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2013 Construction Forecast Forum

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Outlook for Construction: a presentation for the 2013 Construction Forecast Forum in Pittsburgh, PA on April 16, 2013 before the Construction Management Association of America (CMAA); the Three …

Outlook for Construction: a presentation for the 2013 Construction Forecast Forum in Pittsburgh, PA on April 16, 2013 before the Construction Management Association of America (CMAA); the Three Rivers Chapter, Master Builders Association of Western PA; and the Pittsburgh Builders Exchange.

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  • 1. 2013 Construction Forecast Forum April 16, 2013
  • 2. Outlook for Construction Presented by: Bernard M. Markstein Reed U.S. Chief Economist Greenbuild 2010
  • 3. Outlook for Commercial Construction About Reed Construction DataReed Construction Data is a leading constructioninformation provider.We deliver targeted and timely project leads, market intelligence,marketing solutions and RSMeans cost data to constructionprofessionals throughout the US and Canada.Our products and services simplify decision-making and helporganizations: Maximize Increase Drive Productivity Profits Growth Greenbuild 2010
  • 4. Outlook for Commercial Construction Reed Construction DataMarket Intelligence RSMeans cūbus  RSMeans Online™ Reed Construction Forecast  RSMeans Cost Data Construction Starts Database  Green Models Reed Market Fundamentals Expansion Index Predict Plan Analyze ExecuteMarketing Solutions Project Leads specEdge™  Connect™ SmartBuilding Index™  SmartSpecs™  DataLink™ Greenbuild 2010
  • 5. Outlook for Commercial ConstructionMarket Intelligence and Forecasts Reduce UncertaintyPredict Plan Reed Construction Data delivers timely forecasts and industry analysis to keep your businessAnalyze Execute profitable–even in this tough economic climate. With Reed you can:  Set strategy based on current market trends  Identify new development opportunities  Discover high-growth markets  Align resources to meet demand Greenbuild 2010
  • 6. Outlook for Commercial ConstructionThe Economy
  • 7. Outlook for Construction Economy has been growing at a barely acceptable rate Employment growing, but should be faster Unemployment rate down, but not always for the right reasons Inflation moderate Single-family housing recovering, but from a very low level Multifamily largely recovered Lending standards, although improving, remain relatively tight 7 Greenbuild 2010
  • 8. Outlook for ConstructionRisks to the Economy 8
  • 9. Outlook for Construction The federal debt ceiling The federal budget (see you in September?) Europe  European government debt default  The euro Energy (oil) prices 9 Greenbuild 2010
  • 10. Outlook for Construction The distribution ofconstruction spendinghas changed over the past few years 10
  • 11. Outlook for ConstructionConstruction Spending Components 2002 2005 17% 20% 47% 56% 27% 32% Residential Residential Nonresidential Building Nonresidential Building Heavy Construction Heavy Construction2002 Total - $848 Billion 2005 Total - $1,104 Billion 11 Source: U.S. Census Bureau
  • 12. Outlook for ConstructionConstruction Spending Components 2005 2012 17% 32% 33% 56% 27% 35% Residential Residential Nonresidential Building Nonresidential Building Heavy Construction Heavy Construction2005 Total - $1,104 Billion 2012 Total - $855 Billion 12 Source: U.S. Census Bureau Greenbuild 2010
  • 13. Outlook for ConstructionCommercial construction turned around in 2012 and is expected to continue to improve 13
  • 14. Outlook for Construction Construction Spending and $ Billions its Components1,4001,300 History Forecast1,2001,1001,000 900 800 700 600 500 400 300 200 100 0 02 03 04 05 06 07 08 09 10 11 12 13 14 Residential Nonresidential Building Heavy Construction Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 14 Greenbuild 2010
