San Francisco
                                                                                       Market Insight


    ...
McGraw-Hill Construction
       Market leadership for more than a century…

                                              ...
Trends
                  US & Global
                    – Sustainability/Green Building          Job Creation
           ...
What’s the score?
     Jobs…employment declines are slowing, but still present
               Change in Employment
       ...
What’s the score?
  Capital…
  Signs of loosening, but on what terms?!
                   Survey of Bank Lending Officers ...
Other points of concern…
  What About Inflationary Pressures?


                                                          ...
What’s the score?
       Recovery…

                 Real GDP Growth - Quarterly                                          ...
Trends
                  US & Global
                                           Not yet
                    – Sustainabili...
Trends
                  US & Global
                    – Sustainability/Green Building
                    – Interoperab...
What about the stimulus?!
      $787.2 Billion
      ARRA is and will have direct and notable impact on
      construction...
What’s the hold-up?
   Procurement underway…some bottlenecks…



    New GSA Contracts
    Starting To Surge
    GSA contr...
Is it really happening?
   Procurement underway…numbers show acceleration




      According to McGraw-Hill
      Constru...
Is it really happening?
   Water projects lagging…buy America creating challenges


            EPA – quick allocation to ...
Yes, ARRA funded construction is happening!
   Pulled from the regional headlines…

  •10/14/2009 Hungry Contractor Bids L...
Yes, ARRA funded construction is happening!
   ARRA dollars are flowing, projects are accelerating…
  “Stimulus” projects ...
Total Construction Starts
       National & West
       regional 2009-2010
        Total Construction Starts
        (Bill...
Residential bottoming out in 2009,
  Early signs point to an upturn in 2010…
                                             ...
Highway and Bridge Construction
        Continued improvement Under Stimulus
                                Construction ...
Environmental Public Works
       Expect improvement from ARRA after slow start
                                   Environ...
Other Public Works Will Benefit
  Transit/Rail Improving nationally, mixed regionally
                                    ...
Electric Utilities Will Stay
      at Relative High Volume with some Stimulus

                                           ...
Renewable energy
   Big focus on renewable energy
          Investment in Renewable Energy &
          Conservation
      ...
Energy Generation
      further points of perspective
             LT Outlook for Electric Power, Gas and
             Com...
Energy Generation
      large projects…
              Value                                                               ...
Public Buildings, While a Small Category,
     Stimulus boosting activity; holding steady in West
                        ...
Renovation
    Green Wins in Stimulus:
    Renovation Gets a Boost in Green

          Much of Public Building $$ to Green...
Healthcare Facilities
     2010 rebound after modest 2009 decline
                                                        ...
Educational Buildings Will Settle Back,
    State budgets curtailing K-12; Higher-ed holding
                             ...
Office Construction in Retreat,
    Upturn was measured this time, however…
                                              ...
Store Construction in Sharp Correction,
       As goes consumer spending, so goes…

           Stores and Shopping Centers...
Hotel Construction in Sharp Correction,
       Similar story…
                                                            ...
The bottom line…
       2010 West, across the three categories…

                         Residential                     ...
Nationally…
       Total Construction Starts bottoming 2009, improving 2010
        Billions of Dollars
                  ...
West Index of growth…
       As goes the West so goes the US
        Billions of Dollars
                                 ...
A new cycle emerging?
       The cyclical nature of business & construction

                                      Total C...
The longer the down cycle…
         Replacement demand + Industry Confidence
          US Construction over the next 25 ye...
Trends
                  US & Global
                    – Sustainability/Green Building
                    – Interoperab...
Trends
                  US & Global
                    – Sustainability/Green Building
                         “Overall...
What’s the score?
     Innovation…
     Unprecedented levels entering construction marketplace
                           ...
Present Trends…
  Numerous factors impacting industry direction / growth
            Global Markets & Influences
         ...
Project attributes…
      Green Construction tripling in the United States by 2013

