Indianapolis Races Ahead: Market Overview

[EDITOR’S NOTE: This is the first in a series of articles profiling the lawn care and landscape market in major metropolitan areas. Look for a discussion of the Atlanta, Ga. market in an upcoming issue of Lawn & Landscape. If you would like to see your region profiled in an upcoming issue or have an article idea, please contact Nicole Wisniewski at 800/456-0707 or nwisniewski@lawnandlandscape.com.]

"The city is on fire," said Bob Andrews, president of The Greenskeeper, Carmel, Ind. He’s referring to Indianapolis, the rapidly growing capital of Indiana.

While many people picture racing cars and basketball, the city is more than that. As one of the 15 most populous cities in the country, Indianapolis is home to many high-tech and healthcare concerns, in addition to traditional manufacturing roots. The metropolitan area is home to one of the wealthiest and fastest growing suburban counties in the nation, Hamilton, located on the city’s northeast side.

This growth is good news for area landscape contractors. While there are many variables, such as the economic climate, that affect the growth prospects of your business, other considerations include population growth, household and income trends and employment rates. These factors contribute to the overall health and success of a metropolitan area and the ability of its citizens to utilize lawn and landscape services.

POPULATION TRENDS. Population growth rate can indicate a city’s potential customer base. The Indianapolis Metropolitan Statistical Area (MSA) is comprised of nine counties in the center of Indiana. Marion County, with about half of the population of the MSA, serves as the hub from which the eight remaining counties in the region radiate: Boone, Hamilton, Hancock, Hendricks, Johnson, Madison, Morgan and Shelby.

From 1990 to 1999, the Indianapolis MSA population grew 10 percent enveloping more than 1.5 million people. This growth outpaced other large metropolitan regions in the Midwest – matched only by Columbus, Ohio.

The MSA population growth masks impressive growth in individual counties. Hamilton County has grown nearly 40 percent since 1990. In fact, the city of Fishers is one of the fastest growing cities in the nation, rising from just 2,000 citizens in 1980 to an estimated 40,000 citizens today. Other counties experiencing significant population expansion since 1990 are Hendricks (24 percent), Johnson (22 percent), and Morgan and Hancock (both at 18 percent).

According to census projections, these population trends are expected to continue over the next decade.

HOUSING TRENDS. Housing unit increases also can indicate a location’s potential customer base. The number of households and home ownership rates also influence the demand for landscape services.

Though national 2000 housing starts show signs of slowing, residential starts have increased dramatically in the last decade, in general. Approximately 8,500 starts were authorized in 1990 vs. more than 16,000 in 1998, nearly 80 percent of which were for single-family homes. The real value (adjusted for inflation) of housing also has risen substantially since 1990, climbing from under $75,000 to nearly $120,000 – a 37 percent jump.

Between 60 and 70 percent of housing units were owner-occupied, a percentage that again masks much higher numbers throughout the region. Contractors should consider owner-occupied housing statistics since these homeowners are more likely to use their services. In addition, homeowners tend to use a higher level of professional services to address the needs of their homes.

EMPLOYMENT & INCOME TRENDS. When more people work, their disposable income increases, making employment trends a key consideration when determining a city’s economic health.

Employment is strong in the MSA, where the unemployment rate stood at just 2.7 percent in mid-2000, up from 2.3 percent in mid-1999. However, this rate is lower than the state and much lower than the nation as a whole.

Income also indicates whether people have the available cash to spend on landscape services. Both personal and family incomes have been rising in Indianapolis over the last decade and per capita personal income is roughly $30,000 today.

Hamilton County boasts the highest median home income in the region, topping Marion County by approximately $20,000.

LANDSCAPE & LABOR. With low unemployment, there are fewer workers around to fill job vacancies.

"Finding employees is incredibly difficult," said David George, manager, Engledow’s exterior division, Carmel, Ind. "We could probably grow faster, but it would be at the expense of quality."

However, since a large working population boosts confidence in the economy, the demand for landscape services should continue to increase. All of the new office and retail construction being built also will heighten demand for services.

Interestingly, though, the labor shortage had little affect on the number of firms doing business or entering the Indianapolis market. In 1993, there were about 400 companies in metropolitan Indianapolis. Today that number rounds 575 – an annual average growth rate of more than 5 percent.

Also in the mix of companies in Indianapolis are several of the nation’s largest landscape firms: The Davey Tree Expert Co., TruGreen-ChemLawn, The Brickman Group and Scotts Lawn Service, in addition to larger, locally owned firms like Engledow Group and Becker Landscape Contractors.

"I’ve been here for about 23 years and there used to be about 50 firms, and I knew them all," George said. "Any day now, I can see three companies I’ve never seen before."

Andrews also has seen the trend: "Five or six years ago when all of the buy-outs [by the larger firms] started, there was a feeling that there would be eight or nine companies left. Now there are a lot of start ups."

With labor strains, most new firms are smaller but pay employees higher wages.

The average pay per employee in the Indianapolis MSA is several thousand dollars higher than the U.S. average (more than $28,000 in Indianapolis vs. just under $24,000 nationally). Andrews believes the landscape industry has to re-think the way it compensates its workers. "We’ve got to quit paying our employees by competing with other landscape firms," he said.

Despite the higher average wages and shorter work season, finding employees still will be difficult. George noted that the energy of his company is focusing more on recruitment and away from business planning.

The Future. Business in Indianapolis is booming, construction is up and unemployment is down. And with low unemployment, rising wages, an entrepreneurial spirit and a diversified economic base, the industry seems well-positioned for a positive future despite employee shortage concerns.

There is optimism in the city, and growth has been steady, which creates prime market conditions for landscape companies.