2008 McGraw-Hill
Construction Outlook
Cliff Brewis
Senior Director Editorial
McGraw-Hill Construction
U.S. Macroeconomic Picture
Change in Employment
Real GDP Growth - Quarterly
'07 Q4
Annualized Percent Change
Thousands of Workers
2007
95 K /mo.
450
+0.6%
8
2006
175 K /mo.
6
300
4
Jan. '08
-17 K
150
2
0
0
-2
-150
-4
01
02
03
04
05
06
07
-300
08
01
02
03
04
05
06
07
08
Price of Oil
Dollars per Barrel, West Texas Crude
Consumer Price Index
90
Percent Change, Year-over-Year
5
80
CPI
70
4
60
3
50
40
2
30
Core CPI
1
20
10
0
01
2
02
03
04
05
06
07
08
01
02
03
04
05
06
07
08
Default Rates
Seriously Delinquent Rate, Q4
Under 2.47%
2.48% to 3.47%
Over 3.47%
3
Source: Mortgage Bankers’ Association
U.S. Macroeconomic Picture
Tighter lending standards are a major constraint for 2008.
Survey of Bank Lending Officers
Survey of Bank Lending Officers
Percent Reporting Tighter Lending Standards --
Percent Reporting Tighter Lending Standards --
Commercial and Industrial Loans
90
75
75
60
60
45
45
30
30
15
15
0
0
-15
-15
-30
-30
90
4
92
94
96
98
00
02
04
Commercial Real Estate Loans
90
06
08
90
92
94
96
98
00
02
04
06
08
World Growth Remains Strong
Real GDP, % change
8
6
4
2
0
US
Canada
2004
5
Source: Global Insight and S&P
Eurozone
2005
2006
Japan
2007
Other Asia
2008
Latin America
2009
Points of Perspective -- U.S. Construction
Total Construction by Cycle
Cyclical Trough (T) = 100, Based on Constant Dollars
200
180
160
1975-82
1991-2008
140
1982-91
120
100
80
T
T+2
T+4
T+6
T+8
T+10
T+12
Years from Cyclical Trough
6
T+14
T+16
1991- 2005
Major U.S. Construction Sectors (Starts)
Single Family Housing
Billions of Dollars
2006
2007
-14%
-26%
Commercial Building
Billions of Dollars Starts
Construction
120
350
2006
2007
+27% +7%
100
275
80
200
60
125
40
50
20
90
92
94
96
98
00
02
Institutional Building
Billions of Dollars Starts
Construction
04
06
2006
08
2007
+10% +5%
120
92
94
96
98
00
02
04
06
08
Public Works
2006
2007
Billions of Dollars
+17%
+6%
140
100
120
80
100
60
80
40
60
40
20
90
7
90
92
94
96
98
00
02
04
06
08
90
92
94
96
98
00
02
04
06
08
U.S. Single Family Housing
Single Family Housing
Supply of Single Family Housing
Thousands of Dwelling Units
Number of M onths
1,700
10
1,500
8
1,300
6
1,100
4
900
2
90
700
86
88
90
92
94
96
98
00
02
04
06
98
00
02
04
06
08
Percent Change, Based on Median Price
14
12
10
8
6
4
2
0
-2
11
10
9
8
7
6
2007
+0.2%
90
5
92
96
New Home Prices
Percent
90
94
08
Mortgage Rates - Weekly
8
92
94
96
98
00
02
04
06
08
92
94
96
98
00
02
04
06
08
Default Rates
Seriously Delinquent Rate, Q4
Under 2.47%
2.48% to 3.47%
Over 3.47%
9
Source: Mortgage Bankers’ Association
U.S. Multifamily Housing
Multifamily Housing
Thousands of Dwelling Units
1,000
800
600
400
200
0
86
10
88
90
92
94
96
98
00
02
04
06
08
U.S. Multifamily Housing
Top 10 Metros -- ranked by new dwelling units
Year 2006,
Year 2007,
%ch 07/06
1. New York
-1%
1. New York
-35%
2. Miami
-22%
2. Chicago
-21%
3. Chicago
+32%
3. Atlanta
-1%
4. Los Angeles
+23%
4. Seattle
+18%
5. Dallas-Ft.Worth +28%
5. Miami
-51%
6. Washington DC -20%
6. Orlando FL