                  140


              ...
Project attributes…
 Green is growing despite declining new building
 construction
                                       ...
Project Attributes…
   Corporate sustainability practices continue to rise



                                            ...
Project Attributes…
  Building green is proving to be smart business
   Perceived Advantages of Building Green from AEC fi...
Project Attributes…
Water efficiency rapidly growing in importance



    • Becoming one of the                           ...
The correlation between growth & innovation…
       Focus on productivity gains is driving innovation
                    ...
Design & Construction Productivity…
    The case for Digital Design & Construction has been made

                        ...
Design & Construction Productivity…
     And now adoption is increasing
                                    Adoption of BI...
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
Western US Construction Market Insights.Ppt
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Western US Construction Market Insights.Ppt

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Very interesting presentation. Credit to Rusty Sherwood, McGraw-Hill and SMPS for a great event.

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Western US Construction Market Insights.Ppt

  1. 1. San Francisco Market Insight US Construction 2010 Regional projections key trends & business implications Is there an upside (to this “downsized” market)?! Rusty Sherwood I Vice President January 21, 2009 I San Francisco, CA 1 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  2. 2. McGraw-Hill Construction Market leadership for more than a century… History Founded by James H. McGraw, Frederick W. Dodge and Clinton Sweet Over 100 Years Ago Leading provider of construction information Today Founded over 100 Connecting Serves One Million Customers Within the $4.6 years ago Trillion Global Construction Community, Helping Key industry alliances people and products Industry Enterprises Save Time, Money and Energy Over 1,000,000 to projects… customers through the four business essentials Serving the private construction information Find Sell & Market Get Smarter over 100 Seen & Founded Get sector, government and years ago Selected Opportunity Smarter financial communities MHC Integrated • Key industry alliances MHC MHC Network® MHC Over 1,000,000 Research & Media: & Dodge Performance customers Analytics Print, Online, Serving private sector, Database Tools government, financial Events community 2 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  3. 3. Trends US & Global – Sustainability/Green Building Job Creation – Interoperability and BIM – Workforce/Labor – Innovation Capital – Materials – Project Delivery Methods Innovation 3 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  4. 4. What’s the score? Jobs…employment declines are slowing, but still present Change in Employment Jan-June '09 Jul-Oct. '09 Thousands of Workers -560,000/ mo -217,000/ mo 450 300 150 As of November 2009… 0 -150 • 10.2% unemployment, heading -300 7.3 million jobs lost Jan.'08- Oct. '09 for 10.? by mid-’10 -450 -600 • Rate of descent is slowing -750 • 6.8+ million jobs lost in current 01 02 03 04 05 06 07 08 09 10 recession Unemployment Rate Oct. '09 10.2% • 18.5% construction Percent 11 unemployment vs 8% 2008 10 9 8 7 6 5 4 3 01 02 03 04 05 06 07 08 09 10 4 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  5. 5. What’s the score? Capital… Signs of loosening, but on what terms?! Survey of Bank Lending Officers Delinquency Rate, Percent Percent Reporting Tighter Lending Standards -- Commercial Real Estate Loans Commercial Real Estate Loans 14 90 75 12 60 10 45 8 30 6 15 0 4 -15 2 -30 0 90 92 94 96 98 00 02 04 06 08 10 90 92 94 96 98 00 02 04 06 08 10 For prime residential and commercial mortgages some 40% of banks said standards would be tougher than normal “for the foreseeable future”. James Cooper, Business Outlook Businessweek 9/7/2009 “Canary in the coalmine” … commercial real estate loan defaults are accelerating; significant volume maturing in 2010 5 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  6. 