leadership & strategy 2013 market forecast 1 st quarter update kiley advisors llc ashrae meeting...
TRANSCRIPT
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Leadership & Strategy
2013 Market Forecast1st Quarter UpdateKiley Advisors LLCASHRAE Meeting
April 17, 2013
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Leadership & Strategy
2012 Market Begins to Transform• Employment Growth (119,000)• Net Positive Absorption• McGraw Hill Contracts $3.7B -
$3.9B• Surge Felt by All Parties
Looking Back
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Leadership & Strategy
Looking Back
CBRE Q4 SF Under Construction
Net Absorption (YOY)
Office (Q4) 8.5 msf 4.3 msf
Industrial (Q3) 3.8 msf 1.5 msf
Retail (Q3) 1.4 msf 225k sf
Multifamily (Q3) 12,000 3,195 units
• Office• Houston recovered all square footage lost during
recession by the end of 2011, so 4.3 msf is true growth• Houston had the most absorption in a single year since
2006.• Overall rates have increased by almost $1 and Class A
rates have risen $2.25 over the year
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Leadership & Strategy
• Home Sales• Up 16.1% in 2012
• Auto Sales – 325,000 units• Commercial Real Estate “White Hot”
Looking Back
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Leadership & Strategy
International Picture•Positive Growth – All Regions
Looking Ahead
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Leadership & Strategy
International Picture•China 8.6%; India 6.5%•Western Europe, Greece and Spain •Mongolia, Macau and Libya – The Stars
A Deeper Look
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Leadership & Strategy
National Picture
•Fiscal Cliff Averted•GDP Growth 2 – 2.5%•2M Jobs•7.5% Unemployment
Looking Ahead
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Leadership & Strategy
National Picture
•Construction Starts Increasing• McGraw Hill 6%• FMI 8%• Commercial 5%
•Home Building Returns
Looking Ahead
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Leadership & Strategy
Texas and Houston•Population and Employment Growing•Shale Boom•Cost of living remains reasonable•All markets increasing
Looking Ahead
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Leadership & Strategy
Shale Plays
Source: www.Angus.us
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Leadership & Strategy
Shale Gas - The Game Changer for American Manufacturing
•Reshoring•1-3M Jobs (2025-2030)
• Deloitte & Bain Studies
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Leadership & Strategy
Trends/Issues
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Leadership & Strategy
Trends/Issues
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Leadership & Strategy
• Job and Population Growth • 85,000 jobs; 115,000 people• Construction adding 16,200
• Oil and Gas Prices remain favorable• Vacancy levels low• Quick delivery/value building Tenant
Financed/HR Driven• Financing available but tight parameters• Panama Canal Expansion
What Will Drive Construction?
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Leadership & Strategy
•EIA Projections• WTI $88.29 per barrel average• Henry Hub $3.49 average
What Will Drive Construction?
CBRE Vacancy (Total)
Office (Q4) 12.9%
Industrial (Q3) 5.2%
Retail (Q3) 7.8%
Multifamily (Q3) 89.6% occupancy
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Leadership & Strategy
Sector and Segment Highlights
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Leadership & Strategy
• 27,500 new single family dwellings• 10,000 new multi-family units• Lot supply scarce?
