Roofing Contractor's State of the Industry Report and Survey 2019
Roofing Contractors Continue to Ride the Positive Economic Wave Into Prosperity and Look Toward Innovation to Ease Workforce Issues
The beginning of a new year usually brings about the opportunity to take stock in and explore the factors — internal and external — that impacted your business the previous year, and perhaps set the stage for progress in the year to come. The editors at Roofing Contractor have been doing the same for a decade and continue the tradition for 2019 with its 11th annual State of the Industry Report.
As in past years, the report is based upon data collected from roofing contractors and other industry professionals that participated in our annual survey, furnished by Clear Seas Research.
Clear Seas Research is the research wing of BNP Media, RC’s parent company — and it provided participants of this year’s web-based survey with a $5 gift card and entrance into a random drawing for a $100 gift card. The survey targeted residential and commercial roofing contractors from around the United States and circulated between Oct. 4-17, 2018. Respondents were roofing professionals that subscribe to RC.
The survey’s mission was to help identify some of the challenges and successes of the past year, while also putting into perspective the overall optimism across most segments of the industry. Specifically in 2018, roofing contractors indicated that they generally felt good about the state of the roofing industry since the economy continued showing signs of progress as highly anticipated changes to federal regulations and unprecedented tax cuts under the new presidential administration settled in.
The survey was designed to identify current issues and future trends that will impact the industry both in the short- and long-term. To do so, survey designers set out to evaluate roofing sales trends; sales revenue attributed to roofing product categories; workforce and labor issues ranging from recruitment and employee training, and professional certification efforts to the use of subcontractors. We also asked industry leaders about the volatile storm season and wildfires out west, as well as overall industry challenges and what new technologies are making a difference in their day-to-day operations.
As in previous State of the Industry reports, the majority of survey respondents identified themselves as corporate leaders or members of executive management in commercial or residential roofing companies. The vast majority (67 percent) indicated they have purchasing power. Their average age was about 51, and the majority had between 11 and 30 years of experience in the industry.
Roughly 61 percent of this year’s respondents reported residential projects as the majority of their total business revenue, with residential replacement leading the way. Commercial projects generated nearly 40 percent of respondent’s total revenue, with roof replacement slightly edging out repairs, and accounting for double the percentage of new construction.
Similar to 2018’s survey and report, roofing contractors from all corners of the country said they still felt good about the overall state of roofing in terms of sales, in spite of some serious, and still unresolved issues that have both business and broad social impact. The lack of a clear direction from Capitol Hill on improving legal and illegal immigration policies continues to have an impact on an available pool of workers, and contractors also said they’re being pinched by increased labor costs and regulation.
Specifically on the commercial side of the industry, tax cuts were leading to capital improvements, and with key economic indicators like interest rates and unemployment remaining relatively low through the first half of 2018, roofing contractors said they were keeping busy and projecting backlogs well into 2019.
“Most of the roofing contractors I’ve talked to around the country believe the state of the industry is pretty good right now,” said Reid Ribble, CEO of the National Roofing Contractors Association (NRCA). “Everyone in the supply chain is doing well and making money. But the number one thing I still hear about is that workforce continues to be a nagging issue.”
The NRCA has some strategies that will launch this year to help alleviate the workforce problem. Manufacturers are responding proactively as well, and remain focused on developing products and techniques that improve accuracy and efficiency on the jobsite. Both are creating a sense of confidence from coast to coast that the industry is making progress in redefining what a roofer is and the public’s perception when measured against the other skilled trades.
“The tax cuts along with strong consumer confidence has our projections very strong,” said Josh Sparks, owner Infinity Exteriors LLC in Waukesha, Wis. “We will be expanding into new markets and strengthening the hold we have here in the Milwaukee metro area with strong marketing and innovation investments.”
Among them are a new custom estimation app that allows for more precise bidding, he added.
