2021 Was a Banner Year for Remodeling and Design Firms
Average annual rates of revenue growth reached a 4-year high, the 2022 U.S. Houzz State of the Industry report shows
Bryan Anthony
March 15, 2022
Business was at a four-year high for the residential remodeling and design industries last year, with revenue growth up for the majority of firms, new research from Houzz reveals. About three-quarters of companies across all sectors Houzz tracks — including architects, general contractors and landscape firms — report that 2021 revenue met or exceeded expectations.
The 2022 U.S. Houzz State of the Industry study includes responses from more than 2,800 firms in the home renovation and design industries. Read on to see how business went in 2021 for your fellow professionals.
The 2022 U.S. Houzz State of the Industry study includes responses from more than 2,800 firms in the home renovation and design industries. Read on to see how business went in 2021 for your fellow professionals.
Houzz surveyed firms in seven categories. The first four are architects, interior designers, building companies (including general contractors, remodelers and builders) and design-build firms.
The next three categories are different types of specialty firms. Building and renovation specialty firms include pros such as carpenters and cabinet installers. Landscaping and outdoor specialty firms include pros such as landscape architects and pavers. Decorating specialty firms include pros such as decorators and providers of window coverings.
The next three categories are different types of specialty firms. Building and renovation specialty firms include pros such as carpenters and cabinet installers. Landscaping and outdoor specialty firms include pros such as landscape architects and pavers. Decorating specialty firms include pros such as decorators and providers of window coverings.
Revenue Growth Hit a 4-Year High
Average annual rates of revenue growth across the seven categories reached a four-year high in 2021, ranging from 8.6% to 11.9%. In fact, 5 out of 7 industry groups saw double-digit revenue growth in 2021. About 3 in 4 companies (71% to 77%) across all seven business groups report that 2021 revenue growth was at or above their expectations.
Among residential design companies, revenue growth for both architects and interior designers significantly improved (10.3% in 2021 versus 1% in 2020 for architects, and 11.9% versus negative 0.5% for designers).
For design-build firms, general contractors, and building and renovation specialists, revenue growth accelerated by more than 8 percentage points each (8.8, 8.5 and 8.3 percentage points, respectively) in 2021 compared with 2020.
Average annual rates of revenue growth across the seven categories reached a four-year high in 2021, ranging from 8.6% to 11.9%. In fact, 5 out of 7 industry groups saw double-digit revenue growth in 2021. About 3 in 4 companies (71% to 77%) across all seven business groups report that 2021 revenue growth was at or above their expectations.
Among residential design companies, revenue growth for both architects and interior designers significantly improved (10.3% in 2021 versus 1% in 2020 for architects, and 11.9% versus negative 0.5% for designers).
For design-build firms, general contractors, and building and renovation specialists, revenue growth accelerated by more than 8 percentage points each (8.8, 8.5 and 8.3 percentage points, respectively) in 2021 compared with 2020.
Profit Increase Was More Widespread Than in 2020
Year-over-year profit increases were more widespread (experienced by 45% to 59% of companies) in 2021 than in 2020 (35% to 52%) for all seven industry groups. More than half (52%) of landscaping and outdoor specialists report that profits increased in 2021, in line with 2020’s percentage.
The percentages of general contractors, design-build firms, and building and renovation specialists reporting positive profit changes in 2021 increased by 10, 8 and 9 points, respectively, compared with 2020. Still, about 1 in 3 building and renovation specialists and design-build firms (34% and 30%, respectively) saw profits decrease compared with the prior year.
Year-over-year profit increases were more widespread (experienced by 45% to 59% of companies) in 2021 than in 2020 (35% to 52%) for all seven industry groups. More than half (52%) of landscaping and outdoor specialists report that profits increased in 2021, in line with 2020’s percentage.
The percentages of general contractors, design-build firms, and building and renovation specialists reporting positive profit changes in 2021 increased by 10, 8 and 9 points, respectively, compared with 2020. Still, about 1 in 3 building and renovation specialists and design-build firms (34% and 30%, respectively) saw profits decrease compared with the prior year.
Hiring Is on the Rise
More home remodeling and design firms (ranging from 18% to 34%) hired employees in 2021 than did so in 2020 (9% to 24%). Five out of 7 industry groups (design-build firms, decorating specialists, architects, general contractors and interior designers) reported hiring increases of 5 or more percentage points (10, 9, 8, 7 and 5 points, respectively) in 2021 compared with 2020.
Even though more design-build firms increased their number of employees in 2021 than in 2020 (34% in 2021 compared with 24% in 2020), nearly 2 in 5 businesses expect to hire more staff in 2022.
More home remodeling and design firms (ranging from 18% to 34%) hired employees in 2021 than did so in 2020 (9% to 24%). Five out of 7 industry groups (design-build firms, decorating specialists, architects, general contractors and interior designers) reported hiring increases of 5 or more percentage points (10, 9, 8, 7 and 5 points, respectively) in 2021 compared with 2020.
Even though more design-build firms increased their number of employees in 2021 than in 2020 (34% in 2021 compared with 24% in 2020), nearly 2 in 5 businesses expect to hire more staff in 2022.
Business Costs Soared in 2021
The cost of doing business increased for an even greater share of businesses across the seven industry groups in 2021 (64% to 93%) compared with 2020 (39% to 80%).
An increase in the cost of doing business is especially pronounced for home construction firms. More than 9 in 10 general contractors, design-build firms, and building and renovation specialists report that it was more expensive to conduct business in 2021 compared with 2020.
The cost of doing business increased for an even greater share of businesses across the seven industry groups in 2021 (64% to 93%) compared with 2020 (39% to 80%).