  • 15. Outlook for Construction RCD Total Starts (3-Mo MA YoY) 3-Month Moving Average, Year-over-Year % Change4540353025201510 5 0 -5-10-15-20-25-30-35 Source: Reed Construction Data 15 Greenbuild 2010
  • 16. Outlook for Construction Total Construction Spending Billion $, SAAR1,2501,2001,1501,1001,0501,000 950 900 850 800 750 700 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 16 Greenbuild 2010
  • 17. Outlook for Construction Residential construction isrecovering, butfrom a low level 17
  • 18. Outlook for Construction Total Housing Starts Thousands of Units, SAAR2,500 Nation’s long-run (trend) need for2,250 the next decade High Estimate (1.8 million starts per year)2,0001,7501,5001,250 Nation’s long-run (trend) need for1,000 the next decade Low Estimate (1.4 million starts per year) 750 500 250 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: U.S. Census Bureau 18 Greenbuild 2010
  • 19. Outlook for Construction Total Housing Starts (3-Month Moving Average) Thousands of Units, SAAR2,500 Nation’s long-run (trend) need for2,250 the next decade High Estimate (1.8 million starts per year)2,0001,7501,5001,250 Nation’s long-run (trend) need for the1,000 next decade Low Estimate (1.4 million starts per year) 750 500 250 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: U.S. Census Bureau 19 Greenbuild 2010
  • 20. Outlook for ConstructionSingle-family housing market is showing solid recovery 20
  • 21. Outlook for Construction Single-Family Housing Starts Thousands of Units, SAAR2,000 Nation’s long-run (trend) need for1,800 the next decade High Estimate (1.45 million starts per year)1,6001,4001,2001,000 Nation’s long-run (trend) need for 800 the next decade Low Estimate (1.15 million starts per year) 600 400 200 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: U.S. Census Bureau 21 Greenbuild 2010
  • 22. Outlook for Construction Single-Family Housing Starts (3-Month Moving Average) Thousands of Units, SAAR2,000 Nation’s long-run (trend) need for1,800 the next decade High Estimate (1.45 million starts per year)1,6001,4001,2001,000 Nation’s long-run (trend) need for the 800 next decade Low Estimate 600 (1.15 million starts per year) 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: U.S. Census Bureau 22 Greenbuild 2010
  • 23. Outlook for Construction The fallinghomeownership rate is a two edged sword 23
  • 24. Outlook for Construction Homeownership Rate Percent706968 Peak rate:67 Q2 2004 69.4%66 Lowest rate: Q4 1985 63.6%65 65.3%6463 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Source: U.S. Census Bureau 24 Greenbuild 2010
  • 25. Outlook for Construction Rentership Rate Percent3736 Highest rate: Q4 198535 36.4% 34.7%3433 Lowest rate: Q2 2004 30.6%323130 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Source: U.S. Census Bureau 25 Greenbuild 2010
  • 26. Outlook for Construction Rental Vacancy Rate (SA) Percent11.5 Peak rate:11.0 Q3 2009 10.9%10.510.0 9.5 9.0 8.5 8.8% 8.0 7.5 7.0 6.5 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: U.S. Census Bureau 26 Greenbuild 2010
  • 27. Outlook for Construction The multifamilyconstruction market continues to grow 27
  • 28. Outlook for Construction Multifamily Housing Starts Thousands of Units, SAAR500 Nation’s long-run (trend) need for450 the next decade High Estimate (350,000 starts per year)400350300250200 Nation’s long-run (trend) need for the next decade150 Low Estimate (250,000 starts per year)100 50 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: U.S. Census Bureau 28 Greenbuild 2010
  • 29. Outlook for Construction Multifamily Housing Starts Thousands of Units, SAAR1,2001,1001,000 900 800 700 Nation’s long-run (trend) need 600 for the next decade High Estimate (350,000 starts per year) 500 400 300 200 Nation’s long-run (trend) need for the next decade 100 Low Estimate (250,000 starts per year) 0 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 Source: U.S. Census -Bureau 29 Greenbuild 2010