The confidence in the road ahead was demonstrated further by some major, potentially industry-changing mergers and acquisitions. From mid-size roofing contractors to giants like Flynn, companies began to solidify their market positions or expand into new ones altogether. Some of the larger roofing companies also were attractive targets. Many were surprised to see the acquisition of industry giant Tecta America by Toronto-based Altas Partners, and topping the year off was the announcement of rapidly growing North American Roofing’s sale to an Illinois private equity firm. The significance of two of the top five roofing firms on RC’s annual Top 100 Roofing Contractors list wasn’t lost on industry veteran Trent Cotney, of Cotney Construction Law. He also said the climate may provide some opportunities for roofers looking to make the right move at the right time.
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“Roofing company owners need to remain in the loop on the costs and benefits related to both targeting and being the target of propositions to combine or sell their roofing companies,” Cotney wrote in this month’s RC (see page 26).
As Cotney notes in his column and others pointed out in their survey responses, the economy is expected to slow by year’s end, making it important to prepare now and try and set oneself up for success if the next downturn begins.
“There’s a great sense of optimism right now,” Ribble told the audience of about 500 roofing contractors and industry professions at RC’s Best of Success in Dallas. “We collectively, as an industry, have an opportunity to seize this moment, if we’re willing to seize it.”
Even the experts agree that the pace of overall construction, already showing signs of slowing over the past few months, will continue to lose momentum in 2019. The larger culprits are anticipated housing shortfalls and a continued shortage of skilled workers to complete jobs while there’s still an appetite in the market for capital improvements.
Commercial roofing contractors that can find, train and retain workers should continue to flourish as the U.S. demand for commercial roofing is expected to grow 1.6 percent per year over the next several years, which experts say could be valued as high as $8 billion.
Housing starts for 2019 are expected to rise only 0.2 percent this year to $808.3 billion, according to Dodge Data & Analytics’ 2019 Construction Outlook. Commodity prices also appear to be taking their toll. Prices in construction in general rose 6.5 percent in the first three quarters of 2018, that’s nearly double the overall 3.6 percent surge experienced in 2017.
Metal accounts for the largest component of the cost increase due to the Trump administration’s tariffs imposed last June on steel (25 percent) and aluminum (10 percent) on Canada, Mexico and the European Union.
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The impact of overall economic conditions on residential roofing depends on who you ask.
Dodge Data reported that it expects housing to drop about 2 percent overall in 2019, with multifamily housing dropping 6 percent and single family construction staying flat. The National Association of Home Builders (NAHB), however, predicts single-family housing starts will continue to rise in 2019, reaching close to a million starts — a 4.7 percent increase from 2018. The NAHB expects that trend to continue into 2020. Multifamily housing starts are expected to rise more than 7 percent last year, but should see a downturn over the next two years that combined could dip as much as 5 percent.
Major manufacturers are staying optimistic, but realistic.
“Overall, we expect the market will remain strong but flat over the next few years,” said Scott Campbell, director of U.S. field sales for IKO. “Because the industry is not overbuilt like it was in the 2008 recession, there’s still good opportunity for growth, and we don’t anticipate seeing the market pull back like we did during the previous recession.”
IKO put that cautious optimism to the test by marking a milestone in 2018 with the opening of its fifth roofing shingle plant in the U.S. located in Hillsboro, Texas. The 250,000-square foot, state-of-the-art facility was built in response to industry demand and for strategic vertical integration in the asphalt roofing market. Though 2018’s hail-storm season in the Midwest was not as strong as previous years, the strength and impact of multiple hurricanes in the Southeast may boost demand for roofing this year and even in 2020.
The lull in storms left some roofing contractors down in sales, while competitors with diversified services and grassroots marketing found ways to flourish.
“Here in the Midwest the roofing industry is heavily driven by hail storms,” said Jason Quillman, owner of XteriorPRO, in O’Fallon, Mo. “However, our company does not rely upon the storms as heavily as our competitors due to the fact that we run our company and market ourselves as a retail operation versus a restoration business model. It helps us build value with our potential clients and maintain higher than average profit margins.”
