Outlook for Construction: a presentation for the 2013 Construction Forecast Forum in Pittsburgh, PA on April 16, 2013 before the Construction Management Association of America (CMAA); the Three Rivers Chapter, Master Builders Association of Western PA; and the Pittsburgh Builders Exchange.

1. 2013 Construction Forecast Forum
April 16, 2013

2. Outlook for Construction
Presented by: Bernard M. Markstein
Reed U.S. Chief Economist
Greenbuild 2010

3. Outlook for Commercial Construction
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Greenbuild 2010

4. Outlook for Commercial Construction
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Greenbuild 2010

5. Outlook for Commercial Construction
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Greenbuild 2010

6. Outlook for Commercial Construction
The Economy

7. Outlook for Construction
 Economy has been growing at a barely acceptable rate
 Employment growing, but should be faster
 Unemployment rate down, but not always for the right
reasons
 Inflation moderate
 Single-family housing recovering, but from a very low
level
 Multifamily largely recovered
 Lending standards, although improving, remain
relatively tight
7
Greenbuild 2010

8. Outlook for Construction
Risks to the
Economy
8

9. Outlook for Construction
 The federal debt ceiling
 The federal budget (see you in September?)
 Europe
 European government debt default
 The euro
 Energy (oil) prices
9
Greenbuild 2010

10. Outlook for Construction
The distribution of
construction spending
has changed over the
past few years
10

11. Outlook for Construction
Construction Spending Components
2002 2005
17%
20%
47% 56%
27%
32%
Residential Residential
Nonresidential Building Nonresidential Building
Heavy Construction Heavy Construction
2002 Total - $848 Billion 2005 Total - $1,104 Billion
11
Source: U.S. Census Bureau

12. Outlook for Construction
Construction Spending Components
2005 2012
17%
32% 33%
56%
27%
35%
Residential Residential
Nonresidential Building Nonresidential Building
Heavy Construction Heavy Construction
2005 Total - $1,104 Billion 2012 Total - $855 Billion
12
Source: U.S. Census Bureau
Greenbuild 2010

13. Outlook for Construction
Commercial construction
turned around in 2012
and is expected to
continue to improve
13

14. Outlook for Construction
Construction Spending and
$ Billions
its Components
1,400
1,300 History Forecast
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
02 03 04 05 06 07 08 09 10 11 12 13 14
Residential Nonresidential Building Heavy Construction
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 14
Greenbuild 2010

15. Outlook for Construction
RCD Total Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
45
40
35
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
Source: Reed Construction Data 15
Greenbuild 2010

16. Outlook for Construction
Total Construction Spending
Billion $, SAAR
1,250
1,200
1,150
1,100
1,050
1,000
950
900
850
800
750
700
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 16
Greenbuild 2010

17. Outlook for Construction
Residential
construction is
recovering, but
from a low level
17

18. Outlook for Construction
Total Housing Starts
Thousands of Units, SAAR
2,500
Nation’s long-run (trend) need for
2,250 the next decade
High Estimate
(1.8 million starts per year)
2,000
1,750
1,500
1,250
Nation’s long-run (trend) need for
1,000 the next decade
Low Estimate
(1.4 million starts per year)
750
500
250
0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Census Bureau 18
Greenbuild 2010

19. Outlook for Construction
Total Housing Starts
(3-Month Moving Average)
Thousands of Units, SAAR
2,500
Nation’s long-run (trend) need for
2,250 the next decade
High Estimate
(1.8 million starts per year)
2,000
1,750
1,500
1,250
Nation’s long-run (trend) need for the
1,000 next decade
Low Estimate
(1.4 million starts per year)
750
500
250
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: U.S. Census Bureau 19
Greenbuild 2010

20. Outlook for Construction
Single-family housing
market is showing
solid recovery
20

21. Outlook for Construction
Single-Family Housing Starts
Thousands of Units, SAAR
2,000
Nation’s long-run (trend) need for
1,800 the next decade
High Estimate
(1.45 million starts per year)
1,600
1,400
1,200
1,000
Nation’s long-run (trend) need for
800 the next decade
Low Estimate
(1.15 million starts per year)
600
400
200
0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Census Bureau 21
Greenbuild 2010

22. Outlook for Construction
Single-Family Housing Starts
(3-Month Moving Average)
Thousands of Units, SAAR
2,000
Nation’s long-run (trend) need for
1,800 the next decade
High Estimate
(1.45 million starts per year)
1,600
1,400
1,200
1,000
Nation’s long-run (trend) need for the
800 next decade
Low Estimate
600 (1.15 million starts per year)
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: U.S. Census Bureau 22
Greenbuild 2010

23. Outlook for Construction
The falling
homeownership
rate is a two
edged sword
23

24. Outlook for Construction
Homeownership Rate
Percent
70
69
68
Peak rate:
67 Q2 2004
69.4%
66
Lowest rate:
Q4 1985
63.6%
65 65.3%
64
63
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Census Bureau 24
Greenbuild 2010

