Parking Construction to Remain at Current Levels
Parking structure construction will remain at nearly current levels or drop slightly, according to Parking Market Research Company projections presented at the Parking Industry Exhibition in April. Construction is to hold at 375-380 new structure starts or, in a more conservative view, drop to around 350.
According to PMRC Director of Research Dale Denda, these projections are based on PMRC's model, using as its basis announced new projects. "Our information has shown that projects announced in the certain quarters of a given year are a good basis for projection of actual construction starts nine to 18 months out," Denda said.
The projections are nearly 25 percent below the peak in 2001 when 465 structures were built, however they are still well above the 1996 level when 265 structures were started. There is, naturally, a direct correlation between the economy, consumer confidence and garage construction, Denda stated.
In specific terms, the overall market returns, percentage wise by sector, to a pre-9/11 sector activity concerning announced new projects, not actual construction starts. As for the changes, the private sector is off by 3 percentage points, the public sector up by five percentage points, higher education is down by 2 percent and there is virtually no change in medical, airport or joint public/private announced projects.
PMRC's numbers vary from those made by the Census Bureau although the graph lines track perfectly. The difference, according to Denda, is that PMRC independently tracks parking garage construction market on a project specific basis. The U.S. Census Bureau tracks parking facilities in terms of dollars paid out over the life of a construction contract, however while also excluding certain garages while including surface lots. The other big difference, of course, is that PMRC reports before the garages break ground, while the government tracks activity after the fact.
The USCB data are indicative of the direction of the parking garage construction market and are a useful benchmark, despite their infirmities.
Why then, have the numbers been able to hold at 1998/1999 levels even after coming off the heights of 2001 while other economic numbers fall below that benchmark? The answer is that "the pie has gotten bigger," says Denda.
As reported last month in PT, gross parking revenues are up by about 40 percent in the past decade. 1992 revenue for all parking was pegged at $8.4 billion and its estimated to be $11.8 billion in 2003. Over 1 million new revenue production structured parking spaces were built between 1992 and 2002. Plus the volume of garage construction is up by 20 percent (post (9/11 relative to pre-1997).
All of this turns on the fact that basic demand (or structural demand) is resilient, Denda says, and you have relatively healthy construction in a flat or down marketplace.
The forward indicators for 2004 in announced projects put the Mid-Atlantic/Ohio River Valley region first with the West Coast poised for a comeback. The Southeast is still tepid, ranking with the Northeast. The North Central remains uncharacteristically weak, with no change in the South Central region.
However, one should consider that the distribution of new starts reflects the population distribution in those areas. Business emerges from where people live.
Denda predicts that although the construction starts will remain at the 350-375 level, we are not in for a "surge" in new projects.
What could be the catalyst for a surge?
"It's anybody's guess," says Denda. "We are in unprecedented times." The numbers are in flux, the market is up and down daily, geopolitical events are unfolding hourly, and consumer confidence goes up and down on every new report.
"There's a huge psychological factor in play", he said, referring to the fact that consumer spending, which usually correlates in the mid-term with consumer confidence, underpins eight of the 11 sub-markets that make up the parking construction market.
PMRC has compared garage construction with certain economic indicators, including the level of the stock market as a leading indicator of Gross Domestic Product, but especially consumer confidence. When the above projections were made, the stock market (as measured by the Dow Jones Industrial Average) was at 7,800 (in March) and consumer confidence was pegged at 64.5.
What would be a harbinger for change?
"Well," say Denda, "it can't be a five-week rally. To see a major change in garage construction, we would need a return to consumer confidence of 85-plus (as of this writing in mid-May, it is at 80.); the DJIA stock market average over 9,000 (in mid-May at 8,300); a return to unemployment under 4 percent (its now holding at 5.8 percent); and a major watershed event to restore domestic calm.
Although the numbers are looking better than when the projections were made, Denda hastens to point out that we need the numbers noted above to be sustained without "another firecracker going off ANYWHERE."
John Van Horn is editor of Parking Today. He can be reached at firstname.lastname@example.org