Building Materials Distributors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 10,200 building materials distributors in the US purchase and resell a variety of products used in the construction of residential and commercial structures. Companies may offer a wide range of products or specialize in a category, such as roofing materials. Companies often offer related services, such as materials delivery, technical assistance, logistics, design, and fabrication. Customers include contractors, home builders, building owners, and resellers (dealers, home improvement stores).

Dependence on Construction Industry 

Demand for building materials is highly dependent on the health of the construction industry, which is cyclical and vulnerable to economic conditions.

Building Materials Cost and Supply

The cost of building materials can vary, depending on pricing trends for underlying commodities.

Industry size & Structure

The average building materials distributor operates out of a single location, employs 23-24 workers, and generates $16.5 million annually.

    • The building materials distribution industry consists of about 10,200 companies that employ 245,000 workers and generate about $170 billion annually.
    • The industry is concentrated; the top 50 firms account for about 47.5% of industry sales.
    • Many companies are small, independent operations and serve a local or regional geographical market.
    • Large companies include ABC Supply, Builders FirstSource, Allied Building Products, and Beacon Roofing Supply. Large home center chains, such as Home Depot and Lowes, are also major suppliers of building materials.
                                Industry Forecast
                                Building Materials Distributors Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Mar 7, 2023 - Mortgage Applications Drop
                                • As the spring home-buying season nears, high interest rates are crimping demand for home sales, according to The Wall Street Journal. In early February, mortgage rates fell almost a full percentage point from November’s highs, but some economists now expect that stubborn inflation and strong consumer spending will prompt the Federal Reserve to continue its rate hike strategy to tamp down inflation. For the week ended February 24, US mortgage applications for home purchases fell to their lowest level in 28 years, according to the Mortgage Bankers Association (MBA). Spring is typically the busiest time of year for home sales as families prefer to move over the summer and be settled in their new homes before school starts.
                                • Demand for building design services remained soft in January, according to a February report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) was 49.3 in January, up from December’s reading of 48.4. Any reading above 50 indicates growth in architectural billings. In January, the score for new project inquiries rose to 55.2 from 52.6 in December. The design contracts score rose to 53.4 from 50.0. The AIA’s Chief Economist, Kermit Baker said, “While the downturn in design activity extended to four months in January, there are signs of easing. In particular, architecture firms reported that new project work has begun to increase, signifying that this decline in billings may reverse in the coming months.” By major sector, billings index growth in January was mostly in contraction territory: mixed practice was 56.0, institutional was 48.6, commercial/industrial was 46.8, and multi-family residential was 45.9.
                                • Multifamily developer confidence improved in the fourth quarter of 2022 but remained in negative territory, according to February’s Multifamily Market Survey (MMS) report by the National Association of Home Builders (NAHB). The Multifamily Production Index (MPI) rose two percentage points in Q4 to 34 compared to the third quarter of 2022. The Multifamily Occupancy Index increased four points to 49 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. While multifamily housing demand is robust, supply is catching up with demand in some markets. The NAHB expects multifamily production will slow significantly over the next two years after rapid growth in 2022. Developers face several challenges, including high regulatory costs, difficulty in securing financing for new projects, and high interest rates.
                                • The total value of nonresidential construction put in place declined 0.1% in January 2023 compared to the prior month, according to the US Census Bureau. While overall spending declined, manufacturing projects were a bright spot, and manufacturing construction spending in January was up 5.9% over December. Power projects saw 0.9% growth, office spending increased 0.7%, and healthcare was up 0.2%. Spending on commercial projects fell by 3.1%. Construction spending for manufacturing projects in January 2023 was up 53.6% year over year. Associated Builders and Contractors (ABC) chief economist Anirban Basu said, “With the CHIPS and Science Act directing $280 billion into semiconductor manufacturing and an ongoing desire to reshore manufacturing capacity, the segment should continue to thrive.”
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