Where’s Opportunities in the Residential Market?

The residential market represents 8-12%, typically, of the electrical distribution market, or about 15-20% of the overall contractor market. For some distributors it is much more based upon locale, however, typically this is smaller distributors. And for those in lighting, it has declined as a percentage of sale as decorative lighting seemingly is absent in most homes as builders do not want to be bothered with consumer aesthetics, hence the decline of showrooms in many distributors.

Further, given interest rates and the cost of building (land, government regulations, fees, etc.), single family housing has continued to decline.

As editor of US Lighting Trends, a service of Channel Marketing Group, I recently attended Lightovation, which caters to the residential lighting market. Here’s some key points from her article (and click here for the full article as I’ve edited it down.):

“The June edition of the Lightovation resi-oriented trade show and the Lighting One lighting co-op convention – timed to coincide with Lightovation in Dallas last week – was an ideal time to take the collective temperature of distributors now that the noise regarding tariffs has settled down.

Showrooms attending both events agree that while single-family home sales have slowed (on a year-over-year basis), there has been an uptick in two areas: remodeling and multifamily.

The remodeling sector – which includes updating lighting fixtures and adding smart controls throughout the home – is holding its own. Long-time homeowners who aren’t motivated to sell and face a much higher interest rate than when they bought or refinanced are instead renovating popular rooms such as the kitchen, primary bedroom, and main bath because they realize they will be living in – and looking at – those rooms for longer than anticipated.

When it comes to what showroom buyers were looking for at Lightovation, the answer was a little bit of everything. Cindy Agers Strong of The Lighting Corner in Michigan recently completed some light commercial work that came about from a residential client. “I had done the lighting for his home a few times previously and he thought of me when he needed decorative statement and functional lighting for a business he owns,” she said. … In fact, more and more showrooms are finding a cross-over in business from residential to hospitality projects as well as multi-family and office projects.

Allan Margolin, president and owner of M&M Lighting in Houston, has done a booming business in the multi-family sector for decades —but all over Texas and beyond. … the multi-family sector continues to be a steady source of reliable business for M&M.

The Phoenix area has been especially growing with an influx of businesses. An article in the AZ Central recently reported that “… the state has attracted semiconductor manufacturers, medical research facilities, tech startups, fintech, and software developers. This mass business migration means one thing: multi-housing needs to accommodate the large influx of employees.”

Multi-Housing News recently released its findings on the sector (using Yardi Matrix data) and examined smaller markets that recorded exceptional performance last year and that point to sustained growth moving forward. The data points Multi-Housing News used were employment, deliveries, construction pipeline and occupancy, as well as investment metrics.

The Top 10 Emerging Markets that Multi-Housing News pinpointed were: Tucson; White Plains, NY; Madison, WI; Central East Texas; Knoxville, TN; Lexington, KY; North Central Florida; Columbia, SC; Columbus, GA; and Lafayette, IN.  To read Multi-Housing News’ report and learn why each metro was selected, click here.

Until interest rates for home mortgages comes down, spurring home sales again, the multifamily sector seems worth pursuing, depending on how well your store’s product assortment fits developers’ needs.”

Kevin Coleman, who supports Channel Marketing Group’s clients with research insights shared additional research:

• Acuity has a multifamily housing bundle with Juno and Lithonia fixtures and nLight and SensorSwitch controls
• Acuity is making controls more accessible and easier to buy with the Sensor Switch Air portfolio available through Contractor Select.
• RAB’s Lightcloud for multifamily townhomes and apartments
• Leviton’s Multi-Dwelling Units portfolio of lighting and electrical products

Further, he shared that:

• Leading DIY retailers, Home Depot and Lowe’s, are very focused on residential offerings for contractors and efforts to make purchasing easier via their eCommerce. Both companies were mentioned repeatedly by respondents to our State of eCommerce report.
• Home Depot is enhancing its Pro ecosystem for contractors, especially for large complex projects (townhomes).  They Depot acquired SRS Distribution for $18.25 billion in 2024, which runs the Pro channel trade credit program and currently has over 90,000 accounts (SRS contributed $3.6 billion in sales and is expected to grow mid-single digits as Home Depot converts Pro customers to the SRS platform, and acquired International Designs Group (and subsidiary Construction Resources) from a private equity firm, which brings expertise in complex, cross-category professional project design in a showroom business model, in late 2023.
• According to a recent survey, 72% of Gen Z Say Renting is Smarter – Multifamily Executive. This is economically driven (cost of a home, interest rates, student loan debt.)

And another data point … a number of respondents to the Q2 Pulse of Lighting report commented about the residential market and, more importantly, the uptick in renovations and multi-family in the residential market.

We also recently shared information on the Top 25 Housing Markets.

What does it all mean?

• If you are involved in the residential market, you should be segmenting this segment into layers and develop offerings and marketing strategies specific to each segment. The growth areas, broadly, will be higher-end homes, renovation, and multi-family.
• If you determine that multi-family is an opportunity, there can be segments inside of this (i.e. 55+ communities, education, housing (at different levels), mixed-use, etc.)
• Perhaps align a design service with the real estate community which is an influencer to the new home buyer (which can be “new” for the buyer but not new and hence they may want some upgrades.)
• Yes, there is a builder alignment strategy, but this is more for larger companies or manufacturers.
• If interest rates decline, SFH starts may increase, but that takes time and will be market specific.
• Or you can say “I’m not too concerned” and just quote whatever comes your way.

And the other key … manage your expectations. If you are not willing to invest to pursue the business, and segments, which is a strategy, then be “accepting” of the results.

As someone once said, “there is always a market somewhere.” The question is, do you want to pursue it or wait for it to find you?