Window Shopping

This article is intended to provide an update on some of the trends in the deconstruction and reuse industry. One major aspect of the building materials reuse industry in North America is the Habitat for Humanity (HfH) ReStore network. ReStores are retail outlets for donated and reclaimed building materials facilities operated by HfH affiliates as a fundraising mechanism for their home-building programs. The ReStore network is growing by leaps and bounds. In Canada in 2000 there were 16 ReStores with gross sales of $3.1 million. In 2005, there were 41 Canadian ReStores with gross sales of $14.5 million. This is a growth of 156 percent in the number of stores and a growth of 368 percent in revenues in just five years (HfH Partnernet, 2006). The numbers for the United States are similar.

In a recent survey of deconstruction and reuse organizations, an attempt was made to ascertain the materials flows and economics of deconstruction and reuse in the United States. An e-mail survey was sent to 450 organizations identified in three categories: deconstruction services, reused materials retail sales and value-added products manufacturing with reclaimed wood. A total of 76 responses was received or about a 17 percent response rate.

Of these 76 respondents, 41 were reuse stores only and 28 combined both deconstruction or salvage with retail reuse sales or wood reuse/recycling. An additional seven respondents focused on wood reuse only, through remanufacturing. Of the firms selling reclaimed building materials, 59 percent reported conducting some form of deconstruction or salvage operations as well, with the remaining 41 percent reporting only selling donated materials.

Employment - Firms combining both deconstruction/salvage with a reuse sales facility employ on average more full-time employees (FTE) per organization than those with reuse sales only, 5.8 to 4.6 FTE per firm, respectively. It should be noted that many non-profit reuse stores, especially the HfH ReStore, may also have some component of volunteers. The majority of organizations employed a small number of persons; only 12 percent of combined deconstruction and reuse firms reported 16 or more employees. This reflects the diffused nature of the industry. Firms that conduct reclaimed wood value-adding products manufacturing report an average of 15 employees per firm. Clearly the value-added aspect of the deconstruction and reuse industry provides much greater potential for employment than the initial stages of deconstruction or direct retail resale by itself.

Revenues - Firms combining deconstruction and reuse sales facilities reported greater average annual revenues per organization than organizations with reuse sales only, $430,800 to $383,850 per firm, respectively. The difference is about 12 percent average higher annual revenues per firm. Anecdotally, while there is some investment required for deconstruction and salvage services, a much greater investment is required for the facilities and equipment of a reuse sales facility, such as the warehouse space, racking for materials, fork-lift, a truck for pick-ups, etc. Adding deconstruction to a reuse facility operation can add net revenue potential evidenced by higher average revenues for the combined firms. It would clearly be more difficult financially to add a reuse facility to an existing demolition or deconstruction firm. There is more capital investment in land and equipment and potentially less revenues from the reused materials component of the operation.

The potential for start-up of a deconstruction firm is dependent upon a market for the materials. This is reflected in an anecdotal trend towards more partnerships between contractors and particularly non-profit reuse sales firms, whereby the contractor conducts deconstruction and delivers the recovered materials to the existing non-profit reuse firm for resale. This form of partnership benefits both entities, as the non-profit out-sources the materials recovery operation to the for-profit firm, and the non-profit firms are a guaranteed market for the recovered materials. In this model, the respective strengths of the partners’ skills and capitalization are brought together as specializations within an overall deconstruction and reuse operation.

Not surprisingly, firms engaged in reclaimed lumber value-adding reported average annual revenues of $2,089,286 per firm. With an average three times as many employees, these firms also have three-to-four times greater annual revenues than the organizations engaged in the recovery of the materials and direct reused materials sales. Anecdotally there is trend towards reuse firms adding a value-added component to their operations. Also anecdotally there are considerable difficulties to the endeavor, especially when the value-added product sales are located at the reuse facility. In many cases the markets are very different for a value-added higher cost remanufactured product and the reused building materials store’s established clientele that are used to purchasing low-cost products.

Materials Flow - The average amount of materials reported handled annually by firms engaged in both deconstruction and retail reuse sales was about 1.01 million pounds per firm, compared to 583,376 pounds per firms only engaged in reuse retail sales. The firms engaged in wood value adding reported about 1.13 million pounds of wood materials handled on average per firm per year. Interestingly, many reuse retail sales firms did not know the volume of materials they handled per year. About 69 percent of the firms conducting only reuse sales reported not knowing how much materials they handled other than by revenues. About 61 percent of the firms conducting both deconstruction and reuse sales reported not knowing the total amount of materials they handled by mass. Firms that remanufacture wood products reported a board feet metric of the wood materials they processed. There seems to be a small correlation between the amount of materials handled, employees, amount of materials handled and the attention paid to tracking the materials handled.

While many non-profit reuse firms may rely more on volunteer labor and function with lower revenues, making it difficult to justify quantity-based inventory systems, they might also be motivated to track materials flow in regards to environmental metrics for the purposes of donor reporting and demonstrating non-economic goals such as waste diversion.

The average revenues per employee reported by firms engaged in combined deconstruction and reuse retail sales was $73,900, compared to $96,516 per firm for organizations engaged in reuse retail sales only. It is not clear if this relates to wage differences between deconstruction employees and retail store employees in general or other factors. As mentioned above, there is less capital overhead involved in just a reuse retail operation by itself compared to a combined deconstruction and reuse retail sales operation.

Keeping this capital investment lower for reuse firms would certainly increase revenues per employee, but the combined deconstruction and reuse retails sales firms employ on average more persons per firm, move more materials by mass per firm (of which more will be commodity materials such as lumber and brick which are lower value per pound than many other building components such as doors, windows, cabinets and fixtures that are the predominant products in building materials reuse retail stores). Perhaps a trend towards larger facilities and more combined deconstruction and reuse firms will follow in the next few years. At this time we do not have sufficient information over time to make this claim.

For firms engaged in both deconstruction and reuse retail sales the average revenue per mass of materials was $1.39 per pound of materials handled. For firms engaged in reuse retail sales only it was $0.91 per pound; for firms engaged in reclaimed wood value adding it was $3.10 per pound of wood materials. Clearly there is a correlation between the amount of materials handled and the revenues generated on average and a three-times greater economic return per pound by the firms engaged in reclaimed wood value adding.

Given that a non-profit reuse sales facility is much more amenable to volunteer labor than deconstruction activities, the reuse-sales-only organizations potentially make greater use of volunteer labor, which is not accounted for in the FTE accounting. Adding in the volunteer labor used by non-profit organizations would produce a lower revenues/employee + volunteer number for both types, but potentially more so for the organizations that conduct reuse sales only, widening this disparity.

Additionally, the preponderance of the deconstruction and reuse retail sales organizations that reported were non-profits versus for-profits, 87 percent to 13 percent, respectively. As non-profits their IRS reporting is legally required to be made public, whereas this is not so for for-profit organizations. All of the wood remanufacturing firms that reported were for-profits. The proportion of non-profit to for-profit firms reporting is much greater than past surveys suggest is the proportion of non-profit to for-profit in the industry as a whole, so this would clearly distort this information towards the non-profit firm model. C&DR