Fresh off the Press, Vermeulens Beyond Estimation Market Outlook – Q1 2015. Price increases for 2015 are trending towards 8% depending on location.

1. Since 1972
Service Beyond Estimation
®
North America’s Construction Economist
Vermeulens.com
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s
Beyond Estimation Market Outlook

2. 2
AIA Continuing Education
Vermeulens is a Registered Provider with The American Institute of Architects
Continuing Education Systems. Credit earned on completion of this program
will be reported to CES Records for AIA members. Certificates of Completion
for non-AIA members are available on request.
This program is registered with the AIA/CES for continuing professional
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construed to be an approval or endorsement by the AIA of any material of
construction or any method or manner of handling, using, distributing, or
dealing in any material or product. Questions related to specific materials,
methods, and services will be addressed at the conclusion of this
presentation.
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t
Service Beyond EstimationService Beyond Estimation

3. 3
Beyond Estimation Market Outlook®
Learning Objectives
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s
Cost Reconciliation Tracker
 Present trends in median trade costs from January 2009 – Current
Macro Economics
 Understand the Macro Economic impacts on Construction Volume and Cost
Forecast
 Forecast for Future Construction Costs
Procurement Strategy
 In light of current market conditions, recommendations on project procurement

4. 4
Beyond Estimation Market Outlook®
Where We Are…
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

5. 2000 - Current
5
120
130
140
150
160
170
180
190
200
210
220
230
240
250
260
270
VCC Construction Cost Index
Construction Cost Trendline (3.1%)
CPI
CPI Trendline (2.7%)
Beyond Estimation Market Outlook®
Vermeulens Construction Cost Index
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

6. 7,500
8,500
9,500
10,500
11,500
12,500
13,500
14,500
15,500
16,500
17,500 GDP(Billions)
2.7% Trend Line
6
High/Low
-4.3%
Low/Current
+13.3%
Growth Rate of 2.1% for
the last 5 Years
Beyond Estimation Market Outlook®
US Real GDP
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

7. 7
Code Group VCC CM CM-VCC VCC CM CM-VCC
01 Allowances $1,156,805 $2,422,380 $1,265,575 $2,651,790 $2,672,730 $20,940
02 Site Work $2,636,810 $3,773,428 $1,136,618 $2,918,155 $2,882,279 ($35,876)
03 Concrete $5,840,270 $5,065,081 ($775,190) $5,065,361 $5,065,081 ($280)
04 Masonry $1,547,241 $1,767,385 $220,144 $1,615,526 $1,609,395 ($6,130)
05 Metals $17,945,452 $17,804,383 ($141,069) $15,675,089 $15,577,004 ($98,085)
06 Wood/Plastic $3,172,732 $3,831,671 $658,939 $3,694,276 $3,600,999 ($93,277)
07 Thermal/Moisture Protection $2,903,951 $3,046,873 $142,922 $3,099,398 $3,086,080 ($13,319)
08 Doors/Windows $17,219,666 $15,756,579 ($1,463,087) $15,214,307 $15,299,926 $85,619
09 Finishes $9,635,770 $9,399,224 ($236,546) $10,135,975 $10,137,758 $1,782
10 Specialties $1,335,983 $1,163,012 ($172,971) $1,410,825 $1,418,709 $7,884
11 Equipment $1,127,700 $1,852,358 $724,658 $1,692,000 $1,693,414 $1,414
12 Furnishings $784,846 $302,393 ($482,453) $559,342 $573,596 $14,255
13 Special Construction $300,000 $148,575 ($151,425) $150,000 $148,575 ($1,425)
14 Conveying Systems $4,858,875 $7,212,645 $2,353,770 $5,963,888 $5,993,138 $29,250
15 Mechanical $28,949,381 $35,232,816 $6,283,436 $29,127,187 $29,493,221 $366,034
16 Electrical $15,451,608 $16,700,277 $1,248,669 $16,476,313 $16,451,613 ($24,700)
17 Permits & Fees $19,075,543 $20,452,111 $1,376,568 $20,043,336 $20,051,467 $8,130
18 Contingencies $16,841,472 $14,102,030 ($2,739,443) $15,684,472 $15,697,176 $12,704
19 Enabling $22,704,456 $22,704,458 $2 $22,704,458 $22,704,458 $0
20 Total Construction Costs $173,488,558 $182,737,674 $9,249,116 $173,881,696 $174,156,616 $274,920
Beyond Estimation Market Outlook®
Cost Reconciliation Tracker®
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

8. 8
Beyond Estimation Market Outlook®
Cost Reconciliation Tracker®
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

