
The Christian Science Monitor had a good article on the state of the nursery industry this week titled, “The nursery industry is facing tough times.” It paints a pretty bleak picture for the last year and predicts the same for next year. It is actually an extension of an article posted by the Oregon Nurseryman’s Association. I would link them both at the bottom but ONA still doesn’t post on line so CSM you get it. The just of it is that last year commercial growers showed a 17% decline and they are predicting the same again next year. The growers they interview hold their chins up and say the industry will rebound, but that they will be the last ones, because the plants are the last thing to go in when construction comes back. For an industry that rarely operates on a profit margin over ten percent things will have to change. They say that the industry is completely dependent on the housing industry, but that isn’t the complete truth.
I have been in this industry my entire life. I am a Missouri Certified Nurseryman, and worked in some sort of retail or wholesale nursery my entire career until 2004 When I moved to North Carolina. My growing design career had led me to a company that was entirely landscape and maintenance focused with no retail or wholesale operation. The company I came to work for was the biggest in the area, the work was supposed to endless, every house I saw upon arrival seemed to be north of 1 million dollars. Beautiful mountains, lakes, rivers, and golf courses (if you think they are beautiful) where everywhere I turned. Being right outside of the Great Smoky Mountain National Park, this is also on of the most biodiverse areas in the world. For a designer and gardener, this was and still is paradise. I toured about twenty jobs in three states during my interviews and coming from the inner city I saw how I could be creatively reborn, and I was.
When we decided to take the position and move here it wasn’t about work though. We already had roots in the area from my wifes past, and we had a two year old daughter at the time. We had reached the point where we had to leave our beloved Hyde Park, but couldn’t stand the thought of becoming suburbanites, or crossing the state line to Kansas. This was about being the kind of people we wanted to be and raising our daughter in that light. We made sacrifices and I contend they were worth it. However, I have to admit some sacrifices I did not see coming. I was overwhelmed by the beauty of the Blue Ridge Mountains, Mountain Laurels, Rhododendrons, and Azaleas at every turn. I was probably intoxicated form the smell of the Galax as well. I still am and always will be.
What I did not see was the storm that was coming. In the Midwest you can see a storm coming from hours not miles away. It’s flat there, so when you first see that front coming it is still in Nebraska. You have time to secure your site and get out of the way. Here things pop up from behind a mountain and your stuck. Luckily I have never been one to look to the horizon. I am always one to explore inside before I look out. I am a bit introspective if you can’t tell. As a designer I take after Frank Lloyd Wright. I seek out the box and break it down creating as many different views inside until I lead the eye outside to the horizon and nature so we understand our role in it and reveal the greatness of it all.
Once here I had to do the same thing with my new work environment. One of the first things that struck me was that with one of the largest landscape markets in the country there were relatively few nurseries. Where did all these local earth loving gardeners shop? Asheville is way too crunchy for them to shop at WalMart. The next thing that struck me was that we didn’t do any work in town. All of our clients were an hour, county, or state away? I was a mid-towner. I was used to driving by all my work on the way to and from the nursery. I could schedule an appointment on every hour because all my customers were neighbors and new each other, not an hour apart. It was an event for the entire block when I came around.
Finally after a few months it struck me that I had tons of work, but I had no customers. I would meet these people get to “know” them and their space, but when it came time to see the plan they may not even show up. We would send the plan to them or give it to the builder, and a signed contract and deposit would show-up for tens or hundreds of thousands of dollars. Then it struck me that all of these beautiful houses, furnished to the hilt, were empty. There was no one home…EVER. Not only were the homes we were working on empty, but in someways our work had become empty too. After knowing all of my clients closely suddenly I was lucky if I knew ten percent of them.
One of the reasons I always liked working in a nursery was that my customers could find me, but now I couldn’t find them. I knew my customers and as part of their home I became part of their family. Suddenly I had tons of work, but had no customers, and even the greatest of designs somehow lacked soul. I have done a lot of market research this year and from 2002 to 2007 the amount of landscape services performed in this country jumped from 24.5-44.7 Billion dollars. It almost doubled. The number of people didn’t double, and we know that what everyone spent didn’t double because the nation saw wages shrink. What did double (in some cases more than double) was property values. The over inflation in the real estate market that fueled new construction was what was fueling this growth. Almost the entire landscape industry shifted it’s focus to service this new market with deep pockets, and best of all (in some people’s minds) there were no customers to deal with. It was supposed to be easy money, and all you had to do was grow your company to do the work.
