2013 construction forecast forum
DESCRIPTION
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.TRANSCRIPT
2013 Construction Forecast Forum
April 16, 2013
Greenbuild 2010
Outlook for Construction
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist
Outlook for Commercial Construction
Greenbuild 2010
About Reed Construction Data
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Outlook for Commercial Construction
Greenbuild 2010
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Outlook for Commercial Construction
Greenbuild 2010
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Outlook for Commercial Construction
The Economy
Outlook for Construction
7
Greenbuild 2010
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
Outlook for Construction
8
Risks to the
Economy
Outlook for Construction
9
Greenbuild 2010
The federal debt ceiling
The federal budget (see you in September?)
Europe
European government debt default
The euro
Energy (oil) prices
Outlook for Construction
10
The distribution of
construction spending
has changed over the
past few years
Outlook for Construction
11
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
Outlook for Construction
12
Greenbuild 2010
56% 27%
17%
2005
Residential
Nonresidential Building
Heavy Construction
33%
35%
32%
2012
Residential
Nonresidential Building
Heavy Construction
2005 Total - $1,104 Billion 2012 Total - $855 Billion
Construction Spending Components
Source: U.S. Census Bureau
Outlook for Construction
13
Commercial construction
turned around in 2012
and is expected to
continue to improve
Outlook for Construction
14
Greenbuild 2010
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
Residential Nonresidential Building Heavy Construction
$ Billions
History Forecast
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Construction Spending and
its Components
Outlook for Construction
15
Greenbuild 2010
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
453-Month Moving Average, Year-over-Year % Change
RCD Total Starts (3-Mo MA YoY)
Source: Reed Construction Data
Outlook for Construction
16
Greenbuild 2010
700
750
800
850
900
950
1,000
1,050
1,100
1,150
1,200
1,250
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion $, SAAR
Total Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Outlook for Construction
17
Residential
construction is
recovering, but
from a low level
Outlook for Construction
18
Greenbuild 2010
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
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
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
Source: U.S. Census Bureau
Outlook for Construction
19
Greenbuild 2010
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
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
Outlook for Construction
20
Single-family housing
market is showing
solid recovery
Outlook for Construction
21
Greenbuild 2010
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
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
Thousands of Units, SAAR
Nation’s long-run (trend) need for
the next decade
High Estimate
(1.45 million starts per year)
Nation’s long-run (trend) need for
the next decade
Low Estimate
(1.15 million starts per year)
Single-Family Housing Starts
Source: U.S. Census Bureau
Outlook for Construction
22
Greenbuild 2010
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
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)
Source: U.S. Census Bureau
Outlook for Construction
23
The falling
homeownership
rate is a two
edged sword
Outlook for Construction
24
Greenbuild 2010
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
Homeownership Rate Percent
Lowest rate:
Q4 1985
63.6%
Peak rate:
Q2 2004
69.4%
65.3%
Source: U.S. Census Bureau
Outlook for Construction
25
Greenbuild 2010
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
Rentership Rate Percent
Highest rate:
Q4 1985
36.4%
Lowest rate:
Q2 2004
30.6%
34.7%
Source: U.S. Census Bureau
Outlook for Construction
26
Greenbuild 2010
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
Rental Vacancy Rate (SA) Percent
Peak rate:
Q3 2009
10.9%
8.8%
Source: U.S. Census Bureau
Outlook for Construction
27
The multifamily
construction market
continues to grow
Outlook for Construction
28
Greenbuild 2010
0
50
100
150
200
250
300
350
400
450
500
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
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
Source: U.S. Census Bureau
Outlook for Construction
29
Greenbuild 2010
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
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
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
Source: U.S. Census -Bureau
Outlook for Construction
30
Greenbuild 2010
0
50
100
150
200
250
300
350
400
450
500
00 01 02 03 04 05 06 07 08 09 10 11 12 13
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)
Source: U.S. Census Bureau
Outlook for Construction
31
Residential
construction
spending
Outlook for Construction
32
Greenbuild 2010
0
100
200
300
400
500
600
700
800
02 03 04 05 06 07 08 09 10 11 12 13 14
Improvements Single-family Multifamily
$ Billions
Residential Spending Components
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
History Forecast
Outlook for Construction
33
Greenbuild 2010
-60
-50
-40
-30
-20
-10
0
10
20
30
40
503-Month Moving Average, Year-over-Year % Change
RCD Residential Starts (3-Mo MA YoY)
Source: Reed Construction Data
Outlook for Construction
34
Greenbuild 2010
100
150
200
250
300
350
400
450
500
550
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Billion $, SAAR
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Construction Spending:
New Residential Construction
Outlook for Construction
35
Greenbuild 2010
0
50
100
150
200
250
300
350
400
450
Single-Family Multifamily Improvements
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions
