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Slide Presentation on Overall Economic Outlook for 2009-2010

Slide Presentation on Overall Economic Outlook for 2009-2010

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  • LEED in Project Specs Occurrence of LEED in specs has more than doubled since 2004, more than doubling, jumping 8% from 6% in 2004 to 14% last year [note: do not say LEED specification. It’s mentioned in a spec – this is different from the LEED project data in Dodge.] Being incorporated in larger projects faster: Growth from 17% to 31% from 2004 to 2007. That means that the 14% of projects with LEED in their spec is worth 31% of all projects.
  • Green Schools: HR 3021 • Senate Climate Security Act Amendments
  • The most important findings of our survey results: Rapid growth not just in the use of water-saving practices but also in their importance [read rest of bullets]
  • Key Finding: Water use reduction is important in today’s green building marketplace and will become even more important in the next five years In 2013, 85% industry players rank water efficiency as a very important part of green building, up from 69% ion 2008
  • Green Schools: HR 3021, passed June 4, authorizing $6.5 billion for green school construction and renovation starting in 2009; $500 million dedicated to schools in New Orleans. Efficient Buildings: Senate Climate Security Act Amendments include a section providing $51 billion through 2050 to a new program encouraging the construction of highly-efficient commercial buildings and to fund retrofits of existing buildings
  • Over 300 applications are already supporting Green, LEED, Risk Management and these business areas.

Transcript

  • 1. Stephen Jones Senior Director McGraw-Hill Construction US Construction Activity Outlook and Key Trends
  • 2. Agenda
    • The Environment -- Macroeconomic Picture
    • U.S. Construction Market Indicators and Sectors
    • Total Construction
    • Key Trends
  • 3. U.S. Macroeconomic Picture
    • Stimulus Act: American Recovery and Reinvestment Act of 2009
      • Enacted on February 17. Cost : $787 billion.
      • Goal: Save or create at least 3.5 million jobs by the end of 2010 .
      • Approx. $130 billion in construction-related spending, for 2009-2011
      • Transportation
      • - Highways: $27.5 billion
      • - Transit: $8.4 billion
      • - Rail: $9.3 billion
      • Includes $1.3 billion for Amtrak; $8 billion for high-speed rail
      • - Transportation Security Administration: $1 billion to buy,
      • install explosive-detection, airport screening equipment.
      • Environment
      • - EPA clean water and drinking water SRF’s: $6 billion
      • - Corps of Engineers: $4.6 billion
      • - DOE environmental cleanup: $6 billion
      • - EPA cleanup, including Superfund, $1.2 billion
  • 4. U.S. Macroeconomic Picture
    • Stimulus Act, continued
      • Energy
      • - Electricity grid: $11 billion; “Smart-grid” investment: $4.5 billion
      • - Renewable energy loan guarantees: $6 billion
      • - Tax credits for renewable energy projects extended –
      • Wind energy extended through 2012
      • Biomass and geothermal extended though 2013
      • Buildings
      • - GSA federal buildings: $5.6 billion
      • $750 million to construct/ renovate federal bldgs. and courthouses
      • $300 million to construct/ renovate land ports of entry
      • $4.5 billion for energy-efficiency upgrades
      • - DOD restoration, modernization of facilities: $4.2 billion
      • - Veterans Administration : $1.3 billion for hospital upgrades
      • - HUD - public housing capital fund: $4 billion
      • - redevelopment of abandoned, foreclosed properties: $2 billion
      • - community development block grants: $1 billion
  • 5. U.S. Macroeconomic Picture
    • Stimulus Act, continued
      • Schools
      • - No specific line item. ($20 billion in House and Senate version.)
      • - Renovation funding could come from $39.6 billion in bill’s
      • State Fiscal Stabilization Fund
      • “ Buy American” Provisions
      • - No stimulus funds can be used on a project
      • “ unless all of the iron, steel, and manufactured goods
      • used in the project are produced in the United States.”
      • - Exceptions – Buy American section “shall be applied in a manner
      • consistent with United States obligations under international agreements.”
      • Build America Bonds (BABs)
      • - To be issued in 2009 and 2010 by state/ localities for capital expenditures
      • - States/ localities can receive 35% reimbursement by the federal gov’t.
      • for their interest costs; or, bond investors can receive a 35% tax credit.
      • - Use picking up – New Jersey Turnpike Authority sold $1.4 billion
      • in Build America Bonds during April to support agency’s $7 billion
      • capital program (10 years).
  • 6. U.S. Macroeconomic Picture
    • GDP Pattern:
    • History Forecast
    • 2007 2008 2009 2010
    • +2.0% +1.1% -3.0% +1.5%
    • What shape will the recovery be?
    • V or U or L or W ?
    • (Probably U-shaped.)
    The U.S. economy has been in recession since Dec. ’07.