6. Other points of concern… What About Inflationary Pressures? Drop in Materials Prices Bottoming Out BUT Fierce Competition cutting margins Constructions Costs well below 2008 Composite measure of building material prices slipped another 0.5% in November www.enr – eCover 24 September 2009 6 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  7. 7. What’s the score? Recovery… Real GDP Growth - Quarterly The recession is expected to be '09 Q3 Annualized Percent Change the longest and deepest since the +3.5% 1930s 8 6 Fiscal stimulus will support the 4 recovery 2 But recovery is likely to be slow 0 because of financial markets and -2 switch to higher savings -4 If financial markets lock up again -6 01 02 03 04 05 06 07 08 09 10 And, home prices continue to fall GDP Pattern: And, oil prices continue to rise History Forecast The recession could be longer and 2007 2008 2009 2010 deeper With the risk of a “lost decade” +2.1% +0.4% -2.6% +1.8% similar to Japan in the 1990s What shape will the recovery be? Source: David Wyss Chief Economist Standard & Poors October 2009 V or U or L or W ? (Probably U-shaped.) 7 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  8. 8. Trends US & Global Not yet – Sustainability/Green Building – Interoperability and BIM Job Creation – Workforce/Labor – Innovation – Materials Improving Capital – Project Delivery Methods Emerging Innovation 8 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  9. 9. Trends US & Global – Sustainability/Green Building – Interoperability and BIM Stimulus – Workforce/Labor n. pl. stim·u·li (-l ) 1. Something causing or regarded as causing a response. – Innovation 2. An agent, action, or condition that elicits or accelerates a physiological or – Materials psychological activity or response. 3. Something that incites or rouses to action; an incentive: "Works which were in – Project Delivery Methods themselves poor have often proved a stimulus to the imagination" (W.H. Auden). 9 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  10. 10. What about the stimulus?! $787.2 Billion ARRA is and will have direct and notable impact on construction activity “ …the most sweeping economic recovery package in U.S. history… President Barack Obama Signed Denver, CO ” Expect more stimulus construction activity in 2010-2011! 10 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  11. 11. What’s the hold-up? Procurement underway…some bottlenecks… New GSA Contracts Starting To Surge GSA contract awards top $1 billion, but lawmakers and AGC criticize other agencies’ slow pace 08/05/2009 By Tom Ichniowski and Pam Hunter As the American Recovery and Reinvestment Act approaches its sixth month on the books, $158M GSA project: Commerce HQ overhaul the General Services Administration’s $5.5- billion ARRA-funded program to build or Awarded to: Gilbane & Grunley Const upgrade scores of federal buildings suddenly has begun to take off. But critics continue to GSA $1.5B in ARRA awards to date complain that other agencies are not turning their construction stimulus money into jobs- Another $4B to be allocated producing contracts fast enough. 11 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  12. 12. Is it really happening? Procurement underway…numbers show acceleration According to McGraw-Hill Construction’s dB of ARRA projects… – States have allocated $18B of highway aid – $8.0B of total construction projects funded by ARRA from March thru July – Representing 6% of total general building construction & infrastructure starts – Yielding $137B in starts, 32% down over prior year vs $129B 36% down without ARRA – 93% of ARRA projects started are infrastructure 12 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  13. 13. Is it really happening? Water projects lagging…buy America creating challenges EPA – quick allocation to states for wastewater treatment and sewer projects Hold up at state level Only $100M outlayed – out of $8 Billion Buy America clause possible challenge in purchase of manufactured products like membranes – Emerged as top issue for Canada – Special meeting between Canadian Prime Minister Harper and Obama – U.S. Chamber of Commerce concerned about backlash 13 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  14. 