Digging Out

It’s been a few years since residential design/build contractors could feel good about the business environment. Although the housing market remains relatively weak as a whole, several glimmers of hope began to emerge earlier this spring that have contractors feeling as optimistic as they have in a while.

“We’ve seen some things loosening up since early in the year,” says Matt Kulp of The Showcase Group in East Pearl, PA (western side of the state). “There is a lot more interest for small design/build projects once again.”

Out in Las Vegas, one of the hardest-hit housing markets in the country, Rob Diaz reports similar improvements. While new home construction remains virtually non-existent, Diaz says more homeowners are looking to do landscape renovations and upgrades. Diaz is president and CEO of Land Care Inc.

March uptick the real deal?

According to the National Association of Home Builders (NAHB), housing starts were up 7.2% in March after a surprisingly dismal month of February. Both single- and multi-family dwellings improved. Growth in the issuance of building permits was even more impressive as that number jumped 11%. Permits specifically for multi-family units, which represent apartment buildings and condos, increased 25%.

Still, builder confidence remains fragile, and even took a step back in April, according to the NAHB. That’s the type of uncertainty many landscape design/build contractors continue to wrestle with.

“Home builders are looking for price and price alone,” Kulp relates. “There is no value sell anymore; it is strictly a numbers game.”

On Pennsylvania’s eastern side, Mike McShane of Plantique Inc. in Allentown says that homes under construction are still few and far between. “The only home building of any substance in our area is the national builders that are trying to finish large developments started a couple of years ago,” McShane says. “They have had to reduce prices and typically don’t include any substantial landscapes. Fortunately, we’ve never been tied to any builders so we don’t have any exposure.”

For those custom builders that are feeding Plantique work, McShane says his company’s experienced staff of designer architects, not to mention his company’s overall strong command of stormwater management and other regulations, is playing a big role in instilling confidence in both builders and consumers, ultimately resulting in new projects.

Roughly 165 miles away in Monroe, CT, Craig Kopfmann of Get Green Acres Landscape & Design is seeing a similar pattern. “We have always done very little work for home builders, but it seems to me that builders are looking to leverage the knowledge and experience of their contractors,” Kopfmann says. In other words, while new home building activity remains spotty, and home builders are placing a great deal of emphasis on price, they are also looking for some serious credentials from their landscape contractors.

What homeowners are looking for

Homeowners continue to look for that “staycation” environment, according to Kulp. “They want to create a relaxing atmosphere to de-stress and enjoy time with family and friends, and to some degree keep the outside world away,” Kulp says.

About 10 miles south of Wichita in Derby, KS, Kevin Payne of TenderCare Lawn & Landscape, a 2008 Pros in Excellence Award winner, says homeowners are also looking for outdoor living amenities—they’re just looking to spend a little bit less than they were willing to spend four or five years ago.

“People haven’t been looking to spend much money on pool installations lately,” Payne relates, “but they are looking for things like fire pits and pondless water features. I’d say that the dollar value on landscaping projects has definitely dropped, and that most homeowners are looking to spend somewhere in the neighborhood of $10,000 to $15,000—which is fine because these are still great jobs.”

Kulp agrees, adding, “We’ve seen a dramatic decrease in interest from the $15,000 to $50,000 project segment. This has been due to the decrease in home equity.” McShane has been fighting that same battle. “The thing that’s affecting us the most is the drop in equity and the inability to tap home equity for larger projects.”

On a positive note, homeowners who do have some money to spend are looking to extend their existing landscaped areas, according to McShane. “They are looking for additional garden areas, and are adding fire pits and outdoor kitchen areas. The in-ground pool market has actually ticked up slightly for us; this spring we marketed a ‘refresh your poolscape’ program to homeowners with existing pools. Privacy plantings and berms, along with masonry stone walls, make a big impact to existing areas.”

For some landscape contractors, homeowners that are looking for function as opposed to desire have created another opportunity. “They’re not so much saying ‘ooh I want this fire pit,’ but are looking to extend their living space or maybe save water,” says Rob Diaz of Land Care in Las Vegas. “The over-the-top flashy look seems to have lost its luster. People who’ve decided to stay in their homes are trying to live within their means and create an environment they can stay with. On the other hand, those who are upside down with their mortgages aren’t going to put money into their landscapes.”

That’s why Land Care is getting a decent amount of work from what it calls “second-generation renovations” where the first homeowner has left, sticking the bank with the bill, and the new owner who bought the house through a short sale wants to make it their own.

Out east in Connecticut, Craig Kopfmann says homeowners are looking for creative solutions to improve their properties and enhance their day-to-day lives. “We’re seeing a bit more interest in masonry projects than planting,” Kopfmann says. “In mid-March we started receiving inquiries for everything from improving a pool area to creating a family-friendly patio and entertaining space. I’ve spoken with more motivated people than I would have anticipated at this point in the season.”

Generating sales leads

To drum up interest and generate leads like these, Kopfmann has spent a lot of time networking. “I try to stay in touch with my professional contacts and develop ways to help them,” Kopfmann relates. “This is challenging, but has to be a two-way street—otherwise the referral stream will dry prematurely.”

In Kansas, Payne has focused primarily on three areas: people who’d purchased a home fairly recently, empty nesters, and homeowners he’d submitted bids to before the market went south.

“Things got pretty bad around here in late-2009,” Payne recalls. “So in 2010 we’d created flyers telling people to invest in their homes and landscapes because doing so will help their home value come back faster when the economy improves. That worked pretty well. Now we’re focusing on empty nesters who have some disposable cash because they started sitting on it when stocks went bad.”

TenderCare Lawn & Landscape is also focusing on bids they did in 2009 before consumers pulled back. Letters are sent to these prospects saying, “We still care and wonder if there’s anything we can do for you.” Payne explains, “People want more attention these days, not just a bid slipped under the door.”

Kulp says consumers also want peace of mind, which is why his company has increased its warranty. Consumers want more bang for their buck, too. “We have had to educate clients about cost control, getting them involved in material selections, for instance, in order to meet their budget constraints,” Kulp tells.

In 2010 McShane geared his company’s marketing campaign around the concept of “Renew, Refresh, Revive, Reimagine and Rethink.” The premise was to encourage homeowners to enhance their existing landscapes with subtle changes. This year McShane is focusing on his company’s competitive advantages, i.e. designs, 63 years in business, warranty and in-house nursery.

“We need to convey this message to the marketplace and generate sales by explaining the Plantique difference,” McShane says. “We see opportunities out there, and our sales staff needs to extend this conversation with potential clients, listen to them, work within their budgets, and start the process.

“So far the outlook for this year is much brighter,” McShane continues. “Activity and call intake in March was much higher, and the size and scope of projects has increased. There is demand out there. Customers feel like they have sacrificed for two-plus years and will begin to spend … I also believe, though, that this unsettling economy is here to stay, and we just need to get used to it being that way. The recession shook the American consumer to the core, yet I remain very optimistic.”