9. Typical Institutional Project – Direct Trade Cost
Recession Decline -14.0%
2011 +2.0%
2012 +4.0%
2013 +5.0%
2014 +6.0%
Assumes trade-weighted average of individual percentage trade reduction
9
Beyond Estimation Market Outlook®
Construction Cost Impact
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

10. 10
http://www.turnerconstruction.com/cost-index
Recession
Decline
-13.2%
2011 + 2.1%
2012 + 2.6%
2013 + 4.7%
2014 + 4.4%
2015 +2.3%
-14%
+2.0%
+4.0%
+5.0%
+6.0%
Beyond Estimation Market Outlook®
Turner Construction Cost Index
Turner Construction Cost Index
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t
+3.0%

11. 950
675 675 750 750
1150
1075 1050
1150 1250
1300
1000
650
950
1300
0
250
500
750
1000
1250
1500
1750
2000
2250
2500
2750
3000
3250
3500
3750
High Growth Market Adjustment Cost Recovery High Growth
Markup
Labor
Material
3,400
2,750
2,375
2,850
3,300
11
Beyond Estimation Market Outlook®
Structural Steel Pricing
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

12. 12
Beyond Estimation Market Outlook®
Contingency
Project Contingency and Escalation Recommendations
Design Contingency
Preliminary Design 10% to 15%
Schematic Design 6% to 9%
Design Development 3% to 6%
Contract Documents 0% to 3%
Construction Contingency 3% to 5%
Escalation - based on the Market Outlook and Local index 3 to 9%
Bidding Contingency 0% to 5%
Project Contingency (Owner) 5% - 15%
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

13. 100
120
140
160
180
200
220
240
260
280
ENR TURNER VERMEULENS
13
Beyond Estimation Market Outlook®
What’s Next?
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

14. 80
90
100
110
120
130
140
Nominal US Dollar Broad Index
14
-26% +18% -15% +24%
Beyond Estimation Market Outlook®
US Dollar Risk Hedge
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

15. 0
2,000
4,000
6,000
8,000
10,000
12,000
NYSE
15
+123% -58% +154%
US Dollar Risk Hedge
Beyond Estimation Market Outlook®
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

16. 16
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
80
90
100
110
120
130
140
Beyond Estimation Market Outlook®
US Dollar and NYSE
US Dollar and NYSE
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

17. 0
5
10
15
20
25
30
35
40
45
50
Dow Jones Commodity Index
17
+168% -57% +72%
Beyond Estimation Market Outlook®
US Dollar Impact on Commodities
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s
-50%

18. 0
5
10
15
20
25
30
35
40
45
50
80
90
100
110
120
130
140
18
Beyond Estimation Market Outlook®
US Dollar Impact on Commodities
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

19. 19
Jan-00Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15
0
2,000
4,000
6,000
8,000
10,000
12,000
10,000
10,500
11,000
11,500
12,000
12,500
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
GDP (Billions) and NYSE
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

20. 20
2/05/002/05/002/06/002/06/002/06/002/07/002/07/002/08/002/08/002/08/002/09/002/09/002/09/002/10/002/10/002/10/002/11/00
0
2,000
4,000
6,000
8,000
10,000
12,000
128,000
129,000
130,000
131,000
132,000
133,000
134,000
135,000
136,000
137,000
138,000
139,000
140,000
141,000
142,000
Thousands
8.7 M Jobs 12.2M Jobs
245,000 / month
Beyond Estimation Market Outlook®
US Employment (Thousands) and NYSE
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

21. 21
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
128,000
129,000
130,000
131,000
132,000
133,000
134,000
135,000
136,000
137,000
138,000
139,000
140,000
141,000
142,000
BANK ANNOUNCEMENT
21.6 M Jobs 22.4 M Jobs 22.5 M Jobs 21.9M Jobs
Beyond Estimation Market Outlook®
US Employment (Thousands) Public vs Private
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

22. 22
01/31/00 02/02/00 02/04/00 02/06/00 02/08/00 02/10/00
90,000
95,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
90,000
95,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
Thousands
Beyond Estimation Market Outlook®
US Total Employment (Thousands)
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

23. 23
01/01/01 09/28/03 06/24/06 03/20/09 12/15/11 09/10/14 06/06/17
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
145,000
150,000
155,000
160,000
6.2M
6.2M
245,000 / month
Beyond Estimation Market Outlook®
US Total Employment (Thousands)
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

24. 24
0
50
100
150
200
250
300
350
400
450
205K AVG
Beyond Estimation Market Outlook®
US Total Employment (Thousands)
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

25. 25
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
1
2
3
4
5
6
7
8
9
10
Reserve Assets (trillion) Unemployment Rate (%)
Beyond Estimation Market Outlook®
Federal Asset Monthly Purchase
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

