Special Trade Contractors, NEC

SIC 1799

Industry report:

The special trade contractors, not elsewhere classified, industry is comprised of firms that provide a broad range of miscellaneous construction services. Examples of industry activities include bathtub refinishing, gasoline pump installation, grave excavation, swimming pool construction, post hole digging, wallpaper stripping, mobile home setup, house moving, fire escape installation, bowling alley construction, artificial turf installation, and sandblasting.

In 2010, the highly diverse special trade contractors industry included 97,000 establishments and employed 458,200, according to industry statistics. The average firm is small, employing five people. Annual industry revenues totaled roughly $41 billion in 2010.

Although the diversity of this industry makes it hard to classify, a Department of Commerce survey notes that, based on value of construction work, the leading business sector is commercial buildings such as stores, restaurants, and auto service stations. This sector is followed closely by outdoor swimming pools, industrial buildings and warehouses, fencing, single-family houses, and office buildings. A variety of other construction work accounts for the remainder of total industry revenues.

Although each sector of the industry is impacted by different factors, most specialty contractors are heavily dependent upon housing starts or new commercial and institutional construction. During the mid-1980s, most contractors reported steady expansion as commercial and residential building flourished. Likewise, when housing starts and commercial development stalled in the late 1980s and early 1990s, many contractors suffered considerable setbacks. Total U.S. construction expenditures declined 10 percent in inflation-adjusted dollars between 1986 and 1992.

However, the construction industry reported strong growth between 1992 and 1999, as the general economy recovered, interest rates stayed relatively low, and housing starts boomed. For example, single family and multi-family housing starts dropped to 1.01 million in 1991, then rose annually and reached 1.46 million in 1994. While starts dropped to 1.35 million in 1995, they rose to 1.45 million in 1996 and were about 1.64 billion in 1999, a two-decade high. By 2002, U.S. housing starts had climbed to 1.7 million, 1.35 million of which were for single-family homes.

Another industry sector, home remodeling, had grown into a $153 billion industry by 2002. Growth in this segment was expected to average roughly five percent per year, due in part to rising home values against which consumers could borrow. This forecast boded well for special trade contractors that served this market segment.

However, nonresidential construction began to slow considerably in the early 2000s in response to a recession in the United States. Spending on industrial construction declined 3.2 percent in 2001, and commercial construction spending dipped 1.6 percent that year. Institutional construction, on the other hand, bolstered by a few strong segments like health care construction, grew 10 percent in 2001. Nevertheless, even institutional construction spending had started to wane by 2003 when total nonresidential construction spending dropped six percent. The overbuilding of the late 1990s caused the office construction segment to be especially affected throughout the early 2000s. Spending on office building construction declined from $47.5 billion in 1999 to $39 billion in 2003, and the office vacancy rate nearly doubled from 8.9 percent to 16.5 percent.

After the mid-2000s, remodeling revenues declined to $226.4 billion, compared to a 25 percent decline in housing starts. Of that $226.4 billion, 76 percent, was spent on such home improvements as additions, while 24 percent, or $54.8 billion, was spent on maintenance and repairs. When home prices dropped during 2007, expenditures for owner-occupied buildings fell four percent as interest rates rose and property values plunged.

By 2008, the stirrings of instability in the housing market, first felt in 2007, became reality as the United States fell into a recession. New housing starts, which had reached record highs in the mid-2000s plummeted in 2008 and 2009. Specifically, in 2005, total residential housing starts were 2.07 million; in 2009, new residential builds totaled just 554,000. The nonresidential market, which avoided the crash that occurred within the residential market, continued to grow in 2008 but dropped in 2009 as the economy finally took its toll.

Not only did the economy affect new construction, it affected the amount consumers were willing or able to spend on repairs and improvements. However, as the economy recovers, according to the U.S. Bureau of Labor Statistics, specialty trades contractors should expect growth to return to their industry as many existing and older homes and buildings need upgrades or improvements. In addition, more general contractors were subcontracting out specific work to specialty contractors, rather than keeping them on their payrolls. Another trend is for affluent homebuyers to move back into older home that need labor-intensive, highly skilled work to retrofit the homes with modern conveniences. The U.S. Bureau of Labor Statistics forecasted that demand for construction-related jobs would increase by over 18 percent between 2008 and 2018.

Industry Leaders

Most companies in this industry were small, privately held, local enterprises. Some larger firms with diversified offerings also participated in the sector but are not primarily classified within this industry. In 2010, some of the top companies within this industry included AAA Stripe Pro (sealing, striping, driveway sealing, parking stencils) of Knoxville, Tennessee, with estimated revenues of over $1 billion; Summit Contracting LLC (asbestos removal service), of Moses Lake, Washington, with estimated revenues of over $500 million (and revenues of less than $1 billion); Psc Industrial Outsourcing Inc (sandblasting), of Lafayette, Louisiana, with estimated revenues of over $500 million; Dsk (Disk Group; kitchen and bathroom remodeling), of New York, New York, with estimated revenues over $500 million; and Hayward Baker, Inc. (building site preparation), of Odenton, Maryland, with 2009 estimated revenues of $623 million.

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