2

Moderator

Wendy McBaySenior Director, MarketingCMD

18 years construction industry marketing

Six Sigma Green Belt certification

MBA, Auburn University

#CMDInfo

@AGCofA@AIANational@CMD_GroupLLC

4

Before we begin..… Technical issues

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Q&A session– To ask a question, enter your text in the ASK A QUESTION box and click ASK– Speakers will answer as many questions as they can in the allotted time

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Presentations

– Click the DOWNLOAD SLIDES button to download the PDF

Certificates– At the conclusion of today’s webcast, click the AIA/CES Certificate widget

at the bottom of the screen to print your certificate

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5

CMD is a registered provider with the American Institute of Architects Continuing Education Systems. Credit earned on completion of this program is reported to CES Records for AIA members. Certificates of Completion for non-AIA members are available upon request.

This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be deemed or 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.

Learning objectives

• Review the 2014 U.S. economy, including employment, interest rates, materials, foreign trade and construction starts

• Understand and discuss historical data and key construction forecasts for all segments of the industry

• Anticipate business opportunities, target growth markets, compare sales performance against market performance and create more informed and successful sales and business plans

• Understand the impact of current market conditions and how those will impact the performance of various construction sectors

#CMDInfo

6

Speaker

Alex CarrickChief Economist, CMD

Recently named CMD’s North American Chief Economist, Alex Carrick has served since 1985 as Chief Economist for CanaData and Reed

Alex’s online analyses are a popular feature of the Daily Commercial News and Journal of Commerce. 

BA in Economics from the University of Western Ontario and an MA in Economics from the University of Toronto. 

@Alex_Carrick

7

One in three Americans lives in one of only four states

Total U.S. California Texas New York Florida

+7.7% Non-res bldg +5.5% -5.3% +3.7% -0.9%

+11.5% Heavy Engineering/Civil +20.6% +22.4% -9.8% -5.6%

2014 Ytd Starts vs 2009 to 2013 averages (or vs Previous 5-yr average)

#CMDInfo

8

The top 10 U.S. oil producing states

#CMDInfo

9Source: U.S. Bureau of the Census/Chart: CMD.

U.S. has reduced its oil import dependency from 2/3s to 1/2 of all demand; approaching self-reliance in natural gas. Also, U.S. is repatriating jobs in energy-intensive industries (e.g., petrochemicals).

U.S. has reduced its oil import dependency from 2/3s to 1/2 of all demand; approaching self-reliance in natural gas. Also, U.S. is repatriating jobs in energy-intensive industries (e.g., petrochemicals).

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United States’ foreign trade:goods and services balance

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Top 10 U.S. states by manufacturing employment

1st place California has 40% more workers in manufacturing than 2nd place Texas.1st place California has 40% more workers in manufacturing than 2nd place Texas.

#CMDInfo

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States with motor vehicle assembly plants

Michigan is the leader with 12. Grand total = 45.Michigan is the leader with 12. Grand total = 45.

#CMDInfo

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States with the most IT firms

Source: Infoworld.

Massachusetts, Washington and Maryland also prominent in high-tech employment.Massachusetts, Washington and Maryland also prominent in high-tech employment.

#CMDInfo

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Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

U.S. employment: computer systems design services - level

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Data source: U.S. Census Bureau and Bureau of Labor Statistics/Chart: CMD.

U.S. state population growth table:2012 to 2013

1 North Dakota 3.14%2 D.C. 2.06%3 Utah 1.61%4 Colorado 1.52%5 Texas 1.49%6 Nevada 1.30%7 South Dakota 1.30%8 Florida 1.20%9 Arizona 1.15%10 Washington 1.10%11 South Carolina 1.09%12 Wyoming 1.05%13 Idaho 1.04%14 North Carolina 1.02%15 Hawaii 1.00%16 Montana 0.96%17 Delaware 0.95%

18 Oklahoma 0.91%19 Virginia 0.90%20 California 0.88%21 Oregon 0.78%22 Georgia 0.77%23 Minnesota 0.76%24 Maryland 0.75%25 Massachusetts 0.72%26 Nebraska 0.71%27 Alaska 0.66%28 Tennessee 0.64%29 Indiana 0.51%30 Louisiana 0.51%31 Iowa 0.50%32 New York 0.38%33 Kentucky 0.36%34 New Jersey 0.36%

35 Alabama 0.34%36 Missouri 0.33%37 Arkansas 0.32%38 Wisconsin 0.32%39 Kansas 0.30%40 Mississippi 0.16%41 Ohio 0.15%42 New Hampshire 0.14%43 Michigan 0.13%44 Connecticut 0.12%45 Illinois 0.11%46 Rhode Island 0.11%47 Vermont 0.11%48 New Mexico 0.08%49 Pennsylvania 0.07%50 Maine -0.01%51 West Virginia -0.13%

#CMDInfo

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U.S. median household income

#CMDInfo

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Median age of the population in U.S. states, census year 2010

#CMDInfo

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Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

U.S. total employment – level(based on seasonally adjusted data)

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the turning point

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Data source: U.S. Department of Labor/Chart: CMD.

U.S. initial jobless claims (weekly data)

The latest data point is for the week ending October 25, 2014 (287,000).The latest data point is for the week ending October 25, 2014 (287,000).

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Data source: Household Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

U.S. construction unemployment rate (not seasonally adjusted)

04-JA J O05-JA J O06-JA J O07-JA J O08-JA J O09-JA J O10-JA J O11-JA J O12-JA J O13-JA J O14-JA J O0%

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Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

U.S. construction employment – level(based on seasonally adjusted data)

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Source of original data: U.S. Bureau of Labor Statistics/Calculation of composite ranking and table: CMD.

Ranking of labor markets in major U.S. citiesBest (#1) to Worst (#49) − Fall 2014

1 Austin-Round Rock-San Marcos, TX2 Oklahoma City, OK3 Houston-Sugar Land-Baytown, TX4 Dallas-Fort Worth-Arlington, TX5 San Jose-Sunnyvale-Santa Clara, CA6 Minneapolis-St. Paul-Bloomington, MN-WI6 Seattle-Tacoma-Bellevue, WA8 San Antonio-New Braunfels, TX9 San Francisco-Oakland-Fremont, CA10 Denver-Aurora-Broomfield, CO11 Indianapolis-Carmel, IN11 Nashville-Davidson--Murfreesboro--Franklin, TN13 Orlando-Kissimmee-Sanford, FL14 Cincinnati-Middletown, OH-KY-IN14 Milwaukee-Waukesha-West Allis, WI16 Portland-Vancouver-Hillsboro, OR-WA17 Jacksonville, FL18 Boston-Cambridge-Quincy, MA-NH18 San Diego-Carlsbad-San Marcos, CA20 Miami-Fort Lauderdale-Pompano Beach, FL21 Phoenix-Mesa-Glendale, AZ22 Richmond, VA23 Columbus, OH24 Las Vegas-Paradise, NV24 New York-Northern New Jersey-Long Island, NY-NJ-PA

26 Charlotte-Gastonia-Rock Hill, NC-SC27 Louisville-Jefferson County, KY-IN27 Rochester, NY29 Pittsburgh, PA30 Buffalo-Niagara Falls, NY30 Riverside-San Bernardino-Ontario, CA32 Washington-Arlington-Alexandria, DC-VA-MD-WV33 Baltimore-Towson, MD33 Chicago-Joliet-Naperville, IL-IN-WI35 New Orleans-Metairie-Kenner, LA36 Kansas City, MO-KS36 Sacramento--Arden-Arcade--Roseville, CA38 Birmingham-Hoover, AL38 St. Louis, MO-IL40 Virginia Beach-Norfolk-Newport News, VA-NC41 Atlanta-Sandy Springs-Marietta, GA42 Tampa-St. Petersburg-Clearwater, FL43 Los Angeles-Long Beach-Santa Ana, CA43 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD43 Providence-Fall River-Warwick, RI-MA46 Cleveland-Elyria-Mentor, OH47 Hartford-West Hartford-East Hartford, CT48 Memphis, TN-MS-AR49 Detroit-Warren-Livonia, MI

Based on year-over-year job growth (highest to lowest) and unemployment rates (lowest to highest).Based on year-over-year job growth (highest to lowest) and unemployment rates (lowest to highest).

#CMDInfo

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Data source: CMD “Insight”/Table: CMD.

Q3 year-to-date U.S. construction starts ‒ CMD ‒ historical comparisons

Color coding: red is hot; blue is cool; green separates

out residential.

