institutional construction outlook and key trends · enr top lists: rankings of the largest...

1 McGraw Hill Construction Confidential. All information presented © McGraw Hill Construction, 2013. All rights reserved.

August 8, 2013 VMA Market Outlook Workshop Presentation

Institutional Construction Outlook and Key Trends

Harvey M. Bernstein, F.ASCE, LEED AP Vice President, Industry Insights and Alliances McGraw Hill Construction

McGraw Hill Construction Confidential. All information presented © McGraw Hill Construction, 2013. All rights reserved.


Agenda

McGraw Hill Construction Introduction

U.S. Construction Outlook—National and by Building Type

Global Trends

Key Industry Trends Impacting Your Business • Product Trends • Building Information Modeling (BIM) • Prefabrication/ Modular Construction

Future Building Trends


MCGRAW HILL FINANCIAL

McGraw Hill Financial is a leading provider of information and analytics to global financial markets.

$6.2 billion in sales (2011)

17,000 employees

27 countries

Leader in every market we serve

Financial Services

Commodities & Commercial Markets

As part of McGraw Hill Financial, McGraw Hill Construction is aligned with the resources that back S&P, the trusted leader in financial benchmarks and indices. Turning data into market intelligence in order to provide insight for better business decisions is our core competency and the reason why business leaders throughout the world turn to McGraw Hill.

McGraw Hill Financial: Essential Information & Insight


Dodge Project Database: 500,000 projects in the U.S. from pre-planning to start; historical data back to 1967; $4 trillion in global projects

Dodge Construction Outlook and Forecasting Service: Forecasting 22 major building categories at a national, regional, state and county level

SmartMarket Reports and New Market Research: Drawing from Dodge and other proprietary sample sources on key industry trends

ENR Top Lists: Rankings of the largest construction and design firms

Dodge SpecShare: Trends in product specification in over 50,000 projects

Industry Association Network: Providing access to over 500,000 professionals worldwide

Where Does Our Industry Trend Data Come From?


U.S. Construction Outlook—National and by Building Type


Total U.S. Construction Starts

Billions of Dollars 2007 2011 2012 2013 2014

Total Construction 640.9 -7%

442.2 +2%

471.7 +7%

507.1 +8%

599.4 +18%

Education 53.2 +7%

42.7 -10%

37.2 -13%

36.5 -2%

40.5 +11%

Healthcare 24.4 +1%

23.4 -5%

22.1 -6%

22.1 +0%

24.6 +11%

Office 32.6 +7%

17.4 +3%

16.9 -3%

18.8 +12%

22.3 +18%

Public Buildings 12.4 +51%

9.4 -11%

8.2 -13%

7.7 -6%

8.0 +4%

Manufacturing 20.8 +51%

17.2 +81%

12.2 -29%

13.2 +8%

15.0 +14%

Multifamily Housing 60.3 -13%

29.2 +35%

38.8 +33%

47.6 +23%

55.8 +17%

History Forecast

Source: McGraw Hill Construction, Dodge Construction Forecast as of June, 2013


U.S. Capital Expenditures on Construction

Source: U.S. Dept. of Commerce, Bureau of Economic Analysis, Annual Capital Expenditures Survey (2005-2011);

200

300

400

500

600

2005 2006 2007 2008 2009 2010 2011

3.2%

3.1%

3.2%

$ B

illio

ns

3.4% of GDP

4.0%

3.9%

3.9%

► Expenditures on structures/ construction on the rise after sharp decline during the recession

► Share of GDP was notably higher as nonresidential construction spending was increasing (2006–2008)


8

2005 2008 2010 2016

= Nonresidential Market

$172 billion

$3 billion 2% of

market

$61B 41%

$212B = Green Market

$154B

$238 billion

$25B 12%

$142B

$48B 31%

2011 2013

$63B 44%

$67B–$71.5B 45%-48%

$114B– $131B 48%-55% of market

$149B $148B

2012

Source: Green Market Size: McGraw Hill Construction, 2012; base value of construction market from McGraw Hill Construction Dodge Market Forecasting Service, as of April 23, 2013