Despite some perceived challenges brought about by the hurricanes, wildfires and other severe weather that created untimely demand, 2018 was also a good year for distribution. Using their networks of warehousing space and logistical knowhow to move product rapidly in response to volatile market conditions, companies like Beacon Roofing Supply, SRS Distribution Inc., and industry giant ABC Supply Inc. continued to grow and solidify market presence.
Though much of the activity in 2018 went along with projections, officials said there were some surprises, as it’s difficult to accurately predict how quickly demand will slow after a storm in some areas and pick up quickly in others.
“There were geographic areas of weaker demand, but they were largely explained by tough comparisons to weather related shipments in prior years,” explained Mike Jost, ABC’s COO. “Some of these areas, combined with an inflationary cost and sell environment, did create challenges. But we are happy with the outcome and look forward to going into 2019 with some good momentum.”
That momentum is expected to carry over well into this year’s sales cycle, survey data showed. Two-thirds of all respondents said they expect sales growth this year and into the next three years. Roughly 60 percent of residential roofing contractors indicated they expected sales to grow through 2022 and more than half anticipated growth this year alone. The projections were nearly identical among commercial roofing contractors (59 percent and 53 percent, respectively).
Among residential contractors, steep-slope asphalt shingles remained the top product used by roughly 71 percent of all respondents. Those respondents also said shingles comprised of about 30 percent of their overall sales revenue. That data validates the perception that shingles are still the go-to product in the residential sector, but two key trends emerged in 2018 that are giving industry observers some pause.
First, single family home construction growth slowed in the second half of 2018, impacting the overall shingle demand. By the third quarter, overall shingle shipments across the country slowed by 6 percent from 2017, according to the Asphalt Roofing Manufacturer’s Association (ARMA). After experiencing growth in Q2, the drop became an ominous sign that roofing distributors and manufacturers continue to watch closely.
But no one is ready to push the panic button.
Jost said his company recognized a growing emphasis on products with vibrant colors and versatile architectural looks. More squares of SBS modified shingles are selling as manufacturers and insurers continue to emphasize their use.
Data collected by ARMA also verifies that trend, though Q4 numbers were not available at press time.
“We continue to see asphalt roofing perform strongly for both steep-slope and low-slope,” said Reed Hitchcock, ARMA’s executive vice president. “While the third quarter was off from the prior year, on an annualized basis we see an increase in mod bits and shingles a lot closer to even.”
The other trend is the continuing emergence of metal roofing, particularly in the residential sector.
While remaining focused on asphalt roofing, company officials at IKO also saw the opportunity in the metal market. Overall, Campbell said the company experienced roughly a 6 to 7 percent drop in roofing and reroofing demand across the country last year. Last November, the company announced the acquisition of the Roof Tile Group for $39 million to try and advance IKO’s presence in the North American metal roofing market.
“We’re seeing success in this market and saw a good opportunity to expand our current business model into metal roofing (here),” said Jeff Williams, brand director for IKO’s North American operations.
“One of IKO’s core values is agility, and we’re thankful we were able to move quickly on this viable investment and expansion into the metal roofing industry in North America as a complement to our other roofing offerings.”
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More than half of survey respondents indicated residential metal roofing sales increased in 2018, and even more (57 percent) said they expected sales to increase in 2019.
That was little surprise to Renee Ramey, executive director of the Metal Roofing Alliance (MRA). The organization proactively tried to capture the urgency of 2018’s major weather events to help spread awareness of metal roofing’s long-term benefits.
“The need for improved building standards and practices literally hit home this past year, with metal roofing in the spotlight not only for long-lasting performance, but for being able to withstand severe conditions,” Ramey explained.
Despite any expected economic slowdown in the year ahead, Ramey said she’s confident that plenty of homeowners will still be willing to invest in high-quality products that protect their properties.
Boral Roofing is also banking on that sentiment, adding a stone-coated steel product to its lineup in 2018. Company officials said they experienced significant pressure caused by demand in storm-ravaged areas like the Southeast, Rocky Mountains, Texas and California that are trying to recover.
