Distributors focused on residential construction markets have had to find ways to adapt to the relatively nonexistent new housing market over the past year. Joe DeAngelo, CEO of HD Supply, told me in a recent interview that he credits his company’s exposure to diverse markets as reason it’s managed to stay afloat in current conditions.
But those diverse markets are starting to feel the pinch, as well. Infrastructure projects, which DeAngelo refers to as having “endless critical demand,” are starting to fall off. According to a recent article in the Wall Street Journal, cash-strapped cities like Philadelphia, Phoenix and Atlanta are requesting money from the federal bailout plan to help fund infrastructure projects as the cities' revenue streams dry up from the financial markets crisis.
But even with all the negative news, DeAngelo maintains a positive outlook, pointing out that the conditions that contributed to the precipitous drop in the housing market don’t carry over to the infrastructure market. As such, the drop won’t be as extreme or protracted as we’ve seen in residential sectors.
And infrastructure demands will always be there. Cities need to maintain infrastructures to function. At the same time, populations continue to go up. A growing population means growing infrastructure demands, DeAngelo says.
Once the financial markets stabilize, nonresidential construction and infrastructure projects will begin to pick up again, he says. “Areas that were too hot are now ice-cold,” DeAngelo says. “It’ll warm up again and things will be fine.” About 40% of HD Supply's sales are in the infrastructure and energy sectors.
The latest issue of MDM, published Nov. 10, 2008, takes a closer look at the current state of construction markets in the U.S.: Construction Markets Outlook