  • 7. U.S. Macroeconomic Picture Inflation had retreated, but energy prices moving upward again.
  • 8. U.S. Macroeconomic Picture Short-term rates are down; long-term rates lower, but now edging up.
    • With Dec. 16 action, the federal funds funds rate target now set at 0% to .25%.
    • Numerous steps taken to improve liquidity over the course of 2008 and 2009.
    Also a plus – Stimulus bill now in place.
  • 9. U.S. Macroeconomic Picture Tighter lending standards are a major constraint for 2008/ 2009.
    • Numerous instances of tight credit
    • affecting large projects, such as
    • Echelon Resort in Las Vegas
    • Atlantic Yards in Brooklyn
    • Chicago Spire
    • World Trade Center Towers 2, 3
    • Fontainebleau Las Vegas
    • Yet, some emerging signs
    • of improvement …
    • Las Vegas – Project City Center
    • Wash. DC – 1101 K St.
    • Boston – Russia Wharf project
  • 10. U.S. Macroeconomic Picture
    • Housing Rescue Plan.
      • Proposed February 18. Implemented on March 4.
      • Estimated Cost: $75 billion, could help 9 million homeowners
      • Parts: - Help renegotiate loan terms for “at-risk homeowners”
      • Creates a $75 billion program to subsidize loan modifications
      • Loan servicers receive $1,000 for modifying a delinquent loan;
      • $1,500 for modifying a non-delinquent loan.
      • - Remove limit on refinancing for “responsible homeowners.”
      • Allow Fannie Mae and Freddie Mac to guarantee refinancing
      • on mortgages valued at more than 80% of homes value .
    • Financial Stability Plan
      • Proposed February 10. More details on March 23.
      • Goal: Buy up toxic bank assets, to help banks resume normal lending
      • - Public Private Investment Program
      • Low-interest loans, matching funds to get private investors
      • to participate
      • Also: “Mark to Market” Rules Eased. “Stress test” results eased uncertainty.
  • 11. U.S. Macroeconomic Picture Federal budget – $455 billion deficit for fiscal 2008, more in 2009 . Not much negative impact on near term appropriations.
    • Fiscal 2009 Appropriations
    • Base realignment account gets 18% hike .
    • Omnibus Bill signed March 11
    • Federal-aid highway program, down 1%
    • Mass transit, up 8%
    • Airport Improve. Grants, flat
    • Corps of Engineers, down 6%
    • EPA Water Infrastructure, up 1%
    • GSA Construction, +144%
    • GSA renovations, down 4%
  • 12. U.S. Macroeconomic Picture Numerous bond measures passed, but state fiscal health has weakened.
    • November 2007 Elections
    • Texas – numerous school construction
    • measures passed.
    • November 2008 Elections
    • California – voters approved $10 bil.
    • measure for high-speed rail line,
    • a $1 billion measure for children’s
    • hospitals, and Los Angeles voters
    • approved a $7 billion measure for
    • school construction.
    • Numerous states facing large budget
    • gaps for Fiscal Year 2009, including -
    • Shortfall $ bil.
    • California $35.9
    • Illinois 8.0
    • New York 6.4
    • Florida 5.7
    • New Jersey 3.7
    • Massachusetts 3.3
    • Arizona 2.7
    • Georgia 2.3
    • Pennsylvania 2.3
    • Virginia 2.3
    • Also –
    • 20 states have implemented cuts to K-12
    • education, 6 states proposing cuts
    • 28 states have implemented cuts to public
    • colleges and universities.
    • Source: Center on Budget and Policy Priorities
  • 13. U.S. Macroeconomic Picture Material Prices moved higher in early 2008; now easing through 2009.
    • In early 2008, investors pushed
    • commodity prices upward.
    • Slower U.S., global economies
    • have reduced demand,
    • leading to price declines
    • for metals in particular.
    • But – some concern about
    • commodity price increases
    • in near term.
  • 14. U.S. Macroeconomic Picture Other Building Material Prices
  • 15. U.S. Macroeconomic Picture Material Prices Expected to Remain Lower in 2009.
  • 16. U.S. Construction Market Indicators The decline for Total Construction became steeper in 2008.
  • 17. Major U.S. Construction Sectors (Starts) Single Family Housing still falling; Commercial Building heading down; Institutional Bldg. healthy but turning; Public Works was slipping.
  • 18. U.S. Single Family Housing Construction has fallen sharply. Prices at national level still dropping. Single Family Housing Starts 2006 1.331 million units -18% 2007 .937 million units -30% 2008 .549 million units -41%
  • 19. U.S. Single Family Housing Pluses – low mortgage rates, inventories easing. Bottom in sight. Single Family Housing Starts 2009 .375 million units -32%
    • Mortgage rates now very low.
    • Steps taken to improve funds available for mortgages.
    • 2009 Federal Housing Rescue Plan
    • Also – efforts to limit foreclosures taken at state level.