14. Yes, ARRA funded construction is happening! Pulled from the regional headlines… •10/14/2009 Hungry Contractor Bids Low To Win California Freeway Job – ENR •10/14/2009 Brownfield Stimulus Funds Jump- Start San Francisco Redevelopment Project – ENR •10/14/2009 Rural California City Leverages ARRA Funds To Build Better Treatment Plant – ENR •10/02/2009 OPINION High-Speed Rail Authority Applies for Federal Stimulus Funds – California Construction •10/02/2009 Calif. Seeks $4.7B from Feds for High- Speed Rail Line – ENR •09/26/2009 L.A. Seeks Fed Funds for Rail Projects – ENR •09/24/2009 Skanska Says It Won Big Calif. Stimulus Highway Job – ENR •09/22/2009 Calif. to Apply for $1.28B for High- Speed Rail – ENR Free access to news & analysis http://construction.com/stimulus/ http://construction.com 14 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  15. 15. Yes, ARRA funded construction is happening! ARRA dollars are flowing, projects are accelerating… “Stimulus” projects in “Network” as of 12/15/09… Total ARRA Total Value Region Shovel Ready Recovery Stim ulus Recovery Tracked Tracked ENC 1850 3497 5347 $19,547,742,835 ESC 537 1404 1941 $16,020,693,734 MATL 951 1344 2295 $36,113,868,967 NENG 1391 753 2144 $10,444,137,793 PNW 277 1142 1419 $5,983,001,711 PSW 1361 2110 3471 $34,380,472,312 SATL 1344 2839 4183 $31,111,659,361 WNC 1273 1546 2819 $12,311,485,907 WSC 716 1962 2678 $18,639,633,715 US 9700 16597 26297 $184,552,696,335 Nationally $184.5B in ARRA + Shovel Ready value 3,975 “funded” projects in planning 6,517 “funded” projects in construction 6.112 “funded” projects out for bid 15 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  16. 16. Total Construction Starts National & West regional 2009-2010 Total Construction Starts (Billions of Dollars) National West Total Construction Total Construction Millions of Dollars Millions of Dollars 800,000 200,000 700,000 600,000 150,000 500,000 400,000 100,000 300,000 +11% +14% 200,000 50,000 100,000 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 total starts $419B, - 25% from 2008 2009 W starts $96.4B, - 21.8% from 2008 2010 total starts $466B, + 11% from 2009 2010 W starts $109.9B, + 14% from 2009 16 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  17. 17. Residential bottoming out in 2009, Early signs point to an upturn in 2010… Residential (Billions of Dollars) Single Family Housing Multifamily Housing Millions of Dollars Millions of Dollars 100,000 20,000 80,000 15,000 60,000 +39.3% 10,000 40,000 +12.2% 20,000 5,000 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $22.6B, -18.4% from 2008 2009 W starts $3.67B, -61.1% from 2008 2010 W starts $31.5B, +39.3% from 2009 2010 W starts $4.1B, +12.2% from 2009 2010 West Single Family construction tracking ABOVE national Multi Family construction tracking BELOW national Inventories are settling back – starts and sales are recovering!! Prices nationally are down 31% from their peak Stimulus benefits via HUD; guidelines announced May for $980M devel block grants 17 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  18. 18. Highway and Bridge Construction Continued improvement Under Stimulus Construction Starts Including Stimulus Effect (Billions of Dollars) Bridges Streets Millions of Dollars Millions of Dollars 4,000 +14.7% 12,000 +8.7% 3,500 10,000 3,000 2,500 8,000 2,000 6,000 1,500 4,000 1,000 500 2,000 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $2.84B, +4.2% from 2008 2009 W starts $9.7B, -5.1% from 2008 2010 W starts $3.26B +14.7% from 2009 2010 W starts $10.5B, +8.7% from 2009 2010 West Bridge construction tracking ABOVE national Highway construction tracking BELOW national California #2 in $ starts for ‘09 Highway & Bridges construction Debate continues on trans bill to replace SAFETEA-LU 18 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  19. 