7. Atlanta
-20%
7. Washington DC -19%
8. Orlando FL
+21%
8. Houston
+14%
9. Seattle
+39%
9. Los Angeles
-42%
10. Houston
11
%ch 06/05
-6%
10. Boston
-6%
-8%
U.S. Commercial Bldgs. -- Stores
Stores and Shopping Centers
Millions of Square Feet
350
300
250
200
150
100
86
12
88
90
92
94
96
98
00
02
04
06
08
Borrowing Against Your Home
$700
$600
$500
$400
$300
$200
$100
$0
1994
1996
1998
2000
Home equity cashed out
13
Source: Freddie Mac
2002
2004
2006
Home equity loans
2008
U.S. Commercial Bldgs.-- Hotels
Hotels
Millions of Square Feet
110
90
70
50
30
10
86
14
88
90
92
94
96
98
00
02
04
06
08
U.S. Commercial Bldgs. -- Hotels
Top 10 Metros -- ranked by new square feet
Year 2006,
%ch 06/05
1. Las Vegas
2. Atlantic City
+++%
%ch 07/06
1. Las Vegas
2. Orlando
-65%
+190%
3. San Diego
+228%
3. Los Angeles
+35%
4. Phoenix
+531%
4. Chicago
+26%
5. Dallas-Ft. Worth +116%
5. Washington DC +132%
6. New York
+45%
6. New York
7. Los Angeles
+136%
7. San Antonio
-5%
+201%
8. Chicago
+35%
8. Atlanta
+65%
9. New London CT
+++%
9. Phoenix
-33%
10. Miami
15
+866%
Year 2007,
+58%
10. Dallas-Ft. Worth -35%
U.S. Commercial Bldgs. -- Offices
Office Buildings
Millions of Square Feet
425
350
275
200
125
50
86
16
88
90
92
94
96
98
00
02
04
06
08
U.S. Commercial Bldgs. -- Offices
Office Building Factors
Change in Office Employment
U.S. Office Vacancy Rates
Thousands of Workers
1,250
25
Source: CB Richard Ellis
1,000
20
750
500
Suburban
15
250
10
0
-250
5
-500
-750
0
86 88 90 92 94 96 98 00 02 04 06 08
17
Downtown
86 88 90 92 94 96 98 00 02 04 06 08
U.S. Commercial Bldgs. -- Offices
Top 10 Metros -- ranked by new square feet
Year 2006,
%ch 06/05
%ch 07/06
1. Washington DC
+29%
1. Phoenix
+24%
2. New York
+62%
2. Washington DC
-19%
3. Dallas-Ft. Worth
+33%
3. Atlanta
+36%
4. Phoenix
-12%
4. Chicago
+24%
5. Miami
+17%
5. Miami
+17%
6. Chicago
+157%
6. Dallas-Ft. Worth -31%
7. Atlanta
+27%
7. Houston
-4%
8. Houston
+50%
8. Seattle
-7%
9. Los Angeles
10. Seattle
18
Year 2007,
-2%
+335%
9. Charlotte NC
10. New York
+82%
-49%
U.S. Macroeconomic Picture
State & Local Governments
Federal Budget Surplus/ Deficit
Year-End Balance, Percent of Expenditures
Billions of Dollars, 2007 -- CBO Projections
300
200
100
0
12
-100
-200
-300
-400
-500
6
10
8
4
2
0
90
19
92
94
96
98
00
02
04
06
08
90
92
94
96
98
00
02
04
06
08
U.S. Institutional -- Educational Bldgs.
Educational Buildings
Primary, Jr. Highs
Millions of Square Feet
2007 YTD
+1%
-7%
300
High Schools
+15%
-6%
250
Colleges/Univ.
+6%
+5%
200
Libraries
-1%
-7%
-24%
+20%
+2%
-7%
+43%
-12%
Vocational Schools +35%
-50%
Laboratories
150
Museums
100
Comm. Colleges
50
86
20
2006
88
90
92
94
96
98
00
02
04
06
08
U.S. Institutional -- Educational Bldgs.
Student Enrollments, Grades K-8
U.S. Higher Education Enrollments
Millions of Students
Millions of Students
45
22
42
20
39
18
36
16
14
33
12
30
10
1985
1990
1995
2000
2005
2010
2015
Student Enrollments, Grades 9-12
18
Millions of Students
16
14
12
10
1985
21
1990
1995
2000
2005
2010
2015
1985
1990
1995
2000
2005
2010
2015
U.S. Institutional -- Educational Bldgs.
