1. Presented to
American Society of
Professional
Estimators
April 21, 2014
12 Noon
Builders Exchange
ASPE Annual Economic
Forecast

2. 2
1. Rules to Remember
2. National Trends
3. California
4. Bay Area
5. Local Trends
Table of Contents

3. Economic Forecasting
The only function of economic
forecasting is to make astrology
look respectable.
John Kenneth Galbraith
3

4. 3 Rules to Remember
• Construction is one the last industries to go into
a recession and one of the last to come out.
• Real Estate and Construction are Dance
Partners-what one industry does affects the
other
• Overall employment is a key indicator for the
health of the construction industry
4

5. Annual Rate of Construction
Spending US (Billions)1
Public ($) Private ($) Total ($)
2005 256.3 904.3 1160.6
2006 280.9 896.8 1177.7
2007 297.8 842.4 1140.2
2008 319.6 737.1 1053.7
2009 309.6 593.0 902.5
2010 301.0 486.9 787.9
2011 286.6 529.7 816.4
2012 270.1 614.9 885.0
2013 275.0 659.4 934.4
5
1Numbers come from December Annual Construction Report for the US Census Bureau, except for 2013 numbers which came from
the November Report.

6. United States
Construction Starts
In billons 2012
Actual
2013
Estimate
2014
Forecast
% change 12-13 % change
13-14
Total Construction 485,296 508,050 555,300 +4.7% +9.0%
Residential 165,965 207,500 254,250 +25% +23%
Single Family 125,791 159,525 201,125 +26.8% +26.0%
Multifamily 40,174 47,975 53,125 +19.4% +11.0%
Nonresidential 157,581 163,250 176,700 +3.6% +8.0%
Nonbuildings 161,750 137,300 124,350 -15.1% -9.0%
6
ENR Magazine, December 2/9 2013, p2

7. AIA 2014 Consensus
Construction Forecast
Forecast 2014 % Change 2015% Change
Non Residential Total 5.8 8.0
Commercial Total 10.3 10.8
Office 9.2 10.8
Retail & Other Commercial 10.5 11.5
Hotel 13.1 9.2
Industrial Total 7.8 8.7
Institutional Total 7.8 8.7
Health 5.2 7.8
Education 2.8 5.8
Religious -1.7 1.3
Public Safety -0.2 3.1
Amusement/Recreation 9.9 7.5 7

8. Dodge Construction
US Outlook-2014
• Total Construction up 9% in dollars
• Multi Family Housing up 11% in dollars
• Single Family Housing up 26% in dollars
• Commercial Buildings up 17% in dollars
• Public Works down -5% in dollars
• Electric Utilities down 33% in dollars
• Institutional Buildings up 2% in dollars
8Door and Window Magazine, website

9. California Housing
Starts (in thousands)
70.6
87.5
124.9
151.7 157.1 161.4
0
50
100
150
200
Housing Starts
2013 2014 2015 2016 2017 2018
9
Eberhardt School of Business, January 2014, Metro Forecast

10. Residential Building
Permits-Bay Area
Counties New Bldg. Perm.
Jan-Oct 2013
Change from
Jan- Oct 2012
New Bldg. Perm.
Jan-Oct 2013
Change from
Jan-Oct 2012
San
Francisco, Sa
n Mateo and
Marin
418 39.8% 5513 82.5%
Santa Clara,
San Benito
1,686 35% 4,310 24.6%
Alameda,
Contra Costa
2,295 18.8% 1,944 -4.5%
TOTALS 4,399 26% 11,767 38%
10
1”Young Couples Seek Townhouses and condos with an urban feel”, San Jose Mercury News,
December 17, 2013 P. A1
Single-Family Units Multi-Family Units

11. Santa Clara County Residential
Building Permits
Year 2007 2008 2009 2010 2011 2012 2013
Buildings 1,938 1,051 618 841 991 1,528 1,933
Units 4,001 3,273 1,024 4001 3,001 5,433 7,511
Construction
cost (in
millions)
952 618 295 699 680 1,035 1,596
11
US Census Bureau Statistics

12. Office Vacancy Rates
4Q 2014
12
Cornish & Carey Silicon Valley Market Summary, page 2 4th Q 2013
Region Inventory Vacancy Rate (%)
Campbell 2,220,503 10.25%
Cupertino 4,049,215 1.21%
Los Altos 1,163,097 8.57
Los Gatos 1,866,232 5.76%
Milpitas 1,113,735 16.75%
Mountain View 6,925,964 3.03%
Palo Alto 8,075,997 4.51%
San Jose 27,696,775 16.03%
Santa Clara 11,497,211 18.6%
Saratoga 345,231 1.3%
Sunnyvale 10,486,115 6.83%
Summary 75,440,075 10.71%