19. Environmental Public Works Expect improvement from ARRA after slow start Environmental Public Works Construction Starts (Billions of Dollars) Water Sewers Millions of Dollars Millions of Dollars 5,000 6,000 5,000 4,000 +24% 4,000 3,000 3,000 2,000 +20.3% 2,000 1,000 1,000 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $2.95B, -34.3% from 2008 2009 W starts $3.1B, -22.8% from 2008 2010 W starts $3.55B, +20.3% from 2009 2010 W starts $3.84B, +24% from 2009 2010 WEST Environmental construction tracking ABOVE national 19 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  20. 20. Other Public Works Will Benefit Transit/Rail Improving nationally, mixed regionally Other Public Works, Including Transit/Rail (Billions of Dollars) Other Nonbuilding Millions of Dollars +18.7% 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $6.38B, +2.5% from 2008 2010 W starts $7.57B, +18.7% from 2009 2010 West Other Public Works construction tracking ABOVE national 20 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  21. 21. Electric Utilities Will Stay at Relative High Volume with some Stimulus Electric Utilities, Including SmartGrid (Billions of Dollars) Utilities Millions of Dollars 8,000 7,000 6,000 5,000 4,000 3,000 +16% 2,000 1,000 0 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $2.99B, -54.5% from 2008 2010 W starts $3.47B, +16% from 2009 2010 West Energy construction tracking ABOVE national Energy Bills – tax incentives for oil and gas production, electric utilities, transmission lines, etc. extended with financial rescue packages 21 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  22. 22. Renewable energy 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 Expect more support: invented AND manufactured in US 22 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  23. 23. Energy Generation further points of perspective LT Outlook for Electric Power, Gas and Communications is positive – LT demand for power will rise – Need for transmission upgrades to enable renewable energy use – Requirements of new renewable portfolio standards – $23 to $24B by 2013 Pending legislation to limit carbon dioxide emissions major factor in present / future generation methods The “renaissance” of nuclear still in infancy 3 to 4 years to review, evaluate and approve a new reactor High cost / high value and…long construction cycle 23 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  24. 24. Energy Generation large projects… Value Start Date $ Millions City State Year: Mo 1,500.0 John W Turk Jr Coal Fueled Power Plant Fulton AR 2009:01 864.0 West County Energy Ctr. Nat.Gas Power Plant Ph 3 Palm Beach FL 2009:02 619.0 580 MW Bear Garden Power Station New Canton VA 2009:06 600.0 Coolidge Generating Plant Coolidge AZ 2009:08 500.0 PSNH Scrubber Facility & WWTP Bow NH 2009:02 476.0 Martin Solar 75 MW Solar Thermal Steam Gen. Facility Indiantown FL 2009:02 440.0 Wind Turbine Electricity Generating Plant Not Available IA 2009:02 300.0 Papalote Creek 180 MW Wind Farm Taft TX 2009:02 300.0 Natural Gas Fired Combined Cycle Plant Unit 4 Kissimmee FL 2009:04 250.0 PrairieWinds Wind Power Plant Minot ND 2009:08 233.6 Wind Farm Wellsboro PA 2009:08 200.0 Desoto Next Generation Solar Energy Center Not Available FL 2009:03 200.0 Crane Creek Wind Farm Riceville IA 2009:05 170.0 Beech Ridge Wind Farm - Phase 1 Rupert WV 2009:04 Expansion in fossil-based gen continues, but alternative methods are gaining steam 24 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  25. 25. Public Buildings, While a Small Category, Stimulus boosting activity; holding steady in West Public Buildings (Billions of Dollars) Government Service Buildings Millions of Dollars 4,000 +6.9% 3,500 3,000 2,500 2,000 1,500 1,000 500 0 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $3.33B, +26.9% from 2008 2010 W starts $3.56B, +6.9% from 2009 2010 West Public Building construction starts tracking BELOW national levels 25 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  26. 26. Renovation 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 26 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  27. 