Buyers of landscape services in both the commercial and residential markets are opening their wallets again—and prices reflect that demand.
The LM Industry Pulse research shows green industry members’ optimism is rising—and that correlates with their customers’ positive feelings.
Data from both the commercial and residential customer segments show confidence measures moving in the right direction. As a result, landscape and lawn care firms have been able to gradually raise prices, and our pricing research reflects that trend (see charts below).
Residential market
The Conference Board Consumer Confidence Index in October, the most current month for which data were available at press time, is up from the previous month and the same month the previous year.
The Index now stands at 94.5 (compared with a baseline reading of 100 in 1985), up from 89 in September 2014 and 71.2 in October 2013. The reading was 72.2 for the same month 2012. (October 2013 took a hit due to the government shutdown.)
“Consumer confidence, which had declined in September, rebounded in October,” said Lynn Franco, director of economic indicators at The
Conference Board. “A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers’ view of the present situation. Looking ahead, consumers have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential.”
That’s good news for companies like Pavilion Landscape Management in Ballston Spa, N.Y., which primarily serves residential clients.
“Customers don’t seem that interested in messing with the price,” President Chris Solimini says. “They say, ‘I’d like to get this done.’ Instead of cutting back, they’re adding on, which is great.
“The wealthiest of my clients are also business owners,” he says. “Business has been good and they’re not stressed about it. They’re spending money and that trickles down to me.”
Commercial market
Data show executive confidence is up among business executives and real estate professionals, too. The Conference Board’s quarterly Measure of CEO Confidence checked in at 59 for the third quarter of 2013. This is down slightly from 62 in 2014’s second quarter, but up from 54 in the third quarter of 2013 and up from 42 in the third quarter of 2012. (A reading of more than 50 points reflects more positive than negative responses.)
Likewise, the Building Owners and Managers Association International’s 2014 Experience Exchange Report, its annual benchmarking study, showed increases across most income and expense categories for privately owned office buildings, indicating post-recession growth across commercial real estate properties. Notably, the “roads and grounds” expense category rose 16.7 percent, from 18 cents per square foot in 2012 to 21 cents per square foot in 2013.
Craig McBryde can attest to those increases. He’s “pleasantly surprised” at how much commercial accounts are ramping up enhancement spending.
“Stuff we presented two years ago to HOA boards and to property managers is finally getting signed now,” says the owner of McBryde Landscape & Maintenance Solutions/Green Impact in Greenville, S.C. “We’re really excited about that.”
With a steady maintenance business and a growing enhancements business, McBryde plans to increase prices slightly in 2015 by $1 dollar per man-hour.
“It’s kind of hard to increase the prices or you’ll price yourself out of the game,” he says. “Especially in a numbers situation. It’s a bit of an obstacle.”