    • First-time homebuyers –
    • $8,000 tax credit.
    • Inventories settling back.
  • 20. U.S. Multifamily Housing Construction relatively stable in 2006, weakened in 2007 and 2008.
    • Comprised of both apartments
    • and condominiums.
    • Helped by push for
    • downtown redevelopment. Demographics supportive, especially from empty-nesters.
    • Was attractive investment
    • target, less so now –
    • due to mounting concern
    • about over-building of condos
    • and diminished credit availability.
    • Benefits from stimulus bill,
    • via HUD?
      • May 5 – HUD announced guide- lines for $980 million directed at community devel. block grants
    Multifamily Housing 2006 516,000 units -3% 2007 452,000 units -12% 2008 308,000 units -32% 2009 205,000 units -33%
  • 21. U.S. Multifamily Housing Multifamily Housing Top 10 Metros -- ranked by new dwelling units Year 2007, %ch 07/06 1. New York -15% 2. Chicago -31% 3. Houston +53% 4. Washington DC -0- 5. Los Angeles -25% 6. Seattle +18% 7. Atlanta -3% 8. Miami -51% 9. Orlando -8% 10. Dallas-Ft.Worth -26% 12. Las Vegas +4% Year 2008, %ch 08/07 1. New York -2% 2. Dallas-Ft.Worth -1% 3. Washington DC -23% 4. Houston -37% 5. Atlanta -31% 6. Los Angeles -40% 7. Seattle -45% 8. Chicago -58% 9. Phoenix -42% 10. Austin TX -31% 11. Miami -58% 17. Las Vegas -58%
  • 22. U.S. Commercial Bldgs. -- Stores Construction in 2007 at all-time high; now in sharp retreat. . Store Construction 2006 308 msf -1% 2007 314 msf +2% 2008 206 msf -34% 2009 130 msf -37%
    • Derived demand from housing
    • market – definitely going up;
    • now true going down.
    • Substantial building from five major players:
    • Wal-Mart, Home Depot, Lowe’s
    • Target, Kohl’s
    • Impact of slowing retail sales –
    • reduced store openings,
    • store closings, etc.
    • “ Lifestyle centers” losing
    • store chains
  • 23. U.S. Commercial Bldgs.-- Warehouses Construction peaked in 2007; now heading down.
    • Slow economy now having Impact on construction.
    • Vacancy rates now moving up.
    • 2009Q1 reported at 11.5%, after bottoming at 9.5% in 2006 Q3.
    • Some larger regional facilities still being built by major retailers.
    • Continued need for updated facilities to handle improved inventory management practices, but may have to wait until after 2009.
    Warehouses 2006 221 msf -1% 2007 254 msf +15% 2008 188 msf -26% 2009 123 msf -35%
  • 24. U.S. Commercial Bldgs.-- Hotels Construction soared 2006-2007, mild retreat in 2008, plunge in 2009. Hotels 2006 81 msf +67% 2007 86 msf +6% 2008 81 msf -6% 2009 42 msf -48%
    • In 2005: hotel/casino projects, and convention center- related hotels.
    • In 2006-2008:
    • broader expansion, more Las Vegas projects, convention center hotels, “condo” hotels
    • Industry financials decelerating:
    • Revenue Per Available Room
    • (Smith Travel Research)
    • 2005 +8.5%
    • 2006 +7.5%
    • 2007 +5.8%
    • 2008 -1.9%
  • 25. Large Projects U.S. Commercial Bldgs.-- Hotels
  • 26. U.S. Commercial Bldgs. -- Hotels Hotel Construction Top 10 Metros -- ranked by new square feet Year 2007, %ch 07/06 1. Las Vegas -64% 2. New York +45% 3. Washington DC +193% 4. Orlando FL +308% 5. Chicago +30% 6. Los Angeles +22% 7. Dallas-Ft.Worth -11% 8. Miami +15% 9. San Antonio +187% 10. Atlanta +50% Year 2008, %ch 08/07 1. New York +16% 2. Las Vegas -40% 3. Orlando +6% 4. Dallas-Ft.Worth +28% 5. Washington DC -15% 6. Phoenix +47% 7. Houston +68% 8. Miami +10% 9. San Antonio +9% 10. Atlantic City NJ +493%
  • 27. U.S. Commercial Bldgs. -- Offices Construction upturn was measured this time … Office construction 2006 208 msf +25% 2007 219 msf +5% 2008 164 msf -25% 2009 120 msf -27%
    • Market fundamentals were relatively healthy, but now turning.
