Homeowner demand for upscale outdoor spaces spells wins for LBM dealers

The U.S.S. Missouri (designated BB-63 and nicknamed "Mighty Mo") is an Iowa-class battleship launched on January 29, 1944. As part of her design, the massive warship utilized over 1.2 acres of teak decking. Naturally a non-slip surface when wet due to its high mineral content, the teak decking also served as protection against fires and explosions, as the wood prevented metal-on-metal scraping that could have caused sparks that would have ignited the onboard gun power stores. Even more importantly, those teak decks served as a platform for the formal end of WWII when representatives of the Japanese government signed the surrender documents onboard the battleship. Today, the battleship rests at anchor at Pearl Harbor where she serves as a floating museum.

Like the "Mighty Mo"—but nowhere near as historically important—the decking industry keeps floating along despite adversity. "The decking segment is a strong market that has seen growth through even the slowest of economic times, and there are plenty of reasons to believe it will continue to do so into the future," says Mehmet Zenginler, managing partner, U.S. operations for G Wood Pro (the exclusive distributor of Tantimber ThermoWood). "While it's true that the housing market is facing some challenges, those localized issues won't necessarily affect this area of the home improvement industry."

One major issue responsible for that continued growth is the long-hoped-for stabilization of lumber prices. Over the past few years, the lumber market saw unprecedented price increases; from April 2020 to April 2021, Texas A&M reported a shocking 365% increase. Thankfully, prices have returned to more sane levels. According to a report from Forest2Market, lumber prices for southern yellow pine dropped to $400/ MBF in January of 2023—58% lower than the same time in 2022 when that lumber species was going for just below $1,000/MBF.

Jay Hilsenbeck, director of global product management and North America marketing for Arxada, says this spells good news for the deck industry. "While it is widely believed that the housing market will continue to slow down in 2023, there is one clear upside for the homeowner: lumber pricing has come down substantially compared to where it was during the past two years and has remained stable in recent months. So while new home construction and existing home sales may feel the brunt of a softening market, the repair and remodel industry is poised to maintain strength as people will be more inclined to stay in place and continue to make investments in their current homes."

Chris Brown, director of business development for Culpepper Wood Preservers, also sees homeowners choosing to invest in repair and remodeling projects. "We expect the new housing market to be down but do anticipate an increase demand in the multi-family sector as well as the DIY/Renovation/Remodel business," he says.

In fact, the current economic indicators that have some analysts seeing gloom and doom may actually indicate ripening conditions for the decking segment. "While the general economy is facing a lot of uncertainty in 2023, history has shown that when interest rates rise and the housing market softens, homeowners tend to stay in their homes and look for ways to improve the homes they are in," explains Bret Martz, vice president of North American professional sales for Trex Company.

"This typically bodes well for manufacturers in our space as ‘outdoor living’ is one of the more popular areas to focus repair and remodel investments while commanding a high return."

Steve Booz, vice president of marketing for Westlake Royal Building Products, agrees. "Due to the limited inventory of available homes and rising interest rates, we expect remodeling activity to continue next year as homeowners look to improve their current homes versus buying a new one," he says.

Since 2020, homeowners have spent record amounts of time at home, especially in their outdoor spaces. As more people were forced to work from home and eschew public gatherings because of the COVID-19 pandemic, embracing outdoor living became paramount. It's a trend that remains on the upswing, even with the winding down of pandemic worries. A recent report from the International Casual Furnishings Association shows that 90% of Americans see their outdoor spaces as more valuable than ever before, and 78% made upgrades to their outdoor spaces during the COVID-19 pandemic—promising statistics for the decking industry.

"We’re seeing homeowners spending more time at home and looking to maximize livable space wherever possible, including outdoors," says Booz. "As homeowners consider remodeling projects and look to create comfortable and functional outdoor living spaces, we foresee projects like decks, patios, and gardens increasing in 2023."

"Because people are spending more time at home, we’re seeing homeowners looking for decks with spaces that can be tailored to their interests, such as dining, movie nights, swimming, or entertaining," he continues. "This could mean outfitting your deck with an outdoor kitchen, fire pit, or lounge area with comfy furniture."

Michelle Hendricks, category market manager for Deckorators, also sees homeowners demanding more from their outdoor spaces. "Over recent years, there has been more demand than ever for contractors, materials, and supplies within the decking and deck railing segments," she explains. "Many of our in-network contractors have wait-lists of a year or more on outdoor living projects. Consumer expectations are high, and as a brand we have been doing everything within our power to focus on supporting supply of our product. Interest rates continue to remain high and people are opting for home-improvement projects instead of moving, and some of that translates into new outdoor living spaces."