Color coding: red is hot; blue is cool; green separates

out residential.

2014 Q1 to Q3 vs2014 Q1 to Q3 vs average Q1 to Q3, average Q1 to Q3 previous 5 years,

2014 Q1 to Q3 in 2007-2008 peak 2009 to 2013Type of structure (A) (B) (C)

1 Single-Family $119,366,158,926 -24.5% 28.6%2 Roads $36,160,735,430 42.7% 16.1%3 Multi-Family $31,651,879,901 -18.6% 51.6%4 Water and Sewage Treatment $19,389,036,566 9.3% 10.2%5 Elementary / Pre School $13,933,740,019 -17.0% -3.4%6 All Other Civil $13,926,603,456 37.9% 18.2%7 Shopping $13,864,464,514 -21.9% 36.5%8 Jr / Sr High School $13,715,967,136 -11.8% 7.6%9 College / University $12,938,730,105 9.8% 11.5%10 Hospitals / Clinics $10,068,140,178 -29.1% -19.0%11 Offices $9,770,712,427 -28.0% 11.9%12 Bridges $8,132,342,745 15.8% -1.8%13 Government Offices $8,120,084,607 50.2% 2.7%14 Manufacturing $6,924,301,513 5.2% 46.1%15 Military $6,440,441,865 98.8% 17.5%16 Warehouses $5,418,604,799 -12.0% 50.4%17 Hotels $5,388,726,639 -50.3% 26.7%18 Transportation Terminals $5,180,680,385 -2.3% -23.1%19 Amusement $4,797,604,125 -31.3% 12.4%20 Dams / Canals / Marine Work $3,258,290,188 87.9% 3.0%21 Sports Arenas / Convention Centers $3,189,652,560 10.4% 48.9%22 Retail Misc. $2,872,607,429 -39.4% 27.1%23 Airport $2,755,044,057 51.1% 33.0%24 Nursing Homes $2,606,516,244 -18.0% 3.2%25 Industrial Labs / Labs / School Labs $1,922,771,731 -15.4% 30.2%26 Libraries / Museums $1,873,774,265 -16.5% -9.8%27 Medical Misc. $1,803,611,698 -37.6% -7.9%28 Fire and Police Stations $1,296,958,590 -21.2% -3.4%29 Parking Garages $1,256,389,181 -33.2% -8.5%30 Religious $1,078,063,084 -57.4% -29.5%31 Special / Vocational $1,018,466,898 3.9% 9.5%32 Prisons $910,076,092 -58.1% -41.2%33 Courthouses $752,331,460 -45.7% -31.2%34 Power Infrastructure $163,252,090 -84.3% -85.3%

TOTAL $371,946,760,903 -12.4% 17.6%TOTAL LESS RESIDENTIAL $220,928,722,076 -3.0% 9.1%

Ranking Based on $ Volume in Column (A)Ranking Based on $ Volume in Column (A)

#CMDInfo

23

Data source: CMD “Insight”/Table: CMD.

Q3 year-to-date U.S. construction starts ‒ CMD ‒ historical comparisons

Color coding: red is hot; blue is cool; green separates

out residential.

Color coding: red is hot; blue is cool; green separates

out residential.

2014 Q1 to Q3 vs2014 Q1 to Q3 vs average Q1 to Q3, average Q1 to Q3 previous 5 years,

2014 Q1 to Q3 in 2007-2008 peak 2009 to 2013Type of structure (A) (B) (C)

1 Multi-Family $31,651,879,901 -18.6% 51.6%2 Warehouses $5,418,604,799 -12.0% 50.4%3 Sports Arenas / Convention Centers $3,189,652,560 10.4% 48.9%4 Manufacturing $6,924,301,513 5.2% 46.1%5 Shopping $13,864,464,514 -21.9% 36.5%6 Airport $2,755,044,057 51.1% 33.0%7 Industrial Labs / Labs / School Labs $1,922,771,731 -15.4% 30.2%8 Single-Family $119,366,158,926 -24.5% 28.6%9 Retail Misc. $2,872,607,429 -39.4% 27.1%

10 Hotels $5,388,726,639 -50.3% 26.7%11 All Other Civil $13,926,603,456 37.9% 18.2%12 Military $6,440,441,865 98.8% 17.5%13 Roads $36,160,735,430 42.7% 16.1%14 Amusement $4,797,604,125 -31.3% 12.4%15 Offices $9,770,712,427 -28.0% 11.9%16 College / University $12,938,730,105 9.8% 11.5%17 Water and Sewage Treatment $19,389,036,566 9.3% 10.2%18 Special / Vocational $1,018,466,898 3.9% 9.5%19 Jr / Sr High School $13,715,967,136 -11.8% 7.6%20 Nursing Homes $2,606,516,244 -18.0% 3.2%21 Dams / Canals / Marine Work $3,258,290,188 87.9% 3.0%22 Government Offices $8,120,084,607 50.2% 2.7%23 Bridges $8,132,342,745 15.8% -1.8%24 Fire and Police Stations $1,296,958,590 -21.2% -3.4%25 Elementary / Pre School $13,933,740,019 -17.0% -3.4%26 Medical Misc. $1,803,611,698 -37.6% -7.9%27 Parking Garages $1,256,389,181 -33.2% -8.5%28 Libraries / Museums $1,873,774,265 -16.5% -9.8%29 Hospitals / Clinics $10,068,140,178 -29.1% -19.0%30 Transportation Terminals $5,180,680,385 -2.3% -23.1%31 Religious $1,078,063,084 -57.4% -29.5%32 Courthouses $752,331,460 -45.7% -31.2%33 Prisons $910,076,092 -58.1% -41.2%34 Power Infrastructure $163,252,090 -84.3% -85.3%

TOTAL $371,946,760,903 -12.4% 17.6%TOTAL LESS RESIDENTIAL $220,928,722,076 -3.0% 9.1%

Ranking Based on % Change in Column (C)Ranking Based on % Change in Column (C)

#CMDInfo

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Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

U.S. employment: architectural and engineering services - level

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Data source: CMD/Oxford Economics.Table: CMD.

U.S. construction starts forecasts ‒ current $ billions ‒ CMD/Oxford Economics

2013 (actuals) 2014 (estimates) 2015 2016 2017 2018Single Family 146.21 158.10 191.53 212.91 227.23 239.73 Multi Family 43.21 41.42 47.76 51.31 53.57 55.66 TOTAL RESIDENTIAL 189.42 199.52 239.29 264.22 280.80 295.39 Hotels,Motels 6.86 7.15 9.72 10.81 11.04 11.38 Shopping 18.61 18.15 20.82 22.26 23.50 24.55 Parking Garages 1.98 1.65 2.01 2.08 2.14 2.19 Amusement 5.42 6.95 7.60 7.77 8.03 8.28 Offices 14.76 13.24 16.31 17.70 18.43 19.28 Govenmental Offices 9.50 10.89 10.95 11.38 11.51 11.73 Industrial Labs,Labs,School Labs 1.71 2.45 2.45 2.74 2.97 3.14 Warehouses 4.14 6.77 6.57 6.98 7.17 7.30 Sport,Convention Center 2.88 3.86 3.32 3.57 3.72 3.84 Transportation Terminals 11.46 6.85 8.07 8.86 9.86 10.61 Misc Commercial 14.33 10.71 11.39 12.43 13.58 14.45 TOTAL COMMERCIAL 77.32 77.96 87.82 94.14 98.35 102.31 Manufacturing 7.60 8.63 8.63 9.25 9.70 10.11 Religious 1.71 1.61 2.94 3.11 3.20 3.26 Hospitals,Clinics 14.78 15.25 18.93 21.52 23.87 25.51 Nursing Homes,Assisted Living 3.93 3.56 4.14 4.37 4.52 4.67 Library,Museum 2.27 2.69 2.95 3.05 3.05 3.12 Courthouse 1.29 1.11 1.40 1.46 1.51 1.52 Police,Fire 1.58 1.81 2.07 2.26 2.28 2.32 Prisons 1.25 1.34 2.03 2.10 2.24 2.29 Total Court/Police/Prison 4.13 4.27 5.51 5.81 6.03 6.13 Military 4.95 8.55 5.83 5.93 6.06 6.13 College,University 16.77 16.93 16.93 17.41 17.76 18.04 Elementary,Pre School 15.39 18.03 21.19 22.77 24.48 24.88 Jr,Sr High School 15.19 17.57 18.84 19.31 19.31 19.74 Special,Vocational 1.02 1.33 1.33 1.37 1.37 1.40 Total Schools 48.38 53.86 58.28 60.86 62.92 64.05 MED misc 2.55 2.47 3.16 3.62 3.84 4.03 TOTAL INSTITUTIONAL 82.70 92.27 101.74 108.27 113.49 116.89 Retail Miscellaneous 3.26 3.98 4.80 4.98 5.22 5.38 TOTAL NON-RES BLDG 170.87 182.84 202.98 216.64 226.76 234.70 Airport 2.85 3.32 2.98 3.16 3.25 3.35 Roads 41.20 45.31 43.91 45.32 45.39 46.34 Bridges 10.66 11.09 11.35 11.54 11.68 11.87 Dams,Canals,Marine Work 5.37 4.20 3.53 3.38 3.48 3.50 Water,Sewage and Treatment 23.71 27.48 30.13 30.62 31.66 32.40 All Other Civil 17.47 18.64 17.82 17.52 18.15 18.60 Power Infrastructure 0.46 0.29 0.50 0.52 0.54 0.55 Misc Civil 17.93 18.93 18.32 18.03 18.69 19.15 TOTAL ENGINEERING 101.72 110.33 110.21 112.05 114.14 116.61 GRAND TOTAL 462.01 492.69 552.48 592.91 621.70 646.69