26. 26
Beyond Estimation Market Outlook®
US Job Growth
02-Jan-87 24-Jun-92 15-Dec-97 07-Jun-03 27-Nov-08 20-May-14
500
5,000
-200
-100
0
100
200
300
400
6 Month Average Job Growth NYSE Vermeulens
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

27. 0
50
100
150
200
250
300
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
High/Low
Total
-8.7M (-6%)
Construction
-2.3M (-30%)
Low/Current
Total
+12.2M (+9%)
Construction
+948K (+18%)
27
Beyond Estimation Market Outlook®
US Construction Employment (Thousands)
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

28. 3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
28
Beyond Estimation Market Outlook®
Construction Employment and Percent of Total
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

29. 29
Beyond Estimation Market Outlook®
Construction Labor Utilization Rate
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

30. 30
Beyond Estimation Market Outlook®
Construction Labor Utilization Rate
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

31. National
(-30% + 18%)
Denver
(-27% + 43%)
Houston
(-17% + 18%)
Dallas
(-21% + 22%)
Boston
(-25% + 28%)
31
Beyond Estimation Market Outlook®
Regional Construction Labor (Thousands)
140
150
160
170
180
190
200
210
220
Dallas
140
150
160
170
180
190
200
210
220
Houston
60
70
80
90
100
110
120
Boston
60
70
80
90
100
110
120
Denver
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

32. National
(-30% + 18%)
San Jose
(-35% + 43%)
New York
(-19% + 19%)
Seattle
(-38% + 38%)
San Francisco
(-33% + 32%)
32
Beyond Estimation Market Outlook®
Regional Construction Labor (Thousands)
200
220
240
260
280
300
320
340
360
380
400
New York
60
70
80
90
100
110
120
130
140
San Francisco
50
60
70
80
90
100
110
120
130
140
Seattle
20
25
30
35
40
45
50
55
60
San Jose
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

33. National
(-30% + 18%)
Philadelphia
(-25% + 15%)
Portland
(-31% + 24%)
Detroit
(-42% + 40%)
Baltimore
(-21% + 11%)
33
20
30
40
50
60
70
80
Portland
Beyond Estimation Market Outlook®
Regional Construction Labor (Thousands)
40
50
60
70
80
90
100
110
120
Detroit
50
55
60
65
70
75
80
85
90
95
100
Baltimore
60
70
80
90
100
110
120
130
140
Philadelphia
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

34. National
(-30% + 18%)
Minneapolis
(-38% + 33%)
Los Angeles
(-35% + 24%)
Washington DC
(-27% + 7%)
Atlanta
(-38% + 21%)
34
Beyond Estimation Market Outlook®
Regional Construction Labor (Thousands)
25
35
45
55
65
75
85
95
105
Minneapolis
80
90
100
110
120
130
140
150
Atlanta
100
110
120
130
140
150
160
170
180
190
200
Washington DC
150
170
190
210
230
250
270
290
Los Angeles
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

35. National
(-30% + 18%)
Chicago
(-33% + 10%)
San Diego
(-42% + 21%)
Miami
(-49% + 26%)
Phoenix
(-55% + 23%)
35
60
80
100
120
140
160
180
200
220
Phoenix
50
70
90
110
130
150
170
190
Miami
Beyond Estimation Market Outlook®
Regional Construction Labor (Thousands)
100
120
140
160
180
200
220
240
Chicago
50
55
60
65
70
75
80
85
90
95
100
San Diego
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

36. 36
0.0
5.0
10.0
15.0
20.0
25.0
30.0
01-Jan-0102-Jan-0203-Jan-0304-Jan-0404-Jan-0505-Jan-0606-Jan-0707-Jan-0807-Jan-0908-Jan-1009-Jan-1110-Jan-1210-Jan-1311-Jan-1412-Jan-1513-Jan-16
5000
5500
6000
6500
7000
7500
8000
Employment
Unemployment Rate
Beyond Estimation Market Outlook®
Construction Employment and Unemployment Rate
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

37. High/Low
Total -37%
Infra -11%
Res -66%
Non Res -41%
Low/Current
Total +40%
Infra +29%
Res +62%
Non Res +37%
37
Beyond Estimation Market Outlook®
US Construction Volume
0
250
500
750
1,000
1,250
Put In Place Construction Annualized Billions)
Non Residential Residential Infrastructure
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

38. 0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
Put In Place Construction (% of GDP)
Non Residential Residential Infrastructure
Peak
Total 8.2%
Infra 2.0%
Res 4.7%
Non Res 3.0%
Current
Total 6.5%
Infra 2.0%
Res 2.3%
Non Res 2.2%
38
Beyond Estimation Market Outlook®
US Construction Volume
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