13. Santa Clara County
Real Estate Trends-Retail
• Construction activity 450,000 sq. ft. in 2013.
50% increase over 2012.
• Development pipeline-2 million sq. ft. in San Jose.
(650,000 sq. ft. at Valley Fair)
13
Marcus & Millichap San Jose Metro Area Retail Research Report
3rd Quarter 2013

14. Santa Clara County
Real Estate Trends-Commercial
• Vacancy rate 12.7% in 2nd Q lowest since 2008.
• 3,200,000 sq. ft. under way (80% preleased)
• 2,100,000 sq. ft. delivered in 2013.
• 1,600,000 sq. ft. to be completed in 2014
• 5,500,000 sq. ft. planned (1,000,000 for Nvidia)
14
Marcus & Millichap San Jose Metro Area Commercial Research
Report 3rd Quarter 2013

15. Santa Clara County
Real Estate Trends-Apartments
• 6,600 units are being built now (6,000 MktRt)
• 3,700 units in the pipeline.
• 2013-3,500 come online-expanding inventory
by 1.4%-(2012-1,500)
• Development expected to accelerate slightly
in 2014
15
Marcus & Millichap San Jose Metro Area Apartment Research Report 4th
Quarter 2013

16. So far in 2014
As of the end of February 2014, contracts
have been awarded for $173.7 million worth
of future commercial projects in Santa Clara
and San Benito County. That is a 72%
increase over the same period last year.
16
“McCarthy Construction to open San Jose Office, San Jose Business Journal, April 8, 2014

17. 17
Santa Clara County-Construction
Employment Statistics by Month-
Jan.07-Nov.13
Peak Employment- September 2000, 52,200 November 2013 Employment 41,400
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
AxisTitle
Employment
Employment

18. Santa Clara County Construction
Employment-Annual Average
In Thousands
44.4
41.6 43.0 44.5
46.8 47.2
44.2
34.4
32.2 31.4
34.7
38.8
0.0
10.0
20.0
30.0
40.0
50.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
18
Bureau of Labor Statistics-San Jose, Santa Clara, Sunnyvale Statistical Area

19. Bay Area Forecast-
Unemployment (%)
Metro Area 2013 2014 2015 2016 2017
San Francisco 5.5 5.0 4.7 4.3 3.8
San Jose 6.9 6.4 5.9 5.3 4.6
Oakland 7.4 6.9 6.5 5.8 5.1
Santa Cruz 9.2 8.6 8.0 7.3 6.7
Vallejo 8.3 8.0 7.6 6.6 5.7
California 8.9 8.5 8.0 7.3 6.4
19
Eberhardt School of Business, January 2014, Metro Forecast

20. 20
Plans in Online Plan Room
By Month (2009-2013)1
142
143
165
220
221
272
216
244
148
148
138
152
109
144
183
176
233
197
165
176
147
119
109
188
124
138
174
191
218
235
175
185
143
141
131
153
136
161
211
202
248
254
211
196
159
181
159
150
172
167
185
288
257
220
207
170
163
201
158
204
0
50
100
150
200
250
300
350
400
450
2392 plans posted in 2013

21. 21
A few notes about Public
Works Construction
• Public Works construction is the last construction sector to go into a
recession and last to come out of the recession.
• The Builders Exchange received 30% less CalTrans Plans than in 2013
• A new highway bill in Congress should provide at ten-fold increase in
funding of Transportation Infrastructure.1
• 75% of tax revenues are based on property taxes-it takes 3 years between
changes in home prices and local construction spending activity. 1
• Many cities are still struggling with the elimination of redevelopment.
• Because the government is employing fewer workers now than at the start
of the recession, total employment—private sector plus government
workers—is still a half million jobs short of its peak before the recession.2
1“The US Cement Industry:Economic Clouds are Lifting” ,www.worldcement.com
San Francisco Federal Reserve Board, Fed Views, April 10, 2014

22. 22
Other Trends
•While speculation fueled the last Internet boom, companies are now profitable
indicating a more sustainable, growing economy. 1
•About 280,000 new Construction Jobs are expected to be created over the next four
years, about one quarter of the 1.1 million jobs California will add by 2017. Despite
leading the state in job growth over the next four years, there will still be fewer
construction jobs than before the recession. 2
•Construction Employment forecast employment growth of 29% from 2012-20222
•Construction Employment growth of 1.6 million jobs from 2012-2022 in United
States2
• Several corporate campuses underway will return space to market in 2015-2016, but
the commercial market should remain strong in 2014. 4
1 Marcus and Millichap Apartment Market Report, 4th Q, 2013
2Eberhard School of Business, Metro Forecast, September 2013
3 Department of Labor-Labor Projections, Winter 2013-2014
4 Marcus and Millichap Commercial Market Report, 1st Q 2014