Slowing economy provides opportunities
September 19, 2010
The economic news since New Year’s Day has not been good.
From January 1 until the Federal Reserve cut interest rates by .75 percent in an unprecedented emergency meeting on January 22, the stock market (as measured by the Dow Jones Industrial Average) dropped 9.7 percent in 14 trading days.
The DJIA rallied after that, helped along by another .5 percent cut in interest rates on January 30, but still ended the month down 4.6 percent (the worst January since 2000).
Fourth-quarter (of 2007) gross domestic product rose at a near-recession .6 percent (lowest in five years), a remarkable downturn from the 4.9 percent growth of the third quarter.
Unemployment hit 5 percent (highest in two years) in December, and in January, for the first time in more than four years, the economy failed to produce net job growth.
And then there’s housing.
The residential housing industry, in many parts of the country, is already in its own recession, with housing starts down dramatically and foreclosures up dramatically.
And, for the first time in more than 70 years, average national housing prices declined in 2007.
Commercial real estate is not in such dire straits, though the 1.58 million job layoffs in 2007, many of those in banking, mortgage and finance, obviously affected vacancy rates (and related cleaning contracts) in some markets.
While there is no official national recession yet, the uncertain economy of 2008 will clearly have some negative impacts on the cleaning and maintenance industry.
One story highlighted in CM/e-News Daily™ in January was that of a small building service contractor in Modesto, CA, who had to lay off 20 of his 31 employees.
Albert Ells of A&N Cleaning Service said that three times recently he had arrived at a commercial cleaning job, only to find that the offices had closed without warning, and without paying what they owed him.
Of course, Ells is working in one of the epicenters of the real estate recession.
Regarding that story, an e-mailer from a much larger Midwestern BSC commented: “Overall our industry is great and growing, and if anything, the recession is helping grow the facility service business. There are two ways to look at most things.”
Official recession or not, this is occurring at a time when the industry is looking to increase its professionalism, through programs such as ISSA’s Certified Industry Management Standard (CIMS), and to move toward more sustainable practices, as encouraged by the well-publicized and ever-growing LEED-EB (Leadership in Energy and Environmental Design for Existing Buildings) program.
Both of these initiatives will improve cleaning, in both reality and perception, and are an opportunity for JanSan professionals to educate their customers about the value of high-quality cleaning.
But, new and better cleaning will cost money that, in hard times, will be harder for building owners and managers to justify.
One aspect of the housing recession — its negative impact on state and local tax revenues — may be a case of bad news turning into good news for building service contractors.
With many states facing huge deficits ($14.5 billion for California, $4.4 billion for New York, $2 billion for Florida, $1.7 billion for Florida, etc.) and therefore likely to provide less local aid, the pressure on municipalities and school districts to deliver services without raising taxes will be intense.
One such service — cleaning and maintaining public buildings — can be outsourced to cleaning contractors at often substantial savings.
And such outsourcing was growing, even before the economy’s recent turn toward recession.
Another way of turning lemons into lemonade is the opportunities (mostly in California) in cleaning foreclosed homes for banks that want the homes presentable and back on the market as soon as possible.
One California clean-out contractor said in November: “It’s a sad situation all around for everyone, except for us in the service industry.”
An encouraging word comes from Network Services Company, a consortium of leading JanSan distributors, whose CEO R. James Alexy said in January: “The slowdown in housing construction has had minimal impact on the continuous need for janitorial services in office, retail, industrial, healthcare, and institutional markets.”
So the current national economic slowdown presents a variety of challenges and opportunities for the JanSan industry. In the past, the industry has met such challenges and explored such opportunities.
It surely will again in 2008.
For more CM e-News coverage of this issue, log on to www.cmmonline.com and type Recession into the Archive Search box on the upper right of the homepage. To sign up for the free CM e-News Daily e-mail, log on to www.cm-enews.com/forms/cmenews_optin.asp.