International Door & Operator Industry

SEP-OCT 2012

Garage door industry magazine for garage door dealers, garage door manufacturers, garage door distributors, garage door installers, loading docks, garage door operators and openers, gates, and tools for the door industry.

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Page 54 of 132

MANAGEMENT (continued from page 51) fi ve state Pacifi c West region of the U.S., each new one-unit dwelling includes 2.4 garage spaces. That means that the number of newly constructed homes with 3, 4 or more garage spaces is accelerating as a result of two trends: 1) More households include at least one "specialty" vehicle in addition to the now standard two automo- biles, and 2) More households have three or more drivers with separate vehicles. Non-Residential Construction Projected completions of structures with multi-units amount to nearly 234,000 units annually. Unfortunately, this fi gure is running above the prevailing level of multi-unit starts, which stood at 221,000 on a seasonally adjusted annual basis as of June. When completions exceed starts it suggests that the pipeline is not being replenished, consequently door demand will suffer at some future point. However, the difference between multi- unit completions and starts is not exces- sive, thus renewed fall activity may close the gap. With rental vacancy rates running at very low levels, the expectation for accelerated activity is not unreasonable. Since 2006, both the rate and the value of garage door usage have actually increased for newly constructed homes. Recognizing that averages are always dangerous, it is worth noting that in 2005, the average garage door was installed for less than 80.0% of the prevailing 2012 price. This refl ects both price increases and the fact that dealers have been increasingly successful in urging contractors to upgrade con- struction specifi cations for garage doors. When considering "average" values, it must be noted that installation prices per door vary signifi cantly by region and by location within each region. Also, across the last seven years, the average numbers of doors per new one- unit house have increased by about 2.3 percent. In short, fewer houses are being constructed without garages (the Nation- al average is now just above 11.0%), and the average number of garage door spaces per house is growing. For example, in the 52 As many state and municipal governments continue to struggle with budgets, money for new projects is diffi cult to justify. In the private sector, the emphasis on productivity and effi ciency prevents any widespread new construc- tion from developing. The net result is better utilization of existing space, which we examined at length in the previous edition of these comments. To repeat, "… the majority of construction activity is retrofi t work that adds-to, alters, converts, expands, remodels, renovates or rehabili- tates an existing structure, or it involves replacing a major building component (such as a garage door)." Like home construction, the quality and value of specifi ed doors has been elevated across the last seven years. The installed value of replacement doors is nearly 22% greater than in 2005 (again, the cautious use of averages must be observed), and vehicle doors as a percent of construction budgets has grown. It is also interesting to note that the fastest growing segments of the non- residential door business are the most expensive: high-speed doors, fi re doors and high security doors and grilles. The Garage Door Activity Index The upward trend of the Garage Door Activity Index continues, but it has "fl at- tened," just as it did in the previous two years. It may seem like a small victory, but the best part of the Index is that it remains moving in a positive direction. What remains troubling for many dealers and manufacturers as well is the realization that construction International Door & Operator Industry™ activity, like all economic behavior, is largely a matter of willingness to anticipate a rewarding future. Put even more simply, people build structures when they have confi dence that economic growth will justify their investments in bricks, mortar and garage doors. Unfortunately we live in an era of "24- hour media and politically fueled disaster speak." Optimism tends to be tempered by radically polarized interpretations of where the country is headed and how various programs will surely lead to fi scal disaster. The fact is that consumers want to spend, people aspire to home ownership and businesses desire improved facilities, but each sector is hesitant in the face of the perpetual uncertainty that grows out of political and economic intransigence. We see plans and good ideas put on hold because lawmakers absolutely refuse to compromise, bankers refuse to lend for innovation and various organizations create barriers between people that constrain their aspirations. While all of this may sound too philo- sophical for a column that focuses on garage door economics, the central fact of the world economy is stagnation fueled by uncertainty. More garage doors will be sold only when more money is spent to renovate old, and build new buildings. No economic sector is more future- driven than the construction industry. Nothing would be more benefi cial for the industry than widespread optimism. No conditions would more likely induce optimism than lessened antagonisms, fewer confrontations and greater mutual understanding. John E. Zoller and David H. Bowen comprise Zoller Consulting, Inc. of Wooster, Ohio. Zoller Consulting provides consultation of managerial effectiveness and fi nancial performance of construction related businesses. They also offer customized seminars and training sessions. In addition, Zoller Consulting provides acquisition management, including fi nding buyers or sellers, locating funding sources, transaction structuring, and negotiating and organizing the transition to new ownership. Contact Zoller Consulting, Inc. at 330.262.8500 or

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