Nonresidential construction - education, healthcare, hospitality, etc. - keeps the industry afloat.

It’s no surprise that the housing slump is taking its toll on the construction industry. While the U.S. Census Bureau reported that the value of construction spending rose 4.8 percent in 2006 to $1,198 billion, it also noted that residential construction ($630.3 billion) dropped 1.9 percent below 2005 figures ($642.3 billion).

Building permits (estimated 1.8 million) were down 14.9 percent from 2005 (2.2 million), and housing starts (estimated 1.8 million) were 12.9 percent below 2005 starts (2.1 million). However, nearly 2 million homes were completed last year, a 2.4 percent jump from 2005.

Multiunit housing fared a bit better - there was a 3.8 percent jump of new, privately owned housing units under construction of five units or more at the end of last year (percent change for structures with two to four units were not available.)

Private nonresidential construction rose 16.2 percent last year - lodging rose 52.1 percent, commercial construction rose 10.8 percent, healthcare facility building rose 16 percent, power rose 14.6 percent and manufacturing construction rose 19.7 percent.

Public nonresidential construction rose 10.2 percent from 2005 - educational facilities rose 6.4 percent, sewage and waste disposal rose 17.2 percent, water supply construction rose 9.7 percent, and public healthcare construction rose 8.1 percent.

For residential plumbers and mechanical contractors, things look much brighter on the remodeling front. The Census Bureau estimated spending on improvements and repairs of residential properties in 2006 at $228.2 billion, an increase of 6.1 percent from 2005 figures. Home improvements account for 76.6 percent of that number, or $174.8 billion. The remaining 23.4 percent was spent on maintenance and repair projects.

The National Association of Home Builders predicts a 1.9 percent increase of money spent on home improvements in 2007. (Our Pipe Trades Giants survey respondents say that only 25 percent of their work is in retrofit/remodeling.)

“Remodeling continues to show strength despite the housing slowdown,”says Mike Nagel, NAHB Remodelers chairman and a home remodeler from Chicago. “With more than 120 million homes in the United States, plus $11 trillion in owner equity, the demand for remodeling will be there now and in the future.”

Pipe Trades Leaders

The “giants” on our Pipe Trades Giants list represent only a small fraction of the plumbing and mechanical contractors across the nation; most of these companies are small shops. The latest information on this sector from the U.S. Census Bureau is from 2004, which indicates there were 91,684 plumbing and HVAC businesses in the United States. Of this number, 42,180 were firms with one to four employees. Another 17,818 companies had five to nine employees. Only 133 firms in 2004 had 500 employees or more.

Now, not all of the companies on our list have huge employee numbers. But many of our giants are engaged in the nonresidential construction sectors that seem to be growing - healthcare, hotels and hospitality, commercial, education, sewage and wastewater treatment. (Eighty seven percent of respondents’ work is in the commercial and industrial arena, while only 13 percent is in residential work.)

Sixty percent of our survey respondents indicated their profitability increased last year; 5 percent said profitability decreased and 19 percent said profitability remained the same. And almost two-thirds (63 percent) expect sales to increase next year.

We asked respondents to tell us what steps their companies have taken to get new work, improve position in the market, or achieve greater productivity. Continued training and mentoring of personnel was a popular answer, as were improvements in customer service and increased marketing and branding.

Respondents also listed expansion of existing markets or delving into new ones, such as pipe fabrication, electrical work, design/build and fire protection. Refining the bidding process and project management methods were also listed as ways to become more profitable.

We have a few newcomers on the list this year, most notably our No. 10 Giant, RCR Cos. out of Riverside, Calif. RCR used to be part of roll-up American Plumbing & Mechanical (AMPAM), which filed for bankruptcy in 2003. RCR separated from AMPAM in 2004. (For more on consolidator and roll-up companies that didn’t survive and why, see the cover story at this link.)

How The Pipe Trades Giants Happens

The informationPlumbing & Mechanicaluses to rank the 100 Pipe Trades Giants is the most accurate we can gather. We use several different methods, but by far the most effective is the questionnaire we send out. This year we used a different approach - we used the marketing research arm of our company to send out a more comprehensive questionnaire to a wider group of companies.

However, as happens every year, there were some companies who opted not to supply some or all of the information we requested. For a few, we used industry reports to obtain the information. For some public companies, we used information from annual reports or SEC filings. For the rest, we have estimated sales volume and percentage breakdowns, indicated with an asterisk (*).

The only way to present a meaningful report on the state of the industry is to include every company that is a significant player, even if it has had a bad year or is in turmoil for some other reason. 

Editor’s note: The Pipe Trades Giants are not ranked on total sales volume, but what we call “pipe trades volume” - the percentage of a company’s revenue that comes from plumbing, piping, hydronics, fire protection and water/wastewater treatment. HVAC, electrical and other revenue is not added in to our computations (the “Other” category).