Educational Buildings
Top 10 States -- ranked by sq. ft. of new starts
Year 2006, %ch 06/05
22
Year 2007 YTD, %ch 07/06
1. Texas
+2%
1. Texas
+5%
2. Florida
+22%
2. Florida
-1%
3. California
+12%
3. Georgia
+33%
4. Ohio
+18%
4. California
-12%
5. Pennsylvania +61%
5. North Carolina +3%
6. Georgia
6. Ohio
-4%
-33%
7. North Carolina +8%
7. Pennsylvania -27%
8. Illinois
+2%
8. Illinois
+2%
9. Virginia
+31%
9. New York
+9%
10. Arizona
+63%
10. Arizona
-12%
U.S. Institutional -- Healthcare Buildings
Healthcare Facilities
Millions of Square Feet
90
Clinics
75
60
45
30
Hospitals
15
0
86
23
88
90
92
94
96
98
00
02
04
06
08
U.S. Institutional – Healthcare Bldgs.
Healthcare Buildings
Top 10 States -- ranked by sq. ft. of new starts
Year 2006, %ch 06/05
1. California
+32%
+7%
2. Florida
-31%
-6%
3. Texas
-42%
1. Texas
+40%
2. Florida
3. California
4. Indiana
+50%
4. Ohio
-1%
5. New York
+49%
5. Indiana
-4%
-38%
6. Illinois
-4%
6. Ohio
24
Year 2007 YTD, %ch 07/06
7. Pennsylvania
-3%
7. Michigan
-6%
8. Illinois
-1%
8. Arizona
-3%
9. Michigan
-4%
9. Tennessee
10. Maryland
+190%
+24%
10. Washington +16%
U.S. Institutional Buildings
Public Buildings
Amusement & Rec. Buildings
Millions of Squaare Feet
Millions of Squaare Feet
75
115
60
95
45
75
30
55
15
35
0
86
25
88
90
92
94
96
98
00
02
04
06
08
15
86
88
90
92
94
96
98
00
02
04
06
08
U.S. Institutional Buildings
Airport Terminals
Religious Buildings
60
Millions of Sq. Ft.
50
8.0
40
6.0
30
4.0
20
2.0
10
0.0
84 86 88 90 92 94 96 98 00 02 04 06 08
26
10.0
Millions of Sq. Ft.
84 86 88 90 92 94 96 98 00 02 04 06 08
U.S. Manufacturing Buildings
Manufacturing Buildings
Capacity Utilization
Millions of Square Feet
Percent
89
250
86
200
83
150
80
100
77
50
74
0
71
86
27
88
90
92
94
96
98
00
02
04
06
08
90
92
94
96
98
00
02
04
06
08
U.S. Public Works -- Highways & Bridges
Highways and Bridges
Billions of Dollars
60
50
40
30
20
10
86 88 90 92 94 96 98 00 02 04 06 08
28
U.S. Public Works -- Environmental
Sewers, Dams/ Water Resources
Water Supply Systems
Billions of Dollars
Billions of Dollars
18
Sewers
15
15
12
12
9
9
6
6
3
Water Resources
0
3
0
86 88 90 92 94 96 98 00 02 04 06 08
86 88 90 92 94 96 98 00 02 04 06 08
Dams, Water Resources
29
U.S. Total Construction Starts for 2008
Billions of Dollars
Total Construction
Single Family Housing
Multifamily Housing
Commercial Bldgs.
Institutional Bldgs.
Manufacturing Bldgs.
Public Works
Electric Utilities
30
2004
2005
2006
2007
2008
593.2
670.2
684.7
625.4
579.0
+12%
+13%
+2%
-9%
-7%
282.7
315.5
272.4
201.4
169.3
+17%
+12%
-14%
-26%
-16%
50.5
68.7
69.9
62.1
53.1
+23%
+36%
+2%
-11%
-14%
67.3
72.3
91.9
97.9
91.6
+14%
+7%
+27%
+7%
-6%
89.1
99.9
109.9
115.3
117.6
-1%
+12%
+10%
+5%
+2%
8.0
10.1
13.4
16.6
15.0
+17%
+26%
+33%
+23%
-10%
88.2
95.9
112.4
119.3
120.0
+6%
+9%
+17%
+6%
+1%
7.3
7.8
14.7
12.8
12.4
-18%
+6%
+89%
-13%
-3%
Questions?
Cliff Brewis
Senior Director Editorial
McGraw-Hill Construction
Cliff_brewis@mcgraw-hill.com
31