Material World

1
Material World

• Clark Ellis
• Principal and Leader of FMIs
• Residential Consulting Practice
• FMI Corporation

2
What is Globalization?

• Globalization is the acceleration and
  intensification of interaction and integration
  among the people, companies, and governments of
  different nations

3
Is Globalization a Threat or Opportunity?
4
What is the Custom Builders Role?

• Master builder
• Building process consultant
• Master procurer
• Designer
• Land developer
• Craftsman
• Where is the best opportunity for profit?

5
How is Globalization Affecting Custom
Homebuilding?

• Enabling new potential competitors
• IT is driving globalization by allowing both
  builders and homebuyers to be global consumers
• Importing of Building Products
• Potential off-shoring of Design Services

6
Enabling New Competitors

• Large Production Builders
• Regional or Local Production Builders
• High Density Developers and Builders
• Other New Entrants

7
IT is Driving Globalization in Building Products
Related to Custom Building

• Internet is the primary source when searching for
  new products and product info for both builders
  and homebuyers
• 2007 Custom Market Trend Survey Results
• 90 rank the Internet as either very important or
  important as a source for product info
• 87 get product info from magazines
• 76 get it from manufacturers
• 72 listen to clients
• 62 turn to a colleague and
• 61 trust their dealer for product information.

8
2006 Homebuyer Product Importance
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Customer Perspective

• Customers have the time, money and interest to
  invest in new products
• Have the ability to use search tools to identify
  products
• Now homebuyers are telling architects and
  builders what they want

10
Building Products Import Export Trends
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Lumber Other Wood Commodity Products

• The Frame Softwood lumber sawn from pine, fir
  and spruce species
• US milled over 26,200 billion board feet in 2003
  and exports over 380 million worth each year.
• US imports approximately 4.5 billion worth of
  softwood lumber from Canada, accounting for 83
  of total softwood lumber imports by value.
• Another 13 of our total imports in this category
  come from Chile, Brazil, New Zealand, Germany and
  Sweden, collectively.
• Sheathing Most often consists of plywood or
  oriented strand board (OSB)
• In 2003, the U.S. produced over 4,660 million
  board feet of OSB, but demand was almost double
  that.
• We import the difference from Canada, Ireland,
  Germany and other countries, though a significant
  amount of the European supply is made with wood
  from forests in Eastern Europe, Russia, and
  Africa.
• The U.S. imports softwood plywood primarily from
  Canada, Brazil and Chile.

State University of New York College of
Environmental Science and Forestry
12
Lumber Other Wood Commodity Products

• Flooring and Molding
• About 94 of flooring imports and 32 of molding
  imports are made from hardwoods
• The U.S. imports most of its foreign-made
  hardwood flooring from Canada, China, Sweden,
  Indonesia and Brazil.
• The U.S. exports over 190 million dollars worth
  of hardwood logs to Canada each year. Some of
  this wood is processed and shipped back to the
  U.S. in the form of flooring and molding
• China is the largest supplier of imported
  softwood flooring, but manufacturers often import
  raw materials from other parts of Asia.
• Brazil and Chile provide the bulk of softwood
  molding imports, but manufacturers often use logs
  from countries throughout South America.

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Flooring Trends

• Custom homebuilders report that material
  selection for residences includes
• 20-30 carpet, 40-50 hardwood, 15-25 ceramic
  tile and less than 5 vinyl sheet.
• There is a shift to more high-end materials such
  as exotic woods and imported hard tiles.
• Gaining popularity in the move-up, luxury and
  repair and remodeling markets.
• Bamboo, Walnut and Brazilian Cherry are
  competitively priced to domestic luxury options.
• Imported ceramic tile from Europe, South and
  Central America are gaining share in the imported
  flooring market.

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Flooring Trends

• Hard Tiles
• Demand for imported hard tiles should rise an
  estimated 7 by 2011.
• Decreased supply at U.S. quarries has led to
  domestic manufacturers having a difficulty
  meeting demand.
• 15 to 20 of ceramic tile is imported from
  Western European countries such as Italy and
  Central and South America.
• Due to the increased construction of luxury
  homes, the percentage of imported tile is
  expected to increase 5-10 by 2011.
• Engineered Wood
• Between 2007 and 2010, distributors predict
  imported engineered wood will increase from 45
  to 60 due to lower production costs overseas.

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Plumbing Fixtures

• The total import value for the year 2006 was
  158,959,000, which is a 13.7 increase from year
  2005.
• The U.S. had imported industry related
  merchandises from 49 countries in 2006.
• The top importing countries were
• Canada, 82,035,000 (51.61)
• China, 25,298,000 (15.91)
• Mexico, 23,197,000 (14.59)
• Germany, 4,351,000 (2.74)
• Korea, 3,899,000 (2.45)
• Their combined total represents approximately 87
  of import from all countries.

Plastics Plumbing Fixture Manufacturing Industry
in the U.S. and its Foreign Trade (1996-2008)
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Offshoring of Design Services

• The United States is the largest importing
  economy in the world, accounting for one-fifth of
  world merchandise imports, equivalent to half the
  global trade expansion.
• The United States is the largest exporter of
  architecture and design services for the built
  environment globally.

Cramer, J. Simpson, S. New Paradigms in
Professional Practice, AIA 2006 National
Convention and Design Exposition.
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Offshoring of Design Services

• 2006 AIA Firm Survey reveals 5 of firms are
  looking offshore to fill production needs and is
  expected to rise to 20 in the next 2 years.
• Offshore Service Providers include India, China,
  South America and Eastern Europe.
• Outsourcing of services is driven by
  technological advances in communication,
  electronic data transmission and BIM.

AIA Board Considers Offshoring Report Twenty
percent of firms predicted to use international
services by 2008 by Douglas E. Gordon, Hon. AIA
AIArchitect This Week, December 2006
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Summary

• Enabling new potential competitors
• IT is driving globalization by allowing both
  builders and homebuyers to be global consumers
• Importing of Building Products
• Potential off-shoring of Design Services

19
Questions?

• Clark Ellis
• Principal
• Residential Consulting Practice Leader
• cellis_at_fminet.com
• FMI Corporation
• 5171 Glenwood Avenue, Suite 200
• Raleigh, North Carolina 27612
• 919.785.9376
• www.fminet.com