Build it and they will buy

Distributors throughout Florida report double digit growth in sales of construction-related products

By -- Industrial Distribution, 7/1/2000

Tourists and transplants flock to this subtropical peninsula to sizzle, and distributors throughout Florida say local construction markets are blazing hotter than July in the Sunshine State.

Roger Goen, president of the 10-branch Pro Fast Supply, Inc., says he's never seen construction activity any better than during the last three years, and projections through 2005 look equally strong. After working for another company for a few decades, Goen set up shop last April. Helped by several small acquisitions and high growth, Pro Fast Supply quickly ramped up to about $10 million in sales.

Headquartered in the Orlando suburb of Longwood, Pro Fast Supply blankets the center of the state and reaches Daytona Beach at its northeastern limit and Sarasota at its southwestern extreme.

"It may slow down somewhat if interest rates increase," Goen says. "But if it slowed down by five percent, who would notice?"

A bigger pie

Goen's experience reflects statistics published by the Bureau of Economic and Business Research at the University of Florida's Warrington College of Business Administration. According to "The Florida Long-Term Economic Forecast 1999," almost every metropolitan statistical area has more housing starts between 1995 and 2000 than during the first five years of the decade.

Cumulated housing starts for the current five-year period are 647,600 compared with 541,100 for 1991 through 1995. Between 2001 and 2005, cumulative starts, which factor in changing vacancy rates and the stock of mobile homes, are predicted to slow a bit to 631,800. The Orlando area is a notable exception and David Lenze, associate director of the forecasting program at the Warrington College, says there doesn't seem to be any limit to Orlando's growth. The report also concludes that the concentration of multifamily housing is shifting toward the center of the state.

Although the study was published in September 1999, the forecasters factored rising interest rates into their predictions, which partially explains the decline expected in the upcoming five years. Lenze also says this period's housing starts are higher than expected based on prices and population growth.

"The big uncertainty is how much of the demand is being fueled by the wealth effect," Lenze says. "People feel wealthier because of stock market investments."

The construction success story is also linked to the state's rising head count. In a March news release, University of Florida demographer June Nogle predicted a 2000 census count of about 15.6 million-a gain of more than 2.5 million over the 1990 census count. Florida is expected to grow at a similar rate in the upcoming two decades, but the study predicts that the state's population will age. Another uncertainty, Lenze adds, is whether baby boomers will embrace Florida as a retirement paradise.

In addition to the buyers snapping up houses as fast as contractors can build them, multi-million dollar infrastructure improvements are also boosting sales of construction products. The expansion and revamping of the Fort Lauderdale-Hollywood International Airport and the Southwest Florida International Airport on the opposite coast, in Fort Myers, are just two examples. At the top of the state, the Jacksonville Transportation Authority is building a $184 million Skyway monorail for public transportation and spending about $189 million more on road construction.

A savvy southwestern coast

Rick Bartz, general manager of Gulf Coast Nail & Staple in Fort Myers, says strong growth is business as usual. Last year, the university researchers counted 6,076 housing starts in Cape Coral and Fort Myers.

"We grow pretty much every single year about 20 to 25 percent," Bartz says. "The last time we had a slowdown was 1982. It's one of the biggest single family home markets."

Bartz cites Cape Coral, a planned city founded about 40 years ago with a projected 100,000 residents by this year. Streets are laid and canals installed in preparation for homes, and contractors are drawn by an abundance of ready-to-go house lots. Even the city's Web site boasts "home construction is booming...with dozens of single family home permits issued each week."

Bartz keeps a branch office in Cape Coral, but even so, he barely keeps pace with demand. So the company combines sales with delivery by sending employees in 10-ton trucks stocked with fasteners and nails along routes through specific subdivisions.

The mobile store concept is embraced by other distributors, such as Pro Fast Supply. Orlando-based U.S. Tool & Fasteners, Inc. also uses fully-stocked sales and service vans, according to company president John Clayton.

Construction central

Up the coast in Tampa, Paul Tyson, president of Tyson Bolt & Supply, recently wrapped up a decade of 10 percent annual growth. The small distributorship carries a wide breadth of construction-related products and supplies different business segments.

"The residential portion of the market will likely always run strong in Florida," Tyson predicts. "Commercial will certainly run that way for at least another year."

Statistics support Tyson's claims. The Hillsborough County City-County Planning Commission counted 14,951 new residential units in 1999 compared with 12,276 in 1998. During the same time period, the value of non-residential permits rose from $483 to $538 million. According to UF figures, there were 25,042 starts in the Orlando area and 21,142 in the Tampa area last year.