    • Office employment drives vacancy rates:
    • suburban in 2009 Q1 up to 17.1%;
    • downtown in 2009 Q1 up to 12.3%
    • In 2006 and 2007: several major
    • high-rise projects reached
    • groundbreaking, including:
      • Goldman Sachs headquarters
      • Freedom Tower
      • 11 Times Square
    • Early 2008: more NYC WTC –
    • Towers 2, 3, 4
  • 28. U.S. Commercial Bldgs. -- Offices Large Projects
  • 29. U.S. Commercial Bldgs. -- Offices Office Construction Top 10 Metros -- ranked by new square feet Year 2007, %ch 07/06 1. Phoenix +17% 2. Washington DC -19% 3. Miami +32% 4. Atlanta +40% 5. Chicago +29% 6. Dallas-Ft. Worth -21% 7. Houston +14% 8. New York -36% 9. Seattle -4% 10. Orlando FL +43% Year 2008, %ch 08/07 1. New York +83% 2. Washington DC -2% 3. Houston +40% 4. Dallas-Ft.Worth -23% 5. Atlanta -39% 6. Seattle -7% 7. Phoenix -53% 8. Boston +52% 9. Baltimore +56% 10. Chicago -61%
  • 30. U.S. Commercial Bldgs. -- Offices Office Building Factors
    • Overbuilding is less than in past cycles.
    • But – cutbacks in office employment now affecting market fundamentals more severely.
    Forecast
  • 31. U.S. Manufacturing Buildings Plant construction in sq. ft. sliding; surge in dollars reversing. Surge of ethanol plants in 2006-2007 Huge refinery additions in 2008 Manufacturing Buildings 2006 83 msf +4% 2007 90 msf +8% 2008 74 msf -17% 2009 60 msf -19% Manufacturing Buildings 2006 $13.5 bil. +33% 2007 $19.9 bil . +47% 2008 $30.2 bil. +51% 2009 $18.2 bil. -39%
  • 32. U.S. Manufacturing Buildings Large Projects
  • 33. U.S. Institutional Buildings Public Buildings had strong 2007-2008; should stay close in 2009. 2008 Detention Facilities -48% Armories/Military +36% Courthouses -6% Police/Fire Stations +14% Post Offices -1% Total Public 2006 +2% 2007 +49% 2008 -4% 2009 -2%
    • GSA Stimulus List
    • New federal construction, including ports of entry, courthouses.
    • Examples:
    • $223 million to consolidate St. Elizabeth Campus in Wash. DC
    • $199 million for Nogales AZ Land Port of Entry
    • $116 million for U.S. courthouse in Austin TX.
    • Full and partial building modernization. Examples:
    • $226 million for Commerce Dept. headquarters in Wash. DC
    • $121 million for 50 United Nations Plaza in San Francisco CA
    • Green building “limited scope” projects
  • 34. U.S. Institutional -- Educational Bldgs. School construction still strong, but losing some momentum .
    • Numerous states in recent years
    • have passed school construction
    • bond measures, especially
    • California and Texas .
    • Major universities increased
    • capital spending plans – but,
    • now under re-evaluation.
    Educational Buildings 2006 230 msf +5% 2007 220 msf -4% 2008 223 msf +1% 2009 191 msf -14% 2007 2008 Primary, Jr. Highs -7% -5% High Schools -7% +10% Colleges/Univ. +11% +2% Libraries -5% -14% Laboratories +11% -19% Museums -26% +15% Comm. Colleges -0- +8% Vocational Schools -44% +40%
  • 35. U.S. Institutional – Educational Bldgs. Large Projects
  • 36. Educational Buildings Top 10 States -- ranked by sq. ft. of new starts U.S. Institutional -- Educational Bldgs. Year 2007, %ch 07/06 1. Texas +8% 2. Florida -15% 3. Georgia +46% 4. California -27% 5. Pennsylvania -24% 6. Ohio -32% 7. North Carolina -7% 8. New York +26% 9. Illinois -16% 10. Arizona -7% Year 2008, %ch 08/07 1. Texas +24% 2. California +22% 3. Georgia -6% 4. Florida -29% 5. Pennsylvania +17% 6. Ohio +3% 7. North Carolina +10% 8. South Carolina +72% 9. Alabama +49% 10. Illinois -15%
  • 37. U.S. Institutional -- Educational Bldgs. School renovation work already strong – But, no specific line item in final stimulus package; funding could come from State Fiscal Stabilization Fund.
  • 38. U.S. Institutional -- Healthcare Buildings Healthcare facilities reached new high in 2008.
    • Ongoing need to replace
    • aging facilities
    • Hospital vs. outpatient clinic dynamic
    • Growth of the elderly
    • population
    • Veterans Administration
    • hospital work will help
    • to ease slowdown.
