Market Facts from the 2012 AEC Market Guide to California

The Market Outlook Section of The Expanded & Revised 2012 AEC Market Guide to California begins on page 81 and ends on page 279 — nearly 200 pages of data, analysis and even opinion about the many markets served by AEC firms in California. (And, for the record, these are actual full-sized pages…on the order of 500 words per page, not 50 words with some creative formatting.)  

Here are just a few of the facts you can find in this section, including data from the Residential, Commercial, Manufacturing, Water/Wastewater and Transportation markets and subsectors. (Please Note: We updated the original blog post, adding the latter two markets. The final piece, with excerpts from the Institutional, Power and Environmental markets will follow.) 

Single-Family Residential. The state’s median home price of $244,000 in November 2011 reflected a small increase over October, the first improvement since June. The November median marked the 14th straight monthly year-over-year decline in median home price, and was almost half the high watermark of $484,000 recorded in early 2007. Meanwhile, distressed sales (comprised of foreclosures and short sales) accounted for more than half of the homes sold in California through November.

Multifamily For Rent. The apartment market in San Diego reported a gain of nearly 140% in multifamily permits of five or more units through September 2011 (compared with the same period in 2010), suggesting a resurgence in construction. Real estate professionals say apartment supply is “thin” and unlikely to keep up with projected demand. San Diego was hardly alone among major metros in promising multifamily-for-rent results.

Senior Housing. A source at the National Investment Center for the Seniors Housing & Care Industry (NIC) said that 3rd quarter results “showed us that there were very high levels of absorption…some of the highest that we’ve seen over the past few years.” This bodes well for front-end AEC services in senior housing following a difficult period for the market.

Office. Real estate advisory firm Grubb & Ellis says Orange County office tenants are taking advantage of the current commercial market, “relocating within the market, not only to save money by capturing lower rates, but also to take advantage of the opportunity to create a new environment for their firms by designing efficient floor plan configurations and securing space in areas that have desirable amenities.” With this factor in place, Orange County’s market for new office construction is trailing some other major California metros in its recovery, but may hold a better forecast for renovations and expansions in 2012.

Hospitality. For the week of November 6-12, 2011, San Francisco was the nation’s only metro with a hotel occupancy rate above 90%. Its rate was 91.9%. Industry data places San Francisco miles ahead of other U.S. cities in the health of the hotel market, but this may not necessarily translate into construction activity.

Industrial. The Inland Empire is “a burgeoning powerhouse of distribution activity” that soaked up 7.5 million sq. ft. of industrial space in the 2nd quarter, accounting for a full 25% of absorption nationally, according to Grubb & Ellis. Opinions about the IE’s industrial market outlook remain mixed, however.

Manufacturing. The report, “Manufacturing: Still a Force in Southern California,” notes that the five-county Los Angeles metropolitan area employs more people in manufacturing than the traditionally industrial states of Ohio, Illinois and Pennsylvania. Despite these falling employment numbers, the manufacturing sector in some California metros is expected to show surprising strength in 2012.

General Transportation. According to the California Transportation Commission’s “2011 Statewide Transportation System Needs Assessment” report, delivered to the state legislature in October 2011, the total need for all system preservation, system management, and system expansion projects for the 2011 to 2020 period would cost nearly $536.2 billion. Total estimated revenue from all sources during the 10-year study period is $242.4 billion. This represents a shortfall of $293.8 billion.

Continued transportation infrastructure investment from the state is only part of the solution says the CTC. In its report, the group identifies a vibrant federal surface transportation program as the key to bridging the state funding gap, and makes explicit recommendations on how to carry this out. 

Multimodal Transportation. Though the recent trend in urban planning has been to ensure multimodal equity among motorists, pedestrians, bicyclists and mass transit, the federal government  may be taking a step backward in this regard. Congressional leaders who authored the conference report that eventually became the 2012 transportation appropriations bill, made it clear where they want TIGER grant money to go: “The conferees direct the Secretary to focus on road, transit, rail and port projects.”

