How Many Pumping Dollars "WOOD" You Lose On This Project?

by Christi Collins, ACPA Executive Director

With construction activity steadily increasing since the end of the recession, loss of concrete’s market share has probably not been on many radar screens, masked by the uptick of overall business. However, over the past 10 years, the soft wood industry, through its calculated and extremely well-funded WoodWorks campaign, has steadily increased market share in the low/mid-rise market sector, culminating in a now-alarming shift of demand for low/mid-rise building materials. Aggressive changes in sprinkler codes, innovations in products and design, as well as lower upfront costs and faster turnaround times are contributing factors for developers now opting for wood-frame construction over concrete. In fact, data complied by F.W. Dodge and shown in the graph to the right, shows concrete’s share of the low/mid-rise building sector has deteriorated significantly, from 30 percent in 2004 to 22 percent in 2014, whereas the increase in wood’s share has increased from 23 percent to 40 percent during that same period. In 2014 alone, the wood industry boasted it successfully converted 380 projects from concrete to wood, half of which were three stories or taller.

According to the National Ready Mixed Concrete Association (NRMCA), commercial, multi-family and residential market segments make up 40 percent of all ready mix production, which accounted for 130 million cubic yards of ready mix concrete in 2014. If the estimated share of pumping on these types of projects is roughly 90 percent, that’s a potential market of 117 million cubic yards of pumping just in the low/mid-rise segment.

On a project-by-project situation, consider this scenario. A typical 200,000 square foot apartment building using concrete-framed construction consumes 7,000 cubic yards of concrete. However, when the same building is now replaced with wood framing, the amount of concrete falls to 2,000 cubic yards. The loss of 5,000 cubic yards for a single project, according to NRMCA’s economic data survey, roughly translates to a loss of 500,000 dollars in revenue for a concrete producer. Apply that same formula for pumping, assuming 18 dollars per yard on average when pumping vertical construction, and the number becomes 90,000 dollars in lost pumping revenue. Taking it a step further, consider those 380 projects converted last year—the number rises to a staggering 34.2 million dollars of lost pumping revenue.

And their aim gets higher. Recently, the U.S. Secretary of Agriculture, Tom Visack, in partnership with the Softwood Lumber Board and the Binational Softwood Lumber Council, announced the winners of the U.S. Tall Wood Building Prize Competition. The two winning development teams were granted a combined 3 million dollars in funding to support development of the tall wood demonstration projects in both New York and Portland, Oregon. Touting wood as a greener and more renewable resource that actually absorbs carbon dioxide as it grows and is sequestered in the wood when it is cut into building materials, the wood industry claims mass timber can offer a safe, economical and environmentally-friendly alternative for tall building structures. They also claim the recently-developed cross-laminated timber (CLT) actually performs better in fire than structural steel—claims of which have been refuted by the concrete industry—making it an appealing alternative in the eight-story and above building sector.

Long term, the picture becomes even grimmer when you factor in future construction gains. Economic forecasts for these sectors indicate steady growth over the next five years and possibly beyond. According to FMI, multi-family residential construction will grow from 53 billion dollars of put-in-place in 2014 to 83 billion in 2019. The non-residential building market is expected to grow from 378 billion dollars in 2014 to 510 billion dollars by 2019. Lodging, office, healthcare, education, manufacturing—all building types that have potential to consume considerable amounts of concrete—are expected to grow over this five-year period.

In the long term, according to Dr. Arthur C. Nelson, Professor of Urban Planning and Real Estate Development at the University of Arizona, the U.S population will continue to grow at a rapid pace, reaching 400 million by 2034 and 500 million by 2050. This means that the U.S. will have significant demand for new buildings. Dr. Nelson predicts the U.S. will build 287 billion square feet of construction between 2010 and 2040, more than doubling the existing building stock, including both new construction and re-construction.

In a bold move this past September, NRMCA’s board of directors voted in favor of an increase in membership dues to fund an aggressive five-year $20.5 million plan aimed at recovering market share specifically in the low/mid-rise sector. One of their strategies is a Design Assistance Program (DAP), which will work with developers and their design consultants on preliminary designs, cost estimates and operating cost benefits, with the purpose of influencing them to use concrete framing for their projects. Other strategies include communications, education and codes advocacy.

On a wider focus, Portland Cement Association (PCA) has hired the strategic marketing and development firm Statler-Nagle, Inc., masterminds behind the “Got Milk” and “Plastics Make it Possible” campaigns, to develop a collaborated plan for promoting concrete in all market segments of concrete construction. Phase one of the project, currently underway, consists of widespread data collection and assessments from each sector of the concrete industry. Statler-Nagle estimates that a project of this magnitude, however, will take from nine to 12 months before implementation can begin.

What can the pumping industry do to help? The ACPA will continue to support both NRMCA and PCA programs, as well as the Alliance for Concrete Codes and Standards (ACCS). However, influence in the early development stages of a project is crucial. You can help by spreading the word to your contractors and asking for their help in identifying upcoming projects in your area which may be built with wood as opposed to concrete, and then advising NRMCA of these projects. NRMCA will contact the developer and offer support through their DAP plan. Please forward all project information to Kathleen Carr-Smith at kcarrsmith[at]nrmca[dot]org or call (240) 485-1145 for follow up.

More information can be found on the NRMCA website at http://www.nrmca.org/PROMOTION/Overview.asp, or by contacting Christi Collins, executive director at the ACPA National Office.