#CMDInfo

26

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. total construction starts – CMD

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Key determinants of residential construction

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. total residential construction starts – CMD Jobs;

Incomes;

Demographics;

Mortgage rates;

Home prices;

Second home demand;

Move-up market;

Empty-nester market;

Foreign demand.

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Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. total non-residential building starts – CMD

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Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. total commercial construction starts – CMD

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Key determinants of office building construction

U.S. employment: accounting and bookkeeping services - level

Office-based

employment;

Well-being of financial

sector;

Office vacancy rates;

“Cap” rates;

Buy versus build;

Public portion vs

private.

Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

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Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. private office buildingconstruction starts – CMD

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Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. government office buildingconstruction starts – CMD

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Key determinants of retail construction

U.S. retail sales – three months smoothed

Jobs;

Incomes;

Gasoline prices;

Motor vehicle sales;

Stock market prices;

New electronic gadgets;

Confidence.

Data source: U.S. Census Bureau (Department of Commerce)/Chart: CMD.

01

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6-J J N A S F J D M O M A

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20%

Total retail & food

Motor vehicles & parts

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ea

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Sep

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Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

U.S. retail trade employment – level(based on seasonally adjusted data)

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5-J M S

06

-J M S0

7-J M S

08

-J M S0

9-J M S

10

-J M S1

1-J M S

12

-J M S1

3-J M S

14

-J M S

14.0

14.5

15.0

15.5

16.0

Year and month

Nu

mb

er

em

plo

ye

d (

mill

ion

s)

#CMDInfo

35

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. retail/shoppingconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$5

$10

$15

$20

$25

$30

Year

$ B

illio

ns

#CMDInfo

36

Key determinants of warehouse construction

Retail trade;

Foreign trade;

Internet trade;

Arrival of new retail

competitors;

New border crossings;

New port/airport

facilities.

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. warehouse construction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$2

$4

$6

$8

$10

Year

$ B

illio

ns

#CMDInfo

37

Key determinants of hotel/motel construction

U.S. employment: leisure and hospitality services - level

Jobs and incomes;

Business climate;

Special events;

Free trade agreements;

Cost of gasoline and

jet fuel;

Value of U.S. dollar.

Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

00

-J J N A S F J D M O M A0

5-J J N A S F J D M O M A

10

-J J N A S F J D M O M A

11

12

13

14

15

Year and month

Nu

mb

er

em

plo

ye

d (

mill

ion

s)

#CMDInfo

38

Data source: Payroll Survey, Bureau of Labor Statistics (U.S. Department of Labor)/Chart: CMD.

U.S. employment: autos and parts manufacturing versus the gaming industry - level

00

-J M S0

1-J M S

02

-J M S0

3-J M S

04

-J M S0

5-J M S

06

-J M S0

7-J M S

08

-J M S0

9-J M S

10

-J M S1

1-J M S

12

-J M S1

3-J M S

14

-J M S

0.600

0.700

0.800

0.900

1.000

1.100

1.200

1.300

1.400

1.500

1.600

Motor Vehicles and Parts Manufacturing

Amusements, Gambling and Recreation

Year and month

Nu

mb

er

em

plo

ye

d (

mill

ion

s)

#CMDInfo

39

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. hotel/motelconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$5

$10

$15

$20

Year

$ B

illio

ns

#CMDInfo

40

Key determinants of industrial construction

New York Stock Exchange – Dow Jones Industrials (30)

Capacity utilization

rates;

Corporate profits;

Stock markets;

Commodity prices;

Resource demand

outlook;

Value of U.S. dollar;

World trade.

Data Source: Reuters/Chart: CMD.

91

-Ja

n OJu

ly A9

4-J

an O

July A

97

-Ja

n OJu

ly A0

0-J

an O

July A

03

-Ja

n OJu

ly A0

6-J

an O

July A

09

-Ja

n OJu

ly A1

2-J

an O

July A

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Year and month

Ind

ex

17,391 Oct 31

2014 11,497 Dec 199913,930 Oct 2007

Oct

#CMDInfo

41

New York Stock Exchange – Standard and Poor’s (500)

91

-Ja

n A M O M DJu

ly F S A N J9

8-J

an A M O M D

July F S A N J

05

-Ja

n A M O M DJu

ly F S A N J1

2-J

an A M O M

0

300

600

900

1,200

1,500

1,800

2,100

Year and month

Ind

ex

2,018 Oct 31 2014 1,517 Aug 2000 1,549 Oct 2007

Data Source: Reuters/Chart: CMD.

Oct

#CMDInfo

42

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. total industrial/manufacturingconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$2

$4

$6

$8

$10

$12

Year

$ B

illio

ns

#CMDInfo

43

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. total institutionalconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$20

$40

$60

$80

$100

$120

$140

$160

Year

$ B

illio

ns

#CMDInfo

44

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. total educationalconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$20

$40

$60

$80

Year

$ B

illio

ns

#CMDInfo

45

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. elementary and pre-schoolconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$5

$10

$15

$20

$25

$30

$35

Year

$ B

illio

ns

#CMDInfo

46

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. junior and senior high schoolconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$5

$10

$15

$20

$25

$30

Year

$ B

illio

ns

#CMDInfo

47

Key determinants of school construction

U.S. college and universityconstruction starts – CMD

Demographics;

Age distribution;

Unemployment rate;

Financial health of

states and school

boards;

Bond markets;

Stock markets;

Endowment funds.

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$5

$10

$15

$20

$25

Year

$ B

illio

ns

#CMDInfo

48

Key determinants of health care construction

U.S. resident population aged 65 and over

Growing population;

Aging population;

State balance sheets;

Financial strength of

HMOs;

Graduated seniors care;

Latest medical

advances.

Source of actuals: U.S. Census Bureau/Chart: CMD.

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

0

10

20

30

40

50

60

70

80

90

Year

Nu

mb

er

of

Pe

op

le (

Mill

ion

s)

#CMDInfo

49

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. hospital and clinicconstruction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$5

$10

$15

$20

$25

$30

Year

$ B

illio

ns

#CMDInfo

50

Key determinants of engineering construction

U.S. total heavy engineering/civilconstruction starts – CMD

Age of Infrastructure;

Population change

(need for new

infrastructure);

Financial health of all

levels of government;

Commodity prices;

Dedicated taxes.

Source of actuals: CMD “Insight”/

Forecasts: Oxford Economics and CMD/Chart: CMD.

$0

$25

$50

$75

$100

$125

$150

Year

$ B

illio

ns

#CMDInfo

51

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. bridge construction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$5

$10

$15

$20

Year

$ B

illio

ns

#CMDInfo

52

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. roadwork construction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$10

$20

$30

$40

$50

$60

Year

$ B

illio

ns

#CMDInfo

53

Source of actuals: CMD “Insight”/Forecasts: Oxford Economics and CMD/Chart: CMD.

U.S. water and sewage treatment construction starts – CMD

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$0

$10

$20

$30

$40

Year

$ B

illio

ns

#CMDInfo

54

NASDAQ Composite Index

Data Source: Reuters/Chart: CMD.