Theresa Mairn, category marketing manager for ProWood, agrees. "As people spend more time at home, they are seeking to improve and extend their living environments," she points out. "An outdoor deck is an obvious, smart way to achieve expanded living space and to enhance the value of one's home at the same time. We see these elements as having a positive impact on the decking and railing segments in 2023."

When it comes to product choice, factors such as sustainability, resiliency, and low maintenance are increasingly driving the purchase decision and should be factors LBM dealers keep in mind when selling to their customers. Using environmentally certified lumber as recognized by the Forest Stewardship Council (FSC), materials with recycled content, and all-plastic materials that promise extended lifespan not only appeals to consumers, but also can enable a builder to earn points towards LEED certification when such products are used.

"Sustainability and resiliency are critical to consumers in all areas of spending, and that holds true in the decking market," says Mairn. "Fortunately for ProWood, lumber is one of the most sustainable, renewable products in the world, making treated lumber one of the most sustainable products that consumers can choose in this space."

Culpepper Wood Preservers’ Chris Brown points to natural wood's properties as being ideal for sustainable building. "As a raw building material, wood's merits are extensive and wood creates far less carbon dioxide emissions than competing building products," he explains. "The sustainability movement and green building initiatives have been adopted into several model building codes and national standards. Treated wood preserves wood against termite attack and fungal decay, lengthening its serviceable life and extending the benefits of using wood even further."

Arxada's Hilsenbeck echoes Brown's comments. "Wood is nature's sustainable building block, enhanced with life-extending preservatives," he says. "With consumers focusing more on caring for the planet and its resources, it is only natural that they trend toward using treated wood products. Consumers and contractors are looking for a product that is aesthetically pleasing, long-lasting and affordable. Recent research commissioned by Arxada shows that consumers purchase treated wood over alternative materials because of its durability, lower price and because it has been pressure treated to withstand the elements."

Natural wood, however, isn't the only name in the game when it comes to sustainable practices. Alternative decking materials tout their unique benefits as perfectly positioned for both consumer and builder needs. "Sustainability is no longer a ‘nice to have’ but rather a growing requirement among increasingly eco-conscious consumers," Trex's Martz points out. "Shopping with sustainability and circularity in mind will continue to remain a priority in 2023 and beyond as more and more homeowners around the world strive for net zero living."

Westlake Royal's Steve Booz also recognizes the increasing demand for sustainable decking and points to alternative products as ideal solutions. "As in recent years, we will continue to see increased demand for durable, low-maintenance outdoor living products," he says. "No matter where you live, decks are exposed to UV rays, temperature changes, and varying weather elements. We are also seeing an increasing number of extreme weather events each year in the U.S., which will increase the demand for resilient products. As such, durable products like composite decking are becoming more appealing to customers due to their performance qualities."

The desire to build sustainably is one that can ultimately overcome price, says Richard Lam, director of sales and marketing for NewTechWood America. "People are always looking to buy something once and never change it. If a product was able to withstand whatever Mother Nature threw at it, people would buy that. I think people only buy on price because it is something they don't need or want it to last a lifetime, but when we are talking about building materials people are willing to spend a little more for the added durability of the product."

Across the country, manufacturers report an easing of supply chain disruptions that have been the bane of LBM dealers for the past few years. In some cases, that easing is due in part to manufacturing facilities increasing their overall capacity and throughput, and that has dealers smiling.

"We feel confident that the supply chain is adequately positioned to support the market in the coming years," predicts Trex's Martz. "As a whole, the category proactively responded to ‘COVID-19 demand’ by adding significant capacity over the last 18 months."

As an example, in Trex's case, it opened a new decking facility at its main production campus in Virginia, expanded capacity at its existing Nevada facility, and plans to add capacity with another new manufacturing plant that's currently under construction in Arkansas.

This isn't to say that product availability and supply chain breakdowns are a complete thing of the past. Product demand that outpaces availability can still cause headaches for LBM dealers. "Based on current popularity and demand of thermally modified wood products in the market, we foresee product availability and supply chain issues affecting dealers’ ability to get the right materials on time, at a reasonable price point and serve the market," laments G Wood Pro's Zenginler. "To address these issues proactively, it is important to cultivate strong relationships with suppliers like us who can provide access to quality products quickly and cost effectively."

Adding insult to injury, high fuel and freight prices are driving up product costs, forcing LBM dealers to pass along those increases to their customers. "Freight costs have increased both inbound and outbound," explains Culpepper's Brown. "This seems to be a repetitive headline the past few years, but this is real money and not just a fictional cost built into the price of products. We are paying more on the inbound freight for not just wood but other products and supplies including chemical and components necessary for the treatment process. Then when it comes time to ship the product to our customers, we must pay real money to move it off our yard, and those costs are up almost 60% in the past 1-2 years. While diesel price has always been the top indicator for freight costs, other factors have come in to play such as driver availability, lane coverage, other loads paying more money, etc."

