As part of its State of the Industry Report, Roofing Contractor reached out to some industry insiders to get their predictions on what 2011 might hold in store for contractors. They shared their insights on trends in the commercial and residential roofing markets and offered advice to help contractors make the most of their opportunities in the year ahead.
Steep-Slope Market
Bob Tafaro, President and CEO of GAF Materials Corporation, expects a modest uptick in residential new construction compared to last year. “In residential, a moderate increase in home sales and housing starts was helped by lower housing prices, historically low mortgage rates, and the 2010 homebuyer tax incentives,” he said. “While these factors may be muted in 2011, we expect a continued residential increase.”
Sheree Bargabos, President of Owens Corning Roofing & Asphalt, points to a bright spot in the housing market. “The economy is still unsettled and the housing market remains weak, making selling a home and buying a new one more difficult,” she said. “So instead of moving up, many homeowners are choosing to stay in their homes longer, and investing more in them. But they are still cautious about the projects they undertake and the products they choose, paying close attention to value and return on investment.”
“Contractors may mistakenly assume that the trend is for lower cost products when the reality is that the demand for more premium products, such as laminate shingles over three-tabs, is still there. We’ve seen a continued increase in the percentage of laminate sales even in a down economy. Contractors have an opportunity to upsell products they offer which should add to the value of the home, in terms of function and performance and in terms of design.”
Sheree Bargabos, President of Owens Corning Roofing & Asphalt, points to a bright spot in the housing market. “The economy is still unsettled and the housing market remains weak, making selling a home and buying a new one more difficult,” she said. “So instead of moving up, many homeowners are choosing to stay in their homes longer, and investing more in them. But they are still cautious about the projects they undertake and the products they choose, paying close attention to value and return on investment.”
“Contractors may mistakenly assume that the trend is for lower cost products when the reality is that the demand for more premium products, such as laminate shingles over three-tabs, is still there. We’ve seen a continued increase in the percentage of laminate sales even in a down economy. Contractors have an opportunity to upsell products they offer which should add to the value of the home, in terms of function and performance and in terms of design.”
Tafaro agrees that consumer attitudes are evolving. “Key underlying changes will continue, including the rise of ‘the informed consumer.’ Homeowners increasingly value differentiation in shingle appearance (for example, color) and are looking for more choices in this area,” he said. “Homeowners are becoming more educated and continue to go online for information - making a strong online presence of even greater importance.”
In this environment, quality materials are increasingly important, noted Tafaro. “We’re seeing accelerated growth in higher-end laminates as the economy starts to improve, and more contractors are differentiating themselves through the use of more upscale products. Asphalt availability is balanced, but could become tight if refiners cut crude runs due to lack of demand and low margins on fuels.”
Bargabos indicated the cost to produce asphalt roofing shingles is largely influenced by raw materials. “The most significant raw material cost component is asphalt,” she said. “Prior to 2004, asphalt costs were relatively stable. Beginning in early 2004 and through mid 2008, crude oil costs inflated dramatically from $40 a barrel to $149 a barrel. Asphalt costs followed, inflating over this period at an average rate of 40 percent a year or 200 percent. We expect crude oil (and therefore asphalt) costs to trade at higher levels in 2011, in comparison to 2010, influenced by improving demand for gasoline and diesel fuels in a recovering economy.”
In this environment, quality materials are increasingly important, noted Tafaro. “We’re seeing accelerated growth in higher-end laminates as the economy starts to improve, and more contractors are differentiating themselves through the use of more upscale products. Asphalt availability is balanced, but could become tight if refiners cut crude runs due to lack of demand and low margins on fuels.”
Bargabos indicated the cost to produce asphalt roofing shingles is largely influenced by raw materials. “The most significant raw material cost component is asphalt,” she said. “Prior to 2004, asphalt costs were relatively stable. Beginning in early 2004 and through mid 2008, crude oil costs inflated dramatically from $40 a barrel to $149 a barrel. Asphalt costs followed, inflating over this period at an average rate of 40 percent a year or 200 percent. We expect crude oil (and therefore asphalt) costs to trade at higher levels in 2011, in comparison to 2010, influenced by improving demand for gasoline and diesel fuels in a recovering economy.”
Low-Slope Trends
Kate Baumann, Director of Marketing, Customer Service & Procurement for Mule-Hide Products Co. Inc., said low-slope project activity is expected to remain low, but overall it could be slightly up over last year. “Vacant warehouse, office and commercial space along with tight credit will inhibit new project development, and public works construction will be hampered by tight state and local budgets,” she said. “One bright spot in public construction will continue to be military projects. Private construction could be flat, but also could be up slightly as the picture improves for the retail, higher education, hospital and hotel segments.”“Maintenance and repair work will pick up substantially in 2011 due to pent-up demand after two years of project postponements and cancellations. As business confidence improves, maintenance and repair work will continue to grow. Overall, we expect new low-slope projects to be up compared to 2010’s post-recession low. Multi-family will have bottomed out and be ready to show some improvement.”