91

-Ja

nJu

ly9

2-J

an

July

93

-Ja

nJu

ly9

4-J

an

July

95

-Ja

nJu

ly9

6-J

an

July

97

-Ja

nJu

ly9

8-J

an

July

99

-Ja

nJu

ly0

0-J

an

July

01

-Ja

nJu

ly0

2-J

an

July

03

-Ja

nJu

ly0

4-J

an

July

05

-Ja

nJu

ly0

6-J

an

July

07

-Ja

nJu

ly0

8-J

an

July

09

-Ja

nJu

ly1

0-J

an

July

11

-Ja

nJu

ly1

2-J

an

July

13

-Ja

nJu

ly1

4-J

an

July

0

1,000

2,000

3,000

4,000

5,000

Year and month

Ind

ex

4,696 Feb 2000

2,859 Oct 2007

4,631 Oct 31 2014

Oct

#CMDInfo

55

Details

#CMDInfo

56

U.S. economic outlook – Fall 2014

Data sources: Bureau of Economic Analysis (BEA), Housing and Urban Development (HUD) and Department of Labor. Table and forecasts: CMD.

2009 2010 2011 2012 2013 2014est 2015 2016

Real GDP: -2.8% 2.5% 1.6% 2.3% 2.2% 2.4% 3.2% 3.0% Personal consumption expenditures (PCE) -1.6% 1.9% 2.3% 1.8% 2.4% 2.7% 3.0% 3.2% Durable goods -5.5% 6.1% 6.1% 7.3% 6.7% 4.6% 3.8% 3.4% Exports (goods & services) -8.8% 11.9% 6.9% 3.3% 3.0% 3.8% 4.5% 5.2% Imports (goods & services) -13.7% 12.7% 5.5% 2.3% 1.1% 3.6% 4.7% 5.5%Consumer price index (CPI-U) All items -0.4% 1.6% 3.2% 2.1% 1.5% 1.7% 1.9% 2.1% Core 1.7% 1.0% 1.7% 2.1% 1.8% 1.8% 1.9% 2.0%

Unemployment rate 9.3% 9.6% 8.9% 8.1% 7.4% 6.2% 5.8% 5.5% Employment change -5.479 -0.818 0.803 2.587 1.464 2.500 2.400 2.250

Corporate profits (pre-tax) 8.7% 25.0% 4.0% 11.4% 4.2% 1.0% 6.0% 6.5%

Housing starts 0.554 0.587 0.609 0.781 0.925 1.075 1.265 1.396 Light motor vehicles sales 10.4 11.6 12.7 14.4 15.5 16.0 16.4 16.6Federal Reserve Federal funds rate 0.125% 0.125% 0.125% 0.125% 0.125% 0.125% 0.500% 2.000%

(annual average per cent level)

(annual average per cent level)

(year-over-previous-year, millions of jobs based on annual average level)

(year-over-previous-year per cent change in annual average value)

(millions of units)

(million of units)

(year-over-previous-year per cent change in annual average index value)

FORECASTS

(year-over-previous-year per cent change in annual average value)

#CMDInfo

57

U.S. housing starts forecasts (units)

Source of actuals: Census Bureau / Forecasts: CMD/Oxford Economics "Insights". Table: CMD.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total U.S. (units millions) 2.073 1.812 1.342 0.900 0.554 0.587 0.609 0.781 0.925 1.075 1.265 1.396 1.485 1.564(year vs previous year) 6.3% -12.6% -25.9% -32.9% -38.4% 6.0% 3.7% 28.2% 18.4% 16.2% 17.7% 10.4% 6.3% 5.3%

Single-family (units 000s) 1,718.5 1,473.6 1,035.8 616.3 442.4 472.4 431.3 534.0 616.0 721.3 862.1 959.3 1,028.7 1,089.4(yr/yr) 7.1% -14.3% -29.7% -40.5% -28.2% 6.8% -8.7% 23.8% 15.4% 17.1% 19.5% 11.3% 7.2% 5.9%

Multi-family (units 000s) 354.4 338.3 306.1 283.7 111.6 114.1 177.6 246.8 308.6 353.7 402.7 437.1 456.3 474.1(yr/yr) 2.5% -4.5% -9.5% -7.3% -60.7% 2.2% 55.7% 39.0% 25.0% 14.6% 13.9% 8.5% 4.4% 3.9%

Northeast (units 000s) 189.3 170.3 142.8 119.6 60.9 71.3 68.2 79.7 96.9 130.0 155.7 168.7 175.2 182.0(yr/yr) 8.6% -10.0% -16.1% -16.2% -49.1% 17.1% -4.3% 16.9% 21.6% 34.2% 19.8% 8.3% 3.8% 3.9%

Midwest (units 000s) 357.3 284.1 206.2 134.4 95.2 97.8 102.9 127.9 149.6 166.6 193.1 204.6 218.1 230.4(yr/yr) 0.5% -20.5% -27.4% -34.8% -29.2% 2.7% 5.2% 24.3% 17.0% 11.4% 15.9% 5.9% 6.6% 5.6%

South (units 000s) 1,000.6 912.0 675.6 450.8 280.8 297.3 306.0 398.2 463.5 534.8 635.0 720.5 776.8 828.3(yr/yr) 10.4% -8.9% -25.9% -33.3% -37.7% 5.9% 2.9% 30.1% 16.4% 15.4% 18.7% 13.5% 7.8% 6.6%

West (units 000s) 525.8 445.5 317.3 195.2 117.2 120.2 131.8 175.1 214.8 243.6 280.9 302.6 315.0 322.8(yr/yr) 2.5% -15.3% -28.8% -38.5% -40.0% 2.6% 9.7% 32.9% 22.7% 13.4% 15.3% 7.7% 4.1% 2.5%

#CMDInfo

58

Data source: CMD/Table: CMD.

U.S. regional non-residential building construction starts – CMD - through three quarters, 2014

Jan-Sep 2013 Jan-Sep 2014 % Change

Connecticut $2,725,256,738 $1,652,392,595 -39.4%Maine $457,768,614 $589,961,179 28.9%Massachusetts $4,393,897,809 $3,401,159,147 -22.6%New Hampshire $293,440,278 $349,063,191 19.0%Rhode Island $251,111,852 $516,898,738 105.8%Vermont $300,011,605 $180,565,050 -39.8%Total New England $8,421,486,896 $6,690,039,900 -20.6%New Jersey $3,400,926,173 $2,867,420,308 -15.7%New York $10,693,865,876 $10,265,378,059 -4.0%Pennsylvania $3,478,923,644 $4,497,380,122 29.3%Total Middle Atlantic $17,573,715,693 $17,630,178,489 0.3%TOTAL NORTHEAST $25,995,202,589 $24,320,218,389 -6.4%Illinois $4,502,832,951 $5,275,540,872 17.2%Indiana $1,479,937,117 $2,395,310,817 61.9%Michigan $2,453,160,700 $2,983,188,891 21.6%Ohio $4,299,179,640 $3,561,106,809 -17.2%Wisconsin $1,344,564,514 $1,642,046,551 22.1%Total East North Central $14,079,674,922 $15,857,193,940 12.6%Iowa $1,361,789,377 $3,046,935,036 123.7%Kansas $1,457,369,031 $1,489,153,586 2.2%Minnesota $2,219,928,092 $1,628,951,734 -26.6%Missouri $2,362,345,883 $2,720,823,889 15.2%Nebraska $995,441,787 $1,315,367,119 32.1%North Dakota $1,045,224,067 $1,202,759,876 15.1%South Dakota $385,012,479 $421,067,672 9.4%Total West North Central $9,827,110,716 $11,825,058,912 20.3%TOTAL MIDWEST $23,906,785,638 $27,682,252,852 15.8%

