Commercial contractors tap into booming residential demand

Plaza Construction, a New York City-based construction management company that has primarily focused on commercial construction for the past few years, has relaunched its luxury Plaza Homes division to meet rising demand in the industry as other non-residential construction companies move into the glowing housing crowd crowd.

Brad Meltzer, the newly appointed CEO of Plaza Construction, who recently succeeded longtime CEO Richard Wood, said the decision to focus on building high-end homes – a current project covering 20,000 square feet – is due to inquiries from commercial customers.

“The demand was great,” said Meltzer. “We have received calls asking us to do this instead of chasing customers, which is the normal course of business. We have decided to redouble our efforts and concentrate on it. “

The Plaza move comes as the rising demand in the housing market is inundated to attract non-housing companies to housing jobs, just as other troubled non-housing companies have switched to building housing to stay in business.

Take the AA Jedson Company in New York City. The company was a specialist general contractor focused on restaurants and gyms for years, and last year turned to affordable housing projects that were deemed essential to staying in business during the pandemic.

“Nobody wants to open new restaurants or gyms right now,” Michael Bordes, president of AA Jedson, told Construction Dive in late 2020. “So let’s move on to our fallback, housing.”

A boom in housing construction

The effects of the pandemic on residential and non-residential construction are anything but balanced. While many commercial projects have been postponed, closed or canceled entirely, residential construction is booming as buyers look for single-family homes in less densely populated areas away from the urban centers.

Housing employment levels are back to pre-pandemic levels, while non-residential construction has made up only 60% of jobs lost from February to April 2020, according to the Associated General Contractors of America.

The result was commercial contractors soaking up the excess demand for housing.

National Roofing Partners, based in Dallas, Texas, a roofing service provider that works with commercial contractors to serve non-residential customers nationwide, has also shifted toward residential in recent months.

While it usually does large roofing jobs for clients like retailers Tuesday Morning or Kohl’s, it turned to smaller maintenance and service projects during the pandemic. But now that the demand for full-fledged roof replacement projects in the commercial sector is rising again, NRP has partnered with a roofing company to help meet the rising demand for residential jobs that brighten up its phone lines, including single-family homes.

“Now if we get a lead on residential property that I have six of today, I’ll just pass it on to you,” said Tony Rader, vice president of sales at NRP. “Ordinarily we would just say we don’t. But now we have the option to do it for them, so let’s do it. “

New profit center

Ken Simonson, chief economist at AGC, said he couldn’t come up with specific numbers to show that non-residential builders are doing more housework.

“But I suspect that is exactly what is happening,” Simonson wrote in an email. “The switch may just not be fully displayed in the data.”

Simonson noted that during the last housing boom from 2004 to 2006, housing spending grew much faster than housing employment. This was likely due to contractors doing more residential work at the time, he said.

“Conversely, when non-residential construction continued to grow from 2006 to 2008, companies that had focused on residential construction, especially apartment buildings, switched to the office, retail and other non-residential buildings that were popular at the time,” said Simonson.

Now that history repeats itself in the non-residential sector, commercial contractors who have started moving into housing do not necessarily see that line of business go away, even with COVID-19 in the rearview mirror.

“It’s people’s natural instinct to look for other areas that could fill a void,” Meltzer said. “In some cases it can fill a temporary void and then become a business to build on for the future.”

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