Aspe presentation april 21 2014
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Aspe presentation april 21 2014 Aspe presentation april 21 2014 Presentation Transcript

  • Presented to American Society of Professional Estimators April 21, 2014 12 Noon Builders Exchange ASPE Annual Economic Forecast
  • 2 1. Rules to Remember 2. National Trends 3. California 4. Bay Area 5. Local Trends Table of Contents
  • Economic Forecasting The only function of economic forecasting is to make astrology look respectable. John Kenneth Galbraith 3 View slide
  • 3 Rules to Remember • Construction is one the last industries to go into a recession and one of the last to come out. • Real Estate and Construction are Dance Partners-what one industry does affects the other • Overall employment is a key indicator for the health of the construction industry 4 View slide
  • Annual Rate of Construction Spending US (Billions)1 Public ($) Private ($) Total ($) 2005 256.3 904.3 1160.6 2006 280.9 896.8 1177.7 2007 297.8 842.4 1140.2 2008 319.6 737.1 1053.7 2009 309.6 593.0 902.5 2010 301.0 486.9 787.9 2011 286.6 529.7 816.4 2012 270.1 614.9 885.0 2013 275.0 659.4 934.4 5 1Numbers come from December Annual Construction Report for the US Census Bureau, except for 2013 numbers which came from the November Report.
  • United States Construction Starts In billons 2012 Actual 2013 Estimate 2014 Forecast % change 12-13 % change 13-14 Total Construction 485,296 508,050 555,300 +4.7% +9.0% Residential 165,965 207,500 254,250 +25% +23% Single Family 125,791 159,525 201,125 +26.8% +26.0% Multifamily 40,174 47,975 53,125 +19.4% +11.0% Nonresidential 157,581 163,250 176,700 +3.6% +8.0% Nonbuildings 161,750 137,300 124,350 -15.1% -9.0% 6 ENR Magazine, December 2/9 2013, p2
  • AIA 2014 Consensus Construction Forecast Forecast 2014 % Change 2015% Change Non Residential Total 5.8 8.0 Commercial Total 10.3 10.8 Office 9.2 10.8 Retail & Other Commercial 10.5 11.5 Hotel 13.1 9.2 Industrial Total 7.8 8.7 Institutional Total 7.8 8.7 Health 5.2 7.8 Education 2.8 5.8 Religious -1.7 1.3 Public Safety -0.2 3.1 Amusement/Recreation 9.9 7.5 7
  • Dodge Construction US Outlook-2014 • Total Construction up 9% in dollars • Multi Family Housing up 11% in dollars • Single Family Housing up 26% in dollars • Commercial Buildings up 17% in dollars • Public Works down -5% in dollars • Electric Utilities down 33% in dollars • Institutional Buildings up 2% in dollars 8Door and Window Magazine, website
  • California Housing Starts (in thousands) 70.6 87.5 124.9 151.7 157.1 161.4 0 50 100 150 200 Housing Starts 2013 2014 2015 2016 2017 2018 9 Eberhardt School of Business, January 2014, Metro Forecast
  • Residential Building Permits-Bay Area Counties New Bldg. Perm. Jan-Oct 2013 Change from Jan- Oct 2012 New Bldg. Perm. Jan-Oct 2013 Change from Jan-Oct 2012 San Francisco, Sa n Mateo and Marin 418 39.8% 5513 82.5% Santa Clara, San Benito 1,686 35% 4,310 24.6% Alameda, Contra Costa 2,295 18.8% 1,944 -4.5% TOTALS 4,399 26% 11,767 38% 10 1”Young Couples Seek Townhouses and condos with an urban feel”, San Jose Mercury News, December 17, 2013 P. A1 Single-Family Units Multi-Family Units
  • Santa Clara County Residential Building Permits Year 2007 2008 2009 2010 2011 2012 2013 Buildings 1,938 1,051 618 841 991 1,528 1,933 Units 4,001 3,273 1,024 4001 3,001 5,433 7,511 Construction cost (in millions) 952 618 295 699 680 1,035 1,596 11 US Census Bureau Statistics
  • Office Vacancy Rates 4Q 2014 12 Cornish & Carey Silicon Valley Market Summary, page 2 4th Q 2013 Region Inventory Vacancy Rate (%) Campbell 2,220,503 10.25% Cupertino 4,049,215 1.21% Los Altos 1,163,097 8.57 Los Gatos 1,866,232 5.76% Milpitas 1,113,735 16.75% Mountain View 6,925,964 3.03% Palo Alto 8,075,997 4.51% San Jose 27,696,775 16.03% Santa Clara 11,497,211 18.6% Saratoga 345,231 1.3% Sunnyvale 10,486,115 6.83% Summary 75,440,075 10.71%
  • Santa Clara County Real Estate Trends-Retail • Construction activity 450,000 sq. ft. in 2013. 50% increase over 2012. • Development pipeline-2 million sq. ft. in San Jose. (650,000 sq. ft. at Valley Fair) 13 Marcus & Millichap San Jose Metro Area Retail Research Report 3rd Quarter 2013