Jan-Sep 2013 Jan-Sep 2014 % Change

Delaware $286,065,531 $244,345,355 -14.6%District of Columbia $931,702,864 $2,057,954,900 120.9%Florida $4,672,649,300 $5,433,805,490 16.3%Georgia $3,649,665,853 $4,371,500,783 19.8%Maryland $3,018,040,512 $4,501,496,878 49.2%North Carolina $2,593,377,244 $3,576,488,971 37.9%South Carolina $1,898,934,377 $2,050,279,421 8.0%Virginia $3,187,054,299 $4,378,667,808 37.4%West Virginia $666,239,790 $552,244,891 -17.1%Total South Atlantic $20,903,729,770 $27,166,784,497 30.0%Alabama $2,237,407,211 $2,263,784,590 1.2%Kentucky $1,690,398,823 $2,127,214,737 25.8%Mississippi $559,668,991 $1,344,682,617 140.3%Tennessee $2,028,653,029 $1,989,171,431 -1.9%Total East South Central $6,516,128,054 $7,724,853,375 18.5%Arkansas $1,941,457,860 $2,146,445,040 10.6%Louisiana $2,416,262,663 $1,668,007,938 -31.0%Oklahoma $1,486,865,459 $1,801,512,636 21.2%Texas $13,990,453,036 $12,603,669,294 -9.9%Total West South Central $19,835,039,018 $18,219,634,908 -8.1%TOTAL SOUTH $47,254,896,842 $53,111,272,780 12.4%Arizona $1,654,762,363 $1,615,135,673 -2.4%Colorado $2,109,252,503 $2,024,915,509 -4.0%Idaho $407,272,162 $491,054,325 20.6%Montana $309,758,605 $389,479,807 25.7%Nevada $607,207,496 $1,547,613,890 154.9%New Mexico $588,914,437 $692,479,027 17.6%Utah $1,330,575,825 $1,751,782,266 31.7%Wyoming $574,207,064 $711,816,109 24.0%Total Mountain $7,581,950,455 $9,224,276,606 21.7%Alaska $687,323,500 $662,089,269 -3.7%California $13,685,296,755 $15,753,333,711 15.1%Hawaii $1,403,170,314 $1,165,459,304 -16.9%Oregon $4,554,609,965 $1,445,000,945 -68.3%Washington $3,784,218,260 $3,779,513,688 -0.1%Total Pacific $24,114,618,794 $22,805,396,917 -5.4%TOTAL WEST $31,696,569,249 $32,029,673,523 1.1%TOTAL U.S. $128,853,454,318 $137,143,417,544 6.4%

#CMDInfo

59

Data source: CMD/Table: CMD.

U.S. regional heavy engineering/civil construction starts – CMD - through three quarters, 2014

Jan-Sep 2013 Jan-Sep 2014 % Change

Connecticut $720,840,429 $740,255,855 2.7%Maine $370,165,324 $386,216,369 4.3%Massachusetts $1,404,744,738 $1,674,436,502 19.2%New Hampshire $200,820,399 $271,836,490 35.4%Rhode Island $335,255,511 $269,249,831 -19.7%Vermont $199,554,285 $275,473,397 38.0%Total New England $3,231,380,686 $3,617,468,444 11.9%New Jersey $2,397,647,744 $2,121,676,574 -11.5%New York $3,940,734,059 $4,028,530,276 2.2%Pennsylvania $3,496,308,502 $3,736,319,088 6.9%Total Middle Atlantic $9,834,690,305 $9,886,525,938 0.5%TOTAL NORTHEAST $13,066,070,991 $13,503,994,382 3.4%Illinois $4,062,423,922 $4,649,114,406 14.4%Indiana $1,715,307,284 $1,113,701,905 -35.1%Michigan $1,660,276,656 $1,831,248,206 10.3%Ohio $2,933,482,952 $2,836,454,894 -3.3%Wisconsin $1,566,546,446 $1,625,981,537 3.8%Total East North Central $11,938,037,260 $12,056,500,948 1.0%Iowa $1,147,191,398 $1,257,203,438 9.6%Kansas $1,151,050,772 $990,492,792 -13.9%Minnesota $2,258,899,109 $2,267,591,069 0.4%Missouri $1,245,737,257 $1,548,232,230 24.3%Nebraska $518,367,415 $902,013,024 74.0%North Dakota $1,073,052,576 $1,259,667,713 17.4%South Dakota $447,993,712 $415,971,074 -7.1%Total West North Central $7,842,292,239 $8,641,171,340 10.2%TOTAL MIDWEST $19,780,329,499 $20,697,672,288 4.6%

Jan-Sep 2013 Jan-Sep 2014 % Change

Delaware $182,763,844 $179,841,137 -1.6%District of Columbia $262,420,822 $160,209,957 -38.9%Florida $3,960,342,986 $3,443,222,408 -13.1%Georgia $1,788,684,075 $2,247,003,777 25.6%Maryland $1,637,793,886 $2,216,851,003 35.4%North Carolina $2,093,768,165 $2,751,321,910 31.4%South Carolina $867,942,529 $1,228,687,868 41.6%Virginia $1,390,079,171 $1,838,446,999 32.3%West Virginia $592,639,011 $473,701,986 -20.1%Total South Atlantic $12,776,434,489 $14,539,287,045 13.8%Alabama $1,026,040,125 $1,287,367,846 25.5%Kentucky $1,008,721,314 $1,326,188,090 31.5%Mississippi $880,071,457 $795,107,838 -9.7%Tennessee $1,142,728,982 $1,098,668,183 -3.9%Total East South Central $4,057,561,878 $4,507,331,957 11.1%Arkansas $982,087,336 $967,336,077 -1.5%Louisiana $1,760,446,953 $1,847,231,354 4.9%Oklahoma $1,037,980,341 $1,122,917,495 8.2%Texas $6,285,223,606 $7,318,357,104 16.4%Total West South Central $10,065,738,236 $11,255,842,030 11.8%TOTAL SOUTH $26,899,734,603 $30,302,461,032 12.6%Arizona $595,943,385 $679,003,935 13.9%Colorado $998,302,524 $1,354,470,884 35.7%Idaho $420,864,880 $538,964,269 28.1%Montana $474,266,169 $359,306,180 -24.2%Nevada $277,150,982 $714,799,754 157.9%New Mexico $345,408,595 $604,616,501 75.0%Utah $531,801,721 $888,703,006 67.1%Wyoming $385,014,907 $641,146,187 66.5%Total Mountain $4,028,753,163 $5,781,010,716 43.5%Alaska $625,106,197 $873,602,053 39.8%California $7,463,896,158 $8,837,405,396 18.4%Hawaii $756,233,044 $512,188,533 -32.3%Oregon $959,604,536 $998,722,229 4.1%Washington $1,988,212,303 $2,278,247,903 14.6%Total Pacific $11,793,052,238 $13,500,166,114 14.5%TOTAL WEST $15,821,805,401 $19,281,176,830 21.9%TOTAL U.S. $75,567,940,494 $83,785,304,532 10.9%

#CMDInfo

60

Data source: Bureau of Labor Statistics.Table: CMD.

U.S. Producer Price Index results ‒ Sept 2014

* m/m is based on seasonally adjusted data.

* m/m is based on seasonally adjusted data.

Sep 14 vs Sep 14 vsSep 13 Aug 14

Product/Good/Service/Commodity (y/y) (m/m)*

Final Demand Construction 3.0% 0.0%Construction for private capital investment 3.0% 0.0%Construction for Government 3.1% 0.1%New warehouse building construction 2.2% 0.0%New school building construction 3.5% 0.0%New office building construction 3.2% 0.1%New industrial building construction 3.3% 0.0%New health care building construction 2.7% -0.1%Architectural & engineering services 2.1% 0.6%Construction machinery & equipment 1.7% 0.3%Asphalt 10.1% 4.1%Plastic construction products 1.7% -0.2%Softwood lumber 10.2% 2.7%Hardwood lumber 13.2% 0.2%Millwork 2.9% 0.3%Plywood 7.1% -1.9%Gypsum 7.5% -0.1%Construction sand, gravel & crushed stone 3.7% 0.7%Cement 5.7% 0.0%Concrete products 3.6% -0.3%Coal -5.3% 0.4%Iron ore 2.5% -3.6%Iron and steel scrap 6.8% 2.3%Steel mill products 4.7% 0.1%Fabricated structural metal products 1.9% 0.0%Flat glass 1.5% -0.7%Lighting fixtures 0.4% 0.1%Plumbing fixtures & brass fittings 3.1% 0.1%Heating equipment 1.5% 0.2%Natural gas to electric utilities 10.0% 0.8%Commercial electric power 2.7% -0.1%Industrial electric power 6.7% -0.8%Residential electric power 3.5% -0.2%Commercial natural gas 7.3% -0.9%Industrial natural gas 4.2% -1.3%Residential natural gas 6.2% 1.1%

#CMDInfo

Speaker

Kermit Baker Chief Economist, American Institute of Architects

Originated AIA’s Architecture Billings Index and AIA Consensus Construction Forecast Panel

Honorary member of the AIA

Master’s degree in urban planning from Harvard University; Ph.D. from Massachusetts Institute of Technology

61@AIANational

- Broad trends in the construction activity;

- Tracking the housing recovery;

- Issues facing the nonresidential building industry;

- Outlook for the nonresidential sector for 2015 and beyond;

