If you were expecting signs that the nation’s economy was entering - or already in - a slowdown, you wouldn’t have found them Oct. 19-22 at the Sheet Metal and Air-Conditioning Contractors’ National Association’s 65th annual convention, which was held at two resorts in the luxury Maui beachfront community of Wailea.
SMACNA officials say the event attracted a large crowd, matching if not surpassing the attendance of its 2004 event, which was held at the same location. The convention and its accompanying Oct. 21 trade show included a number of late registrations, which boosted final figures.
With the television and newspapers full of stories about the sinking U.S. economy and the final days of the 2008 presidential election, perhaps association members were looking for a chance to escape with a tax-deductable working vacation on a remote Pacific island. The association provided several educational seminars, a small trade show and entertainment by 1980s rock band Huey Lewis and the News.
Real troublesBut if it was easy to forget the mainland and the daily hassles of business, an Oct. 20 session on the future of the HVAC and sheet metal industries may have brought a dose of reality.
John L. Hughes Jr. of FMI Corp. said the results of a recent study by FMI and SMACNA’s New Horizons Foundation demonstrated attendees would be in for major changes in the next decade. By 2018, Hughes said, the building industry will be heavily focused on energy conservation and the related fields of green building and so-called sustainability.
That could mean the size of an average U.S. house will drop as homeowners value energy efficiency over luxury fixtures or square footage.
“Instead of a granite countertop, it might be a high-efficiency (HVAC) system people invest in,” Hughes said.
The world presented in “The HVAC and Sheet Metal Industry Futures Study: Industry Trends and Drivers Shaping Alternative Futures,” will create challenges for many contractors, but the best will be able to profit from the opportunities they present, he added.
The suggestion that green building is a permanent part of the construction landscape made some contractors in attendance question whether or not the movement was a fad doomed to fail, such as the formerly widespread use of subprime mortgages and the collapse of the housing market, or if the added cost of sustainable construction was simply a “tax” on businesses and builders.
Hughes disagreed, pointing out many states now require public buildings to be certified under the standards established by the U.S. Green Building Council, and some are even offering tax incentives to encourage private developers do the same. He predicted most contractors will operate in such an environment soon and said even higher green standards are likely to be required by 2018.
Population shiftsAnother change contractors, especially those who live in the Northeast and Midwest, are likely to encounter is shifting population centers. The migration south and west is expected to continue.
Growth “is not going to be where a lot of you people live,” Hughes said.
This also brought some disagreement from the audience, some of whom wondered how desert states like New Mexico, Nevada and Arizona were going to be able to sustain the number of new residents without easy access to abundant water.
Hughes did not have the answer to that question, but said no one is forecasting a shift east anytime soon.
Retrofit and service work will be an even larger percentage of contractors’ income in 10 years, especially in the residential market.
“The residential market, even when its down, is bigger than the nonresidential market,” he said.
Contractors will soon have to embrace building-information modeling or “BIM” if they haven’t already. These software programs, which allow contractors to map out duct placement and other key design elements on computer before a structure is built, are key to efficiency and profitability, Hughes said.
“(BIM) is a train rolling down the track,” he said. “If you’re not embracing it … you need to be fairly soon.”
He predicted it would become standard on all midsize and large projects by 2018.
Possibly of particular concern to SMACNA members, which typically employ Sheet Metal Workers union members, was the prediction that residential construction unions are not expected to fare very well in coming years. Already largely nonunion, even more residential construction is expected to be mostly done by nonunion firms in most parts of the country.
“It’s just been abdicated,” Hughes said of unions’ involvement in residential work.
This is expected to be true regardless of which political party controls Congress or the White House, he added.
Other predictions from the study:
• Another wave of consolidation is expected to hit. Small, niche firms and middle-size companies will be squeezed by larger players.
• Utility companies, which bought up many contracting companies in the mid- and late 1990s before finding they did not often know how to profitably run the businesses, may try again. Some equipment makers may even purchase contracting companies.
Although Hughes acknowledged, “We’re not even sure on this one,” he said if the move is successful, “there is imminent danger for the independent HVAC contractor.”
• The trend of farming out fabrication work to companies that specialize in it will continue.
Green is herePerhaps proving its endurance, green building was the focus of another Oct. 20 session, where the presenter said the time is now for HVAC and sheet metal contractors to get involved in the growing green-building movement. Those that wait risk getting left behind.
That was the opinion Jerry Yudelson delivered during “Catching the Green Wave: New Business Opportunities in Sustainable Design and Development,” which was held during SMACNA’s HVAC Contractors Forum.
Yudelson is the owner of Arizona’s Yudelson Associates and an expert in sustainable building. He gave a similar presentation in March at the Mechanical Contractors Association of America’s March meeting in California (see “Heating, cooling and counterterrorism,” May 2008 Snips).
