2023 Economic Forecast.pptx
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The document provides an economic forecast for the 2023 construction industry. It includes national construction spending forecasts showing increases in both public and private construction from 2021-2022. California construction employment has recovered past pandemic losses. The housing market outlook forecasts a decline in home sales and prices in California in 2023. Local construction starts in the San Jose area are forecast to remain steady in 2023 after increases in 2021-2022. Office and retail vacancy rates in Santa Clara County have declined slightly in 2022.
2023 Economic Forecast.pptx
- 1. Presented to the Construction Community January 2023 2023 Economic Forecast
- 2. 2 1. Nationwide 3. Local 2. California Table of Contents
- 3. Annual Rate of Construction Spending US (Billions)1 Public ($) Private ($) Total ($) 2011 286.6 529.7 816.4 2012 270.1 614.9 885.0 2013 266.5 663.9 908.4 2014 283.5 698.6 982.1 2015 294.3 828.2 1122.5 2016 284.5 897.0 1181.5 2017 294.8 967.9 1262.7 2018 301.5 991.2 1292.7 2019 338.6 991.2 1327.7 2020 361.2 1107.9 1469.2 2021 347.0 1292.9 1589.0 2022 381.1 1426.4 1807.5 3 1Numbers come from December Annual Construction Report for the US Census Bureau, except for 2022 numbers which came from the November Report. Dollars are counted valued as construction put in place.
- 4. United States Construction Starts ($ Billions) (Dodge) In billons 2021 Actual 2022 Estimate 2023 Forecast % change 21-22 % change 22-23 Total Construction 928.2 1,085.9 1083.4 +17% -0.2% Residential 425.3 425 426.9 -0.1% +0.4% Single Family 306.1 273.7 273.5 -10.6% 0.1% Multifamily 119.2 151.3 153.4 +26.9% +1.4% Nonresidential 298.0 417.8 375.7 +40.2% -10.1% Nonbuildings 204.8 243.1 281.1 +18.7% +15.6% 4 ENR Magazine, November 28/December 5 , p 49
- 5. FMI Construction Put In Place Forecast 2023 ($ Billions) In billons 2021 Actual 2022 Estimate 2023 Forecast % change 21-22 % change 22-23 Total Construction 1,626,44 1,752,800 1,729,477 +7.8% -1.3% Total Residential 802,933 908,866 848,048 +13.2% -6.7% Total Nonresidential 546,925 565,802 590,663 +3.5% +4.4% Non-buildings 276,588 278,132 290,776 +0.6% +4.5% 5 ENR Magazine, November 28/December 5 , p 49
- 6. Construct Connect Construction Put In Place Forecast 2023($ Billions) In billons 2020 Actual 2021 Actuals 2022 Forecast 2023 Forecast 2024 Forecast Total Construction 1499.6 1626.5 1779.9 1820.5 1927.0 Total Residential 644.3 802.9 933.1 903.0 960.4 Total Nonresidential 855.3 823.5 866.8 917.5 966.5 Total Comm. (For Lease) 211.0 199.4 214.2 218.6 229.6 Total Institutional 208.7 187.2 188.6 189.2 197.1 Total Eng/Civil 360.2 358.0 360.2 382.5 411.8 Total Ind/Manuf. 75.4 78.9 103.8 127.1 127.9 6 Alex Carrick, Winter 2022-2023 Forecasts, p. 2 (Non Residential=Commercial +Institutional+Eng/Civil+Industrial)
- 7. Dodge Construction National Growth Forecast 7 Annual % Change for $Volume of Construction Starts 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 +12.0 +10.0 +6.0 +5.0 +2.0 +5.0 +12.0 +13.0 +3.0 -7.0 -13.0 -24.0 +2 2011 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 +1.0 +1.0 +12.0 +11.0 +11.0 +14.0 +7.0 +7.0 +3.0 +5.0 -7.0 +12 +17 0 ENR Magazine, November 28/December 5, 2022, p 52
- 8. Annual Value of Construction Put in Place (in $millions) 8 2019 2020 2021 2022 Total Private 956,272 1,093,730 1,244,971 1,420,380 Residential 508,198 637,138 783,851 887,224 Nonresidential 448,073 456,592 814,169 533,156 Total Public 334,797 344,785 353,049 374,569 Residential 6,341 8,971 9,163 9,281 Non Residential 328,456 335,814 343,886 365,289 TOTAL Construction 1,291,069 1,438,515 1,598,020 1,794,949 1 Construction Business Owner, Jan.2023 , p.48 US Census Bureau Numbers as of October 2022.