25. Outlook for Construction
Rentership Rate
Percent
37
36
Highest rate:
Q4 1985
35 36.4%
34.7%
34
33 Lowest rate:
Q2 2004
30.6%
32
31
30
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: U.S. Census Bureau 25
Greenbuild 2010

26. Outlook for Construction
Rental Vacancy Rate (SA)
Percent
11.5
Peak rate:
11.0 Q3 2009
10.9%
10.5
10.0
9.5
9.0
8.5
8.8%
8.0
7.5
7.0
6.5
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: U.S. Census Bureau 26
Greenbuild 2010

27. Outlook for Construction
The multifamily
construction market
continues to grow
27

28. Outlook for Construction
Multifamily Housing Starts
Thousands of Units, SAAR
500
Nation’s long-run (trend) need for
450 the next decade
High Estimate
(350,000 starts per year)
400
350
300
250
200
Nation’s long-run (trend) need
for the next decade
150 Low Estimate
(250,000 starts per year)
100
50
0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Census Bureau 28
Greenbuild 2010

29. Outlook for Construction
Multifamily Housing Starts
Thousands of Units, SAAR
1,200
1,100
1,000
900
800
700
Nation’s long-run (trend) need
600 for the next decade
High Estimate
(350,000 starts per year)
500
400
300
200
Nation’s long-run (trend) need
for the next decade
100 Low Estimate
(250,000 starts per year)
0
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Source: U.S. Census -Bureau 29
Greenbuild 2010

30. Outlook for Construction
Multifamily Housing Starts
(3-Month Moving Average)
Thousands of Units, SAAR
500
Nation’s long-run (trend) need
450 for the next decade
High Estimate
(350,000 starts per year)
400
350
300
250
200
Nation’s long-run (trend) need for the
150 next decade
Low Estimate
(250,000 starts per year)
100
50
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: U.S. Census Bureau 30
Greenbuild 2010

31. Outlook for Construction
Residential
construction
spending
31

32. Outlook for Construction
Residential Spending Components
$ Billions
800
700
History Forecast
600
500
400
300
200
100
0
02 03 04 05 06 07 08 09 10 11 12 13 14
Improvements Single-family Multifamily
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 32
Greenbuild 2010

33. Outlook for Construction
RCD Residential Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
50
40
30
20
10
0
-10
-20
-30
-40
-50
-60
Source: Reed Construction Data 33
Greenbuild 2010

34. Outlook for Construction
Construction Spending:
New Residential Construction
Billion $, SAAR
550
500
450
400
350
300
250
200
150
100
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 34
Greenbuild 2010

35. Outlook for Construction
Residential Construction Spending
$ Billions
450
400 2002 2003 2004 2005 2006
350 2007 2008 2009 2010 2011
2012 2013 2014
300
250
200
150
100
50
0
Single-Family Multifamily Improvements
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 35
Greenbuild 2010

36. Outlook for Construction
Nonresidential building
construction has
struggled lately, but is
expected to perform
better in the second half
of this year and in 2014
36

37. Outlook for Construction
RCD Nonresidential Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
Source: Reed Construction Data 37
Greenbuild 2010

38. Outlook for Construction
Construction Spending:
Nonresidential Construction
Billion $, SAAR
475
450
425
400
375
350
325
300
275
250
225
200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 38
Greenbuild 2010

39. Outlook for Construction
Nonresidential Construction Spending
$ Billions
100
90
2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
80
2012 2013 2014
70
60
50
40
30
20
10
0
Hotel/Lodging Office Commerical
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 39
Greenbuild 2010

40. Outlook for Construction
Nonresidential Construction Spending
$ Billions
110
100 2002 2003 2004 2005 2006
90
2007 2008 2009 2010 2011
2012 2013 2014
80
70
60
50
40
30
20
10
0
Religious Healthcare Education
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 40
Greenbuild 2010

41. Outlook for Construction
Nonresidential Construction Spending
$ Billions
70
2002 2003 2004 2005 2006
60 2007 2008 2009 2010 2011
2012 2013 2014
50
40
30
20
10
0
Public safety Amusement and recreation Manufacturing
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 41
Greenbuild 2010

42. Outlook for Construction
Heavy engineering
(non-building)
construction held
up best over the
last few years
42

43. Outlook for Construction
Despite considerable
challenges, the outlook
for heavy engineering
construction is fairly
positive
43

44. Outlook for Construction
RCD Heavy Engineering Starts
(3-Mo MA YoY)
3-Month Moving Average, Year-over-Year % Change
80
70
60
50
40
30
20
10
0
-10
-20
-30
-40
Source: Reed Construction Data 44
Greenbuild 2010

45. Outlook for Construction
Construction Spending:
Heavy Engineering
Billion $, SAAR
325
300
275
250
225
200
175
150
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 45
Greenbuild 2010

46. Outlook for Construction
Heavy Engineering Construction Spending
$ Billions
130
120 2002 2003 2004 2005 2006
110 2007 2008 2009 2010 2011
100 2012 2013 2014
90
80
70
60
50
40
30
20
10
0
Transportation Communication Power
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 46
Greenbuild 2010