Residential
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Leadership & Strategy
• 10 billion in Houston Area• 56 billion from Corpus to Baton Rouge• Significant for our workforce picture
The Industrial Picture
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Leadership & Strategy
• Harris County slightly up due to the new medical examiners building • City of Houston down 23% from a year ago• Port of Houston $200M
Public Work - Commercial
Department Amount Aviation Facilities $135 MFire Protection Facilities $14.6 MGeneral Government Facilities $2.8 MHomeless & Housing Facilities $0 Library Facilities $7.2 MParks and Recreation Facilities $20.2 MPolice Facilities $10.5 MPublic Health Facilities $1.5 M
Solid Waste Management Facilities $3.6 M
Total $195.4M
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Leadership & Strategy
Institutional
Institution 2013 Construction
University of Houston $200M (subject to approval)
Lone Star College System $200M
University of St. Thomas $0
Houston Community College $400M bond ($100M in 2013)
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Leadership & Strategy
Churches
• $200M market historically• Archdiocese of Galveston-Houston
• 28M over 10 projects
• Market seems to be flat or slightly down
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Leadership & Strategy
Commercial and Light Industrial SegmentsPrivate Work
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Leadership & Strategy
• More alive than any time in the past 30 years• “Children of Exxon” – 40+ projects; 15 million square feet• Employment growth plus changing requirements driving
• Quick delivery/value buildings• Accommodating the knowledge worker
• Light Industrial picture• Oil field companies• Port expansion• Vacancies small/rents improving
Office & Light Industrial Picture
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Leadership & Strategy
• Slow steady growth – 5% increase over 2012• 2.27 million square feet in 2013
• New retail player• Aldi (a discount concept)• Sprouts (health food)• Fresh Market (specialty produce market)
• Taking the Rice Epicurean space• Healthcare taking retail space (Texas Children’s, Memorial Hermann,
Kelsey-Seybold)• 2014-2015 should be boom years
The Retail Picture
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Leadership & Strategy
• Lots of activity that drives hotels• Convention Activity• Oil & Gas• 2013 NBA All Star Game• Dynamo Stadium
• RevPAR moving in the right direction• 2011 - $90• 2012 - $95• 2013 - $100 anticipated
• Occupancy will continue to increase• 2011 = 59.8%• 2012 – 64%• 2013 – 66%
Hotels
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Leadership & Strategy
• Mainly smaller community projects• Memorial Hermann 4 POBS• Bigger work being considered
• MD Anderson/ Methodist/ Memorial Hermann• Perhaps some bio science expansions (new med center CEO)• Concerns:
• St. Luke’s• ACA
Healthcare
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Leadership & Strategy
• (24 districts reporting)
• Anahuac, Channelview, Clear Creek*, Cleveland, Conroe, Damon, Danbury, Dayton, Deer Park, Dickinson, Katy, La Porte, Santa Fe and Texas City all reported no construction in 2013
• 2012 had 28 districts reporting $749M in work• The “caboose” of construction markets
K-12
District BudgetAlief $5,000,000Alvin $13,500,000 Cy-Fair $87,000,000 HISD $148,000,000Hull-Daisetta $350,000 Klein $18,000,000 Pasadena $87,000,000 Sheldon $15,000,000 Splendora $10,500,000 Spring Branch $18,000,000 Total $402,350,000
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Leadership & Strategy
• Immigration Reform• Margins and Fees remain low• Bonding lines being cut/capped• Concerns of Failures Still Exist- Overall Bonding
Environment Easing, However.. Texas Lures• Skilled craft worker shortage• Talent management remains critical
Industry Issues
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Leadership & Strategy
Infrastructure - $57 Billion/2020•Financing
• Infrastructure Banks• Sovereign Wealth• Pension
•Streamlining•StandardizingMega Projects•0 in 2008•1004 in 2011•Bonding/Impact on Resources
Other Global Issues
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Leadership & Strategy
Longer Range?
• Perryman Population Projection• 10.25M by 2040
• Scenario 2040 • 8-12M
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Leadership & Strategy
• New Contracts Awards• $4 Billion total expected in 2013
2013 Forecast
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Leadership & Strategy
The information contained in this report was obtained from various publications and sources. Special thanks to CB Richard Ellis, American
Metro Studies, O’Connor & Associates, Accenture, ENR Magazine, Grubb & Ellis, Greater Houston Partnership, Ken Simonson - National AGC
economist, Industrial Info Resources, University of Houston Institute for Regional Forecasting, Reed Construction Data, McGraw-Hill, PKF
Consulting, the Houston Chronicle, and other sources mentioned who supplied information and assistance for this forecast.
© Kiley Advisors, LLC
Sources