Like Tyson, Clayton has been in business about ten years and U.S. Tool & Fasteners has enjoyed doubled growth almost every year. Last year, business was up 35 percent and Clayton predicts very strong growth this year for the full-line fastener house that specializes in pneumatic nails and staples. About 65 to 70 percent of the company's annual sales are related to residential construction.

"You can't go down a street without seeing something going up," Clayton says of the Orlando region. "We probably drive by more business in a week than we write in a month. You can't get to it all. You have to pick and choose and take the cream of the crop-the ones that pay their bills very well."

City slickers

Combine the annual influx of snowbirds and beachcombers with a climbing year-round population and the result is urban sprawl in the Miami, Fort Lauderdale and West Palm Beach-Boca Raton metropolitan areas. In the southeastern corridor, development keeps marching west from the ocean toward the Everglades. All three areas enjoyed solid housing starts in 1999: the UF reports Miami had 10,054 new homes built, Fort Lauderdale had 13,988 and 9,286 new homes went up in West Palm Beach and Boca Raton.

In the center of it all and drawing traffic from the north and south, the Fort Lauderdale-Hollywood airport was bursting at the seams before recent upgrades. Improvements include a 7-story, 4,900 car $74 million garage finished last year and a $34 million refurbishment of existing terminals slated to be finished this year. The first nine of 23 gates in a $104 million, 350,000 square foot terminal are scheduled to open this December.

Harry Glusky, president of All Construction Fastening Systems, Inc. in nearby Davie has supplied anchor systems and other materials to airport contractors. Through an office in Boynton Beach and four salespeople in Dade county, the company also distributes to the greater Miami and West Palm Beach areas.

Glusky's sales were up by 20 percent in 1999 and he anticipates 10 to 20 percent additional growth this year.

"Our mainstay business has increased each month and year for the past three years," Glusky says.

Scott Jevaney, president of Profast Systems, Inc. just north of Fort Lauderdale in Pompano Beach, says his mid-sized company grew nearly 40 percent last year. Although he forecasts a 20 percent growth this year, he predicts the market will soften. Jevaney, who has been in business for 30 years, says the warning signs are a lot of apartment jobs in a flurry and an increase in lease signs.

"We've booked over 30 apartment jobs in 7 quarters, with 15 building units or more each," Jevaney says. "When you drop that many rental properties into an area that's geographically not that big, it has an impact."

Jevaney's firm supplies builder's hardware, engineered hardware, fasteners and power tools. To stay competitive, Jevaney also has two offices in West Palm Beach and Stuart, which both serve distinct and growing markets-and counties-north of Fort Lauderdale.

The family-owned R & R Tool Co. in West Palm Beach, which also has a branch in a coastal suburb, is a prime example of a small fish in the big pond known as southeast Florida. Buddy Wilde, whose father owns the company, likened the building boom to a wave over the area. The small distributorship supplies roofers, drywall installers and mason workers. Sales grew about 10 percent last year, Wilde says.

"We've been here 15 years and we're busier now than we've ever been," Wilde says. "The only way to describe it is an absolute boom in South Florida."

Jacksonville joins the pack

Multi-branch distributors, such as Merit Fastener Corp., a $9 million company headquartered in the Orlando suburb of Longwood, consider Jacksonville a hot spot. Merit experienced about 40 percent growth in construction-related sales at its Jacksonville division last year, says general manager Rich Stevens. Sales manager Donna Culp cites the Jacksonville Electric Authority's $592 million Northside Generating Station Repowering Project as a reason for burgeoning company sales.

"We're fortunate to be part of it," Culp says.

The environmental upgrade of two turbines includes $72 million of U.S. Department of Energy funding. Project manager Joey Duncan says there will be close to 900 workers on site during the peak months of the project, which began last summer. The first unit is scheduled to come on line in January 2002.

University researchers counted 9,662 housing starts in the Jacksonville area last year, but Lenze says rental vacancy rates indicate the city may be overbuilt. The city's Planning and Development Department tallied 1,113 commercial construction permits issued during the first six months of 1999 for a total construction value of about $325 million. The next closest half-year during the 1990s was 1997 with close to $222 million.

Bob Frosio, vice president and general manager of Fastening Systems, Inc., which reached about $20 million in sales last year, says the commercial market is stronger than he's ever seen it in Jacksonville and central Florida and sales were up about 20 percent last year. The firm specializes in pneumatically driven nails, staples and tools.

Frosio predicts strong sales through December, but believes the golden era is fading.

"It's been on such a tear, I would think it would have to flatten out," Frosio says. "In 2000 it will continue to grow, but I think in 2001 it will be flat."

For now, distributors are basking in the expansion. Any decrease is relative to the big picture, and distributors like Clayton say there will always be hotels to build and upgrade.

"When the economy turns you don't feel it as quickly here," Clayton says. "With the tourism market people still seem to put together the money for vacation."