Residential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Outlook for Construction
36
Nonresidential building
construction has
struggled lately, but is
expected to perform
better in the second half
of this year and in 2014
Outlook for Construction
37
Greenbuild 2010
-40
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
303-Month Moving Average, Year-over-Year % Change
RCD Nonresidential Starts (3-Mo MA YoY)
Source: Reed Construction Data
Outlook for Construction
38
Greenbuild 2010
200
225
250
275
300
325
350
375
400
425
450
475
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion $, SAAR
Construction Spending:
Nonresidential Construction
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
Outlook for Construction
39
Greenbuild 2010
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
Hotel/Lodging Office Commerical
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions
Outlook for Construction
40
Greenbuild 2010
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
110
Religious Healthcare Education
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions
Outlook for Construction
41
Greenbuild 2010
Nonresidential Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
Public safety Amusement and recreation Manufacturing
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions
Outlook for Construction
42
Heavy engineering
(non-building)
construction held
up best over the
last few years
Outlook for Construction
43
Despite considerable
challenges, the outlook
for heavy engineering
construction is fairly
positive
Outlook for Construction
44
Greenbuild 2010
RCD Heavy Engineering Starts (3-Mo MA YoY)
Source: Reed Construction Data
-40
-30
-20
-10
0
10
20
30
40
50
60
70
803-Month Moving Average, Year-over-Year % Change
Outlook for Construction
45
Greenbuild 2010
Construction Spending:
Heavy Engineering
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
150
175
200
225
250
275
300
325
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Billion $, SAAR
Outlook for Construction
46
Greenbuild 2010
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
110
120
130
Transportation Communication Power
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions
Outlook for Construction
47
Greenbuild 2010
Heavy Engineering Construction Spending
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
110
Highway Water and Sewer Conservation
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
2012 2013 2014
$ Billions
Outlook for Construction
48
A look at the
region’s
performance
Outlook for Construction
49
Greenbuild 2010
Pennsylvania Construction Starts
Source: Reed Construction Data
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Nonresidential Building Heavy Engineering Residential
2003 2004 2005 2006
2007 2008 2009 2010
2011 2012
-23%
24%
8%
$ Millions
Outlook for Construction
50
Greenbuild 2010
Ohio Construction Starts
Source: Reed Construction Data
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Nonresidential Building Heavy Engineering Residential
2003 2004 2005 2006
2007 2008 2009 2010
2011 2012
-10%
24%
-3%
$ Millions
Outlook for Construction
51
Greenbuild 2010
Pennsylvania Construction Starts February Year-to-Date
*January only
Source: Reed Construction Data
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Nonresidential Building Heavy Engineering Residential*
2012 2013
86%
117%
-18%
$ Millions
Outlook for Construction
52
Greenbuild 2010
Ohio Construction Starts February Year-to-Date
*January only
Source: Reed Construction Data
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
Nonresidential Building Heavy Engineering Residential*
2012 2013
157%
72%
-14%
$ Millions
Outlook for Construction
53
Greenbuild 2010
Nonresidential Building Construction Starts
Source: Reed Construction Data
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Pittsburgh Philadelphia Harrisburg Cleveland
2003 2004 2005 2006
2007 2008 2009 2010
2011 2012
-24%
$ Millions
-13%
-26%
-21%
Outlook for Construction
54
Greenbuild 2010
Nonresidential Building Construction Starts February Year-to-Date
Source: Reed Construction Data
0
100
200
300
400
500
600
700
800
900
Pittsburgh Philadelphia Harrisburg Cleveland
2012 2013273%
459% 8%
$ Millions
24%
Outlook for Construction
55
Greenbuild 2010
Heavy Engineering Construction Starts
Source: Reed Construction Data
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
Pittsburgh Philadelphia Harrisburg Cleveland
2003 2004 2005 2006
2007 2008 2009 2010
2011 2012
49%
$ Millions
5% -23%
68%
Outlook for Construction
56
Greenbuild 2010
Heavy Engineering Construction Starts February Year-to-Date
Source: Reed Construction Data
0
50
100
150
200
250
300
350
400
450
500
550
Pittsburgh Philadelphia Harrisburg Cleveland
2012 2013
150%
33% 28%
$ Millions
83%
Outlook for Construction
57
Greenbuild 2010
Residential Construction Starts
Source: Reed Construction Data
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
Pittsburgh Philadelphia Harrisburg Cleveland
2003 2004 2005 2006
2007 2008 2009 2010
2011 2012
34%
$ Millions
31%
26%
25%
Outlook for Construction
58
Greenbuild 2010
Residential Construction Starts January 2012 and January 2013
Source: Reed Construction Data
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
Pittsburgh Philadelphia Harrisburg Cleveland
2012 2013
-39%
-24%
-20%
$ Millions
5%
Outlook for Construction
59
Greenbuild 2010
Connect with Reed Construction Data
Twitter twitter.com/BMarkstein
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LinkedIn www.linkedin.com/company/reed-construction-data
web www.reedconstructiondata.com
Outlook for Construction
60
Greenbuild 2010
Contact Information and Links
Bernard M. Markstein
Office: 301-588-5190
Mobile: 404-952-3381
U.S. Forecast and Commentary: http://www.reedconstructiondata.com/market-
intelligence/articles/
Blog: http://www.reedconstructiondata.com/market-
intelligence/bernie-markstein/