North Bay Economic Trends: Development and Construction CELSOC Marin Chapter

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North Bay Economic Trends Development and
ConstructionCELSOC Marin Chapter

• Robert Eyler, Ph.D.
• Chair, Economics Department
• Director, Center of Regional Economic Analysis
• Sonoma State University
• www.sonoma.edu/org/crea

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Introduction

• Constructions Role in Our Economy
• Easy to define what is construction?
• This is slowly changing
• Renovation the focus from here?
• Skilled job provider
• Employs across age, demographics, education
• Begins a multiplicative economic cycle
• Costs of construction drive business decisions.
• Demanding raw materials to control of available
  space.

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Introduction (cont.)

• Developments Role in our Economy
• Defining development a little more tricky
• Residential vs. Commercial vs. Community
• Profit-driven vs. Community-driven?
• Natural boundaries
• The North Bay is pushing on its urban boundaries
• Will this be expanded?
• Should it be expanded?
• Development leads or follows construction?

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2006 and Beyond

• Economy cycles up and down
• We are in a slow growth period now.
• ABAG Growth in North Bay mainly in Sonoma, Napa
  Counties for jobs
• Marin County slowest growth, oldest, richest
  through 2030.
• Demography shifting toward more Hispanic
  population, older residents.
• Loss of middle class a major concern

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ABAG, Projections 2005
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Caveats to Growth

• Cost of Living
• Housing and energy prices both a major concern
• Locally by-product of growth
• Low unemployment means high prices??
• Traffic and Environmental Factors
• Higher density means more traffic (SF example)
• Issues of where building can take place (EIRs)
• If population expands, where will they live?

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Sustainability and Green Building

• Sustainability
• Many definitions, different for everyone
• Economic Growth with environment and equity
  combined
• Green Building Fact or Fiction
• Fact it is coming and in many forms
• Fiction Transition to Green Building will be
  easy
• Public policy reactions
• Workforce/Affordable Housing?
• SMART?
• Both have a lot of political heat behind them

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Marin Targeted Industries

• Four targets identified, two major partners
• Agri-Tourism, Alternative/Residential Care, Core
  Tech, Financial and Consulting Services
• Green Building and Other Health Services partners
• Sustainability, exportation, expected job growth
  the key criteria
• Sonoma County has just begun this process

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The Remains of the Decade

• Construction has three discernible trends
• More Hispanic workers
• Fewer single family home developments versus
  alternative, mixed-use development and
• Raw materials costs rising.
• Must begin to see these trends and their fruition
• Developer reactions will become constructions
  situation
• Public policy will also show the way

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A Evolving Workforce

• More Hispanic workers, more pressure on
  construction to hire alien workers for cash
• We already know this takes place
• Will public policy react?
• Language issues for some construction companies
• Need to understand this is a great opportunity
  and a function of a societal shift

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Community Development

• Development efforts will be shaped by public
  policy
• General plans are moving toward more mixed-use,
  green development
• Restoration will likely include new mandates,
  especially alternative materials
• Where in the North Bay will new residential
  buildings go?

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International Concerns

• Growth overseas likely to increase demand for all
  raw materials
• Specifically lumber, steel and oil
• China, India the largest, future markets
• Middle East also a possibility
• Continued deficits pressure interest rates
• Leveraging to develop a thing of the past?
• No, but there will be lower margins

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Conclusions

• Construction locally provides a wide breadth of
  services and jobs
• Movement northward of construction to continue.
• Most of the construction growth in trades jobs
• Renovation, Landscaping projected as drivers
• Sonoma County uses Santa Rosa
• Marin part of San Francisco MSA
• Politicians use these stats, important because of
  that

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Conclusions (cont.)

• Development more difficult to project
• General plans make forecasting difficult
• Politics can easily influence development
• Development will also move northward
• Both retail and residential
• Must think about where the communities are headed
• Think about green building, mixed-use
  opportunities now
• Must be ahead of the curve

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California Association of Realtors, 2006
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ABAG, 2006
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ABAG, 2006
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Conclusions (cont.)

• Engineering
• Retrofits, renovations, new mandates should help
  demand
• Location of firms will be less important over
  time
• From data above, civil engineers have best
  outlook
• Need to consider caveats to the data.
• All these parts are connected
• One industry must watch the other

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References and Websites

• ABAG www.abag.gov
• Projections has a cost
• EDD www.labormarketinfo.edd.ca.gov
• CREA www.sonoma.edu/org/crea
• CAR www.car.org
• Follow stats carefully, with caveats