“Boral Roofing is taking strategic steps to ensure we can meet the increased demand in those areas, as well as throughout the nation,” said Marketing Director Ann Iten. “We are putting the customer first in every decision and step of the way.”
That includes the launch of the company’s MyBORAL partner portal as an efficient tool to help in streamlining the supply chain cycle, and it’s revamped website designed for contractors, builders, architects, homeowners and remodelers.
As noted in RC’s Commercial Roofing Trends Report, roofing sales validated the anecdotal evidence that the market and appetite for roofing solutions was strong all year. And expectations are positive for the foreseeable future.
Nearly two-thirds of overall survey respondents said they experienced sales growth in 2018, and more than half expected greater growth this year. At least two-thirds of roofers said they expect sales to continuously improve over the next three years, with the vast majority (78 percent) indicating that commercial roofing sales should continue to increase into 2021.
The vast majority of respondents (88 percent) said their company is involved with single-ply roofing, followed by metal (82 percent) and then coatings (67 percent). On average, 42 percent of overall sales revenue is generated by single-ply roofing, while metal and coatings together account for a quarter of overall sales revenue.
Sales of single-ply roofing and metal roofing increased again in 2018, and that trend is expected to continue. Nearly three-quarters (73 percent) of respondents said they expected to see single-ply grow in 2019, followed by coatings (45 percent) and metal (36 percent) — both again climbed toward the top of commercial roofing products in demand for the second-straight year of RC’s survey.
Manufacturers are taking note and are planning for an increased presence of metal roofing in the market.
“We made many strides in 2018 with new fastener designs for hurricane prone regions, and have adjusted current products to help meet new codes for higher wind uplift/corrosion conditions that will carry over beyond 2019,” said Eric Velliquette, vice president of sales and marketing for Lakeside Construction Fasteners.
“The fasteners used 15 years ago and now today will probably not be the same fasteners-foam products used in future metal buildings,” said Velliquette. “(We) recognize these developments over the past five years and continue to service this new demand.”
Metal’s increased popularity could also have a favorable impact on the sprayfoam segment of the industry, officials said.
“Sprayfoam sees this growth as a boon for the industry because there are frankly very few substitutes that can work to insulate metal roofs and buildings effectively,” explained Kurt Riesenberg, executive director of the Spray Polyurethane Foam Alliance (SPFA). “It is, however, important to do this correctly.”
To reinforce Riesenberg’s point, the SPFA made several technical documents available on its website, and continues to improve on its own certification program, implemented in 2013. Expected later this year is a new certification for an SPF Consultant, currently under development.
When it comes to labor issues, both residential and commercial roofing contractors voiced some frustration with increasing costs of finding and keeping quality people.
About three-quarters (74 percent) said they experienced an increase in overall labor costs since the start of 2018, and that uptick, on average, was by about 13 percent. Another 23 percent said labor costs remained the same and just three percent found costs to decrease last year.
The survey also provided a landscape for the picture of subcontractors to be a little clearer.
The majority of contractors (60 percent) said they used their full-time workforce to complete projects and roughly 31 percent were done by subs. The remaining 9 percent was completed with part-time people.
Specifically on the commercial side, while most (70 percent) indicated field work was completed by full-time employees, another 20 percent consistently used subcontractors. The data shows contractors report an increase in the use of subs over the past 12 months for largely three reasons: large jobs with tight timelines; increased backlogs; and cost cutting. Only about 9 percent of respondents said their use of subs decreased in 2018.
To address recruitment, the majority of respondents said they rely on their own employee referrals. More than 75 percent of respondents said employee referrals were the best method to address workforce issues, while nearly two-thirds (60 percent) said they rely on family and friends to refer new potential workers. Just under half (46 percent) use online job postings and slightly less (40 percent) said they use social media platforms like LinkedIn, Facebook and Twitter to recruit.
