April 25, 2016 | CAPEX Blogs
In real estate, they call it curb appeal. A bad first impression can deter a potential buyer before even entering the home. It’s no different on the commercial side. Landscaping is one of the key categories in facilities management. A great landscaping provider makes a key difference for large firms with a pleasing first impression. Regular and efficient landscaping is also a key component of creating a brand image for commercial landscaping businesses.
The landscaping industry is in a state of slow growth opportunities, due to a number of factors. During this phase, the industry is also facing challenges from regulatory and climatic changes.
Here are some of the key challenges and trends in the landscaping industry and how businesses could reduce the impact from service providers.
H-2B Visa Rule Changes
The H-2B visa program dates to the Immigration and nationality Act of 1952, which provided an opportunity for employers to hire temporary non-agricultural labor in industries such as landscaping, construction and reforestation for a period of less than one year. The Landscaping and Grounds keeping industries are the top employers, contributing about 37 percent of the total H-2B visa holders. There are three key changes this year that will have an impact on the landscaping industry:
Business Impact: It is estimated that these rule changes will impact about 25 percent of the companies that have been using the services of H-2B visa workers, helping to ensure on-time arrival. The heaviest effect is expected between April and September, a peak demand period for landscaping services.
Minimum Wage Increases: Wages contribute to about 40 percent of the operating expenses for the landscaping services provider. More than 14 states have increased the minimum wage, which will impact the landscaping industry. Wage increases will differ in several states, rising from $9 to $10 an hour in California and Massachusetts, but only $8.55 in South Dakota. Several states, however, have not raised the rate in six years.
Business Impact: Engage with your service provider proactively to prevent any discontinuity in maintenance service. Better utilize equipment and technology to reduce man hours required and improve efficiency.
Increased Price of Water: With many states undergoing drought, the price of water increased around 6 to 8 percent last year. A similar increase is expected again this year, making water conservation a trending topic among users of landscaping services.
Business Impact: Evaluate the adoption of “xeriscaping” during the design and build phase to reduce overall water usage. Xeriscaping reduces or eliminates the need for supplemental water from irrigation and focuses on creating drought-resistant landscapes.
Industry Consolidation: Landscaping is a highly fragmented industry where the top five firms are expected to have a market share of around 15 percent. Due to aging baby boomers, who are willing to sell their businesses, renewed interest by private equity players and slow growth has driven most of the merger and acquisition opportunities.
Business Impact: This should increase efficiency of service providers, expand the services scope and geographic presence. Even though the landscaping spend might not be considerable when compared with overall spend in real estate and facilities management spend, efficient management of landscaping service providers and addressing the challenges in the industry could pave the way for smooth operations for businesses.