Green Building is Now a Significant Part of U.S. Nonresidential Starts


-2% +11%

History and Forecast (By Millions of Dollars)

$17 billion

45%

Education Construction Outlook

Dodge Projects with Both Ball and Butterfly Valves Specified

Feb 2013: Brooklyn, NY; NYC College of Technology Klitgord Academic Bldg.; $252M (start stage)

Nov 2012: Philadelphia, PA; Science, Education & Research Center; $110M (start stage)


$9 billion 15%

Green Share 2008 2012

History Forecast



+11% +0%

Healthcare Construction Outlook

Dodge Projects with Ball/Butterfly Valves Specified

July 2013: Washington, DC; Sibley Memorial Hospital Center; $200M (start stage) with Ball Valves Specified

May 2013: Farmington, CT; Inpatient Tower—UConn Health Center; $100M–$150M (start stage) with BOTH Ball and Butterfly Valves Specified


History Forecast

Green Share 2008 2012 $4 billion $10 billion

13% 44%


Office Building Construction Outlook

Dodge Projects with Butterfly Valves Specified

July 2013: Austin, TX; Domain 7 Office Building/Parking Garage; $28M (bidding stage)

June 2013: Fairmont, WV; New WV State Office Building; $18M–$20M (bidding stage)


+18% +12%


History Forecast

Green Share 2008 2012 $8 billion $9 billion

30% 54%


Office (continued): Mission Critical Data Center Construction Activity Trends

Dodge Mission Critical Projects with Ball/Butterfly Valves Specified

July 2013: Wheaton, IL; JTK Administration Building—IT Dept. Data Center; $100M–$200M (bidding stage) with Ball Valves Specified

July 2013: Antigo, WI: Integrys Data Center; $300M–$400M (bidding stage) with Butterfly Valves Specified

Sources: 1. Mortenson Construction, February 2012; 2. Gartner, 2011; 3. Cisco, 2012. Projects: McGraw Hill Construction Dodge

Growth is expected due to growing need and reliance on digital information: • 89% of data center and facilities

professionals believe data center construction will increase by 2014

1

• Volume of data storage is growing 40%–60% each year

2

• By 2015, data center space devoted to cloud computing will be 12 times higher than in 2010

3



History Forecast

+4% -6%

Public Building Construction Outlook

Dodge Projects with Ball/Butterfly Valves Specified

June 2013: Garland, AR; Garland County Adult Detention Center; $42M (bidding stage) with Butterfly Valves Specified

July 2013: Yuba City, CA; Yuba City Courthouse; $53M (bidding stage) with BOTH Ball and Butterfly Valves Specified




History Forecast

+14% +8%

Manufacturing Building Construction Outlook

Major Dodge Projects with Gate Valves Specified

June 2013: Santa Monica, CA; Exposition Metro Line Phase 2 Construction of Maintenance & Operations Facility; $100M (start stage)

July 2013: Laurens, SC; Alupress Aluminum Foundry Building; $3M–$5M (pre-start stage)



+23%

+17%

Multifamily Residential Construction Outlook

Dodge Projects with BOTH Ball and Butterfly Valves Specified

March 2013; Bethesda, MD; 8300 Wisconsin Avenue Bethesda Apartments/Retail; $90M (start stage)

Jan 2013: Chicago, IL; 850 Lake Shore Drive Rental Apartments; $100M (start stage)



History Forecast

Foreclosures, baby boomer retirement, and job relocation led to dramatic increase in rental units and condominiums


Construction Market Long Term Is Positive in Institutional Building, Slower in Commercial

• Education: Back strong in 2015 and beyond due to improving local economies, improved public-finance credit ratings and high enrollments causing pent-up demand

• Healthcare: Turnaround in 2014 to be sustained due to needed facility upgrades and increased capacity demand from seniors, returning soldiers, etc.