Yudelson, a licensed professional engineer with experience in HVAC work, called non-green buildings “functionally obsolete” the day they open and “economically disadvantaged” as long as they remain standing.
It’s a market SMACNA members cannot afford to ignore, he said.
“The fastest growing segment of green construction is spec commercial development, which you would think would be the last,” Yudelson said.
For those in the audience still unconvinced that human-induced climate change is real and that green building is a fad, he cited a United Nations study that says there’s a 90 percent chance humans are causing global warming. A similar study in 2001 pegged the chances at 67 percent, Yudelson said.
Happening nowHe mentioned that 35 years ago, the scientists who first said human use of chlorofluorocarbons was eating a hole in the ozone layer were laughed at. But within 15 years, an agreement was reached to phase out their use.
Today, 1,200 publicly traded corporations issue sustainability reports, a number that is only expected to grow. Yudelson expects more than 5,000 green-themed projects will be started in 2008. And they won’t be marginally “green,” either.
“Zero net energy is going to be the dividing line in real sustainable building,” he said.
It’s an amenity Yudelson said businesses are willing to pay for. He estimated 30 percent of people would accept higher rents to work or live in a green structure, adding the current green market is worth $60 billion to $75 billion.
“What we’re finding out is green buildings have higher incomes,” he said. “People have less absenteeism, higher productivity … in these buildings.”
Yudelson listed some trends that he said are accelerating the green movement:
• High oil prices, and state and federal incentives have owners looking to save energy.
• More young people are looking to live in cities instead of the suburbs.
• Many green office projects are successful.
• Cities are starting to require new privately owned buildings to be green.
• Designers are figuring out how to make green more affordable.
• The American Society of Heating, Refrigerating and Air-Conditioning Engineers and other groups are now pushing development of energy-efficient buildings.
• Some investors are requiring green certification by the USGBC.
• The public wants green buildings.
For reprints of this article, contact Jill DeVries at (248) 244-1726 or e-mail email@example.com.
Association hands out awards at conventionFormer SMACNA President Keith Wilson can add another award to his mantle. The New Mexico resident was named the association’s Contractor of the Year.
The CEO of Albuquerque, N.M.’s Miller Bonded Inc. received the award Oct. 20 at the Sheet Metal and Air-Conditioning Contractors’ National Association’s 65th annual convention in Wailea, Hawaii.
“Keith has been heavily involved in SMACNA both at the national and local levels for many years,” said outgoing SMACNA President Ron Palmerick. “His dedication to promoting partnerships between labor and management and his vision for the future have proven invaluable.”
The award is presented each year in memory of Snips magazine founder Ed Carter and his son, Nick Carter.
Several other awards and new officers were announced at the Oct. 20 ceremony. Iowa contractor John Ilten of Ilten’s Inc. was named 2008-2009 association president. Ilten’s business was hit hard by the Midwest flooding last summer.
In his acceptance speech, Ilten told members they were “using this life-changing event as an opportunity to improve our businesses … Indeed, these are exciting and challenging times requiring aggressive goals. That is why I will rely on the cooperation of my fellow officers, the board, our staff and you - our members.”
Thomas J. Gunning, executive director of SMACNA’s Boston chapter, was given the Chapter Executive Legislative Advocate of the Year award. He has served on the association’s convention planning committee and the National Joint Adjustment Board, and has worked to raise funds for SMACNA’s political action committee.
“He has made our industry one of the most respected voices in both the Massachusetts’ and U.S. capitols, taking countless time to educate and persuade our government officials to support our industry’s position on labor-management, safety, procurement, infrastructure and a wide variety of construction issues,” Palmerick said.
Another Massachusetts resident, Dwight D. Silvia of DDS Industries Inc., received the Legislative Contractor of the Year.
“The Legislative Contractor of the Year Award is the highest legislative honor a contractor may earn within our organization and it is for Dwight’s outstanding and ongoing legislative and political activism that we honor him today,” Palmerick said.
Striker Sheet Metal Inc. President David Oschman won the Distinguished Legislative Service Award, which Palmerick called “one of the highest legislative honors a contractor may earn.”
The Chapter Executive of the Year Award was given to a New Mexico contractor, David M. McCoy, executive director of the New Mexico Sheet Metal Contractors Association. The association said McCoy played a major role in launching TradeUp New Mexico, a program that markets HVAC and sheet metal careers to young people.
SMACNA elected four members to its board of directors: William Blazvick of Royal Metal Works, Las Vegas; Richard Freeman of Stromberg Sheet Metal Works Inc., Beltsville, Md.; Richard C. Mertz of H.T. Lyons Inc., Allentown, Pa.; and Mathew Smith of Smith Heating and Air Conditioning Inc., Stockton, Calif.