Fred Stephan, Vice President and General Manager of Roofing Systems for Johns Manville, expects the industry to be driven primarily by re-roofing in 2011, as it was in 2010. “We expect that stimulus dollars, while still important, will decline in the public sector and will be offset by improved confidence in the private sector,” Stephan said. “Re-roofing will offer the strongest opportunity for growth while new construction is weak. Generally we believe we have hit bottom and have started to climb back into a more stable market. In 2011, we expect the market trend to be flat to modestly up.”
“We expect to see a slow but steadily improving market trend over the next few years as the new construction market returns,” he continued. “By 2015, we expect the market will return to similar levels to what we experienced in the mid to late 2000s.”
John Geary, Vice President of Marketing for Firestone Building Products Company, focused on some product trends. “As the strong growth of thermoplastic polyolefin (TPO) roofing systems continues, other products that are increasingly being used in the low-slope commercial roofing market are black-on-white EPDM bi-laminate membranes, high-density insulation cover boards, low-VOC adhesives and sealants, and daylighting systems,” he said.
Geary also pointed out that building information modeling (BIM) continues to have great influence on construction projects. “Commercial roofing is a key component within BIM, and roofing contractors are using the technology to create model roof assemblies that offer the optimal level of performance or to meet specific building needs,” he said.
Brad Resch, President of Gulfeagle Supply, also believes repair and maintenance work will be on the upswing, leading to opportunities for contractors. “Building owners will look to extend the life of their roof and delay repairs,” he said. “This will allow for contractors to offer maintenance programs and products such as roof coatings to meet the building owners’ needs.”
Metal Roofing
New technology is having an impact on the metal market, according to Geary. “Although metal roofing is a mature product category, it continues to evolve,” he said. “One of the most recent innovations is the integration of photovoltaic (PV) systems into metal roofing,” he said. “Regardless of the PV system an owner chooses - an adhered thin-film system or a crystalline system that is clamped onto the standing seams - metal roofing is an ideal substrate.”Roll-forming technology is also more advanced. “Equipment innovations are providing new options for contractors to roll form panels on a jobsite,” Geary said. “Some of these mobile roll-forming machines now have very sophisticated computerized controls, along with angled notching and cutting. While on-site roll forming may not be the right fit for every job, the innovation in this equipment has helped make mobile roll forming a viable option in many situations.”
Tom Dyszkiewicz, Senior Vice President of Sales and Marketing at Englert, Inc., said new coatings were a trend to watch. He noted that cool metal roof coatings offer both environmental and economic advantages to a contractor’s customers.
“The new UltraCool low gloss coatings now available on many standing seam metal roofing products can reduce energy bills up to 50 percent while meeting Energy Star and LEED requirements for reflectivity and emissivity,” he said. “They also dramatically increase the reflectivity of medium to darker color roofs, allowing contractors the opportunity to offer their customers a wide choice of roofing colors, while substantially cutting warm weather energy costs by keeping the roof and interior spaces cooler. Ultra-Cool coatings also help reduce urban smog by reducing environmental temperatures and increase the life expectancy of the roof by reducing expansion and contraction.”
Sustainability
Despite a stubbornly slow economy, it looks like environmentally friendly products and systems are still gaining momentum.“Energy efficiency and sustainability, along with growing aesthetic considerations, will be the strongest trends impacting roofing material preferences,” said Baumann. “For new construction and re-roofing low-slope projects, white membranes and white elastomeric coatings not only save energy costs, but also reduce peak energy demand, a critical consideration in areas where there is high energy use and concern for periodic blackouts.”
Dyszkiewicz likened green building to the computer revolution. “The computer was representative of a technology trend - embraced easily by some and not so easily by others. Today it is a technology vital to every aspect of our world. And so shall we be looking back at the move toward sustainability in construction 10 years from now and saying the same thing. Right now, 1.1 billion square feet of construction space is being built to meet U.S. Green Building Council LEED standards and that figure is growing. Some in our industry have embraced that trend while others have been slow to do so. But one thing is nearly certain: the trend is here to stay.”