  • 30. Outlook for Construction Multifamily Housing Starts (3-Month Moving Average) Thousands of Units, SAAR500 Nation’s long-run (trend) need450 for the next decade High Estimate (350,000 starts per year)400350300250200 Nation’s long-run (trend) need for the150 next decade Low Estimate (250,000 starts per year)100 50 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: U.S. Census Bureau 30 Greenbuild 2010
  • 31. Outlook for Construction Residentialconstruction spending 31
  • 32. Outlook for Construction Residential Spending Components $ Billions800700 History Forecast600500400300200100 0 02 03 04 05 06 07 08 09 10 11 12 13 14 Improvements Single-family Multifamily Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 32 Greenbuild 2010
  • 33. Outlook for Construction RCD Residential Starts (3-Mo MA YoY) 3-Month Moving Average, Year-over-Year % Change5040302010 0-10-20-30-40-50-60 Source: Reed Construction Data 33 Greenbuild 2010
  • 34. Outlook for Construction Construction Spending: New Residential Construction Billion $, SAAR550500450400350300250200150100 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 34 Greenbuild 2010
  • 35. Outlook for Construction Residential Construction Spending $ Billions450400 2002 2003 2004 2005 2006350 2007 2008 2009 2010 2011 2012 2013 2014300250200150100 50 0 Single-Family Multifamily Improvements Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 35 Greenbuild 2010
  • 36. Outlook for ConstructionNonresidential building construction has struggled lately, but is expected to performbetter in the second halfof this year and in 2014 36
  • 37. Outlook for Construction RCD Nonresidential Starts (3-Mo MA YoY) 3-Month Moving Average, Year-over-Year % Change3025201510 5 0 -5-10-15-20-25-30-35-40 Source: Reed Construction Data 37 Greenbuild 2010
  • 38. Outlook for Construction Construction Spending: Nonresidential Construction Billion $, SAAR475450425400375350325300275250225200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 38 Greenbuild 2010
  • 39. Outlook for Construction Nonresidential Construction Spending $ Billions100 90 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 80 2012 2013 2014 70 60 50 40 30 20 10 0 Hotel/Lodging Office Commerical Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 39 Greenbuild 2010
  • 40. Outlook for Construction Nonresidential Construction Spending $ Billions110100 2002 2003 2004 2005 2006 90 2007 2008 2009 2010 2011 2012 2013 2014 80 70 60 50 40 30 20 10 0 Religious Healthcare Education Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 40 Greenbuild 2010
  • 41. Outlook for Construction Nonresidential Construction Spending $ Billions70 2002 2003 2004 2005 200660 2007 2008 2009 2010 2011 2012 2013 20145040302010 0 Public safety Amusement and recreation Manufacturing Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 41 Greenbuild 2010
  • 42. Outlook for ConstructionHeavy engineering (non-building)construction held up best over the last few years 42
  • 43. Outlook for Construction Despite considerablechallenges, the outlook for heavy engineering construction is fairly positive 43
  • 44. Outlook for Construction RCD Heavy Engineering Starts (3-Mo MA YoY) 3-Month Moving Average, Year-over-Year % Change8070605040302010 0-10-20-30-40 Source: Reed Construction Data 44 Greenbuild 2010
  • 45. Outlook for Construction Construction Spending: Heavy Engineering Billion $, SAAR325300275250225200175150 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 45 Greenbuild 2010
  • 46. Outlook for Construction Heavy Engineering Construction Spending $ Billions130120 2002 2003 2004 2005 2006110 2007 2008 2009 2010 2011100 2012 2013 2014 90 80 70 60 50 40 30 20 10 0 Transportation Communication Power Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 46 Greenbuild 2010
