Window and Door Demand to Top $36 Billion by 2010

New study sees growth slowing to 3.3 percent per year
March 15, 2007
FEATURE ARTICLE | Statistics

Window and door demand in the United States will increase 3.3 percent annually through 2010 to $36.5 billion, according to a new study from the Freedonia Group Inc. The annual growth rate represents a deceleration from the 2000-2005 period, attributed largely to a sharp drop in single-family housing construction from the strong pace of recent years.

“We’re not quite at the bottom yet,” says Bill Baumgartner, a Freedonia analyst, looking at residential new construction. The firm’s economists project the market will be fairly weak for the next five years, he notes, adding, “I wouldn’t mind if we were wrong on that.”

This downturn will be offset, to some extent, by a strong rebound in nonresidential construction. The Cleveland-based market research firm also sees continued gains in the residential improvement and repair market. That segment will grow 6.0 percent annually, thanks to the large stock of existing homes.

MATERIAL SHIFTS
The differing fortunes between the various market segments will have a significant impact on window and door materials. For example, demand for wood windows, used primarily in residential buildings, will increase less than 1 percent per year while metal products, largely purchased for nonresidential projects, are “seeing a bump,” Baumgartner notes. Table 1
Plastic windows and doors (e.g., vinyl, fiberglass, and wood-plastic composites) will continue to make inroads as a replacement for both wood and metal products, with demand increasing 6.5 percent annually, the study projects. Plastic materials have primarily rivaled wood products in the residential market, due to their advantages in terms of high energy efficiency, low maintenance requirements and relatively low costs.

Vinyl’s share of the window market continues to grow, Baumgartner reports. It’s also strong in the healthier, replacement segment of the business. Fiberglass doors also are gaining share quickly, “but it’s starting from a pretty small base,” he says. “We still see fiberglass in the early stages of the product life cycle, where vinyl windows were, maybe 15 or even 20 years ago.”

Plastics have made less progress in nonresidential markets, due to durability concerns, the report notes. Nonetheless, plastic’s share of total value demand has risen from 15 percent in 2000 to 20 percent in 2005 and its share is expected to reach 23 percent by 2010. This share is even higher when measured in units, due to the lower cost of these products. As can be seen in Table 2, vinyl accounted for 58 percent of the residential prime window demand in 2005. That number is expected to approach 65 percent by 2010 and top 70 percent by 2015.

Looking at pricing trends within the industry, Baumgartner notes that raw material costs have trended up over the past five years, particularly for manufacturers of plastic and metal products. Freedonia sees some moderation in this arena in the coming years. “We’ve also seen some pretty strong growth in wood window and door products in recent years,” the analyst suggests, but for a different reason. “As wood loses market share, wood product manufacturers are increasingly focusing on the higher end market. They’re doing even more value-added,” he says, “because that’s the market that’s left for them and where they all have to compete.”

Thanks to tightening code requirements, another value-added product that’s seen growth in recent years is the hurricane-resistant window. “It continues to be a growing segment, although that growth will be somewhat muted by the weakness in single-family construction,” Baumgartner states. The report sees demand for these products continuing to be confined predominantly to those specific areas affected by hurricanes, but he also sees manufacturers “selling the same features” in the general market.

INDUSTRY STRUCTURE

The Freedonia study also looks at the trend toward greater consolidation in the window and door industry in recent years, highlighting many of the recent acquisitions. Fenestration, like most building product industries, has seen consolidation, he notes, but “there’s no indication that the pace is increasing.” Given the tough market conditions expected in the coming years, “some companies will pull back on the horns,” as far as making further acquisitions. On the other hand, “strong companies will probably see it as a good time for them” to strengthen their position by acquiring a weaker competitor.

 

Baumgartner also doesn’t see any big changes ahead as far as foreign competition, suggesting that transportation costs are still a big factor when it comes to building materials in general. “Yes, imports will probably grow, but it isn’t going to become a real threat, at least in the near term.”

 

Companies that are broad based, serving both the residential and nonresidential markets and offering a range of products made of different materials, are in the strongest position in the coming years, Baumgartner concludes. “Those focused on the residential market are going to have a tougher time,” he continues, noting that to “ride it out,” he expects window and door manufacturers will look to add more value, “whether it’s impact, or energy efficiency, or self-cleaning or smart glass.” 

 

These and other trends are presented in “Windows & Doors,” the recently released study from Freedonia. The 391-page report is available for $4,500 by calling 440/684-9600. Information may be obtained at

www.freedoniagroup.com

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