39. 05-Feb-00 05-Feb-00 06-Feb-00 06-Feb-00 06-Feb-00 07-Feb-00 07-Feb-00 08-Feb-00 08-Feb-00 08-Feb-00 09-Feb-00 09-Feb-00 09-Feb-00 10-Feb-00 10-Feb-00 11-Feb-00 11-Feb-00
0
2,000
4,000
6,000
8,000
10,000
12,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
39
Beyond Estimation Market Outlook®
Construction Volume (Millions) and NYSE
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

40. 40
Indicator Bottom Increase
Equities March 2009 +154%
Commodities February 2009 - 14%
GDP Q2 2009 2.1% Annual
Employment February 2010 12.2M
Non Res Volume February 2011 + 37%
Beyond Estimation Market Outlook®
Economic Summary
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

41. 41
Beyond Estimation Market Outlook®
Forecast
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

42. 42
2008 Peak to Bottom 2010: - 14.0%
Change in 2011: + 2.0%
Change in 2012: + 4.0%
Change in 2013: + 5.0%
Change in 2014: + 6.0%
+ 5% + 7%2015: + 10%
+ 4% + 6%2016: + 9%
Beyond Estimation Market Outlook®
Forecast
+ 3% + 5%2017: + 8%
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

43. 150.0
170.0
190.0
210.0
230.0
250.0
270.0
43
Fitout Procurement
Core & Shell Procurement
+0.6% +8.5% per year -14.0%
Beyond Estimation Market Outlook®
Procurement Strategy BWH
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

44. 44
Recommendations
 Change pricing models to reflect higher construction cost
escalation at schematic design
 Remove MEP & Interiors from Core/Shell package
 During a high inflationary market – cost advantage of early
packages
Beyond Estimation Market Outlook®
Procurement Strategy BWH
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

45. 45
150.0
170.0
190.0
210.0
230.0
250.0
270.0
Enabling Package (Slurry Wall &
Excavation)
100% CD GMP
Early Steel, Elevators and
Design Assist Enclosure
+0.6% +8.5% per year -14.0%
Procurement Strategy Dana Farber
Beyond Estimation Market Outlook®
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

46. 46
Recommendations
 Distinct early packages (no cross pollination)
 Detailed concept design options to marry program and budget
 Timely decision making at conceptual design – avoid escalation
 Use of bidding contingency to mitigate market risk
 GMP 100% Documentation = lowest cost
Beyond Estimation Market Outlook®
Procurement Strategy Dana Farber
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

47. 220
Construction Trendline (3.1%)
CPI Trendline (2.7%)
High
Low
Vermeulens Index
47
SD DD CD
Enabling
Structure & Envelope
Interiors & MEP
Concept Design
Beyond Estimation Market Outlook®
Procurement Strategy
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

48. 48
When Is CM @ Risk Recommended
Fast track projects
•no time for 100% Contract Documents prior to starting
construction
Very busy construction markets
CM relationships required to get subcontractors to bid on
your project
Financing requires a GMP in order to proceed
Complicated renovations or additions interfacing with operating
facilities
Beyond Estimation Market Outlook®
CM @ Risk
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

49. 49
Beyond Estimation Market Outlook®
CM @ Risk
15%
10%
5%
0%
>
>
>
>
1. GMP at DD • 10-15% premium
• End costs vary depending on completeness
of documents, relationship of Owner to CM,
cost control process
2. GMP at CD • 5-10% premium
• Proponents provide estimate of costs and
commit to general requirements and fee
3. Modified Bid • 0-5% premium
• Proponents provide GMP based on
completed construction documents
4. Lump-Sum Bid • 6-8 pre-qualified general contractors submit
lump-sum bids for complete scope of work
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

50. 50
What Are The Added Costs
Beyond Estimation Market Outlook®
CM @ Risk
Construction Contingency 2% to 5%
General Conditions & Requirements 2% to 5%
Higher Service Level
Higher Insurance Levels
Fees 0% to 1%
Sub Contractor Selection/Pricing 2% to 5%
High Level of Service & Quality
Highly Qualified
Scope Holds
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

51. Strategic Early Procurement Packages
Escalation is extremely variable across the country
Evaluate Delivery Options and GMP Timing
Watch Job Creation for Continued Growth
51
Beyond Estimation Market Outlook®
Recommendations
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s

52. Track Record
Project Volume & Benchmarking
Consensus Approach in Reconciliation
Market Outlook
Conceptual Estimating
Trusted Advisor
Beyond Estimation Market Outlook®
Why Vermeulens
N o r t h A m e r i c a ’ s C o n s t r u c t i o n E c o n o m i s t

53. Beyond Estimation Market Outlook
Service Beyond Estimation
North America’s Construction Economists
Vermeulens.com
B o s t o n w T o r o n t o w D a l l a s w D e n v e r w L o s A n g e l e s
Thank You
Since 1972
®