Transcript 2013 Market Forecast

Leadership & Strategy
2013 Market Forecast
1st Quarter Update
Kiley Advisors LLC
ASHRAE Meeting
April 17, 2013
Leadership & Strategy
Looking Back
2012 Market Begins to Transform
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Employment Growth (119,000)
Net Positive Absorption
McGraw Hill Contracts $3.7B - $3.9B
Surge Felt by All Parties
Leadership & Strategy
Looking Back
CBRE
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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
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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
Leadership & Strategy
Looking Back
• Home Sales
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Up 16.1% in 2012
• Auto Sales – 325,000 units
• Commercial Real Estate “White Hot”
Leadership & Strategy
Looking Ahead
International Picture
• Positive Growth – All Regions
Leadership & Strategy
A Deeper Look
International Picture
• China 8.6%; India 6.5%
• Western Europe, Greece and Spain
• Mongolia, Macau and Libya – The Stars
Leadership & Strategy
Looking Ahead
National Picture
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Fiscal Cliff Averted
GDP Growth 2 – 2.5%
2M Jobs
7.5% Unemployment
Leadership & Strategy
Looking Ahead
National Picture
• Construction Starts Increasing
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McGraw Hill 6%
FMI 8%
Commercial 5%
• Home Building Returns
Leadership & Strategy
Looking Ahead
Texas and Houston
• Population and Employment Growing
• Shale Boom
• Cost of living remains reasonable
• All markets increasing
Leadership & Strategy
Shale Plays
Source: www.Angus.us
Leadership & Strategy
Shale Gas - The Game Changer for American
Manufacturing
• Reshoring
• 1-3M Jobs (2025-2030)
• Deloitte & Bain Studies
Leadership & Strategy
Trends/Issues
Leadership & Strategy
Trends/Issues
Leadership & Strategy
What Will Drive Construction?
• Job and Population Growth
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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
Leadership & Strategy
What Will Drive Construction?
CBRE
Vacancy
(Total)
Office (Q4)
12.9%
Industrial (Q3)
5.2%
Retail (Q3)
7.8%
Multifamily (Q3)
89.6% occupancy
• EIA Projections
• WTI $88.29 per barrel average
• Henry Hub $3.49 average
Leadership & Strategy
Sector and Segment Highlights
Leadership & Strategy
Residential
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27,500 new single family dwellings
10,000 new multi-family units
Lot supply scarce?
Leadership & Strategy
The Industrial Picture
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10 billion in Houston Area
56 billion from Corpus to Baton Rouge
Significant for our workforce picture
Leadership & Strategy
Public Work - Commercial
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Harris County slightly up due to the new medical examiners building
City of Houston down 23% from a year ago
Port of Houston $200M
Department
Aviation Facilities
Fire Protection Facilities
General Government Facilities
Homeless & Housing Facilities
Library Facilities
Parks and Recreation Facilities
Police Facilities
Public Health Facilities
Amount
$135 M
$14.6 M
$2.8 M
$0
$7.2 M
$20.2 M
$10.5 M
$1.5 M
Solid Waste Management Facilities
$3.6 M
Total
$195.4M
Leadership & Strategy
Institutional
Institution
University of Houston
2013 Construction
$200M (subject to approval)
Lone Star College System
$200M
University of St. Thomas
$0
Houston Community College
$400M bond ($100M in 2013)
Leadership & Strategy
Churches
• $200M market historically
• Archdiocese of Galveston-Houston
• 28M over 10 projects
• Market seems to be flat or slightly down
Leadership & Strategy
Commercial and Light Industrial Segments
Private Work
Leadership & Strategy
Office & Light Industrial Picture
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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
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Quick delivery/value buildings
Accommodating the knowledge worker
Light Industrial picture
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Oil field companies
Port expansion
Vacancies small/rents improving
Leadership & Strategy
The Retail Picture
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Slow steady growth – 5% increase over 2012
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2.27 million square feet in 2013
New retail player
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Aldi (a discount concept)
Sprouts (health food)
Fresh Market (specialty produce market)
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Taking the Rice Epicurean space
Healthcare taking retail space (Texas Children’s, Memorial Hermann,
Kelsey-Seybold)
2014-2015 should be boom years
Leadership & Strategy
Hotels
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Lots of activity that drives hotels
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RevPAR moving in the right direction
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Convention Activity
Oil & Gas
2013 NBA All Star Game
Dynamo Stadium
2011 - $90
2012 - $95
2013 - $100 anticipated
Occupancy will continue to increase
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2011 = 59.8%
2012 – 64%
2013 – 66%
Leadership & Strategy
Healthcare
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Mainly smaller community projects
Memorial Hermann 4 POBS
Bigger work being considered
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MD Anderson/ Methodist/ Memorial Hermann
Perhaps some bio science expansions (new med center CEO)
Concerns:
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St. Luke’s
ACA
Leadership & Strategy
K-12
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(24 districts reporting)
District
Alief
Alvin
Cy-Fair
HISD
Hull-Daisetta
Klein
Pasadena
Sheldon
Splendora
Spring Branch
Total
Budget
$5,000,000
$13,500,000
$87,000,000
$148,000,000
$350,000
$18,000,000
$87,000,000
$15,000,000
$10,500,000
$18,000,000
$402,350,000
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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
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2012 had 28 districts reporting $749M in work
The “caboose” of construction markets
Leadership & Strategy
Industry Issues
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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
Leadership & Strategy
Other Global Issues
Infrastructure - $57 Billion/2020
• Financing
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Infrastructure Banks
Sovereign Wealth
Pension
• Streamlining
• Standardizing
Mega Projects
• 0 in 2008
• 1004 in 2011
• Bonding/Impact on Resources
Leadership & Strategy
Longer Range?
• Perryman Population Projection
• 10.25M by 2040
• Scenario 2040
• 8-12M
Leadership & Strategy
2013 Forecast
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New Contracts Awards
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$4 Billion total expected in 2013
Leadership & Strategy
Sources
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