-date with the changes that are shaping the industry.
“In terms of area trends, we are seeing a higher demand for energy efficient and better performing products, such as low-E glass,” says Conley. “Other products increasing in demand in our area are sunshades, light shelves and thermally improved systems. With the dramatic increase in energy costs predicted for this winter, I expect the trend of more energy efficient and “smart” glass products to continue well into the future.”
Condit says another trend he expects to see impact the industry and one that people can expect to read more about is the Leadership in Energy and Environmental Design (LEED) Green Building Rating System. This is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings.
“This environmentally-friendly trend is catching on across the nation and allows representatives in our industry to give something back to the environment through the conservation of resources in the design and construction of a building,” says Condit. “We have recently completed our first LEED project locally and expect to be involved in more of these types of ‘green’ projects in the future.”
Urban renewal and utilization of existing facilities are also on the rise.
“With many cities across the Midwest working to curb urban sprawl, local governments are offering incentives and encouraging the redevelopment of existing properties and older buildings in urban areas into viable living spaces (apartments and condos),” explains Conley.
“That alone is driving up this segment of construction in our market.”
Renninger agrees. “Our fastest growing segment is the renovation and rehabilitation of older structures, especially in our Cleveland and Cincinnati markets,” he says. “Most of us in this industry could capitalize on the building boom of the 1960s and 1970s. With the average life span of a building being around 30 years, many structures in and around our urban areas are in need of renovation with new, energy-efficient building products. Expect to see more opportunity in this segment across the board.”
Ratings and Certifications
Barber says the National Fenestration Rating Council’s (NFRC) push to develop a certification for the non-residential industry is a concern for him (see related article in the September 2005 USGlass, page 22).
“While we agree in philosophy that a process is important and it should reflect the needs of the industry overall, we must approach this with caution so that this new rating or process does not result in a burden to businesses in terms of added costs with only marginal benefits to building owners. We are involved with the Glass Association of North America and are working closely with this association on the issue; it is of high priority to us personally.”
Diversification is Key
Almost all of the companies interviewed for this article believe that diversification is a key aspect for any business to stay viable and competitive. Accent Glass & Mirror diversified its service segment to include replacements, door and storefront repairs and is looking into the possibility of incorporating panel systems into its operation. Thomas Glass added an automatic door company to its operations.
Paul Nesses, owner of Paul’s Glass, a small family-owned and operated glass business in Greenwood, Ind., says there have been dozens of glass businesses open and close their doors in the greater Greenwood area during the past 18 years, yet he has survived. “While we have built our business on excellent service and competitive prices, sometimes that just isn’t enough to pay the bills and keep your doors open,” explains Nesses. “Without a doubt, diversification has been the key to our success.
“The small guy definitely feels it when there is any shift in the market or when the economy gets shaky,” continues Nesses. “That’s why it is essential that we keep a lean and well trained workforce and offer a mix of products and services across all segments of this industry.” While he admits there have been times when he wasn’t sure where his next job would come from, now isn’t one of them. There seems to be an abundance of work these days especially in the government sector.
“We are just entering the flat glass market,” notes Nesses. “While it is extremely competitive, if you get the job you have a better chance of making a higher profit margin than in other segments of the glass industry.”
“Our customer base is diverse and we have a presence across the board in the business—office, medical, institutional, government, educational, private and public sectors,” says Barber. “It is this diversity that has, in part, helped us to weather the various ups and downs in our industry over the years. The majority of our jobs are negotiated in the commercial construction sector. As a union, mid-sized subcontractor company employing around 40 individuals, we do have to work hard for each and every job and, each and every job is important to our viability.”
Gernes agrees. “While the competition in our end of the industry is fairly static, it remains extremely competitive,” he says. “With owners and developers demanding lower costs, this is driving the industry to develop new and different supply chains for lower cost products and we have to think and work more efficiently than ever. Despite the fact that business is on the rise, we still have to get out and beat the bushes like everyone else.”
Peggy Georgi is a contributing writer for USGlass magazine.
© Copyright 2005 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.