It’s confession time now. A little over two years into my new position here, I went to work for the other side. I started a consulting company that designed and managed properties for a few of the most elite resort developments in the Southeast. I got a unique inside look at what was feeding the growth on the other side. One of my roles was to create management and financial plans to manage these properties down the road. It was part of the collateral needed to get the construction loans. A big change coincided with this growth at the beginning of the decade that greatly effected how this all worked.
For the first time in our nations history, the banks that made the loans that drove this country ceased to hold them and the responsibility to guarantee them. As a result a fundamental change in underwriting occurred. Property values were no longer calculated for what they were worth, but for what they could be worth. If you had the land, a landscape architect, and a good marketing package you could set the price, get the appraisal and get the loan. The banks didn’t care, because they were only writing a five year balloon that they were going to collect the fees on and sell the loan in six months. Even worse the government was giving out HUD agreements protecting the developers from the buyers if for some reason they didn’t deliver what they were selling. Even at the lot buyer level, the eventual homeowner could get their lot home package for no money down and no payments for two years if they had the personal credit the developers could use to build a house.
When it came to building the developments it worked the same way. It was on the backs of the contractors to go out and buy the equipment for these multi year-commitments, and if it meant they could get part of the windfall and not have to deal with all those pesky customers they were all for it. In the end, everyone involved was living off the over inflated land, and as long as the cash kept coming to feed the machine they were all fine with it. Something happened on the way to the bank though. Suddenly there were way more million dollars houses than there were people that could afford them, and all those little investors who financed those home to make a fortune on in two years suddenly couldn’t pay the bank when there was no one to buy the house. When the banks came to collect, they realized there was still no asphalt on the roads to get to the house, the pool the developer promised wasn’t there yet, and that golf course was still five years out. There line of credit would expire and be dry before the golf course it was for was even built. Foreclosures on the spec homes started to mount, the banks couldn’t sell the loans and property values plummeted.
Suddenly the same was true for the developers and bankers. All of these over inflated construction loans were due on a five year turn around, and before the construction could be completed the properties were already worth less than the loans. The lines of credit came to a halt, property sales stopped completely and developers that sold hundreds of lots the year before were lucky to sell three. With the banks cutting off the credit, and the buyers nowhere to be found, it was over.
The house of cards was collapsing, but to make that house of cards look strong people kept spending. The contractors kept going even thought the developers couldn’t pay. As payables mounted to 90, 120 days or more, the companies would finance them to service the debt on that equipment. If they could just keep going and make the developers look strong someone would finance it, or they could slap liens on teh properties and when the bank sorted it out they would get paid. The problem was, the banks held the first mortgage, and since the properties weren’t worth the note, the liens didn’t get paid because the banks were in line first.
In all of this, the only one left holding the bill is the contractors and the few homeowners that didn’t buy their homes in an LLC. so they could walk away. Oddly enough the ones stuck with the bill are the only ones that could have walked away, but chose to stay. In the next three years 1.5 Trillion dollars in commercial loans are coming due on properties that aren’t worth what those notes are for, and this isn’t over yet.
Our industry sold it’s soul, or so it seems. The thing is, our soul never left us, we just left it and we have to find it again. There are those that didn’t get sucked in. They stayed craftsman before contractor and realized to be a craftsman you have to have someone to craft a piece of art for. We have seen down turns before in the 80’s and early 90’s, again after September 11, and this industry grew out of the great depression. In those times though, the industry didn’t invest in what collapsed. We didn’t finance the stock market, the dot com boom, or Osama Bin Laden. The difference this time is we bought in and got left holding the tab. In times like this people find their homes and gardeners are born. The jobs will be smaller, but there will be more of them. The customers will not have as much money, but they will value our work more. This industry was built on relationships, and going back to that is the only way it will come back. We have to find what made us who we are in our souls.
Landscape companies will have to change, some will go, and many new ones will emerge. The work is still there and is not going away. The yards need mowed, the trees need trimmed, the house needs shade, and in more and more cases landscapes have become a structural part of construction. Most importantly, more people are finding their homes and garden as something more than where they park at night. In some way the industry got what they wanted which was less customers. However I have to think that everyone is really like me and what they love about what they do is the customer. If this is true the industry will be fine, but we have to be honest with ourselves that we are not victims of the housing industry, because we are in the home industry. We just forgot where our home was.
More from the CSM: http://www.csmonitor.com/The-Culture/Gardening/2010/0219/The-nursery-industry-is-facing-tough-times