Geary pointed out that “green” doesn’t necessarily mean vegetated systems; there are a lot of other options that can save energy and reduce impact to the environment. “One overall market trend we’ve seen this year, and certainly expect to see continue in 2011, is a better understanding throughout the industry that there are multiple ways to add environmentally sound enhancements to an existing building’s roof,” Geary said. “Although solar reflectivity has received a lot of attention, there is a broader acceptance that there is no one-size-fits-all roof solution to improving energy efficiency. The location, size and function of a building are important factors in determining the best roofing solution. In some cases, energy savings will be much greater through additional insulation under black EPDM.”
Stephan agreed. “Owners are beginning to understand that the most concrete method of saving energy is by adding more insulation,” he said. “White roofs make sense in some parts of the county as do black roofs, for example, in the northeast. Owners need to understand the science of the tradeoff between heating and cooling costs. JM is working with leaders in the building science industry to study the relationship of roofing systems and installation environment; including climate, building construction type, purpose, and life-cycle considerations. Recycling and longer life solutions are also emerging as critical considerations for building owners.”
Bargabos mentioned the residential market is also taking note. “The green building movement has been a growing trend in the industry,” she said. “Manufacturers, contractors and consumers alike are in pursuit of products or services that can lessen their environmental impact. Products such as solar reflective shingles, known as cool roofs, and ENERGY STAR-rated shingles have increased in demand as consumers want to improve the energy efficiency of their homes. This is particularly true in states like California, where installing a solar-reflective roof is one way to meet the strict requirements under the California Building Energy Efficiency Standards, Title 24, Part 6. Asphalt shingles designed with solar reflective granules keep roofs cooler, reducing energy use and wear and tear on the air conditioner system.”
Recycling
One outgrowth of the green movement has been an increased emphasis on recycling. “Homeowners are becoming more willing to invest in recycled products and services, and contractors are making an effort to meet this need,” said Tafaro. “Asphalt continues to be America’s most recycled material,” Tafaro said. “That said there have been many announcements in this area but some without major substance (for example, ambitious, large-scale efforts to recycle commercial materials have run into logistical problems). Solutions need to be developed that help contractor’s make a real difference in this area.”Some solutions are already in place. “Since the EPDM Roofing Association launched a major recycling initiative in 2006, EPDM recycling has become a more cost-effective solution for tear-off re-roofing projects throughout the U.S. and parts of Canada,” said Geary. “Many roofing contractors have used EPDM roof recycling to differentiate them by demonstrating the cost savings over traditional waste disposal fees and to help building owners qualify for LEED credits,” Geary said.
“Every year, millions of tons of asphalt shingles from tear-offs are placed into landfills, yet these shingles contain valuable materials - asphalt and aggregate - that can be recycled into products such as asphalt paving,” said Bargabos. “Last year, Owens Corning Roofing and Asphalt unveiled its Preferred Contractor Shingle Recycling Program. The Program makes shingle recycling convenient, cost-effective, and differentiating for contractors, with operations provided through a national strategic alliance with Heritage Environmental Services.”
Baumann pointed out that end-of-life recycling is not the only consideration. “Recycling waste material from a project can earn LEED points and often qualify a project for other incentive programs,” she said.
Photovoltaic Systems
Tafaro characterized the solar market as “a relatively small but rapidly growing segment of the roofing industry.” But it has yet to really take off.“As yet, though, no ‘killer application’ is in place or about to launch that is temperature resistant, lightweight, and aesthetically pleasing, or that has great standalone economic viability without government subsidies,” Tafaro said. “More contractors are interested in this area, but they will require support in terms of marketing, back-office, and financing solutions.”
Stephan believes the roofing industry should be the key driver rooftop solar applications. “Long term, the roofing industry will play a much stronger role in rooftop solar as owners begin to understand the importance of a compatible service life between a roof and a photovoltaic system,” he said. “There are significant issues with the lack of roofing knowledge in the solar channel that threaten the continuance of a roofing manufacturers’ guarantee.”
Geary noted that Firestone is fielding more questions about best practices to maintain the watertight integrity of the roofing system. “Elevating the framing and conduits to promote drainage, adding a sacrificial layer of roof membrane directly below the PV system, installing a high compressive strength cover board over thermal insulation and establishing an inspection program are among the ways to protect the roofing system from PV-related system service and maintenance loads,” Geary said.
Dyszkiewicz pointed to advances in technology as a key area to watch. “The latest metal roofing innovation is the Solar Sandwich, an integrated roofing system that is simple to install and saves your customers money,” he said. “In the middle is a LEED-compliant, UltraCool standing seam roof. On top, SunNet solar photovoltaic laminates attached to the standing seam. And on the bottom, a solar thermal system under the roofing panels which transfers heat from the roof to conventional heat and distribution system through a glycol, protected, closed loop recirculating system. The UltraCool roofing material by itself can reduce a customer’s energy bills for cooling by 20 to 70 percent. The solar photovoltaic and thermal systems can reduce heat and electricity bills overall up to 80 percent. And together, they can earn customers up to 20 LEED credits.”