27. Healthcare Facilities 2010 rebound after modest 2009 decline Healthcare Construction Starts (Billions of Dollars) Healthcare Facilities Millions of Dollars 7,000 +7.9% 6,000 5,000 4,000 3,000 2,000 1,000 0 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $5.72B, FLAT from 2008 2010 W starts $6.18B, +7.9% from 2009 2010 West Healthcare construction tracking ABOVE national levels Hospital chains hit hard by tight credit conditions; healthcare reform debate creates uncertainty $430M Kaiser Permanente Hospital Fontana, CA 2009:03 27 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  28. 28. Educational Buildings Will Settle Back, State budgets curtailing K-12; Higher-ed holding Educational Buildings (Billions of Dollars) Educational Buildings Dormitories Millions of Dollars Millions of Dollars 16,000 1600 14,000 1400 12,000 1200 10,000 1000 8,000 800 6,000 -3% 600 -11% 4,000 400 2,000 200 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $9.42B, -33.9% from 2008 2009 W starts $987M, -31.7% from 2008 2010 W starts $9.14B, -3% from 2009 2010 W starts $881M -11% from 2009 2010 West Education construction starts tracking BELOW national levels Major universities increased capital spending plans – but now under re-evaluation 20 states have implemented cuts to K-12 education 28 states have implemented cuts to public colleges & universities 28 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  29. 29. Office Construction in Retreat, Upturn was measured this time, however… Office Construction Starts (Billions of Dollars) Office Buildings Millions of Dollars 10,000 8,000 6,000 - 1.8% 4,000 2,000 0 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $4.04B, -32% from 2008 2010 W starts $3.97B, -1.8% from 2009 2010 West Office construction starts tracking ABOVE national levels Tight credit conditions causing more and more projects to be deferred Rents and vacancies deteriorating in difficult economic climate New York #2 nationally in 2009 new square feet 29 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  30. 30. Store Construction in Sharp Correction, As goes consumer spending, so goes… Stores and Shopping Centers Warehouses (Billions of Dollars) (Billions of Dollars) Retail Warehouse Millions of Dollars Millions of Dollars 8,000 4,000 7,000 3,500 6,000 3,000 5,000 2,500 4,000 2,000 - 2% 3,000 1,500 2,000 1,000 1,000 - 6.5% 500 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $2.78B, -43.7% from 2008 2009 W starts $1.15B, -55.5% from 2008 2010 W starts $2.6B, -6.5% from 2009 2010 W starts $1.13B, -2% from 2009 2010 West Retail construction starts tracking BELOW national levels Impact of slow retail sales – reduced store openings, store closings US consumer expected to remain cautious in near term 30 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  31. 31. Hotel Construction in Sharp Correction, Similar story… Hotels and Motels (Billions of Dollars) Hotels Millions of Dollars 8,000 7,000 6,000 5,000 4,000 3,000 - 7.3% 2,000 1,000 0 86 88 90 92 94 96 98 00 02 04 06 08 10 2009 W starts $1.49B, -46.2% from 2008 2010 W starts $1.38B -7.3% from 2009 2010 West Hotel construction starts tracking ABOVE national levels Negatives: weak economy, reduced business travel, hotel/casino overbuilding 31 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  32. 32. The bottom line… 2010 West, across the three categories… Residential Nonresidential Non-building Total Residential Total Nonresidential Total Nonbuilding Millions of Dollars Millions of Dollars Millions of Dollars 120,000 70,000 40,000 60,000 35,000 100,000 50,000 30,000 80,000 25,000 40,000 60,000 20,000 30,000 15,000 40,000 20,000 10,000 20,000 10,000 5,000 0 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 86 88 90 92 94 96 98 00 02 04 06 08 10 Overall 2010 vs 2009 +35.6% Overall 2010 vs 2009 -1.9% Overall 2010 vs 2009 +16.5% $35.6B in starts forecasted $39.1B in starts forecasted $35.1B in starts forecasted A low base but turning upward Tracking at US growth %’age Benefiting from ARRA Tracking above US avg Tracking above US avg 32 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  33. 