  • 47. Outlook for Construction Heavy Engineering Construction Spending $ Billions110100 2002 2003 2004 2005 2006 90 2007 2008 2009 2010 2011 80 2012 2013 2014 70 60 50 40 30 20 10 0 Highway Water and Sewer Conservation Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 47 Greenbuild 2010
  • 48. Outlook for ConstructionA look at the region’sperformance 48
  • 49. Outlook for Construction Pennsylvania Construction Starts $ Millions9,000 2003 2004 2005 20068,000 2007 2008 2009 2010 2011 20127,0006,0005,000 -23% 8%4,0003,000 24%2,0001,000 0 Nonresidential Building Heavy Engineering Residential Source: Reed Construction Data 49 Greenbuild 2010
  • 50. Outlook for Construction Ohio Construction Starts $ Millions9,000 2003 2004 2005 20068,000 2007 2008 2009 2010 2011 20127,0006,000 -10%5,0004,000 -3%3,000 24%2,0001,000 0 Nonresidential Building Heavy Engineering Residential Source: Reed Construction Data 50 Greenbuild 2010
  • 51. Outlook for Construction Pennsylvania Construction Starts February Year-to-Date $ Millions1,800 117%1,600 2012 20131,4001,2001,000 86% 800 600 400 -18% 200 0 Nonresidential Building Heavy Engineering Residential* *January only 51 Source: Reed Construction Data Greenbuild 2010
  • 52. Outlook for Construction Ohio Construction Starts February Year-to-Date $ Millions1,3001,200 72%1,100 2012 20131,000 900 800 700 157% 600 500 400 300 -14% 200 100 0 Nonresidential Building Heavy Engineering Residential* *January only 52 Source: Reed Construction Data Greenbuild 2010
  • 53. Outlook for Construction Nonresidential Building Construction Starts $ Millions5,0004,500 2003 2004 2005 2006 2007 2008 2009 20104,000 2011 20123,5003,000 -21%2,5002,0001,500 -26% -13%1,000 -24% 500 0 Pittsburgh Philadelphia Harrisburg Cleveland Source: Reed Construction Data 53 Greenbuild 2010
  • 54. Outlook for Construction Nonresidential Building Construction Starts February Year-to-Date $ Millions900800 273% 2012 2013700600500400 24%300 459% 8%200100 0 Pittsburgh Philadelphia Harrisburg Cleveland Source: Reed Construction Data 54 Greenbuild 2010
  • 55. Outlook for Construction Heavy Engineering Construction Starts $ Millions2,8002,600 2003 2004 2005 2006 68%2,400 2007 2008 2009 20102,200 2011 20122,0001,8001,6001,4001,2001,000 5% -23% 800 600 400 49% 200 0 Pittsburgh Philadelphia Harrisburg Cleveland Source: Reed Construction Data 55 Greenbuild 2010
  • 56. Outlook for Construction Heavy Engineering Construction Starts February Year-to-Date $ Millions550500 83%450 2012 2013400350300250200 150%150100 28%50 33% 0 Pittsburgh Philadelphia Harrisburg Cleveland Source: Reed Construction Data 56 Greenbuild 2010
  • 57. Outlook for Construction Residential Construction Starts $ Millions2,8002,600 2003 2004 2005 20062,400 2007 2008 2009 20102,200 2011 20122,0001,8001,6001,400 25%1,2001,000 800 31% 600 26% 400 34% 200 0 Pittsburgh Philadelphia Harrisburg Cleveland Source: Reed Construction Data 57 Greenbuild 2010
  • 58. Outlook for Construction Residential Construction Starts January 2012 and January 2013 $ Millions170160 5%150140 2012 2013130120110100 90 80 70 60 -39% 50 40 -20% 30 20 -24% 10 0 Pittsburgh Philadelphia Harrisburg Cleveland Source: Reed Construction Data 58 Greenbuild 2010
  • 59. Outlook for Construction Connect with Reed Construction Data Twitter twitter.com/BMarkstein Twitter twitter.com/ReedConstrData Facebook www.facebook.com/Reed-Construction-Data LinkedIn www.linkedin.com/company/reed-construction-data web www.reedconstructiondata.com 59 Greenbuild 2010
  • 60. Outlook for Construction Contact Information and LinksBernard M. Markstein Office: 301-588-5190 Mobile: 404-952-3381 b.markstein@reedbusiness.com U.S. Forecast and Commentary: http://www.reedconstructiondata.com/market- intelligence/articles/ Blog: http://www.reedconstructiondata.com/market- intelligence/bernie-markstein/ 60 Greenbuild 2010