2016 was a year where a more confident economy helped grow the level of roofing demand. Commercial roofing demand grew at a healthy rate nationally, with particular strength in the West and Midwest, although the third quarter did witness a breather in the pace of demand. New residential construction roofing demand has continued to pick up, although single family construction still only comprises 1.4 percent of Gross Domestic Product – below historical norms of at least 2 percent¹, indicating that there is still more new construction growth to come. This year was also characterized by large regional variations in residential reroofing. Stronger economic demand in the Southeast was complemented by large storms in the Southwest. The Northeast is still recovering from the pull-forward of demand from the storms of 2014 and the warmer winter of the past while the season got off to a late start in the Midwest. In the West, demand was impacted by Title 24 regulatory changes that mandated adoption of more reflective shingle products. Environmental laws and preferences continue to bring the roof into the environmental evaluation, whether it’s LEED^® v4 treating the roof as part of the overall structure, increasing interest in water retention systems being more closely tied to the roof, or the roof being more of a factor in resilient design. As more companies adopt environmental and energy platforms, understanding these trends is becoming much more important in the selling process.

This year highlighted the importance of easy-to-flex, next-generation supply chains. Regional variations and rapid changes in demand meant that roofing manufacturers and distributors had to respond quickly, revealing the importance of next-generation supply chains. Backlogs and delays showed that some parts of the industry have further work to do in order to systemize and expand the flexible nature of their supply chains.

Technology trends continue apace from prior years, with the continued growth of TPO in both reroof and new construction and with more property owners seeing the benefit of liquid roofing solutions. The Sunbelt especially has an opportunity to benefit from reflective roofing solutions. PVC maintained its pockets of strength and we expect it to continue to be a robust market.

Looking to 2017, there seems to be some stronger business fundamentals but there’s still some level of caution and uncertainty among businesses. We anticipate that roofing channels will avoid taking large winter inventory positions, translating into a hopefully brisker spring roofing season.

The industry will also have to address a rising cost base. Raw material prices are expected to increase in nearly every category, and labor costs are also expected to increase. One thing that did not change in 2016 was the continued concern over the availability and cost of labor in the roofing industry and construction as a whole: 76 percent of builders expected labor cost and availability problems in 2016, compared to 65 percent in 2014.² The impact, if any, of further restrictions on immigration is still to be determined, but is very unlikely to impact the supply of labor in our industry. This shortage of labor is forcing many companies to pay greater attention to training in all areas. The sheer quantity of training that needs to be done is driving increased use of virtual training solutions.

Greater consumer confidence may drive a greater appetite and preference to finance. Residential contractors are adopting financing more broadly and including it as part of every proposal, which requires training their employees to use financing successfully. At the same time, alternative forms of financing are influencing the roofing industry, such as in California where PACE financing is driving sales of products that meet the Title 24 cool roofing requirements. Financing changes are also impacting commercial roofing, where the use of solar power and tax credits can help reduce or even pay for the cost of a roof. In 2017, we expect to see the launch of finance products targeted at smaller jobs in the commercial roofing industry. As contractors navigate new financial products, they must also deal with the natural turnover of the generations and the continued emergence of the millennial generation changing their customer base. For a variety of social and financial reasons, millennials have been delaying household formation decisions that have traditionally driven house purchase and remodeling activity. For instance, in 1975, 56 percent of 30-year-olds owned a home compared to 33 percent today.³ That said, the impact of this generation is beginning to be felt and 35 percent of all recent home purchases were made by millennials.⁴ The roofing industry has started and must continue to adapt to the buying preferences of this new generation, which includes ensuring that businesses are technology friendly. Having a good technology infrastructure and a solid online presence are both essential in order to serve a generation that’s much more research-focused. Overall, focusing on the selling and customer experience becomes even more critical especially considering, across industries, customers are 16 percent less likely to switch brands when there is a good experience.⁵

The industry is also seeing the emergence of a new generation of technology as contractors experiment and develop new ways to enhance their selling, installation, and business management. Measurement and visualization apps are seeing greater adoption, and changes announced by the FAA at the end of August mean the use of drones (under prescribed conditions and subject to local ordinances) can now be used in certain circumstances. Some contractors are adopting drones as measurement tools while others are using them to enhance their selling process by making it more visual. New technology is also being applied in the field of data and analytics, such as the emergence of solutions to give contractors access to more customized weather data.

In 2017, we will continue to see the emergence of new generations impacting the roofing industry as customers, employees, or through technology. Roofing companies who can work with and absorb these new generations can look forward to a successful year.

¹Commerce Department, The Wall Street Journal

²NAHB annual survey conducted each January, U.S. Census Bureau

³John Burns Real Estate Consulting

⁴NAR

⁵MarketingProfs