  • Santa Clara County Real Estate Trends-Commercial • Vacancy rate 12.7% in 2nd Q lowest since 2008. • 3,200,000 sq. ft. under way (80% preleased) • 2,100,000 sq. ft. delivered in 2013. • 1,600,000 sq. ft. to be completed in 2014 • 5,500,000 sq. ft. planned (1,000,000 for Nvidia) 14 Marcus & Millichap San Jose Metro Area Commercial Research Report 3rd Quarter 2013
  • Santa Clara County Real Estate Trends-Apartments • 6,600 units are being built now (6,000 MktRt) • 3,700 units in the pipeline. • 2013-3,500 come online-expanding inventory by 1.4%-(2012-1,500) • Development expected to accelerate slightly in 2014 15 Marcus & Millichap San Jose Metro Area Apartment Research Report 4th Quarter 2013
  • So far in 2014 As of the end of February 2014, contracts have been awarded for $173.7 million worth of future commercial projects in Santa Clara and San Benito County. That is a 72% increase over the same period last year. 16 “McCarthy Construction to open San Jose Office, San Jose Business Journal, April 8, 2014
  • 17 Santa Clara County-Construction Employment Statistics by Month- Jan.07-Nov.13 Peak Employment- September 2000, 52,200 November 2013 Employment 41,400 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 AxisTitle Employment Employment
  • Santa Clara County Construction Employment-Annual Average In Thousands 44.4 41.6 43.0 44.5 46.8 47.2 44.2 34.4 32.2 31.4 34.7 38.8 0.0 10.0 20.0 30.0 40.0 50.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 18 Bureau of Labor Statistics-San Jose, Santa Clara, Sunnyvale Statistical Area
  • Bay Area Forecast- Unemployment (%) Metro Area 2013 2014 2015 2016 2017 San Francisco 5.5 5.0 4.7 4.3 3.8 San Jose 6.9 6.4 5.9 5.3 4.6 Oakland 7.4 6.9 6.5 5.8 5.1 Santa Cruz 9.2 8.6 8.0 7.3 6.7 Vallejo 8.3 8.0 7.6 6.6 5.7 California 8.9 8.5 8.0 7.3 6.4 19 Eberhardt School of Business, January 2014, Metro Forecast
  • 20 Plans in Online Plan Room By Month (2009-2013)1 142 143 165 220 221 272 216 244 148 148 138 152 109 144 183 176 233 197 165 176 147 119 109 188 124 138 174 191 218 235 175 185 143 141 131 153 136 161 211 202 248 254 211 196 159 181 159 150 172 167 185 288 257 220 207 170 163 201 158 204 0 50 100 150 200 250 300 350 400 450 2392 plans posted in 2013
  • 21 A few notes about Public Works Construction • Public Works construction is the last construction sector to go into a recession and last to come out of the recession. • The Builders Exchange received 30% less CalTrans Plans than in 2013 • A new highway bill in Congress should provide at ten-fold increase in funding of Transportation Infrastructure.1 • 75% of tax revenues are based on property taxes-it takes 3 years between changes in home prices and local construction spending activity. 1 • Many cities are still struggling with the elimination of redevelopment. • Because the government is employing fewer workers now than at the start of the recession, total employment—private sector plus government workers—is still a half million jobs short of its peak before the recession.2 1“The US Cement Industry:Economic Clouds are Lifting” ,www.worldcement.com San Francisco Federal Reserve Board, Fed Views, April 10, 2014
  • 22 Other Trends •While speculation fueled the last Internet boom, companies are now profitable indicating a more sustainable, growing economy. 1 •About 280,000 new Construction Jobs are expected to be created over the next four years, about one quarter of the 1.1 million jobs California will add by 2017. Despite leading the state in job growth over the next four years, there will still be fewer construction jobs than before the recession. 2 •Construction Employment forecast employment growth of 29% from 2012-20222 •Construction Employment growth of 1.6 million jobs from 2012-2022 in United States2 • Several corporate campuses underway will return space to market in 2015-2016, but the commercial market should remain strong in 2014. 4 1 Marcus and Millichap Apartment Market Report, 4th Q, 2013 2Eberhard School of Business, Metro Forecast, September 2013 3 Department of Labor-Labor Projections, Winter 2013-2014 4 Marcus and Millichap Commercial Market Report, 1st Q 2014