33. Nationally… Total Construction Starts bottoming 2009, improving 2010 Billions of Dollars 2005 2006 2007 2008 2009 2010 Total Construction 670.3 689.6 639.2 554.9 418.9 466.2 +13% +3% -7% -13% -25% +11% Single Family Housing 315.5 272.4 201.2 122.4 95.3 126.2 +12% -14% -26% -39% -22% +32% Multifamily Housing 68.6 69.8 61.4 39.7 18.2 21.1 +36% +2% -12% -35% -54% +16% Commercial Bldgs. 72.2 93.0 100.8 84.5 48.2 46.1 +7% +29% +8% -16% -43% -4% Institutional Bldgs. 100.1 110.8 117.6 129.3 110.2 111.1 +12% +11% +6% +10% -15% +1% Manufacturing Bldgs. 10.1 13.5 20.4 28.9 10.9 9.4 +26% +33% +51% +41% -62% -14% Public Works 96.0 112.4 121.7 120 119.7 136.3 +9% +17% +8% -1% -0- +14% Electric Utilities 7.9 17.7 17.8 30.2 16.5 16.0 +6% +125% +1% +70% -45% -3% 33 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  34. 34. West Index of growth… As goes the West so goes the US Billions of Dollars 2005 2006 2007 2008 2009 2010 Total Construction M-H 670.3 689.6 639.2 Construction Starts 554.9 418.9 466.2 +13% +3% -7% -13% -25% +11% Indexed, 1991 = 100 Single Family Housing 400 315.5 272.4 201.2 122.4 95.3 126.2 +12% -14% -26% -39% -22% +32% 350 Multifamily Housing 68.6 69.8 61.4 39.7 18.2 21.1 300 +36% +2% -12% -35% -54% +40% 250 United States Commercial Bldgs. 72.2 93.0 100.8 84.5 48.2 46.1 200 +7% +29% +8% -16% -43% -4% West 150 Institutional Bldgs. 100.1 110.8 117.6 129.3 110.2 111.1 100 +12% +11% +6% +10% -15% +1% Manufacturing Bldgs. 50 10.1 13.5 20.4 28.9 10.9 9.4 +26% +33% 88 90 92 94 96 98 00 +51% 02 04 +41% 06 08 -62% 10 -14% Public Works 96.0 112.4 121.7 120 119.7 136.3 +9% +17% +8% -1% -0- +14% Electric Utilities 7.9 17.7 17.8 30.2 16.5 16.0 +6% +125% +1% +70% -45% -3% 34 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  35. 35. A new cycle emerging? The cyclical nature of business & construction Total Construction Activity by Cycle Cyclical Trough (T) = 100, Based on Constant 2000 Dollars 190 1991-2009 175 160 1975-1982 145 1982-1991 130 115 100 85 T T+2 T+4 T+6 T+8 T+10 T+12 T+14 T+16 T+18 Years from Cyclical Trough 35 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  36. 36. The longer the down cycle… Replacement demand + Industry Confidence US Construction over the next 25 years… 50% of Building Stock Will Be New – Built After 2000 New Building Stock Will Represent 127 Billion Additional Sq Ft Most Growth Will Be in the South and West ENR Construction Industry Confidence Index… 752 AEC firms; inception 4/2009; 1 to 100 scale; quarterly updates 44% predict market improvement next 12 to 18 mths raising CICI to 30 Segments with highest CICI: power (59), transportation (57), water (56), healthcare (53) & education (49) Segments with lowest CICI: retail (17), office (19), hospitality (23) multi-family (25) …the greater the “spring load” 36 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  37. 37. Trends US & Global – Sustainability/Green Building – Interoperability and BIM – Workforce/Labor Not if… – Innovation – Materials – Project Delivery Methods but different construction hemlines & trends 37 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  38. 38. Trends US & Global – Sustainability/Green Building “Overall, industry specific – Interoperability and BIM – Workforce/Labor innovation does not follow, – Innovation – Materials creates expansion” but – Project Delivery Methods of capitalism” “The Instability - Joseph Schumpeter – 1928 38 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  39. 39. What’s the score? Innovation… Unprecedented levels entering construction marketplace Areas of Innovation with Greatest Many global firm leaders believe Expected Impact on Future Business innovation in technology and processes will help solve their New Construction Safety & Health Methods & Processes biggest concerns of Workforce 13% 29% Advances in technology are fueling alternative delivery Other Green 16% Building methods and sustainable “smart” 16% design All bringing the potential of greater value to the building owner Intelligent Building & Infrastructure Pre-Fabrication 13% & Modularization 13% 39 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  40. 