Overview

62#CMDInfo

63

Since Downturn, Construction Activity Has Been a Declining Share of Our Economy

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e)0%

2%

4%

6%

8%

10%

4.7% 4.5%3.5%

2.4%1.8% 1.7% 1.6% 1.8% 2.0% 2.1%

3.7% 4.0%

4.5%

4.8%

4.5%3.7%

3.4%3.5% 3.4% 3.4%

8.4% 8.5%8.0%

7.3%

6.3%

5.4%5.1% 5.3% 5.4% 5.5%

Residential

Nonres

Residential and nonresidential construction spending as a % of GDP

Source: U.S. Census Bureau. #CMDInfo

64

Construction Recovery for This Cycle Has Been Painfully Slow for Most Sectors

S-F construction MF construction Home improvements Nonres bldg. construction

$0

$100

$200

$300

$400

$500

$600

$434

$53

$328

$501

$105

$15

$276

$337

$193

$43

$314

$377

Peak Trough 2014(p)

Note; 2014 estimated through first three quarters; home improvement spending estimated from JCHS LIRA; Source: JCHS and U.S. Census Bureau Construction Spending Put-in-Place

Spending at various points in the past construction cycle ($Billions)

#CMDInfo

65

Tracking the Housing Recovery

#CMDInfo

66

In Recent Years, Total Housing Demand Has Been Well Below Trend of Past Several Decades

19

80

s

19

90

s

20

00

s

20

10

20

11

20

12

20

13

20

14

(e)

0

0.5

1

1.5

2

1.741.61

1.70

0.700.64

0.700.82

0.96

Source: U.S. Census Bureau.

Residential completions plus mobile home placements, millions of units

#CMDInfo

67

House Prices Continue to Recover, Having Gained Back More than 60% of Their Losses

Jan-0

5

Jul-0

5

Jan-0

6

Jul-0

6

Jan-0

7

Jul-0

7

Jan-0

8

Jul-0

8

Jan-0

9

Jul-0

9

Jan-1

0

Jul-1

0

Jan-1

1

Jul-1

1

Jan-1

2

Jul-1

2

Jan-1

3

Jul-1

3

Jan-1

4

Jul-1

4130

140

150

160

170

180

190

200

210

-32.5% +30.5%

Single-family house price index (Jan. 2000=100)

Source: CoreLogic National House Price Index (HPI), Single family attached and detached structures as of July, 2014

#CMDInfo

68

House Prices Are Recovering the Fastest in Many Previously Distressed Markets

Change in Zillow Home Value Index (ZHVI) – Median estimated home value for all homes,August 2013 – August 2014 (Percent)

10 metros with largest increase

10 metros with largest decrease

Notes: Metro areas mapped are top 50 by 2010 U.S. Census Bureau PopulationSource: JCHS calculations of Zillow, Median estimated home value for all homes (includes single family residence, condo/co-op).

National change = 6.6%

#CMDInfo

69

House Price-to-Income Ratios Currently Close to Historical Averages in Most Large Metro Areas

Source: National Association of Realtors (NAR): Real Estate Outlook; U.S. Bureau of Economic Analysis (BEA); U.S. Census Bureau (BOC); Moody's Analytics (ECCA) Estimated

Residential single-family existing house price to household income, (ratio, SA)

United S

tate

s

San F

ranci

sco

Los Angel

es

River

side

Seattl

e

Boston

New Y

ork

Was

hingto

n

Mia

mi

Phoenix

Philadel

phia

Chicag

o

Dalla

s

Atlanta

Houston

Detro

it0.0

1.0

2.0

3.0

4.0Long Run Average (1989-2013)

2014-Q2

#CMDInfo

70

Housing Starts Expected to Increase Sharply, But Still Years Away From Returning to Historical Levels

FannieMae

FreddieMac

Moody’s Analytic

s MBA NAHB NARWells Fargo

Zelman &

Assoc.Standard & Poor’s

Consensus (average)

2014 1.01 1.02 1.01 1.01 1.01 1.02 0.99 1.02 1.02 1.01(+11%)

2015 1.17 1.30 1.53 1.16 1.24 1.28 1.12 1.18 1.28 1.25(+24%)

2016 NA NA 1.91 NA 1.54 NA 1.25 1.36 1.53 1.52 (+22%)

F’cast Date

Sep-14 Sep-14 Oct-14 Sep-14 Sep-14 Oct-14 Oct-14 Oct-14 Sep-14

Total Housing Starts (millions)

#CMDInfo

71

Nonresidential Building Trends and Outlook

#CMDInfo

72

Institutional Categories Account for Over Half the Spending on Nonresidential Buildings

Office; 12.4%

Retail/Other Comm.; 16.2%

Lodging; 4.7%

Manufacturing; 10.7%Education; 22.9%

Health Care; 10.4%

Religious; 1.6%

Public Safety; 2.6%

Amuse./Rec.; 4.6%

Transportation; 8.7%Commun.; 5.2%

Chart TitleShare of U.S. nonresidential building construction spending, 2004-2013

Source: Construction Spending Put-in-Place, U.S. Department of Commerce

2004-2013 average = $384.7 billion

Commercial/Industrial = $169.3 billion

Institutional = $ 215.4

#CMDInfo

73

Since the 2011 Market Bottom, Nonresidential Building Spending Has Seen Only Modest Recovery

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

(e)

$0

$100

$200

$300

$400

$500

$600

-40%

-20%

0%

20%

40%

$309 $324 $346

$390

$463 $501

$434

$348 $337 $355 $356 $377

-3.8%

5.0%

6.7%12.7%

18.8%

8.2%

-13.4%

-19.8%

-3.2%

5.3%

0.3%5.9%

Spending Annual % Change

Note: Nonresidential construction categories covered include: commercial, office, lodging, manufacturing, health care, educational, religious, public safety, amusement and recreation, transportation, communication.Source: U.S. Department of Commerce, Construction Spending Put-in-Place, estimate through June 2014.

National spending, and annual percent change in spending, on nonresidential buildings*

#CMDInfo

74

Nonresidential Building Activity Improves Modestly Through First Three Quarters of 2014

Sep 2014p Sep 2013 % change

Total Nonres. Bldg. Construction $276.4 $263.8 4.8% 

Commercial/Industrial 123.7 109.4 13.1%Lodging 11.6 9.8 18.2%     

Office 32.1 27.3 17.6%     

Commercial (retail and other) 41.1 37.2 10.3%     

Manufacturing 38.9 35.1 11.0%

Institutional 152.7 154.4 -1.1%Health care 28.9 31.1 -7.0%     

Educational 60.1 60.1 0.0%     

Religious 2.7 2.8 -3.5%     

Public safety 6.9 7.2 -4.6%    

Amusement and recreation 12.0 11.3 6.2%     

Transportation 30.3 29.4 3.0%     

Communication 11.8 12.4 -5.2%      

Source: U.S. Census Bureau, Value of Construction Put in Place

Billions of $, NSA, totals for Jan – Sep, 2014

#CMDInfo

75

At Present, Coastal Markets Have Lower Office Vacancy Rates

NYC Bro

oklyn

San Fra

ncisco

NYC Midtown S

outh

Silicon V

alley

Portland, O

R

U.S. A

vera

ge

Northern

NJ

Suburban, M

D

Fairfield C

o. CT

Northern

, VA

Phoenix-5%

0%

5%

10%

15%

20%

25%

30%

4.2%

8.3% 8.5%11.5% 11.7%

15.2%

20.3% 20.4% 20.5% 20.6%22.3%

Source: Cushman and Wakefield

Overall Office vacancy rates for top 5 and bottom 5 major U.S. markets , Q3-2014

#CMDInfo

76

Construction Employment Off From Peak; Heaviest Losses in New Construction Oriented Occupations

2007 2012 Percent Chg.

Drywall Installers 272 175 -35.7%

Supervisors & Managers 2,225 1,535 -31.0%

Masons 395 274 -30.8%

Plasterers 54 40 -26.9%

Flooring Installers 251 188 -25.3%

Carpenters 1,821 1,407 -22.7%

Painters & Paperhangers 798 677 -15.2%

Plumbers 593 510 -14.0%

Laborers & Helpers 2,469 2,224 -9.9%

Electricians 695 646 -7.1%

Glaziers 34 33 -1.9%

Roofers 313 309 -1.3%

Insulation Workers 50 52 5.3%

Total 9,969 8,068 -19.1%

Source: JCHS tabulations of the US Census Bureau, American Community Survey (ACS).