• Office: Continued growth in mid-term, though changing trends (telecommuting, smaller office spaces, etc.) mean office will never return to 2007 peak

Green Building Will Change Heating and Cooling Systems and Increase the Demand for Graywater Recycling Systems—Creating Both Opportunities and Risks for Manufacturers

Future Construction Activity and Trends


Global Trends


Global Economic Trends

► Infrastructure Investments Leading to Economic Growth in Emerging Markets

• China: $167 billion/year in high speed rail, water supply, electricity, highways

• India: $125 billion/year in ports, roads, rail, water infrastructure, power plants

• Brazil: $225 billion/year including $19 billion high-speed rail from Rio de Janeiro to São Paulo, power plants, dams and ports

Source: International Monetary Fund, 2013

GDP Around the World FORECAST

WORLD Growth: • 3.25% in 2013 • 4% in 2014 70% of growth by 2025 will come from Emerging Markets

United States Growth: 2% in 2013 3% in 2014

European Union Decrease of 0.25% in 2013 Emerging Markets 36% of 2012 World GDP

São Paulo, Brazil


Global Construction Market Shifts

China takes over as largest single world construction market

U.S. largest single world construction market

Sources: Global Construction 2020; U.S. Dept. of Commerce; Global Insights

Emerging markets will present more opportunities

Construction Spending (Billions of U.S. Dollars)


33%

6% 2%

30%

26%

10%

1% to 15% Green ProjectsExploring (None)

12%19% 17%

11%

21% 21%13%

28%

51%

More than 60% Green Projects31% to 60% Green Projects16% to 30% Green Projects

3 Years Ago (2009) Current (2012) In 3 Years (2015)

LOW INVOLVEMENT MODERATE TO HIGH INVOLVEMENT

Green Activity On the Rise Around the World

Source: World Green Building Trends SmartMarket Report, MHC, 2013


68.5%

31.5%

ENR Top Firms 2012 Revenue from Domestic vs. International Markets

75.6%

24.4% DomesticMarket

InternationalMarket

$75.5 billion

Top 400 CONTRACTORS

TOTAL 2012 Revenues: $309.5 Billion

Top 500 DESIGN FIRMS

TOTAL 2012 Revenues: $90.3 Billion

$28.4 billion

Source: McGraw Hill Construction, Research & Analytics / ENR, Top 500 Design Firms (April 29, 2013), Top 400 Contractors (May 20, 2013)

2008 International Revenue: 16.8% 2008 International Revenue: 24.8%


Where Top U.S. Firms Were Working Abroad in 2012

Source: McGraw Hill Construction, Research & Analytics / ENR, Top 500 Design Firms (April 29, 2013), Top 400 Contractors (May 20, 2013)

30.4% 27.7%

16.8%

11.0% 10.5%

3.5%

28.8% 27.4%

10.9%

19.4%

8.0% 5.5%

Asia and Australia Canada Middle East Europe Latin America/Caribbean

Africa

Top 400 Contractors Top 500 Design Firms

17% in 2008

► CONTRACTORS: Largest Increases in Asia and Latin America; Softening in Middle East and Europe from 2008 to 2012

► DESIGN FIRMS: Relatively Stable from 2008 to 2012; Increases in Asia and Canada; Drop-off in Middle East

6.4% in 2008


Key Industry Trends • Product Trends • Building Information Modeling (BIM) • Prefabrication/Modular Construction


Specification Trends of Ball, Butterfly and Gate Valves

Source: McGraw Hill Construction, Dodge SpecShare, June 2013

Valve Specification Rates in Projects 2009-2012

PRODUCT TRENDS

10%

15%

20%

25%

30%

35%

2009 2010 2011 2012

Butterfly ValvesBall ValvesGate Valves

► Economic Factors Influence Specification Rates • Specifiers less

concerned with specifying a particular type of valve in down markets

• Gate valves are somewhat less affected by market fluctuations


Valve Specification by Key Sectors for 2009–2012

EDUCATION Specification

Source: McGraw Hill Construction, Dodge SpecShare, June 2013

15%

25%

35%

45%

2009 2010 2011 2012

ButterflyValvesBall Valves

Gate Valves

15%

25%

35%

45%

2009 2010 2011 2012

15%

25%

35%

45%

2009 2010 2011 2012

15%

25%

35%

45%

2009 2010 2011 2012

HEALTHCARE Specification

DORMITORY Specification PUBLIC BUILDING Specification


Ensuring What They See is What They Get

► Transparency in supply chain and product attributes ► Growth of Use of EPDs, HPDs and