A vast majority of those surveyed (88 percent) indicated they offer in-house, on-the-job training, and about 40 percent have a formal training program for all employees. An additional 43 percent said they participate in manufacturer training, while 21 percent are involved with training programs offered by roofing contractor associations.
Just over half of roofing contractors (54 percent) said they believe national roofing certification efforts, like the NRCA’s ProCertification program, will improve the industry, while another 38 percent indicated they were unsure. Still, about 63 percent said they’ll likely participate with the NRCA’s unprecedented effort to create a certified, portable roofing workforce.
Commercial roofing contractors, as a whole, also appear supportive of national training and certification efforts underway by NRCA. Well over half of respondents (57 percent) said they believe certification will improve the industry, and more than two-thirds (69 percent) said they’ll likely participate in the NRCA’s ProCertification program, expected to launch next year.
“We are very encouraged and excited about what the NRCA is doing in regard to offering roofing certifications and allowing us to have a voice in Washington D.C. with NRCA Roofing Day,” said CJ Martin, president of Showalter Roofing Services Inc., of Naperville, Ill. “We participated in the inaugural event in 2018 and are going again in 2019 but this time we are taking twice the amount of people as our first experience. I would encourage everyone to attend.”
Not everyone is showing that level of enthusiasm, yet. The survey also shows the promotional effort is just ramping up. More than a third of all roofing contractors said they don’t see any impact — positive or negative — from national or regional certification programs.
About one-quarter (26 percent) of all respondents do not plan to participate in any roofing certification programs in 2019.
While startup might be slow, the benefit of a certification process will pay dividends, said Reisenberg, who’s watched the SPFA’s grow into a legitimate differentiator at the kitchen table when potential customers are contemplating the best return-on-investment.
“A recognized and legitimately-standardized national certification for a critically important job like a roofer is one more foundation brick laid by our industry to bring the best solutions to our industry’s customers,” he said.
Drones, followed by on-the-job mobile devices and cloud computing are the most used current technologies identified in the survey. Nearly half of all respondents said they’ll likely use drones for business purposes within the next two years.
About 22 percent of all respondents indicated they’re using drones for a variety of purposes, including before-and-after photos for clients (79 percent), roof inspections (74 percent) and marketing (71 percent). Taking measurements (24 percent) and thermal inspections (15 percent) are currently lagging behind, but experts tend to agree that will change as federal and local regulations soften, and the equipment becomes more effective and affordable.
More than 83 percent said they depend on staff with proper Part 107 certification to operate drones while 17 percent outsourced to a drone provider.
Commercial roofing contractors, in particular, also appear to be on the cutting edge of developing technologies. About 18 percent of respondents said they currently use drones, and a combined 38 percent are exploring their use within the next five years. That said, the majority indicated they’re currently not exploring augmented and virtual reality programs to add to their business model, and 67 percent said they’re not looking into robots or 3-D printing in the next five years.
Some roofing contractors are taking a different approach. Carthage-Tenn.-based Rackley Roofing Co., Inc. (see page 50) is already exploring what elements advancements like artificial intelligence can add to their successful commercial roofing operation.
“Anytime you can learn about new technologies in the pipeline for roofing, there’s an excitement,” President Curtis Sutton said. “Technology is everywhere, including the construction industry. If you don’t embrace it, you will be left behind.”
The survey indicates there are good reasons backing the continued optimism in the roofing industry into 2019. Contractors in various roofing segments will have opportunities to grow, and gain from manufacturers that not only see the impact of a shrinking workforce, but are now proactively developing products and strategies to make roofing more cost-effective.
Riesenberg said he’s looking forward to what the manufacturers will bring to the table.
“Many SPF roofing manufacturer companies have voiced their intent to redouble their efforts in their roofing product categories, partly stemming from new roof-related expertise and resources coming from merged or acquired companies,” he explained. “These companies are looking to use their new tools and reach to significantly expand.”
