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2005 Outlook forU.S. Construction
November 12, 2004
Cliff BrewisSenior Director EditorialMcGraw-Hill Construction
U.S. Macroeconomic Picture
Change in Employment
-450
-300
-150
0
150
300
450
600
98 00 02 04
Thousands of Workers
Real GDP Growth - Quarterly
-4
-2
0
2
4
6
8
98 00 02 04
Annualized Percent Change
Consumer Price Index
0
1
2
3
4
5
98 00 02 04
Year-over-year Percent
30 Year T-Bonds3 Month T-Bills
CPI
Core CPI
The economy is working through the mid-2004 “soft patch”
Status at State Level
Recession
Flat
Expanding
Issues Impacting Recovery Pattern of Economic Expansion – Annual GDP2001 2002 2003 2004 2005
+0.8% +1.9% +3.0% +4.3% +3.5%
Jobless Recovery – Productivity
– Off Shore Employment
– Oil/Health Care
Cost of Money– Deficit
– Inflation
International– Iraq/Middle East
– China/India
Increasing Costs of Material – Tied to China/India
– Impacts different Building Sectors
U.S. Construction Market Indicators
150
250
350
450
550
650
90 92 94 96 98 00 02 04 06
M-H Construction Starts 2003 +5%
2004 +9%Billions of Dollars
400
575
750
925
1100
90 92 94 96 98 00 02 04 06
Construction Put in Place 2003+5%
2004+9%Billions of Dollars
4.2
4.7
5.2
5.7
6.2
6.7
7.2
90 92 94 96 98 00 02 04 06
Construction Employment 2003 -0-
2004 +3%Millions of Workers
Colorado
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Major U.S. Construction SectorsBy major sector, the construction start pattern has diverged. Single Family Housing
50
100
150
200
250
300
90 92 94 96 98 00 02 04
Billions of Dollars
2003 2004+13% +14%
Income Properties
40
55
70
85
100
115
130
90 92 94 96 98 00 02 04
Billions of Dollars 2003 2004 +6% +11%
Institutional Building
30
45
60
75
90
105
90 92 94 96 98 00 02 04
Billions of Dollars2003 2004 -0- +1%
Public Works
30
45
60
75
90
105
90 92 94 96 98 00 02 04
Billions of Dollars2003 2004 -6% +4%
U.S. Single Family HousingConstruction continues to be robust ...
Single Family Housing Starts
2002 1.304 million units +7%2003 1.417 million units +9%
2004 1.530 million units +8%
2005 1.425 million units -7%
Sales of New Single Family Homes
400
600
800
1000
1200
1400
90 92 94 96 98 00 02 04
Thousands
Single Family Housing
500
720
940
1160
1380
1600
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Thousands of Units
Mortgage Rates - Weekly
5
6
7
8
9
10
11
90 92 94 96 98 00 02 04
Percent
U.S. Single Family Housing
Ratio: U.S. Median Home Price to Median Income
2.5
3.0
3.5
4.0
4.5
5.0
70 75 80 85 90 95 00 05
Consumer Confidence
25
50
75
100
125
150
90 92 94 96 98 00 02 04 06
Monthly, 1985 = 100
Supply of Single Family Housing
2
4
6
8
10
90 92 94 96 98 00 02 04 06
Number of Months
Colorado: Single Family
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S. Income Properties -- Stores
Store Construction2002 257 msf - 8%2003 283 msf +10%
2004 290 msf +3%
2005 300 msf +3%
(msf = million of sq. ft.)
Stores and Shopping Centers
100
150
200
250
300
350
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Millions of Square Feet
Colorado: Retail
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S. Income Properties -- Offices
Office Construction
2002 157 msf -30% 2003 144 msf -9%
2004 155 msf +8% 2005 170 msf +10%
Offices
50
125
200
275
350
425
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Millions of Square Feet
U.S. Income Properties -- Offices
Change in Office Employment
-300
0
300
600
900
1200
1500
84 86 88 90 92 94 96 98 00 02 04
Thousands of Workers
0
5
10
15
20
25
84 86 88 90 92 94 96 98 00 02 04 06
Downtown
Suburban
U.S. Office Vacancy Rates CB Richard Ellis
U.S. Income Properties -- OfficesOffice Building Factors
Year 2004 (Jan. - Sept.) Top 10 Metro Areas for Office Building
Ranked by square feet of new office starts
1. Wash. DC +16% 6. Chicago
-19%
2. New York +181% 7. Baltimore
+36%
3. Atlanta +53% 8. Tampa
+24%
4. Phoenix -6% 9. Las Vegas
+140%
5. Dallas +21% 10. San Diego
+123%
Tech-Related Markets:11. Seattle +113%25. Boston +19%66. Austin -40%72. San Jose -37%160. San Francisco -92%
Colorado: Offices
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S. Income Properties -- Hotels
Hotel Construction
2002 40 msf - 25%2003 45 msf +13%
2004 47 msf +4%
2005 53 msf +13%
Hotels
10
30
50
70
90
110
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Millions of Square Feet
Colorado: Hotels
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S. Income Properties -- Multifamily Housing
Multifamily Housing
2002 402,000 units -3%
2003 444,000 units +10%
2004 435,000 units -2%
2005 445,000 units +2%
Multifamily Housing
0
200
400
600
800
1000
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Thousands of Units
Colorado: Multi-Family
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S. Institutional BuildingsSchool construction still strong, but slipping.
