If you didn’t like 2012, chances are you won’t be crazy about 2013.
The economy is expected to continue its moderate — but still subpar — pace of growth, as consumers, businesses and governments adjust to the new normal of fiscal constraint.
Elected leaders will feel the pressure to rein in budget deficits with the understanding that fiscal policy will be dictated by the choices made today and the long-run growth of the economy.
According to Wells Fargo Securities, the 2013 forecast remains cautious to say the least:
“Real GDP growth appears to have slowed to around a 1 percent annualized rate during the final quarter of 2012, as businesses have put expansion and hiring plans on hold ahead of the fiscal cliff negotiations. We expect growth to get off to a slow start in 2013, as higher taxes hit households at all income levels. Federal government spending will also contract modestly. We expect growth to rebound modestly by the middle of the year, as the economy moves further away from the fiscal cliff and homebuilding gains momentum.”
Following is a sector-by-sector look at how Savannah’s economy is shaping up for 2013:
Tourism: Booming business
Savannah keeps making tourism records meant to be broken.
The visitor impact passed 12 million people and neared $2 billion in 2011, and 2012 will eclipse those marks. Hotel occupancy was up 2.6 percent as of Oct. 31 and rooms were fetching a slightly higher price than in 2011.
This year promises another increase. Savannah’s national and international profile continues to grow, as evidenced by the features and mentions the city regularly receives in travel publications. The city’s convention and visitors bureau, Visit Savannah, will launch an updated website in the coming months and expand its already significant social media marketing efforts.
Local convention business will likely fall short of 2012’s returns but will be at or above the historical average in 2013. Among the groups meeting in Savannah this year are Running USA, the National Association of Truck Stop Operators, Southern Association of Wholesale Distributors, the Georgia Municipal Assocation and the Georgia Association of Chiefs of Police.
The National YMCA Gymnastics Championships will also be staged in Savannah.
Banking: Crowded landscape
Many banking insiders believed the economic downturn would solve Savannah’s “overbanked” issue. Several financial institutions with a local presence would — and did — fail, including Darby Bank, First National, Woodlands, Atlantic Bank, Atlantic Southern and First Citizens Bank of Effingham.
Yet Savannah has seen expansion instead of contraction. Only one of those failed banks was acquired by another local bank, and several new names have come to town. Two more banks have opened local loan production offices and have plans to open branches.
Assuming those banks follow through in 2013, Savannah will have more banks than it did prior to the crisis. The impact will likely be felt across the market, with banks discounting products and services to remain competitive. That could be a drag on earnings and could lead many of the out-of-town banks to rethink their Savannah strategy.
From a pure earnings perspective, 2013 should be a banner year, at least relative to the last few years. The Coastal Bank will post a profit in 2012 after losing a combined $10 million the previous three years and expects growth in 2013. First Chatham closed 2012 with back-to-back profitable quarters and anticipates a profitable year in 2013. Carver State Bank avoided the red ink of its peers during the recession.
Savannah’s largest local community bank, Savannah Bank, is no longer local, having been acquired along with its sister bank, Bryan Bank & Trust, by South Carolina Bank & Trust. The deal closed in mid-December. Both Savannah Bank and Bryan Bank will maintain their brand names and their local management.
Real estate: Shortage ahead?
Savannah’s real estate rush stalled in 2008, leaving the area with an oversupply of warehouses, office space, condominiums and finished and unfinished subdivisions.
New construction will resume in most of those areas in 2013, and demand could threaten to outstrip supply. The start of the Savannah Harbor deepening project will stress the industrial sector. As for office space, there’s plenty available, but there’s not a wide variety, especially when it comes to high-quality properties downtown.
New retail projects are already under way across the area, from the Whole Foods center on the eastside to the Mall Boulevard redevelopment on the Southside to several strip centers in Pooler. A large-scale outlet mall near the airport is in the planning stages.
On the housing front, the market is poised to go from healing to thriving, although prices are unlikely to reflect it. Home building has resumed to the west, and the new westside high school will renew the demand for homes in the fallow New Hampstead developments. Housing starts are even set to resume in luxury communities, including The Landings, in 2013.
Holding prices in check will be the “shadow inventory,” which refers to repossessed homes and those owned by distressed borrowers. Many local Realtors believe there is a glut of these properties waiting to hit the market, and lenders will list more and more of them as demand increases, particularly during the spring and early-summer buying season.
Many local real estate insiders are proponents of a “slow and steady” recovery anyway. The 2013 market is unlikely to disappoint.
Jobs: Gradual improvement
Savannah’s 13,000-plus job losses during the downturn shook the local economy but failed to cripple it. Insulated by a diversity of industries — manufacturing, tourism, maritime, military, services — the area began to crawl back in 2012. Savannah reclaimed half of its job losses by the end of this year.
The trend should continue this year. Several local businesses have announced expansions, tourism is poised for another record year and the Savannah Economic Development Authority continues to market the area to large companies. The construction industry, the hardest hit sector during the recession, will get a boost as home builders address the housing shortage and contractors ramp up for the commercial projects.
Local economist Michael Toma, with Armstrong Atlantic State University, is forecasting 1 to 2 percent growth in the labor force.
“It is a good sign for the regional economy that employers are beginning to fill gaps in their workforce in response to increased demand,” Toma wrote in his quarterly “Economic Monitor” published in early December.
