Fast 5

Today, design/build businesses face myriad challenges, from the housing slump to the credit crunch to peaking prices on all business purchases and expenses.

But while negative news may dominate headlines, there’s always a bigger picture. While one economic trouble may hamper one area of business, another could develop. As the reduction in new construction limits new design/build work, renovation can soar as families limit vacation and focus on the home front, for example. As drought impacts some lawn care and landscape services more heavily than others, for instance, a service like hardscaping – that can be done in almost any weather condition – can prosper. Some design/build businesses today are still growing fairly strong, and a part of that is thanks to their home state’s ability to hang on through economic hardship.

In Lawn & Landscape and Professional Landscape Design’s “Fast 5,” we look at the five fastest growing states in the design/build and hardscape service category. To determine the chief contenders, we examined 20 separate factors in five general categories, with a specific focus on growth, and not just sheer size. And, in light of current conditions, we also took into account a state’s growth through the past year in addition to the previous seven to 10 years to pinpoint strength despite the increased economic burdens the U.S. faces today.

It’s no secret that the southern and western U.S. are currently stronger than other regions. The costs of living and doing business there are often cheaper than in big coastal cities. Economists call the Southwest a “haven of stability,” while they predict the Southeast (excluding Florida) could be positioned to recover sooner than other regions, according to Moody’s Economy.com.

No wonder Texas, Georgia and Colorado top our list this year, following by Virginia and Illinois to round out the Fast 5. Texas and Colorado benefit from being energy-producing states, while all five top contenders boast metros that are known as technology hubs or are home to larger corporations like computer manufacturer Dell in Austin and UPS, CNN and AT&T Mobility in Atlanta.

Also, having college towns, which all five of these states possess, doesn’t hurt a state’s economy, considering universities don’t go out of business in bad times and add highly educated employees to a job market, as well as an avenue for learning marketable skills when unemployment is high.

And, finally, stability in tough economic times also enables ancillary industries like landscaping to skirt slumps.

For instance, Texas’ economy is so buffered that even if the rest of the country goes into decline, at the most you’ll have flatness in Texas, according to Edward Friedman, an economist who covers Texas for Moody’s Economy.com.

And Arlington, Va., was recently named No. 1 on Business Week’s “Best Cities For Riding Out a Recession” list. Many of its employees work for the federal government or in lobbying and legal jobs, which are not experiencing the same downturns as vulnerable financial, real estate and insurance sectors (only 7 percent of Arlington residents work in these risky markets).

Before continuing on to read about each state’s merits, here’s a closer look at the factors we considered in compiling our list.

POPULATION. When it comes to population, growth is just as important as sheer size. Here, we looked at U.S. Census 2010 population projections and expected percent growth from 2000 to 2030.

HOMES & BUSINESS ESTABLISHMENTS. When it comes to housing – what some consider a major driver in residential design/build work – we gathered historical figures, but made sure not to ignore existing economic challenges. Therefore, we looked at housing stock (2007 figures), as well as growth in these figures over a seven-year period and the most current year, according to U.S. Census data.

Additionally, to further highlight growth, a state got bonus points for having a metropolitan area on the U.S. Census Bureau’s list of 100 fastest growing counties based on housing unit growth, also over a seven-year period and the most current year.

Concerning housing starts, we looked at 2008 and 2009 National Association of Home Builders/Housing Economics projections, as well as growth (or lack thereof) to provide the most accurate picture of the current market. We also factored the percent change in home prices from 2007 to 2008, singling out strong state economies that are holding through housing market dips.

Taking into consideration the commercial design/build sector of the industry, we factored in the number of business establishments per state and growth as well, according to U.S. Census Bureau data.
 
CLIENT INCOME. Here, we scored median household income and its change from 2005 to 2007, per U.S. Census Bureau figures. Also, we looked at the percent change in personal income over the past year – the numbers we gathered represented income growth from the second quarter of 2007 to the second quarter of 2008, the most recent period for which figures are available.
In addition, we looked at September 2008 state unemployment rates as a measure of job security.

State personal income tax rates also affect individual economic decision-making in important ways. A high personal income tax rate raises the costs of working, saving, investing and risk taking. In fact, the personal income tax influences business far more than generally assumed because roughly 90 percent of businesses file taxes as individuals, and therefore pay personal income taxes rather than corporate income taxes. The measurement we reviewed was each state’s top personal income tax, according to the 2008 Small Business & Entrepreneurship Council’s Business Tax Index.

GENERAL ECONOMY. Nothing assesses a state’s true economy better than its gross domestic product, which is the total measure of the goods and services produced by a state’s economy over a period of time. The deceleration in real GDP growth was most pronounced in Arizona, California, Florida and Nevada, based on the most recent Bureau of Economic Analysis information.

Since we are looking at landscape market economics as well as overall state data, we also took into account the number of landscape companies located in each state, based on Lawn & Landscape figures.

Finally, to ensure we brought current economic issues into scope, we also deducted a point from each state if it had a major metropolitan area in recession, and gave each state points for major metropolitan areas experiencing expansion, based on Moody’s Economy.com’s state-by-state recession watch map. As of press time, only 19 states (18 plus D.C., highlighted in blue, right) were not considered “in recession,” and three of them are on our list.