Leadership & Strategy
1 st Quarter Update
Kiley Advisors LLC
ASHRAE Meeting
April 17, 2013

Leadership & Strategy
Looking Back
2012 Market Begins to Transform
• Employment Growth (119,000)
• Net Positive Absorption
• McGraw Hill Contracts $3.7B - $3.9B
• Surge Felt by All Parties

Leadership & Strategy
Looking Back
CBRE
Office (Q4)
Industrial (Q3)
Retail (Q3)
Multifamily (Q3)
Q4 SF Under
Construction
8.5 msf
3.8 msf
1.4 msf
12,000
Net Absorption
(YOY)
4.3 msf
1.5 msf
225k sf
3,195 units
• Office
• Houston recovered all square footage lost during recession by the end of 2011, so 4.3 msf is true growth
• Houston had the most absorption in a single year since
2006.
• Overall rates have increased by almost $1 and Class A rates have risen $2.25 over the year

Leadership & Strategy
Looking Back
• Home Sales
• Up 16.1% in 2012
• Auto Sales – 325,000 units
• Commercial Real Estate “White Hot”

Looking Ahead
International Picture
• Positive Growth – All Regions
Leadership & Strategy

Leadership & Strategy
A Deeper Look
International Picture
• China 8.6%; India 6.5%
• Western Europe, Greece and Spain
• Mongolia, Macau and Libya – The Stars

Looking Ahead
National Picture
• Fiscal Cliff Averted
• GDP Growth 2 – 2.5%
• 2M Jobs
• 7.5% Unemployment
Leadership & Strategy

Looking Ahead
National Picture
• Construction Starts Increasing
• McGraw Hill 6%
• FMI 8%
• Commercial 5%
• Home Building Returns
Leadership & Strategy

Leadership & Strategy
Looking Ahead
Texas and Houston
• Population and Employment Growing
• Shale Boom
• Cost of living remains reasonable
• All markets increasing

Shale Plays
Leadership & Strategy
Source: www.Angus.us

Leadership & Strategy
Reshoring
1-3M Jobs (2025-2030)
• Deloitte & Bain Studies

Trends/Issues
Leadership & Strategy

Trends/Issues
Leadership & Strategy

Leadership & Strategy
What Will Drive Construction?
• Job and Population Growth
• 85,000 jobs; 115,000 people
• Construction adding 16,200
• Oil and Gas Prices remain favorable
• Vacancy levels low
• Quick delivery/value building Tenant Financed/HR
Driven
• Financing available but tight parameters
• Panama Canal Expansion

Leadership & Strategy
What Will Drive Construction?
CBRE
Office (Q4)
Industrial (Q3)
Retail (Q3)
Multifamily (Q3)
Vacancy
(Total)
12.9%
5.2%
7.8%
89.6% occupancy
• EIA Projections
• WTI $88.29 per barrel average
• Henry Hub $3.49 average

Leadership & Strategy
Sector and Segment Highlights

Residential
• 27,500 new single family dwellings
• 10,000 new multi-family units
• Lot supply scarce?
Leadership & Strategy

The Industrial Picture
• 10 billion in Houston Area
• 56 billion from Corpus to Baton Rouge
• Significant for our workforce picture
Leadership & Strategy

Leadership & Strategy
Public Work - Commercial
• Harris County slightly up due to the new medical examiners building
• City of Houston down 23% from a year ago
• Port of Houston $200M
Department
Aviation Facilities
Fire Protection Facilities
General Government Facilities
Homeless & Housing Facilities
Library Facilities
Parks and Recreation Facilities
Police Facilities
Public Health Facilities
Solid Waste Management Facilities
Total
Amount
$135 M
$14.6 M
$2.8 M
$0
$7.2 M
$20.2 M
$10.5 M
$1.5 M
$3.6 M
$195.4M

Leadership & Strategy
Institutional
Institution
University of Houston
Lone Star College System
2013 Construction
$200M (subject to approval)
$200M
University of St. Thomas $0
Houston Community College $400M bond ($100M in 2013)

