Construction Market Will Continue to Weaken in 2008

RISMEDIA, Oct. 29, 2007-The McGraw-Hill Companies released its 2008 Construction Outlook, which forecasts a drop in overall U.S. construction spending for next year, fueled by tighter lending conditions and weaker job growth. Against this backdrop, the level of construction starts is expected to decline 2%, to $614 billion, following an 8% decline predicted for 2007.

“The credit crunch that emerged at mid-2007 continues to be a major concern for construction and the overall economy,” said Robert A. Murray, vice president, Economic Affairs, McGraw-Hill Construction. “As a result, we’re now predicting downturns in the previously resilient multifamily and commercial segments, as well as continued weakness in single-family home construction.”

There are some positives for the market in 2008, Mr. Murray noted. Transportation projects should continue to see moderate growth amid a renewed emphasis on infrastructure maintenance and upgrades, particularly in the aftermath of the I-35W bridge collapse in Minneapolis. Financing from public sources will stay generally supportive, and the growth of public-private partnerships also offers the potential for greater funding. Finally, growth in “green” construction practices means that the demand for sustainable building design and materials will continue to rise.

Highlights of the 2008 Construction Outlook include:

– Single-family housing will weaken further, given the large inventory of
unsold homes and diminished loan availability to home buyers. A 3% drop
in dollar volume is expected, corresponding to another 6% decline in
the number of units.

– Multifamily housing will slide 8% in dollars and 11% in units,
following steeper declines in 2007. Condominium development is being
dampened by greater scrutiny from lenders as well as reduced home buyer
demand.

– Commercial buildings will slip 6% in dollar volume and 11% in square
feet. Tighter lending standards and the slower absorption of space
will contribute to a measured downturn for stores, warehouses, offices,
and hotels.

– Institutional buildings will rise 4% in dollar volume, while square
footage edges up 1%. School construction is expected to strengthen
again after its 2007 pause, and transportation terminals are also
expected to grow. The other institutional structure types, including
healthcare facilities, will see a modest loss of momentum.

– Manufacturing buildings will retreat 11% in dollar volume, after a 40%
surge in 2007 that featured the start of several unusually costly
projects plus a large number of ethanol plants. Square footage for
manufacturing buildings in 2008 is expected to advance 5%.

– Public works construction will move up 3%, following the 5% gain
in 2007. Highways and bridges are likely to receive greater funding
when fiscal 2008 appropriations are approved. The environmental
project types should be up slightly next year, but site work connected
to single family development will settle back.

– Electric utilities will see another modest decline in percentage terms,
but essentially this project type is holding at the enhanced level
achieved in 2006.

The 2008 Construction Outlook was presented at the McGraw-Hill Construction Outlook Executive Conference in Washington, DC, which brought together top management from all parts of the construction industry including firms involved in building product manufacturing, architecture and design, contracting, engineering, industry associations and other industry professionals. The Construction Outlook is a mainstay of business planning for construction and manufacturing industry executives.

For more information, visit http://www.mcgraw-hill.com.