Growth Expected in Garage Construction for 2004-2005


Growth Expected in Garage Construction for 2004-2005

Garage construction starts are expected to rebound in 2005 to 370 garages, up from 355 in 2004. The strong overall market will be increasingly dependent on the return of key private-sector submarkets, according to Dale Denda, Director of Research for the Parking Market Research Co. The total cost of garage construction and maintenance in this year will exceed $3.5 billion.
The 2005 projections will bring the parking construction marketplace back to a level seen in 1998, when 365 garages were built. Construction will not reach the levels of 2000 and 2001, when all-time-high starts were in the 460 range. The advent of the recession brought construction back to 385 in 2002 and to 380 in 2003, and bottomed out at 355 in 2004.
“Construction mirrors the economy,” Denda reported at the Parking Industry Exhibition held in April. “The increase in steel costs in late 2003-early 2004 didn’t stop many garages; it simply pushed their construction off a bit, and that is part of the increase we are seeing for 2005.
“More fundamental, assuming the steel issue stabilizes, is the tepid pace of construction activity in the private sector,” he said. “Its complexity makes forecasting next to impossible, and for the last couple of years, there’s been a significant gap between announcements and starts.”
Many factors affect the garage construction marketplace, he noted. These have a direct relationship with economic conditions/activity and institutional budget conditions.
His company makes assumptions when forecasting market trends, including:
1. The private sector’s announced projects will in fact proceed on schedule (and three of the 11 private-sector submarkets will grow).
2. The public sector drop in construction is no greater than expected.
3. Medical construction continues to grow
4. Higher education remains above 10% of total garage construction.
Denda also pointed out that joint-venture projects are a key variable in these projections. “Public-sector construction will drop, but many of the garages could still be built,” he said. “These projects will become joint public/private projects, with private developers taking more of the risk as public agencies are strapped for funding. These will become the vehicle for delivering what would otherwise be totally public facilities.”
The average size (in spaces) of new garages is stabilizing at just over 900, up from 800+ in the mid-1990s. (This number excludes airport garages.)
The current spread of garage construction by sector (Spring 2004) is as follows (see graph nearby): Public, 25%; Private, 30%; Medical, 10%; Higher Education, 20%; Airport, 4% and Joint Venture, 11%.
The private sector is broken into a number of smaller submarkets. Mixed use amounts to 20% of the total private-sector activity. Garages serving office, retail and hotel amount to 65% of the total mixed-use construction, while mixed-use projects with garages serving residential and other commercial uses take up the rest.
Residential garage construction makes up 35% of the total private-sector garage market, while office and retail garages make up 18% and 9%, respectively. Hotels provide 8% of the total, with small and mass events and general multiple use making up the rest.
Denda pointed out that the 2005 market assumptions also take into account three factors associated with optimistic assumptions in each case:
First, the 2004 steel-cost jump simply has the effect of delaying, but not necessarily cancelling, all of the affected projects (2004 delays become 2005 starts).
Second, the drop in announced public-sector/public-agency projects must be offseting an increasing number of joint-venture projects.
Third, economic conditions continue to improve in general for certain private-sector submarkets (retail, office and hotel).
A problem in any one of these three factors, Denda warned, could put the market at 340 starts or lower.

Article contributed by:
John Van Horn
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