Savannah Chamber

13 7 valuation ever recorded. Home prices will decline in 2023, Nonetheless, single-family home prices will remain well above pre-pandemic levels due to demographic supports as well as the increased importance of the single-family home as a place to live, to work, to learn, and to play. Non-Residential Construction Overall spending for new nonresidential construction will increase in 2023, but private-sector spending will be less vigorous than public spending. Private sector spending for non-residential construction will increase, but very modestly. There's a need for more manufacturing, transportation, logistics, and distribution facilities. Lab space is in relatively short supply. The CHIPS and Science Act will provide over $200 billion in federal funds to promote domestic semiconductor production, which will boost spending on chip manufacturing facilities. Investors are interested in new properties because real estate holdings are good hedge against inflation. In addition, overvalued equity and bond markets will make investors interested in income-producing property as an asset class. Spending for nonresidential construction will increase, but will lack vigor because interest rates have risen, uncertainty is high, top line sales will slow in many industries, corporate profits will decline, vacancy rates will be elevated for office and retail space, and net absorption will be negative for office and retail space. Trade tensions, dollar strength, and travel restrictions will continue to dampen foreign investors' interest in US real estate, but probably not to a greater degree than in 2020-22. In 2023, there will be some bright spots. For example, private spending will increase to build data centers, communications infrastructure, research and development facilities, and warehouses. In addition, construction spending by federal, state, and local governments will soar. In contrast, there will be little interest in building new office buildings or shopping centers. Office and retail vacancy rates are very high in many markets. We expect vacancy rates to increase in 2023. COVID-19 accelerated the trend towards remote work, which reduces office headcounts and the overall demand for commercial office space. The result is likely to be substantially less utilization of commercial office space per dollar of US GDP. Demand for new commercial office space will be most resilient in lower-density urban and suburban markets, especially where high technology and health ca re industries are concentrated. One positive factor is that the construction pipeline was not very full at the onset of the pandemic. Hence, the delivery of projects in the development pipeline does not hurt the prospects for office construction to the extent that it did in the wake of the Great Recession. Even though consumers' spending for goods recovered very quickly, retail is tremendously overbuilt and under demolished. The glut of retail space will sharply limit new retail construction, but some will occur in places that benefited from heavy in-migration of teleworkers and retirees. Financing to build new retail space will be difficult to obtain, but some will be available for the repurposing of retail space in good locations. The success of online retailing decreases the need to build shopping centers and stores, but increases the need to build distribution centers. Industrial development will be focused on locations with logistical advantages. Public sector spending for nonresidential construction will increase much faster than private spending for nonresidential construction. Revenue collections by state and local governments held up much better throughout the pandemic than initially feared. In addition, federal government transfers to state and local governments were massive. Many state and local governments recognize that recent revenue gains are unlikely to be repeated and therefore will direct revenue surpluses to one-time uses, such as construction projects, rather than to continuing obligations such as hiring permanent staff. Construction spending by local governments probably will increase faster than such spending by state governments due to local governments' high reliance on property taxes. Courtesy of the housing boom, many local governments' property tax digests are soaring and will continue to do so. In contrast, nonresidential property tax digests probably will grow relatively slowly. In most jurisdictions, overall property tax digests will benefit

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