As we embark on a new year, our Industry Group leaders reflect on the changes spurred by 2020 — stories of novel products and services, shifting market trends, and new M&A strategies — and consider the implications for 2021. Access more industry perspectives in our related insights tab.
Webb: Our team is more bullish on the building products and materials industry's growth and M&A activity than we were at the beginning of 2020, despite starting the year more optimistically than others.
McNulty: As we noted last June, building products and materials has had a reputation of vulnerability to recessions, yet its resilience through this most recent recession has led many investors to see the industry in a more positive light. In addition, the challenges of 2020 contributed to the strong momentum the industry is showing right now.
Webb: Heading into the recession, several factors contributed to that strength: Consumers were in better shape financially than in prior downturns, housing starts were below long-term averages, housing supply was limited, and building products and materials companies were generally performing well. At the onset of the pandemic, those companies were deemed essential, as were the retailers connecting them to consumers and contractors. Locked in their homes and kept from traveling, many consumers have prioritized home renovation and repair products. Migration from cities to less-crowded areas has also received a substantial push from the pandemic, boosting demand for new residential construction.
If there’s one area that hasn’t done quite as well, it’s commercial construction related to offices and retail. The prolonged switch to working remotely has challenged commercial real estate markets in big cities like New York and Chicago. At the same time, we’ve observed a trend of businesses opening up locations in secondary cities, or in more desirable locations like coastal Florida. Longer-term, we see strong prospects for commercial builders in areas where not enough office space exists to support that migration. We also expect continued strength in commercial construction related to the boom in remote working and e-commerce, specifically data centers and warehouses.
All of this adds up to a very robust M&A environment for building products and materials, and, most importantly, a new view of the industry’s resilience among investors. With interest rates staying low, first-time buyers looking for more space, and signs of economic recovery on the horizon, we’re very optimistic.
Click here to explore our experience in the building products and materials industry.
Which aspect of "regular life" are you most excited about returning to?
McNulty: It has been inspirational to see how much we can do remotely, but you can't replace having an engaging and thought-provoking discussion with a human being in the same room—coupled with a smile, a joke, or a laugh.
Webb: I look forward to hugging family, high-fiving buddies, and generally spending more time with the people we miss.