- 9. National Development Profile West Midwest Northeast South Nat. Average 49.6 50.8 50.3 50.6 47.7 9 The further the index is from 50, the larger the number of firms reporting the change Index <50- Architectural Firms are reporting decrease in billings Index=50 –Architectural Firms are reporting no change in billings Index>50- Firms are reporting an increase in billings Construction Business Owner, January 2023 p. 48 West Mid States Northeast South Dec. 2022 7.2 8.1 8.9 11.5 Dec .2021 8.4 8.2 7.5 9.0 Construction Backlog Indicator (in months) ABC Press Release, P. 2, 1/10/2023
- 10. Turner Building Cost Index 10 Turner Building Cost Index, 2022 Q3 1967 base year at 100 Year Ave. Index % Change Y to Y 2021 1199 1.9 2020 1177 1.8 2019 1156 5.5 2018 1096 5.6 2017 1038 5.0 2016 989 4.8 2015 943 4.5 2014 902 4.4 2013 864 4.1 2012 830 2.1 Quarter Index % Change Q3 2022 1311 2.18 Q2 2022 1283 2.23 Q1 2022 1255 2.03 Q4 2021 1230 1.91
- 11. US National Construction Optimism Quotient 103.0109.0 102.0 86.0 80.0 42.0 66.0 96.0 114.0 103.0 124.0 130.0 108.0 123.0 133.0 122.0 99.0 78.0 112.0 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 11 Wells Fargo 2022 Construction Industry Forecast, p. 11
- 12. Housing Production in CA 2006-2022 164280 113034 64962 36421 44762 47343 59225 8547285844 98233 100961 115670 117892 110218 105339 110913 106418 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 New Housing Units 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 12 Information from US Fred Database 2022data is through November 2022
- 13. Last Word on 2023 Economy “If the economy shrinks next year, no one should be surprised. We’re facing the most widely forecast recession in history.” Wall Street Journal, Dec 4, 2022 Of course, it is possible the nation could see a recession this year as there are there are unknowns. If the Fed continues to push interest rates up in a largely futile largely futile effort to constrain inflation, they may eventually create enough pain to create enough pain to cause a recession. This remains the biggest short-run risk—albeit a short-run risk—albeit a low one given the excessive focus on labor markets. As for longer markets. As for longer term, there could be new imbalances forming within the economy within the economy right now. For example, the U.S. consumer might start picking up start picking up new debt to maintain spending at an excessively high level (note that level (note that there has been a decline in the U.S. savings rate). But these types of But these types of trends would have a relatively long runway before they become toxic they become toxic to the current expansion. So… all in all, in the year ahead, expect to be surprised largely by the lack of surprises. the lack of surprises. • Christopher Thornberg, PhD, Founding Partner at Beacon Economics, Blog Entry Entry 1/13/2023 13
- 14. 14 CAR 2023 Housing Market Forecast • Existing Single Family home sales are forecast to total 333,450 units in 2023, a decline of 7.2% from 2022 projected pace of 359,220 • California’s median home price is forecast to decline 8.8% to $758,000 in 2023 following a projected 5.7% increase to $831,460 in 2022. • Housing affordability is expected to drop to 18% in 2023 from a projected 19% in 2021. 1 California Association of Realtors 2023 Housing Market Forecast Press Release
- 15. 15 CAR 2023 Housing Market Forecast 1 California Association of Realtors 2023 Housing Market Forecast Press Release, Oct 2022 2019 2020 2021 2022 (p) 2023 (f) Sing.Fam Home Resale (000s) 398.0 411.9 444.5 359.2 333.4 Med Price (000’s) $592.4 $659.4 $786.7 $786.7 $758.6 Hous.Afford. Index 31% 32% 26% 19% 18% 30 yr. Fixed Rate Mortg. 3.9% 3.1% 3.0% 5.2% 6.6%
- 16. 16 More California Notes • CA finally recovered all the jobs that were lost during the pandemic in 10/22 • Since the outbreak of the pandemic there are more job openings than unemployed.1 • The # of homes sold in California in 2022 is around half the level of 2021 • CA Inland communities have added jobs at three times the rate of Coastal Communities. Since 2000, the # of housing units in Inland CA has grown at 3 times the rate of Coastal Communities 1 Beacon Outlook-California, Winter 2023 Taner Osman,
- 17. California Construction Employment (In Thousands) 569.2 609.1 653.2 689.2 757.9 784.7 831.5 871.9 901.3 867.0 890.2 919.2 0.0 200.0 400.0 600.0 800.0 1000.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 17 BLS.Gov., State and Area Employment, Construction Employment based on November Data since 2010