Several workforce development initiatives were launched in 2012 by Savannah Tech, Georgia Tech Savannah and the Savannah-Chatham County public schools, as well as area manufacturers such as JCB and Gulfstream. Improvement in the economy should allow for expansion of those programs.
Manufacturing: Slow, steady growth
It was more turtle than hare last year as most Savannah area manufacturers saw steady — if not overwhelming — growth in 2012. Some, however, posted significant gains. Gulfstream Aerospace has added jobs in the thousands as it ramps up production here of its newly certified ultra high-speed, ultra-long-range G650 flagship business jet, the G650.
A healthy backlog of orders for the G650 — the average wait time is five years — helped boost Gulfstream’s revenues by 30 percent in the third quarter. Construction equipment manufacturer JCB, retooled its Pooler plant to engineer, design and produce all JCB skid steer loaders for worldwide distribution, bringing production back up and nearly tripling a workforce once crippled by layoffs.
Of the relatively new area manufacturers, Efacec in Rincon now has more than 400 employees, Daniel Defense continues to expand and Mitsubishi has geared up on the megasite, expecting to finish the year with more than 300 employees.
Barring any major economic crises, the forecast for 2013 calls for more of the same steady growth with some significant upticks — Mitsubishi expects to double its work load in all product lines, for example — as Savannah’s diverse manufacturing base continues to pull out of the recession.
Ports: Ramping up to dredge
Georgia Ports Authority wrapped up fiscal 2012 last year with record cargo volumes, growing faster than any other port in the nation for the last eight years and sporting a 10-year compound annual growth rate nearly double its closest competitor.
Through June of last year, GPA moved a record 2.98 million TEUs — or 20-foot container equivalents, falling just 16,000 shy of the three million mark. Other records included 26.5 million cargo tons moved, an increase of more than half a million tons; growth of 15.6 percent in breakbulk cargo and a record 569,984 auto/machinery units moved.
But even those accomplishments paled in comparison to the news in October that the port’s 15-year effort to deepen the Savannah River channel had been given the final OK, with dredging expected to begin this summer.
The state has already committed to the majority of its share of the $652 million project financing and all eyes will be on President Obama’s budget recommendations in February. The federal portion of the deepening is approximately $400 million.
Meanwhile, the port continues to move out of the economic downturn with a solid lock on its position as the fourth busiest container port in the country, second only to the Port of Los Angeles in exports and third in auto imports behind Los Angeles and New York/New Jersey.
While the outlook for 2013 could be tempered by several factors (update fiscal cliff, strike and European economy), container numbers are generally expected to be stronger this year as the country recovers from the downturn and consumer confidence grows. Imports are beginning to rebound while exports continue to be strong. The movement of auto and heavy machinery is growing exponentially.
Infrastructure projects — necessary to accommodate port growth — will continue this year, with groundbreaking on the Jimmy DeLoach Parkway project, which will take 5,000 trucks a day off Ga. 21 by bringing Interstate 95 directly into the ports when it’s completed in 2015.
Economic Development: New leadership
When Steve Weathers resigned abruptly in September after two years as president of the Savannah Economic Development Authority, the SEDA board wasted no time finding a new leader.
Trip Tollison, former vice president and chief operating officer for the Savannah Area Chamber of Commerce and Visit Savannah, had played a critical role in helping SEDA with various economic development projects, including both phases of major Gulfstream expansions.
He negotiated a resolution between the state, county, Georgia Ports Authority and Caterpillar related to ad valorum taxes on Caterpillar goods-in-transit through GPA — the last issue to resolve before the company’s announcement of a major new facility near Athens and substantial exports through the Port of Savannah.
And he has worked with Georgia Ports staff for the past decade, representing the business community’s support of the Savannah Harbor Expansion Project in both Atlanta and Washington, D.C.
With Tollison on board as interim SEDA president — a position most business leaders expect will become permanent before the end of this year — and SEDA’s new World Trade Center Savannah in place, expectations are high for Savannah’s economic development future.
While he has made it clear the organization’s core strategies — job retention, job creation and attracting investment — remain central to the mission, Tollison has also challenged staff to “look outside the box” to fulfill that mission.
The World Trade Center Savannah, for example, is working to put the city on the global stage, making it more international in scope. A major initiative, “Savannah Touches the World,” is expected to be announced this month.
SEDA Innovations, meanwhile, will address the issue of helping startup businesses in the region become capital-investment ready.
Among the most recent major projects reportedly on the horizon include a preliminary master business plan for a mixed use development on 56 acres of land on Hutchinson Island and a $200 million upscale shopping mall in Pooler.
Small business: Uncertainty clouds picture
Small business remains the engine of economic recovery, but those companies and startups are taking a triple hit in 2013: higher payroll taxes, higher personal taxes for those making more than $400,000 and new healthcare costs and fees as Obamacare begins to kick in.
While the economy is expected to grow at a healthier rate of between 2.1 and 3 percent this year, small business loans still won’t be easy to get. According to the monthly Biz2Credit Small Business Lending Index, big banks are approving a little more than 10 percent of small business loan requests, while smaller banks are approving about half and increasing the number of SBA-backed loans they make.
Many small businesses, especially those just under the Obamacare threshold of 50 employees, are likely to hold off on hiring until they get a better idea of the costs associated with the Affordable Care Act.
According to the local office of the University of Georgia’s Small Business Development Center, small business owners must plan with their advisors to be sure they understand how changing laws could impact their business strategy.