While national training and certification programs bring the promise of positive change and improving the perception of roofing contractors nationwide, the survey data indicates there’s still quite of bit of skepticism and lack of awareness about its benefits. Ribble and the NRCA will be busy trying to change that throughout 2019, planning to put $15 million toward the unprecedented effort.
Certified or not, the voracity of recent severe storm cycles and a contractor’s overall ability to market well and connect with customers will make a difference in their performance in 2019. Therefore, where you are geographically may be just as important as any other business measurable this year.
“We have a ton of work signed up (for this year) already,” said Jackie Butcher, marketing director of Butcher & Butcher Construction, headquartered in suburban Detroit. “The comeback of Detroit has been great for us as a business. We’ve had a lot of work downtown, the economy is booming and people are building.”
The feeling is just as strong, if not stronger is some areas across the south, where many contractors are “enjoying” the backlog of work and just happy to be along for the ride.
“With a strong economy, new home production is booming in Texas,” said Chris Lowe, owner of Kidd Roofing, based in Austin, Texas. “We will keep riding the wave as long as we can!”
This editorial content is sponsored by CertainTeed. The information contained within this article is from: Clear Seas Research. 2018 Roofing Contractor State of the Industry Report. Nov. 2018. Clear Seas Research is a full service, B-to-B market research company focused on making the complex clear. Custom research solutions include brand positioning, new product development, customer experiences and marketing effectiveness solutions. Clear Seas offers a broad portfolio of primary, syndicated research reports and powers the leading B-to-B panel for corporate researchers, myCLEARopinion Panel. Learn more about the report and purchase it at clearseasresearch.com.
Who Took RC’s 2019 Annual State of the Industry Survey?
*Data provided by Clear Seas Research
For the 11th consecutive year, Roofing Contractor and Clear Seas Research reached out to roofing professionals across the country to collect their perspectives on the residential and commercial markets in 2018, and to gauge their prospects for the year ahead. Here’s a closer look at who responded to the annual RC State of the Industry survey.
The data from this year’s report indicates that respondents generate roughly 61 percent of revenue from residential roofing. Of those, 39 percent said they did residential reroofing work, 14 percent classified as residential repair, and 8 percent identified as new construction. Thirty-nine percent of their revenue came from commercial projects, with 30 percent attributed to repair and replacement contractors. The remaining 9 percent generated from new construction.
- The overwhelming majority of survey respondents (85 percent) were men.
- The number of this year’s female respondents (15 percent) has remained relatively consistent in each of the last three State of the Industry surveys commissioned by RC.
- The mean age of the survey respondent was 51 among both residential and commercial roofing contractors.
- The largest age group represented among roofing contractor respondents (32 percent) were those between ages 40-49. It’s the first time the average age of respondents to RC’s survey dipped below the 50-59 age group since 2015.
- The next largest segment among the contractor respondents (26 percent) was between ages 50-59, while 22 percent were between ages 60-69.
- Thirteen percent of respondents said they were between ages 30-39; and just 3 percent said they were under age 29.
- Four percent of all survey respondents were 70 years old or older.
Rank and Performance
- Thirty-eight percent of survey respondents were in corporate or executive management positions.
- Roughly 18 percent were in general management in both the residential and commercial sectors.
- About 21 percent identified their job title as roofing contractors.
- Over half (55 percent) had between 11 and 30 years of experience in the roofing industry.
- Twenty-nine percent of respondents said they had more than three decades of service in the roofing industry.
- Nearly half (47 percent) said their companies had less than 10 employees.
- Roughly the same amount of respondents (32 percent) identified themselves as being with companies that grossed between $1 million-$5 million; the majority of commercial (37 percent) said they were with companies that grossed between $500,000 and $1.9 million, and $2 million and $10 million in annual sales.
- Thirty-five percent of survey respondents were from the South.
- Roughly 29 percent of the contractors that responded were from the Midwest.
- Seventeen percent of respondents said they hailed from the West.
- About 20 percent of survey respondents were from the Northeast.