47. Outlook for Construction
Heavy Engineering Construction Spending
$ Billions
110
100 2002 2003 2004 2005 2006
90 2007 2008 2009 2010 2011
80 2012 2013 2014
70
60
50
40
30
20
10
0
Highway Water and Sewer Conservation
Source: History – U.S. Census Bureau; Forecast – Reed Construction Data 47
Greenbuild 2010

48. Outlook for Construction
A look at the
region’s
performance
48

49. Outlook for Construction
Pennsylvania Construction Starts
$ Millions
9,000
2003 2004 2005 2006
8,000
2007 2008 2009 2010
2011 2012
7,000
6,000
5,000 -23%
8%
4,000
3,000
24%
2,000
1,000
0
Nonresidential Building Heavy Engineering Residential
Source: Reed Construction Data 49
Greenbuild 2010

50. Outlook for Construction
Ohio Construction Starts
$ Millions
9,000
2003 2004 2005 2006
8,000
2007 2008 2009 2010
2011 2012
7,000
6,000
-10%
5,000
4,000
-3%
3,000
24%
2,000
1,000
0
Nonresidential Building Heavy Engineering Residential
Source: Reed Construction Data 50
Greenbuild 2010

51. Outlook for Construction
Pennsylvania Construction Starts
February Year-to-Date
$ Millions
1,800
117%
1,600 2012 2013
1,400
1,200
1,000 86%
800
600
400
-18%
200
0
Nonresidential Building Heavy Engineering Residential*
*January only
51
Source: Reed Construction Data
Greenbuild 2010

52. Outlook for Construction
Ohio Construction Starts
February Year-to-Date
$ Millions
1,300
1,200 72%
1,100
2012 2013
1,000
900
800
700 157%
600
500
400
300 -14%
200
100
0
Nonresidential Building Heavy Engineering Residential*
*January only
52
Source: Reed Construction Data
Greenbuild 2010

53. Outlook for Construction
Nonresidential Building Construction Starts
$ Millions
5,000
4,500 2003 2004 2005 2006
2007 2008 2009 2010
4,000 2011 2012
3,500
3,000
-21%
2,500
2,000
1,500 -26%
-13%
1,000
-24%
500
0
Pittsburgh Philadelphia Harrisburg Cleveland
Source: Reed Construction Data 53
Greenbuild 2010

54. Outlook for Construction
Nonresidential Building Construction Starts
February Year-to-Date
$ Millions
900
800 273%
2012 2013
700
600
500
400
24%
300
459% 8%
200
100
0
Pittsburgh Philadelphia Harrisburg Cleveland
Source: Reed Construction Data 54
Greenbuild 2010

55. Outlook for Construction
Heavy Engineering Construction Starts
$ Millions
2,800
2,600 2003 2004 2005 2006
68%
2,400 2007 2008 2009 2010
2,200 2011 2012
2,000
1,800
1,600
1,400
1,200
1,000 5%
-23%
800
600
400
49%
200
0
Pittsburgh Philadelphia Harrisburg Cleveland
Source: Reed Construction Data 55
Greenbuild 2010

56. Outlook for Construction
Heavy Engineering Construction Starts
February Year-to-Date
$ Millions
550
500
83%
450 2012 2013
400
350
300
250
200
150%
150
100
28%
50 33%
0
Pittsburgh Philadelphia Harrisburg Cleveland
Source: Reed Construction Data 56
Greenbuild 2010

57. Outlook for Construction
Residential Construction Starts
$ Millions
2,800
2,600 2003 2004 2005 2006
2,400 2007 2008 2009 2010
2,200 2011 2012
2,000
1,800
1,600
1,400
25%
1,200
1,000
800 31%
600
26%
400
34%
200
0
Pittsburgh Philadelphia Harrisburg Cleveland
Source: Reed Construction Data 57
Greenbuild 2010

58. Outlook for Construction
Residential Construction Starts
January 2012 and January 2013
$ Millions
170
160 5%
150
140 2012 2013
130
120
110
100
90
80
70
60 -39%
50
40
-20%
30
20 -24%
10
0
Pittsburgh Philadelphia Harrisburg Cleveland
Source: Reed Construction Data 58
Greenbuild 2010

59. Outlook for Construction
Connect with Reed Construction Data
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twitter.com/BMarkstein
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twitter.com/ReedConstrData
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 LinkedIn
www.linkedin.com/company/reed-construction-data
 web
www.reedconstructiondata.com
59
Greenbuild 2010

60. Outlook for Construction
Contact Information and Links
Bernard M. Markstein
 Office: 301-588-5190
 Mobile: 404-952-3381
 b.markstein@reedbusiness.com
 U.S. Forecast and Commentary:
http://www.reedconstructiondata.com/market-
intelligence/articles/
 Blog:
http://www.reedconstructiondata.com/market-
intelligence/bernie-markstein/
60
Greenbuild 2010