    Healthcare Facilities 2006 110 msf +1% 2007 103 msf -6% 2008 111 msf +8% 2009 91 msf -18% 2007 2008 Clinics/ Nursing Homes +1% -6% Hospitals -16% +29%
  • 39. U.S. Institutional – Healthcare Buildings Large Projects
  • 40. U.S. Institutional – Healthcare Bldgs. Healthcare Buildings Top 10 States -- ranked by sq. ft. of new starts Year 2007, %ch 07/06 1. California +36% 2. Texas -39% 3. Florida -13% 4. Ohio +8% 5. Illinois -0- 6. Michigan +2% 7. Indiana -14% 8. Pennsylvania -27% 9. Arizona +11% 10. Minnesota +55% Year 2008, %ch 08/07 1. Texas +62% 2. Illinois +110% 3. Ohio +31% 4. California -34% 5. Florida -24% 6. Virginia +133% 7. Maryland +125% 8. Tennessee +78% 9. New York +81% 10. Wisconsin +40%
  • 41. U.S. Institutional Buildings Amusement/Recreational and Churches still declining. Amusement & Rec . 2008 Convention Centers +11% Sports Arenas +50% Theaters -32% Other (inc. theme parks ) -14% Total Amuse. & Rec. 2006 +8% 2007 -9% 2008 -10% 2009 -17% Religious Buildings 2006 34 msf -6% 2007 31 msf -10% 2008 27 msf -12% 2009 26 msf -3%
  • 42. Airport terminal work in sq. ft. expected to decline further, Renovation work should help dollars move upward. U.S. Institutional Buildings Airport Terminals 2006 $2.0 bil. +23% 2007 $1.8 bil . -9% 2008 $1.4 bil. -22% 2009 $1.6 bil. +12% Airport Terminals 2006 3.1 msf -28% 2007 2.2 msf -28% 2008 2.0 msf -8% 2009 1.9 msf -5%
  • 43. Highways and bridges slipped back in 2008; Gets substantial funding in 2009 from stimulus bill. U.S. Public Works -- Highways & Bridges
    • Fiscal 2008 appropriations –
    • federal-aid highway program up 5%,
    • including added funding for bridge
    • maintenance. Fiscal 2009: status quo.
    • Congress supplied $8 billion to
    • Highway Trust Fund in Sept.
    • Large boost in 2009 coming
    • from stimulus bill -- $27.5 billion.
    • Half of stimulus funding must be
    • designated by June 30.
    • Remaining half must be designated
    • by March 2010.
    • “ Use or lose it.”
    • This year and next – debate over new
    • transportation bill to replace
    • SAFETEA-LU.
    Highways, Bridges 2006 $51.0 billion +15% 2007 $53.6 billion +5% 2008 $52.7 billion -2% 2009 $60.8 billion +15%
  • 44. . U.S. Public Works – Mass Transit Mass transit work has also been on upward track, set to grow further.
    • Federal funding will rise under stimulus bill.
    • New York City area in recent years
    • has seen start of major projects,
    • including:
    • - East River Tunnel to connect
    • to Grand Central Terminal
    • - Second Avenue subway line
    • - No. 7 subway line extension
    • - Now – start of $8.7 billion
    • rail tunnel connecting
    • New Jersey and Manhattan
    • High-speed rail in California –
    • includes planned line from
    • Sacramento to southern CA.
    Mass Transit Starts 2006 $2.3 billion -26% 2007 $3.7 billion +64% 2008 $3.8 billion +3% 2009 $4.8 billion +25%
  • 45. U.S. Public Works -- Environmental Environmental public works slowed in 2008. In 2009 large boost coming from stimulus bill. Environmental Public Works 2006 $33.3 billion +6% 2007 $37.2 billion +12% 2008 $38.0 billion +2% 2009 $41.3 billion +9%
    • Projects generally take longer to reach construction start stage compared to transportation work.
    • Various “gap” analyses point
    • to aging infrastructure, and how
    • current funding is coming up short.
  • 46. U.S. Electric Utilities New electric utility starts soared in 2008. Electric Utilities 2006 $17.7 billion +125% 2007 $16.8 billion -5% 2008 $27.7 billion +65% 2009 $18.0 billion -35%
    • Energy Bills -- tax incentives for oil and gas production, electric utilities, transmission lines, etc.
    • Extended with financial rescue package.
    • Capacity utilization had climbed to 87% for full year 2007; has since retreated to 83% (late ’08).
    • Stimulus bill should provide boost --
    • incentives for alternative sources of
    • electricity generation. Also, push for “smart grid.”
