Truist Reports on NeoCon 2023

Chicago, IL, June 14, 2023--Truist issued the following remarks about NeoCon 2023.

Demand Trends Remain Very Positive in Many Non-Residential Areas.…Commentary from multiple players in all areas of non-residential point to continued strong demand in end-user markets such as education and healthcare, with particularly good results in hospitality, and most notably, multi-family. Most notably, our expectations for good results in this area continue into 2024.

.… But Corporate Office Anecdotes Hard To Read. Commentary in this sector is the most varied we have ever seen in all our years of covering the sector. Commentary on recent trends vary from very good to a substantial deceleration of demand. Projections for the future are just as murky as some are starting to see projects delayed, and in some places canceled, but others with a nice backlog. Construction related business is universally positive, but remodeling has substantial variation. There is just no consensus.

Historically Group Enters Recession After Residential Downturn. We discuss the historical link later in this report that would mean a 2024 downturn if repeated. Many investors avoid this industry given the potential impact on office spending, given higher interest rates and falling office property values. We would note that this is only one part of non-residential and the remainder is much less cyclical. While we believe there will be a downturn, we believe it will be limited by the non-office markets. We are expecting a mid-single-digit decline next year as a result.

Some Signs of Growth Due to Population Movement Occurring. For the first time, several players are starting to see notable differences of demand by region. While the pressure in San Francisco is well documented, the growth in areas which have seen residential migration is becoming more pronounced, mostly in the Southeast.

LVT Flooring Share Gain Continues; Pricing Pressure Not As Pronounced As Residential. The continued shift to hard surfaces, particularly LVT, has continued in the market. We have seen substantial price deflation in residential LVT, but the impact has been more muted in commercial.”