40. Present Trends… Numerous factors impacting industry direction / growth Global Markets & Influences – China impact – Emergence of India + Middle East Project Attributes – Sustainability/Green Building – Renovation – Renewable Energy – Water Efficiency – New Materials Project Design & Construction Influences Productivity – Workforce – Interoperability/BIM – Pre-fabrication & Modularization Alternative Construction Financing – Public-Private Partnerships Infrastructure requirements 40 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  41. 41. Project attributes… Green Construction tripling in the United States by 2013 140 120 Upper Market Size Lower Market Size 100 Triple Market Size $ (billions) 80 60 Double Triple 40 Five Fold 20 0 Total Non-Res Residential Total Non-Res Residential Total Non-Res Residential 2005 2008 2013 CONSTRUCTION TRENDS 41 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  42. 42. Project attributes… Green is growing despite declining new building construction = Commercial & Institutional Market $245 Billion = Green Market $29 Billion $182 Billion $208 Billion $3 Billion 2005 2006 2007 2008 2009 CONSTRUCTION TRENDS Source: Commercial & Institutional Market Size: McGraw-Hill Construction, as of January 27, 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. 42 McGraw-Hill Construction Confidential. All information presentedBuilding: Green Trends Driving Market Change, McGraw-Hill Construction, 2008 Green Market Size: Commercial & Institutional Green © McGraw-Hill Construction, 2009. All rights reserved.
  43. 43. Project Attributes… Corporate sustainability practices continue to rise 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 CONSTRUCTION TRENDS 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) 43 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  44. 44. Project Attributes… Building green is proving to be smart business Perceived Advantages of Building Green from AEC firms and Owners 2005 2008 Decreased Operating Costs: 8-9% 13.6% Increased Building Values: 7.5% 10.9% Improvement in ROI: 6.6% 9.9% Increased Occupancy: 3.5% 6.4% Rent Rise: 3.0% 6.1% Increased revenue flows: 71% 77% Increased profits: 59% 61% Advantages are Increasing Over Time! “When Aardex developed the Signature Centre (LEED certified), the market sat at 15% CONSTRUCTION TRENDS vacancy… all 300,000 sqft were leased 5 months before completion – and for nearly double the going rents of surrounding buildings.” 44 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved. Source: The Denver Post 9/8/2009
  45. 45. Project Attributes… Water efficiency rapidly growing in importance • Becoming one of the Next 5 Years Currently most important aspects of a green building Energy 91% efficiency 96% • Correlation beginning to emerge between saving water and saving Water use 69% energy reduction 85% CONSTRUCTION TRENDS 45 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  46. 46. The correlation between growth & innovation… Focus on productivity gains is driving innovation Increases in Productivity Broadly Influence Society By Improving Standards and Creating Income 46 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  47. 47. Design & Construction Productivity… The case for Digital Design & Construction has been made Digital Design shifts the bulk of project work to the Design phase to help coordinate building systems s ge and the project and manage project costs Abili an Ch ty t n ig es o D co f t o ntr Effort os ol Digital Traditional C co Design st Design Litigation Phase Design Design Devel Const Docs Construction CONSTRUCTION TRENDS Time Source: International Alliance for Interoperability, 2007 47 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.
  48. 48. Design & Construction Productivity… And now adoption is increasing Adoption of BIM Increasing Over 2009 % of Total Projects Expected % of Total Projects 2008 2009 18% 35% 1-15% 38% 45% 16-30% 31-59% 20% >60% 10% 17% 17% Architects Engineers Contractors Owners 23% 54% 35% 43% 38% 41% 43% 46% 12% 60%+ 8% 20% 15% 8% 31-59% 11% 16% 11% 21% 10% 14% 22% 10% 16-30% 20% 35% 45% 41% 1-15% 12% 36% 32% 33% 21% 12% 12% CONSTRUCTION TRENDS 2008 2009 2008 2009 2008 2009 2008 2009 48 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2009. All rights reserved.

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