  • 47. U.S. Total Construction Starts for 2009 Billions of Dollars 2005 2006 2007 2008 2009 Total Construction 670.3 689.6 639.1 552.0 457.7 +13% +3% -7% -14% -17% Single Family Housing 315.5 272.4 201.2 122.4 84.7 +12% -14% -26% -39% -31% Multifamily Housing 68.6 69.8 61.8 39.4 26.7 +36% +2% -12% -36% -32% Commercial Bldgs. 72.2 93.0 100.7 84.6 60.3 +7% +29% +8% -16% -29% Institutional Bldgs. 100.1 110.8 117.4 128.8 118.7 +12% +11% +6% +10% -8% Manufacturing Bldgs. 10.1 13.5 19.9 30.2 18.3 +26% +33% +47% +51% -39% Public Works 96.0 112.4 121.4 118.9 131.0 +9% +17% +8% -2% +10% Electric Utilities 7.9 17.7 16.8 27.7 18.0 +6% +125% -5% +65% -35%
  • 48. Single Family Housing, by Region
  • 49. Single Family Housing, by Region
  • 50. Nonresidential Building, by Region
  • 51. Nonresidential Building, by Region
  • 52. Points of Perspective – U.S. Construction
  • 53. Points of Perspective – U.S. Construction
  • 54. Agenda
    • Economic Outlook
      • The Environment -- Macroeconomic Picture
      • U.S. Construction Market Indicators and Sectors
      • Total Construction
    • Key Trends
  • 55. Using Trends to Capitalize on Opportunities
    • Strategic Planning in Allocation of Resources
    • Positioning for Long-Term Success
    • Leveraging Key Intelligence
  • 56.
    • Global Marketplace
    • Sustainability/Green Building
    • Renovation
    • Renewable Energy
    • Workforce
    • Climate Change
    • Water Efficiency
    • Public-Private Partnerships
    • Technology/BIM
    Future Trends Driving Industry Change
    • Interoperability
    • New Materials
    • Pre-fabrication & Modularization
    • Waste Management
    • Productivity
    • Transportation Infrastructure
    • Integrated Project Delivery
    • Innovation
    • Health and Wellness
    MAJOR TRENDS TRACKED BY MCGRAW-HILL
  • 57. Global Construction: $5.6 trillion * Source: IHS Global Insight, April 2009 *Numbers in 2005 USD$ Trend
  • 58. Largest Construction Markets by Value * in $US Billions Source: IHS Global Insight, October 2008 *Numbers in 2002 USD$, based on 2007 market
  • 59. Dubai Today: The Bubble has Burst
    • Global Financial Crisis Has Reached UAE
      • Tighter lending standards
      • Property values spiraling 30-50%
      • Developers citing significant profit losses
      • Layoffs due to cancelled or halted projects
      • Expats fleeing
      • Shifting focus to infrastructure projects for 2010
    • Abu Dhabi & Rest of Region Holding Steady
      • Per survey at Arabian World Construction Summit 2009, 2/3 of construction companies will shift to Abu Dhabi, Qatar and Saudi Arabia in 2009
  • 60. India Market: Poised for Growth
    • May 2009 National Elections – Results welcomed by Indian businesses
      • Overwhelming victory for centrist party  continued economic liberalization
      • Outlined priorities: combating global slowdown, economic growth
      • Policy reforms expected: project finance, government program management
      • 2009 GDP growth projected: >6%
    • Indian Financial Institutions hold steady in global downturn
      • Historically conservative lending has kept banks afloat
      • Foreign investment, slowed in H2-2008, expected to rebound
    • Construction a key growth sector
      • Urban development a priority area
      • Residential, hospitality and retail sectors showing signs of recovery
      • Steady growth expected in SEZs (Special Economic Zones), hospitality and education projects
      • $514B budgeted to meet infrastructure needs (2007 – 2012) *
    *Conversion Rate: $1 = INR 40
  • 61. China: Construction Opportunities Persist
    • Export-Driven Economy Hit Hard by Global Crisis
      • Manufacturing sector declining due to slowed global trade
      • 24 million unemployed
      • Increased costs for raw materials
    • Government Action Expected to Buoy Market
      • $586B stimulus package announced
      • Interest Rate cuts
      • Urbanization Leading to growing Consumer class; Retail sales up 21% in 2008
    • Current 5 Year Plan for Infrastructure
      • $350B budgeted for transportation up to 2010
      • Major infrastructure sectors focus on ports, railways and roads
    • China Construction Regions of Focus for 2009-2010
      • Hong Kong and Macau
      • Singapore and Algeria
  • 62. Silver Lining in the Down Economy = 2008 = 2013 Europe South America Asia Sub- Saharan Africa 36% 73% Percentage of Firms Largely Dedicated to Green (on over 60% of projects) from 2008-2013 Doubling 29% 56% Trend Sustainability/Green Building:
  • 63. Market Size $ (billions) 2005 2008 2013 In the U.S.: Increasing Market Opportunity Total Non-Res Residential Total Residential Total Non-Res Residential Non-Res Triple Double Triple Five Fold
  • 64. How is Green Building Affected by the Down Market? Less Affected No Difference More Affected According to U.S. Green Building Council Members
  • 65. Green: Part of the Corporate Mission & Growth Strategy Not Involved Only Regulatory Involvement Some Green Actions Green Is an Opportunity Value-Based Commitment to Sustainability Is Green a Part of Your Company’s Growth Strategy? 2009 – 50% Shift in Dedication to Green 2009 Preliminary expanding decreasing
  • 66. Corporate Sustainability Practices
    • Corporate Leaders:
      • Over one-third of companies (36%) are positioning themselves around green and sustainability, up from only 18% in 2007
      • Nearly all firms (95%) are undertaking at least some sustainability practices
    Source: The Greening of Corporate America SmartMarket Report , McGraw-Hill Construction, 2007; Bernstein, Harvey. Presentation. Construction Industry Trends. McGraw-Hill Companies Offices, New York, NY, May 2009. (based on 2009 market research data conducted by McGraw-Hill Construction in 2009)
  • 67. Market is Growing Despite Declining New Building Construction $244 Billion = Commercial & Institutional Market = Green Market Source: Commercial & Institutional Market Size: McGraw-Hill Construction, as of June 3, 2009. MHC Housing Starts data is similar to the Census Bureau, except that MHC defines single family housing as detached housing only. MHC includes townhomes in its multifamily data. Green Market Size: Commercial & Institutional Green Building: Green Trends Driving Market Change, McGraw-Hill Construction, 2008 $182 Billion $3 Billion $29 Billion $196 Billion
  • 68. Rapid Growth of LEED in Specs
  • 69.
