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Viega will delay construction of Waterfront headquarters CEO says revenues will be flat amid housing downturn

November 28, 2008

Wichita Business Journal
by Chris Moon

Saying it wants to stick to its priorities, Viega LLC will delay construction of a large headquarters building in east Wichita.

The company had planned to build a 75,000-square-foot, three-story building in 2009 at the Waterfront development at 13th Street North and Webb Road. That project, which would have been a large one for the Wichita market, now won’t happen until 2010 at the earliest, says Dan Schmierer, president and CEO of the German manufacturer of plumbing products.

“We will not seriously consider a new North American headquarters building before 2010,” he says.

The rattled national economy isn’t a factor, Schmierer says. Rather, the firm first wants to finish work on a large manufacturing plant in McPherson.

“If the economy was rosy, I don’t think it would change the sequence,” he says.

Growing Firm

Viega entered the Wichita market in 2006 by purchasing two McPherson firms — Midtec of America and Vanguard Piping Systems — and moving its North American headquarters to Wichita.

The company’s new McPherson plant, at 439,000 square feet and approximately $50 million, is expected to be complete by the end of the year. There, the company will manufacture PEX piping, a plastic pipe used in new home construction, along with other plumbing products.

The new plant will allow the company to consolidate its McPherson manufacturing operations under one roof. About 300 people will work out of the facility. It was designed by Wichita architecture firm McCluggage Van Sickle & Perry.

But these are interesting times for Viega, whose fortunes are tied to the rise and fall of the construction industry.

Schmierer says the company’s residential product lines have been significantly down in 2008 as new home starts have dropped with the national housing crash. The National Association of Realtors is forecasting 936,000 new home starts for 2008, down from 1.3 million last year. Things are expected to get worse in 2009.

But Schmierer says Viega’s commercial construction business is up significantly, and the company recently ventured into the industrial market.

“We want to diversify,” he says.

The company’s revenues for 2008, he says, should remain flat, between $200 million and $250 million.

Big Projects

But with those projects under way — along with work at facilities in Reno, Nev., and Merrimack, N.H. — the new headquarters building has been pushed back on the company’s timeline.

“It’s a matter of priorities. Let’s get the bread-and-butter stuff done first and then we’ll worry about the office building,” Schmierer says. “I think that will probably happen, but it’s in line with a number of other events.”

The company occupies two floors in the Epic Center in downtown Wichita.

Schmierer says he expects 2009 to be a tough year, especially the first two quarters. He says the onus is on Viega to keep expenses low. The firm hasn’t cut jobs so far but is “evolving toward fewer positions,” he says.

“Hope for the best and plan for the worst, which is a nice way of saying cost-management is a big deal right now,” Schmierer says. “This is no time to be overly bold and aggressive. Take a very conservative tack around your costs and hope for the best. Only Houdini has a real clear picture of what could happen next year. There are 20 scenarios one could envision.”

‘Hunkering Down’

The delay in Viega’s headquarters project comes at a time when the local office market already is soft, says developer Paul Jackson, who has developed several buildings at the Waterfront.

He says he expects to remain on the sidelines during 2009. Many companies aren’t looking to move unless they absolutely have to. And many are simply looking for extensions from their current landlords.

“I think a lot of folks are still in the same mode I’m in,” Jackson says. “Everyone’s kind of hunkering down and being very cautious until we see how bad this thing’s going to get.”

But architect Jeff Van Sickle, a partner with McCluggage Van Sickle & Perry, says he’s seen little contraction so far in commercial construction in Wichita.

While it’s finishing work on Viega’s McPherson plant, MVP is designing Cessna Aircraft Co.’s 600,000-square-foot Columbus plant.

“We really haven’t had any private-sector projects pull (out) at all,” Van Sickle says.

However, he says some clients are asking architects to design projects but waiting until the economy improves to begin construction.


cmoon@bizjournals.com | 266-6176

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