Educational Buildings
2002 254 msf -7%
2003 241 msf -5%
2004 217 msf -10%
2005 223 msf +3%
Educational Buildings
50
100
150
200
250
300
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Millions of Square Feet
U.S. Institutional Buildings
Student Enrollments, Grades K-8
29
32
35
38
41
1980 1985 1990 1995 2000 2005 2010 2015
Millions
Student Enrollments, Grades 9-12
10
12
14
16
18
1980 1985 1990 1995 2000 2005 2010 2015
Millions
U.S. Higher Education Enrollments
11
13
15
17
19
1980 1985 1990 1995 2000 2005 2010 2015
Millions
U.S. Institutional Buildings
MO .7
CO 7.6
AZ 9.7
AK 14.6
HI 13.8
CA 13.2
NV 7.7
NM 13.6
TX 10.4
OK .8
KS 3.0
WY 14.9
ID 13.6
UT 12.3
WA 5.5
OR 5.3
MT 6.0
IA -1.4NE
3.2
ND -1.9
SD 4.0
MN .1
IN .4
KY -3.0
MS -2.0
LA 1.0
AR -1.8
TN 1.7
IL .8
GA 5.3
AL -1.0
FL 4.0
VA 2.1NC -1.4
SC .7
MD .8
PA -3.0OH
-2.6WV -4.7
MI -1.2
WI .1
NY -3.8
NJ .7
DC 4.3
DE .9
CT -3.0
MA -2.6
VT -2.0
RI -.6
NH .0
ME -1.0
Increase 10% to 15%
Increase 5% to 10%
Increase 0% to 5%
Decrease
Change in K-12 Student Enrollments, 2003 - 2013By State, Source: National Center for Education Statistics
Colorado: Education
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S. Institutional Buildings
Healthcare Facilities
2002 97 msf +6%
2003 91 msf -6%
2004 86 msf -6%
2005 88 msf +2%
Healthcare facilities settling back from a robust 2002.
Healthcare Facilities
0
15
30
45
60
75
90
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Millions of Square Feet
Clinics
Hospitals
Colorado: Medical
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
U.S. Public Works
Highways, Bridges
2002 $43.5 billion +1%
2003 $42.5 billion -2%
2004 $40.6 billion -5%
2005 $42.5 billion +5%
Highways and bridges now settling back ...
Highways and Bridges
10
20
30
40
50
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Billions of Dollars
U.S. Total Construction for 2004/2005Billions of Dollars
2001 2002 2003 2004 2005_
Total Construction 496.6 503.5 529.8 576.6 585.4 +5% +1% +5% +9% +2%
Single Family Housing 186.9 214.2 242.3 276.6 267.6 +6% +15% +13% +14% -3%
Income Properties 103.1 94.0 99.5 110.0 119.5
-8% -9% +6% +11% +9% Institutional Bldgs. 90.8 90.0 89.9 91.2 97.4
+9% -1% -0- +1% +7%
Manufacturing Bldgs. 8.1 5.4 6.4 7.0 8.0 -8% -33% +19% +9% +15%
Public Works 83.6 87.9 82.8 85.9 87.4 +7% +5% -6% +4% +2%
Colorado 2000 2001 2002 2003 2004 2005
Total $12,490,718 $12,388,899 $12,226,856 $12,224,574 $14,013,088 $13,847,646 99.18% 98.69% 99.98% 114.63% 98.82%
Single Fam $5,915,239 $5,843,420 $5,934,930 $6,622,416 $8,189,251 $7,560,905 98.79% 101.57% 111.58% 123.66% 92.33%
Multi Res $1,122,724 $1,306,177 $1,218,276 $709,455 $1,071,257 $1,147,736 116.34% 93.27% 58.23% 151.00% 107.14%
Retail $448,122 $491,091 $448,537 $403,900 $430,710 $510,832 109.59% 91.33% 90.05% 106.64% 118.60%
Ofc $1,134,694 $717,350 $423,632 $296,082 $288,137 $288,745 63.22% 59.06% 69.89% 97.32% 100.21%
Hotel $124,956 $82,545 $40,319 $219,539 $116,163 $120,380 66.06% 48.84% 544.51% 52.91% 103.63%
Mfg $68,941 $151,411 $70,906 $33,295 $108,562 $90,373 219.62% 46.83% 46.96% 326.06% 83.25%
Education $507,786 $749,169 $486,495 $520,366 $549,309 $570,482 147.54% 64.94% 106.96% 105.56% 103.85%
Medical $142,860 $330,628 $272,871 $330,097 $425,052 $376,872 231.43% 82.53% 120.97% 128.77% 88.67%
Public $292,369 $151,964 $80,327 $218,396 $77,181 $83,522 51.98% 52.86% 271.88% 35.34% 108.21%
Points of Perspective – U.S. ConstructionTotal Construction by CycleCyclical Trough (T) = 100, Based on Constant Dollars
80
100
120
140
160
180
T T+2 T+4 T+6 T+8 T+10 T+12 T+14
Years from Cyclical Trough
1991 - 2005
1982 - 1991
1975 - 1982
Questions?Cliff Brewis
Senior Director Editorial
McGraw-Hill Construction
130 Doolittle Dr Ste 1
San Leandro, CA 94577
510.383.1106 x14