Number of people employed in the construction industry (000s)

#CMDInfo

77

Average Age of Construction Workforce Has Increased Since Downturn

Age 55 & Over Under Age 35 More Than HS Education

Foreign-Born Women0%

10%

20%

30%

40%

50%

13.3%

40.6%

31.0%

25.1%

3.5%

19.0%

32.9%34.5%

24.4%

3.1%

20072012

Share of population in construction industry labor force

Notes: In 2007, 10.0 million people were occupied in the construction industry. This estimate fell to 8.1 million in 2012. Annualized earnings of $15,000 a year is roughly equivalent to working year-round at the federal minimum wage.Source: JCHS tabulations of the US Census Bureau, American Community Survey (ACS). #CMDInfo

78

Though Volatile Recently, Architecture Billings Are in the Midst of a Strong Upturn…

40

45

50

55

60

Source: AIA Architecture Billings Index

diffusion index: 50 = no change from previous month, seasonally adjusted

#CMDInfo

79

…And the Volume of New Design Contracts Indicates That Billings Will Continue to Accelerate

40

45

50

55

60

Billings

New Design Contracts

Source: AIA Architecture Billings Index

diffusion index: 50 = no change from previous month, seasonally adjusted

#CMDInfo

80

Projects Stalled During Downturn Starting to Resurface

% of stalled projects likely to be completed

% with projects resur-facing

% firms - stalled projects

0% 20% 40% 60% 80% 100%

20%

43%

76%

% of responding firms

Source: The American Institute of Architects Work on the Boards Survey, September, 2014. #CMDInfo

81

Recent Upturn Has Lifted Business Conditions For Firms Serving All the Major Construction Sectors

Source: AIA Architecture Billings Index

Billings scores since 2008; index: 50 = no change from previous month

Jan '10

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan '11

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan '12

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan '13

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan '14

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

40

45

50

55

60Residential

Commercial/ Industrial

Institutional

#CMDInfo

82

Annual Percent Change

Commercial Construction Upturn Paces Broader Nonresidential Building Recovery

Total Nonres. Commercial Industrial Institutional-$100

$0

$100

$200

$300

-5%

0%

5%

10%

15%$299

$102

$49

$147

4.4%

9.9%

7.6%

-0.1%

8.1%

11.2%

9.2%

5.8%

2013 Spending level2014 % change2015 % change

Billions of $ of Construction Spending

Source: AIA Consensus Construction Forecast Panel, July, 2014 #CMDInfo

Speaker

Ken Simonson Chief Economist, AGC of America

AGC Chief Economist since 2001; 2012-13 President, National Association for Business Economics

Writes The Data DiGest weekly construction economics bulletin with 47,000 subscribers

BA in economics from the University of Chicago and MA in economics from Northwestern University

83@KenSimonson

84Source: BLS, Census Bureau construction spending reports

2006 2008 2010 2012 2014-20%

-10%

0%

10%

Total (9/13-9/14: 3.9%)Residential (5.9%)

2006 2008 2010 2012 2014-30%-15%

0%15%30%

Total (9/13-9/14: 3%) Res (1%) Private Nonres (6%) Public (2%)

2006 2008 2010 2012 20140

1,5003,0004,5006,0007,500

Total employment, Jan. 2006-Sept. 2014thousands, seasonally adjusted

Construction spending & employment, 2006-14

12-month % change, Jan. 2006-Sept. 2014

2006 2008 2010 2012 2014$0

$250,000$500,000$750,000

$1,000,000$1,250,000

Total spending, Jan. 2006-Sept. 2014billion $, seasonally adjusted annual rate (SAAR)

9/14: $951 bil.

12-month % change, Jan. 2006-Sept. 2014

9/14: 6,079,000

#CMDInfo

85

Construction is growing, but unevenly

3 trends helping many sectors and regions:• ‘Shale gale’ • Panama Canal expansion• Residential revival, especially multifamily

3 trends holding down construction growth:• Government spends less on schools, infrastructure• Consumers switch from stores to online buying• Employers shrink office space per employee

Source: Author#CMDInfo

86

One (or many) bright spot(s): the shale ‘gale’

Source: U.S. Energy Information Administration

Haynesville

Eagle Ford

Bakken

Marcellus

Niobrara

Permian

#CMDInfo

87

Shale’s direct and indirect impacts on construction

• Onsite: Each well requires access road, site prep, pad, storage pond, support structures, pipes

• Nearby: Products, water require trucking, rail, pipeline, processing

• Local spending by drilling firms, workers, royalty holders• Upstream: orders for fracking sand, rigs, compressors,

pumps, pipe, tanks, trucks, railcars, processing facilities • Downstream: Petrochemical, power, steel plants; LNG

export terminals, fueling stations; LNG-powered vehicles• Losers: coal; maybe wind, solar, nuclear & suppliers

Source: Author #CMDInfo

88

U.S. ports affected by Panama Canal expansion

Source: U.S. Army Corps of Engineers

Baltimore

NY-NJ

Norfolk

Seattle & Tacoma

Charleston San Diego

Oakland

Miami

Savannah Jacksonville

Mobile

Columbia River at Mouth, OR & WA

Los Angeles/ Long Beach

New OrleansHouston

#CMDInfo

89

Panama Canal expansion’s impacts on construction

• Ports: investing in dredging, piers, cranes, land access

• Nearby: Storage, warehouse, trucking, rail facilities• Bridge, tunnel, highway improvements• Inland: possible changes in distribution,

manufacturing

Source: Author #CMDInfo

Source: Census Bureau construction spending reports 90

2011 2012 2013 2014-15%

0%

15%

30%

45%

60%

12 m

onth

% c

hang

e

2011 2012 2013 2014$0

$75,000

$150,000

$225,000

$300,000

$375,000

$450,000

Billi

on $

Private residential spending: MF still soaring,SF slowing

Private residential spending, Jan. 2011-September 2014 (billion $, SAAR)

Multifamily (MF)

Single family (SF)

Improvements

Improvements: -17%

Single family: 10%

Multifamily: 26%

Total: 1%

12-month % change, Jan. 2011-September 2014

#CMDInfo

91

Housing outlook

• SF: rising for now but tight credit, fear of lock-in, demographic shifts may limit increases

• MF: Upturn should last into 2015– Vacancy rates near multi-year lows in most cities– Preference for urban living adds to demand– Condos have been slower to revive than rentals– Government-subsidized market likely to worsen

• Improvements: should generally track SF sales

Source: Author #CMDInfo

92

Nonres segments, 2013 & 2014 forecast(billion $, SAAR)

Source: Census Bureau construction spending report; Author’s forecast

9/14 Total 2013 vs. 2012 2014 Forecast

Nonresidential $596billion -1 % 4-8%Power (incl. oil & gas structures, pipelines) 95 -7 10+Highway and street 80 1 0 to -5Educational 80 -8 0 to -5Commercial (retail, warehouse, farm) 58 8 0 to 5Manufacturing 55 0 10+Office 45 0 0 to 5Transportation 40 5 2 to 5Health care 38 -2 0 to -5Sewage and waste disposal 23 -3Lodging 17 25 10+Amusement & recreation 16 0Other (Communication; water; public safety; conservation; religious): 8% of total -2

#CMDInfo

93Source: Census Bureau construction spending reports

2008 2009 2010 2011 2012 2013 2014$0

$10,000

$20,000

$30,000

2008 2009 2010 2011 2012 2013 2014$0

$10,000

$20,000

$30,000

2008 2009 2010 2011 2012 2013 2014$0

$10,000

$20,000

$30,000

2008 2009 2010 2011 2012 2013 2014$0

$30,000

$60,000

$90,000

Construction spending: public works(billion $, SAAR)

Highways (99.8% public)

Amusement & recreation (55% public)

Sewage/waste (99% public)

Water supply (96% public)

Latest 12-mo. change: -1.7% Latest 12-mo. change: 1%

Latest 12-mo. change: 1% Latest 12-mo. change: -2%

#CMDInfo

94Source: Census Bureau construction spending reports

2008 2009 2010 2011 2012 2013 2014$0

$15,000

$30,000

$45,000

$60,000

2008 2009 2010 2011 2012 2013 2014$0

$30,000

$60,000

$90,000

$120,000

2008 2009 2010 2011 2012 2013 2014$0

$15,000

$30,000

$45,000

$60,000

2008 2009 2010 2011 2012 2013 2014$0

$15,000

$30,000

$45,000

$60,000

Construction spending: industrial, heavy(billion $, SAAR)

Power (88% private)