    • Decreased Operating Costs: 8-9%
    • Increased Building Values: 7.5%
    • Improvement in ROI: 6.6%
    • Increased Occupancy: 3.5%
    • Rent Rise: 3.0%
    Perceived Business Benefits Increasing 13.6% 10.9% 9.9% 6.4% 6.1% 2005 2008
  • 70. Before 2006 2006 to 2008 Increasing State Government Influence Before 2006 Enacted 2006-2008 2005 57 2008 156 Number of Local Governments
  • 71. State & Local Legislative Trends
    • Trends
    • Requiring green building certification of both public and private buildings
    • Mandatory reporting of energy use/ Energy Star rating
    • Legislation
    • California AB32 “Global Warming Solutions Act of 2006”
      • Monitoring & reduction greenhouse gases
    • Washington DC “The Clean & Affordable Energy Act 2008”
      • Mandates Energy Star benchmarking and reporting
  • 72. Green Wins in Stimulus: Renovation Gets a Boost in Green
    • Much of Public Building $$ to Green Renovation Projects
      • GSA  $4.5 billion
      • DOD  $4.2 billion
      • VA  $1 billion
    • Tax breaks for Residential Energy Efficiency expanded & extended
    • Stimulus in Action:
      • Minnesota uses $148.6 million to renovate schools and public facilities
      • Philadelphia Housing Authority will use the $90 million in stimulus funds to completely renovate and provide energy upgrades for 300 houses and apartments
    Trend Renovation
  • 73. Big Focus on Renewable Energy
    • Investment in Renewable Energy & Conservation
      • "Smart-Grid" activities $11B
      • Energy efficiency grants $6.3B
      • Renewable energy loan guarantees $6B
    • Incentives: Manufacture of Green Energy Products
    • Stimulus Boosts Solar Marketplace:
      • NJ to add 120 MW solar power to brown fields and undeveloped properties
      • 1 Block Off the Grid, the solar group purchasing program is expanding
    Trend Renewable Energy
  • 74. Increases from Stimulus, Especially Green Jobs
    • Stimulus Bill Labor Specifics
      • $3.95 billion training and employment services
      • $500 million for job training in energy efficiency (out of above $$)
      • $250 million toward creation of Job Corps Centers
    • Stimulus Package Funding Creating Opportunities for Green Jobs
      • Federal Facilities Retrofit: Energy Efficiency
      • Renewable Energy: SmartGrid Investment Green Jobs
    • Stimulus in Action:
      • In Michigan, green jobs currently make up 3% private-sector jobs
        • Expected to double over next two years from Stimulus package and new energy-efficient legislation
    Trend Workforce:
  • 75. Transforming Construction
    • Increased frequency of natural disasters
    • Rising water level
    • ***************
    • Increase in tracking carbon footprints
      • Emergence of carbon credit exchanges (Chicago, Northeast, West)
      • EPA programs like Climate Leaders
      • Tracking and reporting carbon-footprint in GreenSource case studies
    • USGBC’s LEED 2009: Emphasizing credits impacting climate change
    Trend Climate Change:
  • 76. Water Efficiency
    • Penetration of water-efficient practices dramatically increasing over the next five years
    • Water use reduction important in today’s green building marketplace
      • Becomes even more important over the next five years
    • Owners highly committed to water-efficient practices and methods
    Trend
  • 77. Water Efficiency Involvement Growing Dramatically
    • Government & Education Buildings: Sectors with heaviest use of water-efficient technologies
    2008 Use: - A/E Firms = 35% - Owners = 30% 2013 Use: - A/E Firms = 51% - Owners = 50%
  • 78. Water Efficiency Rapidly Growing in Importance
    • Becoming one of the most important aspects of a green building
    • Correlation between saving water and saving energy
  • 79. Perceived Business Benefits from Water Efficiency in Buildings
    • Reduction Water Use: 15%
    • Decreased Energy Use: 10-11%
    • Reduction Operating Costs: 11-12%
    Currently
  • 80. Public-Private Partnerships
    • Very Few PPPs to date
      • Every State has its own PPP contract and requirement
      • Political environment not favorable
    • Market Opportunity is immense
      • More brownfield potential than any other emerging PPP market
      • Well publicized infrastructure investment needs