- 18. San Jose, Sunnyvale, Santa Clara Construction Starts ($ millions) In millions ($) 2019 Actual 2020 Actual 2021 Actual 2022 Forecast 2023 Forecast Total Construction 5,236 3,887 5,236 5,764 5,817 Residential 1,646 1,363 1,498 1,789 1,993 Non Residential 3,164 1,983 2,832 3,334 2,878 -Comm/Manuf 2,515 1,227 1,804 2,528 1,791 Office/Bank 1,704 731 1,150 1,770 1,195 Institutional 649 756 1,028 816 1,086 Nonbuildings 426 542 907 630 946 18 ENR Magazine, December 12/19, p CANW12
- 19. San Jose, Santa Clara, Sunnyvale Construction Starts 2011-2023 4153 4213 6127 3718 4985 6713 3830 5236 3887 6285 5764 5817 0 1000 2000 3000 4000 5000 6000 7000 8000 Total Construction Total Construction, in Millions 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (a) 2022 (f) 2023 (f) 19 Engineering News Record San Jose Reports-2011-2022 (2019 and 2020 are forecasted numbers) ENR Magazine, , p CANW4
- 20. Private Housing Units Authorized by Building Permits San Jose/Sunnyvale/Santa Clara MSA 20 1Census Bureau Statistics, through November 2022 995 4116 2645 5665 7628 9599 7262 6344 7193 8955 7118 5925 5049 5702 0 2000 4000 6000 8000 10000 12000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 # of Units # of Units
- 21. Santa Clara County Retail Market Breakdown (SF) 21 Kidder Mathews, 2022 3Q Market Breakdown 3Q2022 2Q2022 3Q2021 New Construction 0 13,394 5,399 Under Construction 204,122 195,312 145,034 Vacancy Rate 4.3% 4.5% 4.2% Net Absorption 107,193 -35,609 96,180
- 22. Santa Clara County Office Market Breakdown (SF) 22 Kidder Mathews, 2022 3Q Market Breakdown 3Q2022 2Q2022 3Q2021 Vacancy Rate 12.38% 12.70% 13..50% Availability Rate 18.41% 16.8% 16.2% Sale Transactions 308,991 812,970 2,423,403 Net Absorption 461,430 1,388,322 472,616 Total Inventory 2020 (SF) 121,709,076 Under Construction 2020 (SF) 9,451,115 Total Inventory 2021 (SF) 124,807,669 Under Construction 2021 (SF) 6,700,000 Total Inventory 2022 (SF) 128,906,198 Under Construction 2022 (SF)7,417,945
- 23. Santa Clara County RD Market Breakdown (SF) 23 Kidder Mathews, 2022 3Q Market Breakdown 3Q2021 2Q2022 3Q2022 Vacancy Rate 10.6% 9.7% 8.13% Availability Rate 12.8% 9.7% 10.26% Sale Transactions 2,648,398 999,691 674,583 Net Absorption 11,396 819,269 1,020,379 Total Inventory(SF) 118,649,471 Under Construction (SF) 2,544,995
- 24. Santa Clara County Industrial Market Breakdown (SF) 24 Kidder Mathews, 2022 3Q Market Breakdown 3Q2022 2Q2022 3Q2021 Vacancy Rate 1.8% 2.1% 2.3% Availability Rate 3.2% 2.5% 3.3% Sale Transactions 95,329 346,267 219,777 Net Absorption 144,255 151,114 427,203 Total Inventory(SF) 49,864,206 Under Construction (SF) 309,777
- 25. Santa Clara County Warehouse Market Breakdown (SF) 25 Kidder Mathews, 2022 3Q Market Breakdown 3Q2022 2Q2022 3Q2021 Vacancy Rate 2.85% 3.1% 4.9% Availability Rate 3.36% 3.8% 4.2% Sale Transactions 215.491 372,795 637,266 Net Absorption 145,947 (278,423) 710,661 Total Inventory(SF) 65,963,830 Under Construction (SF) 260,643
- 26. More Real Estate News • 63% of the total transactions sq. ft. in 4Q22 was under 10,000 sq.ft. in Silicon Valley • No deals were signed in 4Q22 over 100,000 sq.ft in SV • City of Santa Clara vacancy rate 26.2% • Downtown San Jose vacancy rate 17.4% • There are 200 Million Sq. Ft of Office Leases set to expire across the US in 2023.2 26 1 ”CBRE Silicon Valley Commercial Real Estate Report, 4Q 2022 2 ”Future of the Office” Silicon Valley Business Journal, Jan. 6, p 14
- 27. Santa Clara County Construction Employment-Annual Average In Thousands 2007-2022 47.5 44.5 34.6 32.431.8 34.8 37.5 39.7 43.9 48.349.349.9 53.0 50.1 51.7 54.9 0.0 10.0 20.0 30.0 40.0 50.0 60.0 2007200820092010201120122013201420152016201720182019202020212022 27 Bureau of Labor Statistics-San Jose, Santa Clara, Sunnyvale Statistical Area November 2022 is 57,400
- 28. Santa Clara County Construction Employment-By Month 2022 (in thousands) 51.0 52.7 53.2 54.0 54.3 55.0 55.5 55.9 57.1 57.9 57.4 48.0 49.0 50.0 51.0 52.0 53.0 54.0 55.0 56.0 57.0 58.0 59.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 28 Bureau of Labor Statistics-San Jose, Santa Clara, Sunnyvale Statistical Area
- 29. 29 Santa Clara County Data • Largest GDP Growth in country from 2019-2021 $307 billion to $382 billion 1 • Grew 13.3% in 2021 • The county's growth over that total period left it with the third largest county economy in the nation, trailing only Los Angeles and New York, which includes just Manhattan. 2 1 Gabriel Greschler, “Silicon Valley Economy during COVID’s first 2 Years,” Dec. 16, 2022 Mercury News 2 Olivia Peterkin, “Santa Clara County GDP Growth-3rd Highest in the US” Dec. 12, 2022 Business Journal