Transportation facilities (71% public)

Manufacturing (99% private)

Public & private transportation facilities

Latest 12-mo. change: 2% (private 2%; public -0.1%)

Latest 12-mo. change: 1%

Latest 12-mo. change: 16%

Latest 12-mo. change: private 6%; public -1%

Public

Private

#CMDInfo

95Source: Census Bureau construction spending reports

2008 2009 2010 2011 2012 2013 2014$0

$20,000$40,000$60,000$80,000

$100,000$120,000 Total education (79% public)

2008 2009 2010 2011 2012 2013 2014$0

$10,000$20,000$30,000$40,000$50,000

2008 2009 2010 2011 2012 2013 2014$0

$20,000$40,000$60,000$80,000

$100,000

2008 2009 2010 2011 2012 2013 2014$0

$10,000$20,000$30,000$40,000$50,000

Construction spending: institutional(private + state/local)

Total healthcare (72% private)

Education (state & local K-12, higher; private)

Hospitals (private, state & local)

Latest 12-mo. change: 7%

Latest 12-mo. change: -8% Latest 12-mo. change: private -10%; state & local -9%

S/L preK-12

Private

S/L higher ed

S/L

Private

Latest: state/local preK-12 6%, higher 12%; private 3%

#CMDInfo

96Source: Census Bureau construction spending reports

2008 2009 2010 2011 2012 2013 2014$0

$20,000

$40,000

$60,000

$80,000

2008 2009 2010 2011 2012 2013 2014$0

$10,000

$20,000

$30,000

$40,000

2008 2009 2010 2011 2012 2013 2014$0

$10,000

$20,000

$30,000

$40,000

2008 2009 2010 2011 2012 2013 2014$0

$20,000

$40,000

$60,000

$80,000

Construction spending: developer-financed (billion $, SAAR)

Retail (private)

Warehouse (private)

Office (83% private)

Lodging (private)

Latest 12-mo. change: 5%

Latest 12-mo. change: 56% Latest 12-mo. change: 15%

Latest 12-mo. change: 16% (private 18%; public 6%)

Private

Public

Total

#CMDInfo

97Source: BLS state and regional employment report

-2%

5%

-1%

6%

-3%

1%

7%

13%

-6%

4%

0%

10%

0.5%

1%

2%

2%

5%

7%

5%

1%

8%

4%

6%

5%

6%

-1%

-3% 3%

-0.1%

1%

3%

2%

4%

5%

11%

3%

-6%

9%

11%

HI2%

4%

VT4%

CT6%

RI4%

DE13%

NJ-8%

MD3%

DC0%

NH-2%

Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5%

MA1%

State construction employment change (U.S.: 3.9%) 9/13 to 9/14: 39 states up, 10 down

5.1% to 10% Over 10%

Shading based on unrounded numbers

0%

6%

#CMDInfo

99Source: Author, from BLS national and state & area employment data(www.bls.gov/ces. www.bls.gov/sae)

Construction employment, Sep. ‘14 vs. peak• US: construction -21% (-1.6 million) below Apr. ‘06 peak• States: La., Okla. and N.D. at new peak in 2014, 43 states >

10% below• Metros: only 33 of 339 at new Sep. peak, not seas. adjusted

F

Peak in 2014

Within 10% of peak

>10% below peak

#CMDInfo

100Source: Author, from Census Bureau (spending), BLS (employment, hours, PPI)

Spending +19% but jobs only +10%. How do they do it?• Contractors charging more: PPI +11% (nonresidential buildings)• More hours per worker: aggregate hours +13% (+2% per employee)• Implication: further spending growth will trigger larger pickup in

hiring—but will workers be available?

Spending Total hours worked0%

5%

10%

15%

20%

13%

% c

hang

e 9/

10-9

/14

7% real

Construction spending, labor & prices, 9/10-9/14

Spending Employment0%

5%

10%

15%

20% 19%

10%

% c

hang

e 9/

10-9

/14

19% total

11% price change

#CMDInfo

101Source: Author, from BLS

October '10 October '140%

5%

10%

15%

20%

17.3%

6.4%9.0%

5.5%

Construction Total

Change in construction (un)employment, 10/10-10/14• Construction unemployment fell sharply in past 4 years• But industry employment rose much less• Thus, workers left for other sectors, school, retirement

Unemployment rates(Not seasonally adjusted, Oct. 2010-Oct. 2014)

0.00

250,000.00

500,000.00

750,000.00

1,000,000.00

903,000

588,000

Change in unemployment & employment(Not seasonally adjusted, Oct. 2010-Oct. 2014)

315,000Workers who

have left industry

#CMDInfo

102Source: AGC Member Survey, Jan. 2014

Hardest positions to fill(% of respondents who are having trouble filling)

CraftCarpenters 66%Roofers 64

Equipment operators 59Plumbers 54Electricians 52

Professional

Project managers/supervisors 48%Estimators 32

#CMDInfo

103Source: Author, based on Bureau of Labor Statistics for Producer Price Indexes (PPIs) and Employment Cost Index (ECI); Federal Highway Administration for NHCCI

2011 2012 2013 2014100

102

104

106

108

110

112

Dec

embe

r 201

0 =

100

Material & labor costs vs. nonresidential building prices 12/10-9/14

ECI (empl. cost)9/13-9/14: 1.4%

PPI for nonres buildings9/13-9/14: 3.1%

PPI for materials9/13-9/14: 1.6%

12/10

#CMDInfo

104Source: Author, based on BLS producer price index reports

2011 2012 2013 201480

100

120

140

2011 2012 2013 201480

100

120

140

2011 2012 2013 201480

100

120

140

2011 2012 2013 201480

100

120

140

Producer price indexes for key inputs, 12/10-9/14 (Dec. 2010=100)

Steel mill products

Gypsum products

Copper & brass mill shapes

Lumber & plywood

Latest 1-mo. change: 0.1%, 12-mo.: 5%

Latest 1-mo. change: -0.1%, 12-mo.: 7%

Latest 1-mo. change: -0.8%, 12-mo.: -2%

Latest 1-mo. change: 0.3%, 12-mo.: 11%

12/10

12/10 12/10

12/10

#CMDInfo

105

2011 2012 2013 201480

100

120

140

2011 2012 2013 201480

100

120

140

2011 2012 2013 201480

100

120

140

2011 2012 2013 201480

100

120

140

Producer price indexes for key inputs, 12/10-9/14 (Dec. 2010=100)

Source: Author, based on BLS producer price index reports

Plastic construction products

Concrete products

Asphalt paving mixtures & blocks

Latest 1-mo. change: -1.4%, 12-mo.: -8%

Latest 1-mo. change: -0.2%, 12-mo.: 2%

Latest 1-mo. change: -0.3%, 12-mo.: 4%

Latest 1-mo. change: -0.1%, 12-mo.: 2%

Diesel fuel

12/10

12/10 12/10

12/10

#CMDInfo

106

Best prospects for 2014-15

• Multifamily• Manufacturing, esp. petrochemical, oil/gas supply• Oil & gas fields• Pipelines• Warehouses• Lodging (hotels & resorts)• Rail• Data centers

Source: Author #CMDInfo

107

Trends: 2014-2017

• Total construction spending: +6% to +10% per year– less SF housing, retail; declining public spending– new drivers: shale-based gas & oil; Panama Canal

widening; more elderly & kids, fewer young adults• Materials costs: +1 to +3% (similar to CPI); rare spikes• Labor costs: +2.5% to + 5%• Labor supply: widespread shortages possible due to

retirements, competition from other sectors, fewer vets

Source: Author #CMDInfo

108

Summary for 2013, 2014-17

Source: 2012: Census, BLS; 2013-17: Author’s ests.

2013actual

2014forecast

2015-17ann. avg.forecast

Total spending 6% 6-9% 6-10%

Private – residential 20% 6-10% 1-10%

– nonresidential 1% 12-15% 1-10%

Public -3% -1 to +2% 0 or less

Materials PPI 1.3% 1-2% 1-3%; rare spikes

Employment cost index 2.0% 1.5-2.5% 2.5-5%

#CMDInfo

109

AGC economic resources (email simonsonk@agc.org)

• The Data DIGest: weekly 1-page email (subscribe at www.agc.org/datadigest)

• monthly press releases: spending; PPI; national, state, metro employment

• state and metro data, fact sheets• website: http://www.agc.org/Economics• webinars: Nov. 20 (email for details)

@AGCofA

This concludes The American Institute of Architects Continuing Education Systems Program

Questions & Answers

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