An increase in the cost of doing business is especially pronounced for home construction firms. More than 9 in 10 general contractors, design-build firms, and building and renovation specialists report that it was more expensive to conduct business in 2021 compared with 2020.
Rising Material Costs Eroded Profits
While the mix of cost drivers remained largely unchanged in 2021 compared with previous years, the share of businesses citing product and material costs as a driver increased notably (ranging from 81% to 92% of companies). Subcontractor costs and employee wages and benefits were among the top three drivers of profit erosion for 6 of the 7 industry groups in 2021.
While the mix of cost drivers remained largely unchanged in 2021 compared with previous years, the share of businesses citing product and material costs as a driver increased notably (ranging from 81% to 92% of companies). Subcontractor costs and employee wages and benefits were among the top three drivers of profit erosion for 6 of the 7 industry groups in 2021.
Shortages and Price Volatility Posed Big Challenges
Price volatility of products and materials was among the top three challenges across all seven industry groups in 2021. Availability of products and materials was among the top challenges for 6 of the 7 industry groups.
Challenges for architects in 2021 included managing the workload, keeping up with price changes and managing customer expectations (cited by 41%, 31% and 25% of respondents, respectively).
General contractors, design-build firms, and building and renovation specialists cite price volatility (47% to 55%) and availability of products and materials as the top two challenges they faced in 2021. It’s no surprise, then, that an increased cost of doing business is the No. 3 challenge these three groups faced in 2021.
Price volatility of products and materials was among the top three challenges across all seven industry groups in 2021. Availability of products and materials was among the top challenges for 6 of the 7 industry groups.
Challenges for architects in 2021 included managing the workload, keeping up with price changes and managing customer expectations (cited by 41%, 31% and 25% of respondents, respectively).
General contractors, design-build firms, and building and renovation specialists cite price volatility (47% to 55%) and availability of products and materials as the top two challenges they faced in 2021. It’s no surprise, then, that an increased cost of doing business is the No. 3 challenge these three groups faced in 2021.
Residential Services Were Still the Focus
Projects for existing homes account for the largest share of 2021 annual gross revenue (ranging from 49% to 74%) for all firms surveyed. The share of gross revenue from commercial services (7% to 16%) remained mostly unchanged in 2021 compared with 2020 (7% to 17%).
Projects for existing homes account for the largest share of 2021 annual gross revenue (ranging from 49% to 74%) for all firms surveyed. The share of gross revenue from commercial services (7% to 16%) remained mostly unchanged in 2021 compared with 2020 (7% to 17%).
Project Activity Increased
Despite product and material shortages, price volatility and the increased cost of doing business, a large share of firms (25% to 60%) across all seven industry groups worked on 30 or more projects in 2021, compared with 16% to 58% who did so in 2020.
Despite product and material shortages, price volatility and the increased cost of doing business, a large share of firms (25% to 60%) across all seven industry groups worked on 30 or more projects in 2021, compared with 16% to 58% who did so in 2020.
Revenue for Midsize Projects Grew
More companies across all seven industry groups earned $10,000 or more in gross revenue for a typical midsize project in 2021 (ranging from 36% to 91%) versus 2020 (34% to 87%).
More general contractors and design-build firms also earned $50,000-plus in gross revenue per midsize project in 2021 (61% and 66%, respectively, versus 50% and 57% in 2020), as well as earned $10,000 or more in gross profit per midsize project (60% and 63% in 2021, respectively, versus 53% and 58% in 2020).
More companies across all seven industry groups earned $10,000 or more in gross revenue for a typical midsize project in 2021 (ranging from 36% to 91%) versus 2020 (34% to 87%).
More general contractors and design-build firms also earned $50,000-plus in gross revenue per midsize project in 2021 (61% and 66%, respectively, versus 50% and 57% in 2020), as well as earned $10,000 or more in gross profit per midsize project (60% and 63% in 2021, respectively, versus 53% and 58% in 2020).
More Firms Recorded $3 Million or More in Annual Gross Revenue
Compared with 2020, the share of companies reporting $3 million or more in annual gross revenue increased for 5 of the 7 industry groups in 2021. The share of architects reporting this remained the same, and the share of decorating specialists declined.
General contractors and design-build firms were the industry groups most likely to meet or exceed $3 million in gross revenue (23% and 25%, respectively) and to have five or more employees (37% and 41%, respectively).
Compared with 2020, the share of companies reporting $3 million or more in annual gross revenue increased for 5 of the 7 industry groups in 2021. The share of architects reporting this remained the same, and the share of decorating specialists declined.
General contractors and design-build firms were the industry groups most likely to meet or exceed $3 million in gross revenue (23% and 25%, respectively) and to have five or more employees (37% and 41%, respectively).
Download the full study
And to get a sense of how remodeling and design firms expect business to go in 2022, read this story.
More on Houzz
Read more stories for pros
Browse millions of photos for inspiration
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
And to get a sense of how remodeling and design firms expect business to go in 2022, read this story.
More on Houzz
Read more stories for pros
Browse millions of photos for inspiration
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
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We had numerous inquiries for remodels in 2021 and so far, multiple in 2022. So much, that we could not meet the demand, and had to opt out of taking on all of the projects that contacted us. For reference, our company is in Oakland County MI.
@PRM Custom Builders: Same situation in southwest Michigan. I, a homeowner seeking serious estimates for several projects, am having difficulty getting people out to the house. I have submitted some requests/measurements/photographs online, per company preference, so they can do a basic assessment of the job before committing their personnel, who are stretched thin. Even those who do come on site give the necessary caveat about long waits, most often due to difficulty getting skilled tradespeople. There is SO much small- and mid-market money being left on the table, and too little is being done to address it in order to aid both you business owners, and us consumers.