The biggest and most prevalent disruptor for LBM dealers, however, remains labor shortages. Manufacturers continue to report labor shortages, a problem that's impacting everything from factory throughput to product delivery. "Labor is costing our companies more money than ever," Brown continues. "We are having to pay more to get new hires, which also means we have to pay more to keep the employees we have. Even when we offer more, we hope every day they show up. And everyone has had to get creative trying to fill those positions: offering sign-on bonuses, incentive programs, flexible schedules and whatever the other company down the street or across the road is doing. The national averages we all see are real. These costs are incurred by our company and your company. This will be an ongoing challenge for all of us."

Westlake Royal's Steve Booz also sees labor constraints as a potential continuing obstacle in keeping up with demand in 2023. But, he says, there's cause for LBM dealers to feel a bit of optimism. "Working with a company like Westlake Royal Building Products that has U.S.-based manufacturing, broad distribution and a diversity of offerings across multiple exterior brands can help meet the increasing demand," he says. "We are happy to say that barring any unforeseen upstream issues, nearly every [Westlake Royal] product is back to normal lead times for delivery. In particular, our outdoor living products are back in stock at the dealer level."

In the face of these challenges, LBM dealers can take specific steps and put into place vital practices that can help minimize the impact these disruptions can bring. Start with the product lines you carry, say decking manufacturers, by being mindful of what you’re selling and the benefits those products can bring to your customers. "One practice would be investing in high quality sustainable products for your customers," says G Wood Pro's Zenginler. "For example, Tantimber's ThermoWood decking products are both aesthetically pleasing and designed to withstand outdoor use and harsh weather conditions. They are also sourced from responsibly managed forests and come with a warranty of up to 25 years. This means fewer maintenance issues for the customer and lower chances of product complaints down the road. Through this type of investment, you will be able to stand out among other dealers as having access to top-notch materials for your buyers, which can form a competitive edge that proves invaluable over time."

As well, manufacturers recommend LBM dealers partner with product lines the dealers can trust to deliver during challenging times. As NewTechWood America's Lam points out, "It's best to pick a product and a partner that will work with you during those challenges and also to ride trend waves as those are probably the only thing that isn't affected as much by the recessions."

Manufacturers also stress the importance of LBM dealers being upfront and honest about pricing. Don't shy away of increasing what you charge your customers, they say, especially in the face of the before-mentioned challenges of increased labor and product costs. "The biggest focus we try to relay is to pass on these increased costs to their customers," explains Culpepper's Brown. "It seems we all have prices in our memory bank of ‘where things used to be.’ Unfortunately, those memories are exactly that—things of the past. All expenses for all companies have risen the past two years. The price of doing business has gone up drastically even aside from the cost of goods sold. The return to normal, however, which we all waited on, has passed us by. We are in the new normal and need to accept that. Labor, insurance, benefits, freight, chemicals, etc. are up. Due to many of these factors, aside from just the cost of wood, there have been increases introduced to the market in our segment. These are real costs and the dealers need to pass these increases on. The financial stability of our lumber dealers is dependent on margin. Therefore we communicate openly and honestly so they can protect what they work so hard for."

It should come as no surprise that communication is key to the successful implementation of these recommendations. "Active communication early and often will help customers manage their expectations," Deckorators’ Hendricks points out. "Being realistic and conveying a sense of understanding goes a long way to show that we are all in this together. We are in regular contact with our Certified Pros because they have the pulse on what's happening with homeowner requests and other issues that inform how we improve on the fly; a small effort to connect with each other can pay dividends."

It's all part and parcel of setting yourself apart from the competition, manufacturers point out. And part of any LBM dealer's strategy should include serving as a resource for its customers. By providing product information, training resources, and practical advice, manufacturers say, you’ll ensure a visit from a returning customer. For example, Westlake Royal Building Products offers several installation and design resources LBM dealers can avail themselves of. "On our websites WestlakeRoyalBuildingProducts.com and WestlakeRoyalPros.com, we provide a number of helpful materials that building professionals can download, such as installation guides and training videos," explains Booz. "We also have a national sales team and install specialists who are happy to help guide distributors and installers with any questions they might have."

To say that the decking industry is going to be nothing but smooth sailing in 2023 would indeed by a sailor's tall tale. With continued labor shortages, high fuel prices, and uncertain economic forecasts, industry experts seem to share a cautious yet hopeful vision for what the decking category might bring for the LBM dealer.

It's an optimism that keeps one eye on the past and one on the horizon, and is perhaps best summed up by Deckorators’ Michelle Hendricks. As she puts it, "Challenges in production, accessibility, and market demand continue to persist. At Deckorators we believe that the best thing we can do is to communicate honestly and openly with our contractors and dealers. As we roll out select new products for 2023, we are continuing to be mindful of what is feasible in the current market, and what is going to be available."

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