Kitchen & Bath Design News

APR 2019

Kitchen & Bath Design News is the industry's leading business, design and product resource for the kitchen and bath trade.

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Page 35 of 68

Home professionals are cautiously optimistic for 2019, projecting growth in revenue and profits, despite challenges from rising material costs and labor shortages, a new Houzz survey reports. BY JANICE COSTA Cautious Optimism ome renovation professionals are cautiously optimis- tic about business for 2019, with plans for increased hiring, despite a tight labor market, rising costs and deceleration in annual growth rates. That's according to a new study completed by Houzz Inc., a leading platform for home remodeling and design based in Palo Alto, CA. The survey, which polled nearly 4,800 professionals in the Houzz community, shows companies across all segments of the home remodeling industry citing a positive outlook for 2019. Industry segments were broken into categories including architects, interior designers, general contractors/remodelers/ builders and design-build, among others. Although there was no separate category for kitchen and bath dealers and design- ers, the majority of kitchen and bath pros participating in the survey were included in the interior designer or design-build category, according to Houzz. SLOW GROWTH Despite some challenges ahead, revenues have continued to rise, driving continued optimism, with more than half the companies saying their 2018 revenues met or exceeded their expectations. For 2019, those projections continue to show growth, with 74% of interior designers, 72% of design-build firms, 71% of GCs/remodelers/builders and 49% of architects expecting increases in revenue (see Graph 1). While increased revenue doesn't always translate to in- creased profit, especially in times of rising material and labor costs, those polled were also largely optimistic about profits for 2019. Some 70% of interior designers expect to see increased profits in 2019, according to the survey, while 66% of de- sign-build firms, 63% of GCs/remodelers/builders and 46% of architects project profit increases this year (see Graph 2). That optimism is not surprising: According to Houzz principal economist Nino Sitchinava, "Residential construc- tion and design service professionals large and small have sustained a remarkable multi-year run with upper-single to double-digit revenue growth." While the Houzz report projects a deceleration in average growth rates in 2018 (5-8 percent compared to 8-11% in 2017), Sitchinava believes "the recent deceleration in growth of con- struction services is likely a function of capacity constraints due to labor shortages, rather than a contracting demand." Growth for 2019 is expected to continue to progress at a slower pace, thanks primarily to increases in material and labor costs. Interior designers polled are currently project- ing growth of 9.4% in 2019, compared to 11.1% in 2018, while design-build firms project 8.4% growth, compared to 9.9% in 2018. Architects expect to see growth of 5.1% this year, compared to 6.9% the previous year, while GCs/re- modelers/builders are projecting growth of 8.7%, compared to 10.5% in 2018. This growth can also be reflected in demand for added help; despite challenges in labor availability and rising costs, some 20% of survey respondents in design-related industries and more than a third of those in construction-related indus- tries say they are planning to hire additional staff in 2019, the survey reports. While facts and figures support these growth projections, attitude also plays a role in how the industry evolves. When asked to report on their overall business outlook for 2019, most of those polled were upbeat, with 78% of interior designers, 58% of architects, 79% of design-build firms and 78% of GCs/ remodelers/builders describing their business outlook for 2019 as "good" or "very good." That said, attitudes about the national economy were mixed, with more survey respondents expecting the national economy to worsen than improve in 2019. H 1 HOW HOME PROS SEE REVENUE CHANGING FOR 2019 ■ INCREASE ■ DECREASE 2 HOW HOME PROS SEE PROFIT CHANGING FOR 2019 ■ INCREASE ■ DECREASE Architects Interior Designers Design-Build Firms GCs/Remodelers/Builders Architects Interior Designers Design-Build Firms GCs/Remodelers/Builders Source: Houzz Source: Houzz 49% 46% 70% 66% 63% 11% 74% 72% 71% 18% 20% 9% 9% 6% 7% 7% April 2019 • 35 HOUZZ SURVEY

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