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Pcbe markstein may 6, 2014

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Presentation charts on the construction outlook for Philadelphia Council for Business Economics meeting

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Pcbe markstein may 6, 2014

  1. 1. Philadelphia Council for Business Economics May 7, 2014
  2. 2. Current Construction Trends Presented by: Bernard M. Markstein Reed U.S. Chief Economist
  3. 3. About Reed Construction Data Reed Construction Data is a leading construction information provider. We deliver targeted and timely project leads, market intelligence, marketing solutions and RSMeans cost data to construction professionals throughout the US and Canada. Maximize Productivity Increase Profits Drive Growth Our products and services simplify decision-making and help organizations:
  4. 4. How we do it: our channels
  5. 5. Our coverage and penetration Private projects 22%increase year over year 80%acquisition rate Plans and specs TOTAL ACTIVE PROJECTS: 15.2% increase over 4 years 130,000public and private Non-residential construction information industry sources 22.9%increase over four years Plans and specs
  6. 6. Every state and every area in USAcovered including Alaska and Hawaii More coverage in Canada than anyone in the construction industry Our coverage and penetration
  7. 7. 7 The U.S. Economy
  8. 8. 8  Economic growth – improving, but should be better  Employment growing, but should be faster  Inflation remains moderate, too low?  Washington less of an obstacle, but will wrangling break out again and hinder basic business?  Federal Reserve has started to taper, when do interest rates rise? Overview of the economy
  9. 9. 9 Risks to the economy  Spike in interest rates due to Fed unwinding its Quantitative Easing program too fast  Sharp cuts to federal government spending in the near term  European government debt default  The euro  Energy (oil) prices  Russia?
  10. 10. 10 Construction Outlook
  11. 11. 11 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35 3-Month Moving Average, Year-over-Year % Change Reed Total Starts (3-Mo MA YoY) Source: Reed Construction Data Shaded area represents recession Overview of construction
  12. 12. 12 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Residential Nonresidential Building Heavy Construction $ Billions History Source: History – U.S. Census Bureau; Forecast – Reed Construction Data Forecast Forecast: Construction to improve Construction Spending and its Components Overview of construction
  13. 13. 13 47% 32% 20% 2002 Residential Nonresidential Building Heavy Construction 56% 27% 17% 2005 Residential Nonresidential Building Heavy Construction 2002 Total - $848 Billion 2005 Total - $1,104 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction
  14. 14. 14 56% 27% 17% 2005 Residential Nonresidential Building Heavy Construction 31% 36% 33% 2010 Residential Nonresidential Building Heavy Construction 2005 Total - $1,104 Billion 2010 Total - $805 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction
  15. 15. 15 38% 33% 29% 2013 Residential Nonresidential Building Heavy Construction 2005 Total - $1,104 Billion 2013 Total - $900 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction 56% 27% 17% 2005 Residential Nonresidential Building Heavy Construction
  16. 16. 16 2002 Total - $848 Billion 2013 Total - $900 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction 38% 33% 29% 2013 Residential Nonresidential Building Heavy Construction 47% 32% 20% 2002 Residential Nonresidential Building Heavy Construction
  17. 17. 17 Residential construction is recovering, but from a low level  Single-family housing market is on the mend, but much further to go before it is back to normal  Multifamily market has largely recovered, but still some room for growth Overview of housing
  18. 18. 18 0 250 500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade Low Estimate (1.4 million starts per year) Nation’s long-run (trend) need for the next decade High Estimate (1.8 million starts per year) Total Housing Starts (3-Month Moving Average) Source: U.S. Census Bureau Shaded areas represent recession Overview of housing
  19. 19. 19 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade Low Estimate (1.15 million starts per year) Nation’s long-run (trend) need for the next decade High Estimate (1.45 million starts per year) Single-Family Housing Starts (3-Month Moving Average) Overview of housing Source: U.S. Census Bureau Shaded areas represent recession
  20. 20. 20 0 50 100 150 200 250 300 350 400 450 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade Low Estimate (250,000 starts per year) Nation’s long-run (trend) need for the next decade High Estimate (350,000 starts per year) Multifamily Housing Starts (3-Month Moving Average) Overview of housing Source: U.S. Census Bureau Shaded areas represent recession
