Shop Talk: K&W Interiors on how diversifying has helped business

This is an installment of Shop Talk, an occasional series of interviews with business owners in Alaska, focusing on the state economy and how it is affecting them.

Home remodeling company K&W Interiors, on the Old Seward Highway in South Anchorage, has been through tough economic times before.

The business started in 1985 on the cusp of Alaska's massive crash. Working on repossessed homes at the time kept K&W afloat, said Mike Kaercher, one of the owners.

Mike and his brother Anthony Kaercher, also one of the owners, talked to the Anchorage Daily News about their business.

What have you noticed in the state recession, and how is it affecting you?

Anthony: I'd say new construction is definitely slower. It's still going, though. It hasn't stopped. … Remodel work has continued on. We diversified our business more into the remodeling in 2005 because we kind of saw what was coming up here. Rather than just concentrate on new construction, we pressed more into the remodel work.

What were you seeing at the time?

Mike: We noticed just a slow-up of new homes and a lot more people coming in asking for the services.

Have you noticed more people in recent years interested in remodeling?

Mike: I think we have a lot of people that have been in their houses for a long time; a lot of them probably bought them new back in the '80s. And they like their neighborhood, they're just not wanting to leave that space. Land is so much harder to come by right now. … So consequently, land prices are higher, building prices are higher. Supply and demand just of lumber is ridiculous right now because of all the hurricanes. All that material's going south.

I'm curious what you see on a day-to-day basis that tells you anything about the economy in town right now.

Mike: I think people are secure. A lot of the remodels we're doing are large ones. … We're tearing out walls and re-plumbing whole areas.

Anthony: I think one thing that is different this time around is that the stock market is doing well and people's retirements are safe, so they're not so nervous as, you know, 2007.

[Remodels on the rise as permits for new construction dip in Anchorage]

Have you guys had to adapt to the downturn at all?

Mike: We've just been a lot more mindful and definitely keeping an eye on trends. … A lot of it has to do with our salespeople. We've lost (two) salespeople. They've decided to leave the state for other ventures. Not necessarily because of the economy or their job. … It was completely because of family issues. …

Just qualified people. Especially in this area, finding a qualified person is almost an impossibility, (in) our industry.

What about looking toward the future? What are your biggest concerns about the economy right now?

Mike: Interest rates, I guess. For new home sales, interest rates matter greatly. And since we're definitely tied in with that, that affects our business. A lot of people, not necessarily all, but a lot will have home improvement loans. If those interest rates go up, they may decide not to do that as well.

Anthony: The other issue I'm concerned with is developable land. We've kind of run through the (Anchorage) Bowl here and there's no big tracts that I know of that are in process for development.

Will you guys focus more on remodeling than new construction because of that?

Anthony: It depends upon the builders we work with. Are we going to be expanding more to the Valley or to Chugiak, or where are we going to go from here? Really can't go south, unless it would be Bird.

Sounds like you're not too worried about the state recession.

Anthony: Well, we're always concerned. We've got 20 people that work here. …

We've kind of been waiting for the shoe to drop here. We hear all the bad information in the news and so forth and we're just kind of waiting for it. We certainly have noticed it to some degree. But people are still doing remodeling work. … As opposed to buying a new home, it's definitely less money to remodel what you've got, so I think we're pretty secure in that spot.