    From a demand standpoint, there isn’t a bigger marketplace on the planet, regardless of growth in Asia or elsewhere. — Manju Chandrasekhar Vice President Halcrow Consulting Business Group ” “ Trend
  • 81. Experience Leads to Positive Opinion of PPPs! None gave PPPs an unfavorable rating
  • 82. As Experience Increases, so Does Interest in Future PPPs Large percentage of ambivalent officials suggests opportunity Interest in PPPs Officials with PPP Experience Officials without PPP Experience
  • 83. Financial Crisis: Changing the Types of PPPs Pursued
    • Before the Crisis
    • Tolled Concessions or Monetizations
    • Long concession terms
    • High ratio of Debt to Equity (80/20)
    • During the Crisis
    • Availability Concessions
    • Shorter concession terms
    • Lower ratio of Debt to Equity (60/40)
    • After the Crisis
    • Higher Debt/Equity ratios will return
    • Asset monetization likely to increase due to underfunded local/state government pensions
  • 84. Traditional Information Exchange Interoperable Exchange Source: International Alliance for Interoperability, 2007 Trend Interoperability/BIM Structural Engineer HVAC Engineer City Constr. Manager Facilities Manager Building Owner Civil Engineer Architect Structural Engineer HVAC Engineer City Constr. Manager Facilities Manager Building Owner Civil Engineer Architect Structural Engineer HVAC Engineer City Constr. Manager Facilities Manager Building Owner Civil Engineer Architect Building Information Model (BIM)
  • 85. Making the Case: Shift to Digital Design Effort Time Traditional Design Digital Design Digital Design shifts the bulk of project work to the Design phase to help coordinate building systems and the project and manage project costs Source: International Alliance for Interoperability, 2007 Litigation Phase of Design Changes Cost Ability to cost control Design Design Devel Const Docs Construction
  • 86. BIM Enables Exchange/Access for All Relevant Information BIM Environmental Data Design Data Financial Data Specification Data Owner / Occupier Data Legal Data Sustainers Data Geospatial Data Source: buildingSMART alliance
  • 87. Adoption of BIM Increasing Over 2009 Architects Engineers Contractors Owners
  • 88. Measuring BIM ROI: Factors Considered
    • Top 4 most important factors:
      • Improved project outcomes
      • Better communication through 3-D visualization
      • Positive impact of winning projects
      • Higher productivity of personnel
  • 89. New Materials: Smarter, Greener
    • Biomimicry Example
    • HOK partnered with the Biomimicry Guild to enhance sustainable design.
    • Designed “skin cells” for buildings, which absorb sunlight, water and CO 2 to produce oxygen and collect water.
    • New project in India – mimics root structures of indigenous trees and plants to help anchor houses along steep mountain slope.
    Trend
  • 90. Prefabrication & Modularization
    • Benefits for the construction industry
      • Increase productivity
      • Enhance on-site safety
      • Reduce construction time
      • Reduced labor costs
      • Enhance durability and quality
      • Reduce environmental impact
    Prefabrication and modularization - off-site preconstruction or manufacturing of a component or complete system that is transported to the job site. Trend
  • 91. Prefab & Modularization: Building Texas Refineries in Maine!!
    • In 2007, Cianbro Co. converted an old paper mill in Brewer, ME into a modular facility
    • This $60m project reinvented the company, protects local trades and skilled labor
    • Maine-based company can now capitalize on the active energy infrastructure market
    • 4 modules, part of $7B refinery, were shipped by barge to TX in March 2009
    • CEO Peter Vigue now looking to grow green energy and interstate connectivity to boost ME economy
  • 92. Prefabrication Examples
    • SG Blocks
      • Code-engineered cargo shipping containers and site-ready modularized blocks
      • New Applications: “Home in a Box” & Hurricane-resistant temporary structures
      • Reuse = Sustainability
    • Dubai’s Dynamic Tower (formerly called DaVinci Tower)
      • World’s first prefabricated skyscraper
      • 90% to be built as modules in a factory
      • Minimize on-site labor costs, risk & time
  • 93. Stephen Jones Senior Director McGraw-Hill Construction US Construction Activity Outlook and Key Trends