  21. 21. 21 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade High Estimate (350,000 starts per year) Nation’s long-run (trend) need for the next decade Low Estimate (250,000 starts per year) Multifamily Housing Starts (3-Month Moving Average) Overview of housing Source: U.S. Census Bureau Shaded areas represent recession
  22. 22. 22 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 3-Month Moving Average, Year-over-Year % Change Reed Residential Starts (3-Mo MA YoY) Overview of housing Source: Reed Construction Data Shaded area represents recession
  23. 23. 23 0 100 200 300 400 500 600 700 800 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Improvements Single-family Multifamily $ Billions Residential Spending Components Source: History – U.S. Census Bureau; Forecast – Reed Construction Data History Forecast Overview of housing
  24. 24. 24 0 50 100 150 200 250 300 350 400 450 Single-Family Multifamily Improvements $ Billions 2006 to 2013 ’14 ’15 Residential Construction Spending Source: History – U.S. Census Bureau; Forecast – Reed Construction Data Overview of housing
  25. 25. 25 Issues Facing Housing
  26. 26. 26 Headwinds for housing  Builders’ inventory of land for development and construction is low  prices for land rising  Shortages of skilled labor in some markets  Lending standards easing, but still rigorous by historical standards  Debt burden by young adults—student debt  Fear of homeownership?
  27. 27. 27 Would you lend to a person carrying a large amount of student debt? Would you want to borrow more money if you were such a person? The debt burden headwind
  28. 28. 28 Headwinds for housing
  29. 29. 29 Headwinds for housing
  30. 30. 30 Are views about homeownership changing ?
  31. 31. 31 0 5 10 15 20 25 30 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ 2006 2008 2010 2012 Millions Head of Household by Age Cohort in 2012 Source: U.S. Census Bureau, American Community Survey (ACS) Demographics and housing
  32. 32. 32 63 64 65 66 67 68 69 70 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Homeownership Rate Percent Lowest rate: Q4 1985 63.6% Peak rate: Q2 2004 69.4% 65.0% Demographics and housing Source: U.S. Census Bureau Shaded areas represent recession
  33. 33. 33 30 31 32 33 34 35 36 37 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Rental Rate Percent Highest rate: Q4 1985 36.4% Lowest rate: Q2 2004 30.6% 35.0% Demographics and housing Source: U.S. Census Bureau Shaded areas represent recession
  34. 34. 34 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Rental Vacancy Rate (SA) Percent Peak rate: Q3 2009 10.9% 8.3% Demographics and housing Source: U.S. Census Bureau Shaded areas represent recession
  35. 35. 35 Nonresidential Building Construction
  36. 36. 36 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 3-Month Moving Average, Year-over-Year % Change Reed Nonresidential Starts (3-Mo MA YoY) Nonresidential building construction Source: Reed Construction Data Shaded area represents recession
  37. 37. 37 275 269 283 302 340 404 438 376 290 284 298 299 312 338 0 50 100 150 200 250 300 350 400 450 500 550 02 03 04 05 06 07 08 09 10 11 12 13 14 15 $ Billions History Source: History – U.S. Census Bureau; Forecast – Reed Construction Data Forecast Nonresidential Construction Spending
  38. 38. 38 0 10 20 30 40 50 60 70 80 90 100 Hotel/Lodging Office Commercial $ Billions 2006 to 2013 ’14 ’15 Nonresidential Construction Spending Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
  39. 39. 39 0 10 20 30 40 50 60 70 80 90 100 110 Manufacturing Healthcare Education $ Billions 2006 to 2013 ’14 ’15 Nonresidential Construction Spending Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
  40. 40. 40 Heavy engineering
  41. 41. 41 Reed Heavy Engineering Starts (3-Mo MA YoY) -40 -30 -20 -10 0 10 20 30 40 50 60 3-Month Moving Average, Year-over-Year % Change Source: Reed Construction Data Shaded area represents recession
  42. 42. 42 171 171 169 185 208 248 272 274 265 251 272 263 276 300 0 50 100 150 200 250 300 350 400 02 03 04 05 06 07 08 09 10 11 12 13 14 15 $ Billions History Source: History – U.S. Census Bureau; Forecast – Reed Construction Data Forecast Heavy Engineering Construction Spending
  43. 43. 43 0 10 20 30 40 50 60 70 80 90 100 110 120 Transportation Communication Power $ Billions 2006 to 2013 ’14 ’15 Heavy Engineering Construction Spending Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
  44. 44. 44 0 10 20 30 40 50 60 70 80 90 100 Highway Water and Sewer Conservation $ Billions 2006 to 2013 ’14 ’15 Heavy Engineering Construction Spending Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
  45. 45. 45 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 Contact
  46. 46. 46 Contact Information and Links Bernard 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/ Contact

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