Leadership & Strategy
Churches
• $200M market historically
• Archdiocese of Galveston-Houston
• 28M over 10 projects
• Market seems to be flat or slightly down

Leadership & Strategy
Commercial and Light Industrial Segments
Private Work

Leadership & Strategy
Office & Light Industrial Picture
• More alive than any time in the past 30 years
• “Children of Exxon” – 40+ projects; 15 million square feet
• Employment growth plus changing requirements driving
• Quick delivery/value buildings
• Accommodating the knowledge worker
• Light Industrial picture
• Oil field companies
• Port expansion
• Vacancies small/rents improving

Leadership & Strategy
The Retail Picture
• Slow steady growth – 5% increase over 2012
• 2.27 million square feet in 2013
• New retail player
• Aldi (a discount concept)
• Sprouts (health food)
• Fresh Market (specialty produce market)
• Taking the Rice Epicurean space
• Healthcare taking retail space (Texas Children’s, Memorial Hermann,
Kelsey-Seybold)
• 2014-2015 should be boom years

Hotels
• Lots of activity that drives hotels
• Convention Activity
• Oil & Gas
• 2013 NBA All Star Game
• Dynamo Stadium
• RevPAR moving in the right direction
• 2011 - $90
• 2012 - $95
• 2013 - $100 anticipated
• Occupancy will continue to increase
• 2011 = 59.8%
• 2012 – 64%
• 2013 – 66%
Leadership & Strategy

Leadership & Strategy
Healthcare
• Mainly smaller community projects
• Memorial Hermann 4 POBS
• Bigger work being considered
• MD Anderson/ Methodist/ Memorial Hermann
• Perhaps some bio science expansions (new med center CEO)
• Concerns:
• St. Luke’s
• ACA

Leadership & Strategy
K-12
• (24 districts reporting)
District
Alief
Alvin
Cy-Fair
Budget
$5,000,000
$13,500,000
$87,000,000
HISD $148,000,000
Hull-Daisetta $350,000
Klein
Pasadena
Sheldon
$18,000,000
$87,000,000
$15,000,000
Splendora $10,500,000
Spring Branch $18,000,000
Total $402,350,000
• Anahuac, Channelview, Clear Creek*, Cleveland, Conroe, Damon, Danbury, Dayton, Deer Park,
Dickinson, Katy, La Porte, Santa Fe and Texas City all reported no construction in 2013
• 2012 had 28 districts reporting $749M in work
• The “caboose” of construction markets

Leadership & Strategy
Industry Issues
• Immigration Reform
• Margins and Fees remain low
• Bonding lines being cut/capped
• Concerns of Failures Still Exist- Overall Bonding
Environment Easing, However.. Texas Lures
• Skilled craft worker shortage
• Talent management remains critica l

Other Global Issues
Leadership & Strategy
Infrastructure - $57 Billion/2020
• Financing
• Infrastructure Banks
• Sovereign Wealth
• Pension
• Streamlining
• Standardizing
Mega Projects
• 0 in 2008
• 1004 in 2011
• Bonding/Impact on Resources

Longer Range?
• Perryman Population Projection
• 10.25M by 2040
• Scenario 2040
• 8-12M
Leadership & Strategy

2013 Forecast
• New Contracts Awards
• $4 Billion total expected in 2013
Leadership & Strategy

Leadership & Strategy
Sources
The information contained in this report was obtained from various publications and sources. Special thanks to CB Richard Ellis, American
Metro Studies, O’Connor & Associates, Accenture, ENR Magazine, Grubb
& Ellis, Greater Houston Partnership, Ken Simonson - National AGC economist, Industrial Info Resources, University of Houston Institute for
Regional Forecasting, Reed Construction Data, McGraw-Hill, PKF
Consulting, the Houston Chronicle, and other sources mentioned who supplied information and assistance for this forecast.
© Kiley Advisors, LLC