Tuesday, June 17, 2008

 

What the Bankruptcy Wave Means for the New York Renovation Business


In a Crain's article yesterday, Daniel Massey laid out the state of the commercial bankruptcy wave in New York City, and as expected, the numbers look ugly.


Through May, Chapter 11 filings at federal bankruptcy courts in the city totaled 335, up from 104 in the same period a year earlier. The increase was due to a nearly fivefold rise in filings at the U.S. Bankruptcy Court for the Southern District of New York to 288, from 60.
According to the article, along with the restaurant industry, interior decorators and construction firms are among the hardest hit groups. Essentially, because of a change in Chapter 11 law that went into effect in 2005, it is easier for a business owner to just walk away, rather than attempt to work things out during bankruptcy.

This appears to be the case for Jose Luis Sampedro, who may have to walk away from his 15-year-old company Barrera Construction & Development Corporation. His costs of doing business as an interior and exterior renovator ballooned 70%. Insurance costs, gas prices and construction materials were mentioned as the straws that broke the camel's back. He is trying to reorganize his finances, but the economy in New York isn't doing him any favors.



“Everything is going up, and people don’t want to do renovations anymore. It’s impossible.”

What does this mean to the New Yorker in the market for a renovation contractor? According to cityhammer.com's local research:



  • General contractors and home improvement companies in the area may have shorter lead times, giving you more flexibility when scheduling a project with them.



  • Professionals in the remodeling industry may also be more willing to bid competitively for your business, especially if the work being done is a little more plain vanilla than a gut renovation or complete overhaul. The simpler the task or project, the more compromise you may be able to get on pricing.



  • The negative in all of this is that for many items, contractors have no choice but to pass on the higher costs of materials to the end consumer. This is occurring in almost every major industry in the country, from restaurants making up for prices on dairy and wheat ingredients (which have tripled in price) to truckers adding on a fuel surcharge to their hauls. This could result in a situation where remodeling materials, especially anything metal, and even the cost to ship these materials, will hit your wallet before the project even gets underway.

So to sum up, its a tough time to be a remodeling professional in New York City, but with advertising and patience, the quality firms should be able to survive the cycle and possibly take market share from those who couldn't, emerging stronger than ever.

We wish Mr. Sampedro and the many other construction companies in New York good luck in these difficult times.

Read the full article in Crain's New York here: NYC Bankruptcies Soar

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