Green Roofs, Cool Roofs
Tafaro noted vegetative systems represent a portion of the market that is generating a great deal of interest from building owners. “Unfortunately, cost pressures have continued to limit this segment,” he said.“With the growing interest for vegetative roofing systems among building owners and specifiers, roofing contractors have been seeking product solutions that are low maintenance, yet offer high performance,” said Geary. “Modular tray systems allow contractors to offer their customers a garden roofing system that will conserve energy, attain green building standards and provide a beautifully landscaped rooftop.”
Baumann pointed to the many benefits of vegetative systems. “Vegetative roofs, both built-in-place and modular systems, offer multiple advantages that go beyond aesthetics to include energy savings, storm water management, recycled content materials, and roof system lifecycle extension - all criteria that help buildings earn LEED points.”
There is growing recognition of the value of reflective technology for commercial and residential roofs, noted Tafaro. “In fact, adoption of cool roofs is moving eastward from its traditional California base,” Tafaro said. “Sustainability codes are rapidly developing, and impact from new codes might be seen in 2011 and 2012 in both residential and commercial.”
Geary agrees the market for cool roofs continues to show promise. “Highly reflective roofs are available in many roofing product types, including thermoplastic, EPDM, granule surfaced modified bitumen, coatings and even ballasted systems. Selecting the optimal level of reflectivity and R-value for insulation on a roof can save energy and money for building owners,” he said.
Advice for Contractors
Given the current economic climate, how should contractors position themselves to make the most of these trends?Bargabos summed up the problem succinctly and offered some suggestions: “In a down economy with high unemployment, the number of people who become roofing contractors increases. This can create difficulty for established, professional roofing contractors. Professional contractors can differentiate themselves in the marketplace in several ways. By understanding industry, business and local trends; which can be simply achieved by reading national and local media, contractors can tailor their product offering and selling style to best fit their customer base.”
Aligning with a roofing manufacturer can help with sales, noted Bargabos. “Co-branding with a roofing manufacturer with a strong consumer brand, attending training and achieving third-party certification are great ways to gain credibility with homeowners.”
Contractors should focus on three areas, advised Tafaro: “First, they should differentiate themselves and compete on quality, reflecting the market trends outlined previously. Second, contractors must continue to invest in their brand and business in order to take advantage of quality products. They should apply service innovations, particularly in information technology, while exploring new opportunities such as solar. Finally, contractors should partner with suppliers who can give their businesses the support to help them be successful.”
Stephan agreed that differentiation was crucial in today’s environment. “Focus on differentiating what you offer, finding new customers and being flexible to do the type of work that is available,” he said. “In addition, now is a great time to strengthen your service offering and prepare for longer term re-roofing opportunities. Manufacturers can continue to offer opportunities for training, lead generation and business development for those contractors interested in partnering.”
Resch emphasized the importance of sales and marketing, which are even more critical in a tough economy. “Contractors need to become selling organizations,” he said. “The days of waiting for the phone to ring, or just quoting as many jobs as you can because you know you’ll get some of them, won’t be back for quite awhile. The distributor must be able to adapt quickly to the current trends and provide the proper tools to assist in the contractors success.”
Baumann believes contractors must understand the trends in their market and invest in education and crew training to successfully address those trends. “For example, learn how to install white, heat-welded systems and apply elastomeric acrylic coating systems,” she suggested.
“Where vegetative roofs are becoming popular (typically urban areas with high demand for energy savings and storm water management), consider expanding into modular vegetative roofing systems, which lend themselves to contractor installation. Contractors also can share information that will help building owners and facility managers make the move to more sustainable buildings. They can suggest conducting an energy audit and refer owners and managers to an energy engineer or other resources. For example, Alliant Energy offers an online facility assessment wizard athttp://members.questline.com/FacilityAssessment.aspx.”
Geary emphasized the importance of environmentally friendly design. “Because re-roofing and retrofitting will continue to outpace new construction in 2011, the greatest opportunity for roofing contractors to improve revenue and profit is by incorporating green building solutions into project specifications,” he said. “In its 2011 Green Outlook, McGraw-Hill Construction forecasts non-residential green building construction will grow from about $54 billion today to $145 billion in 2015. Contractors need to be familiar with the features and benefits of the wide range of environmental roof solutions, including higher R-value insulation; white, reflective TPO and EPDM membranes; vegetative systems; as well as daylighting and PV systems.”