The thinly veiled implication is that too much focus has been placed on “non-traditional” forms of transportation such as bikeways and pedestrian trails, as well as high-speed rail.

Aviation. In September 2011, the state released its biennial airport capital improvement plan (CIP), “California Aviation System Plan 2012-2021.” It includes “2,057 airport development and Airport Land Use Compatibility Plan (ALUCP) projects desired by airport sponsors with a fiscally unconstrained cost estimate of $3.62 billion.” Of this, 88% ($3.13 billion) would be funded by the Federal Aviation Authority (FAA), 12% ($431 million) would come from local funds, and only 2% ($64 million) would come from the state.

With the federal aviation bill that expired in 2007 nearing the end of its 22nd extension (January 31, 2012), the big question is whether Congress will finally pass new legislation reauthorizing the FAA and ensuring the needed federal funds. Even if a new FAA law is enacted, the actual project work at state airports is likely to be considerably less than the CIP estimate.

Transit and Rail. Congress stripped all federal funding for high-speed rail from the FY2012 funding bill, but the backlash against HSR may ultimately benefit light rail and bus lines. The Fiscal 2012 Transportation, Housing and Urban Development and Related Agencies (THUD) Appropriations Bill, signed into law in November, was full of budget cuts, large and small. But it treated transit and bus programs well, providing a total of $10.6 billion in FY 2012 funding for the Federal Transit Administration (FTA), a 3% increase over FY 2011 levels, according to APTA. The Formula and Bus Grant programs received $8.3 billion, an $18 million increase, and the New Starts Capital Investment Grant Program is funded at $1.9 billion, a $358 million increase.

Bus rapid transit projects in Fresno, Oakland and San Francisco will receive a total of $72.8 million in earmarked funds under the Bus and Bus Facilities program.

Ports and Shipping. The ports and shipping sector is a dynamic market heading into 2012, with strong import-export activity and continued public and private investment in port facility improvements balancing against several major issues and threats. Activity could increase even more if legislation passes that would direct Congress to release $5.6 billion from the Harbor Maintenance Trust Fund. Threats to the market include the impending opening of the Panama Canal Expansion, which could draw as much as 25% of inbound traffic away from California’s ports, according to one estimate, as well as burdensome and inconsistent state regulations that impede California’s ability to compete in a global market.

Port facility owners and advocates say that competing ports, both domestically and internationally, are looking to take market share away from California’s major ports. Thus, they say, needed investments in port facilities must continue if the state’s ports are to maintain their leadership position.

Water/Wastewater. The big water-related political topic of 2012 is likely to be “will they-won’t they” with respect to the $11.14 billion Water Bond Proposition that was initially due to be on the 2010 ballot. At Governor Schwarzenegger’s urging, the measure was pulled with the intention of re-introducing it in 2012 when the economy would presumably be better.

The economy is better, but possibly not better enough to ask voters to go further in debt with another in a long line of bond measures. Also, the drought conditions that were a major driver of the original measure have eased considerably.

Indications are that the bill will be on the ballot, but most likely in a scaled-back form.

This is obviously a small sampling of the information reported in the 342-page 2012 AEC Market Guide to California. When feasible, the report breaks down the markets by major metropolitan area and geography. (We’ll offer more facts from the Guide Market Section’s next 100 or so pages — including the education, health care, transportation, water/wastewater, environmental and energy markets — in upcoming AEC Insight blog entries.

The report also includes a section we call “12 for ’12,” which looks at a dozen major issues expected to affect the California AEC industry in 2012. In addition, the report provides a summary view of the national and state economic outlook, a review of legislative action and other political factors influencing the industry, and a final chapter that assesses 40 different markets served by AEC firms by anticipated strength in 2012. The links and resources section is nearly 50 pages alone. (See below for a full Table of Contents.)

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