Lifecycle Assessment ► Transparency in building performance

Future Product and Policy Trends Driving Industry Change in Manufacturer Expectations

Source: www.boredpanda.com

What Does This Mean to You? Demand for

product attributes and materials

Demand for material sourcing data

Need to connect your product to building performance


BIM Is a Major Trend Transforming the Construction Industry

Traditional CAD drawings and specs have no native intelligence, just lines and text

► Integrates directly with other digital tools

► Produces drawings and specs as needed

► Focus on assemblies and systems rather than discreet materials and products

Image: Mortenson

CAD Drawings and Specs BIM Models

BIM

http://www.prlog.org/11540423-buildings-architectural-construction-drawings.jpg


BIM BIM Allows Companies to Do Business More Effectively—Leading to Strong Growth in Its Use

BIM Benefits With Greatest Growth In Importance Over Time

Source: McGraw Hill Construction, Business Value of BIM in North America SmartMarket Report, 2012

Growth in BIM Adoption in North America (2007-2012)


BIM Allowing Use of Model Data for Digital Fabrication

Source: McGraw Hill Construction, Business Value of BIM in North America SmartMarket Report, 2012

Contractors’ Use of Models for Digital Fabrication


HOW DO ARCHITECTS USE BIM OBJECTS?

Developing Specification

Conducting Analysis or Simulation Processes

Budgeting and Cost Estimating

WHAT’S IN A BIM OBJECT?

Geometric data, such as spatial coordination, etc.

Non-graphical data, such as material strength, etc.

Why Does This Matter for Your Business? BIM Objects Will Become a Necessity for Product Specification and Selection

HOW DOES HAVING BIM OBJECTS HELP YOU INCREASE SPECIFICATION AND INSTALLATION? Increases in BIM use will make it an imperative:

• Use by nearly all A/E firms in the future

• Owners demanding BIM models, leading to lower use of paper drawings

Lowers chance of spec changes due to heavier BIM use by contractors

Gives specifiers confidence your product information is current and accurate

Ensures compatibility of your product information with changing software programs


Today’s Trends Driving Increase in Use of Prefabrication/Modular Construction: • Easier onsite system assembly • Faster and cheaper project completion • Worker shortages—Do more with less staff

Looking out: • Prefabrication of MEP building systems,

wall units, etc. will become standard • Increased levels of waste reduction

Prefabrication and Modular Construction Will Increase and Change Distribution, Manufacturing and Sales Strategies

Source: Prefabrication and Modularization SmartMarket Report, McGraw-Hill Construction, 2011

Owners–90% used prefab or modular in 2009, 100% expected in 2013

PREFABRICATION/MODULAR


Prefabrication / Modularization Current Uses by Types of Projects

Prefab/Modular Elements Used by Largest Percentage of Respondents:

• MEP Building Systems (48%)

• Exterior Walls (48%) • Building

Superstructure (44%)



Benefits of Prefab/Modular Construction

Project Schedule Project Budget


35% experiencing decreases of 4 weeks or more

42% experiencing budget reduction by 6% or more

Amount of Construction Site Waste

Project Material Use


HOW WILL PREFABRICATION CHANGE CONSTRUCTION IN THE FUTURE

Jobsites will focus on component integration

Product manufacturers will compete on BIM model attributes not just price and quality

Distribution will be easier, to fewer delivery points

HOW WILL YOUR BUSINESS BE AFFECTED? More centralized procurement practices

New product transport logistics due to fewer locations for product deliveries—to prefabrication facilities versus a number of different jobsites

Increasingly model-driven, making BIM objects even more critical and catalog updates less important

Different warrantees necessary across multiple systems

More immediate marketing and communication strategies (for example, need to know immediately if there are dimensional changes in a ball valve that impact the model)

Why Does This Matter for Your Business? Prefabrication/Modularization Changing How Building Products Are Specified and Distributed


Future Building Trends


Biomimicry will be applied in designs, allowing for significant reductions in resource use and enhancing sustainable design: • “Skin cells” for buildings • Fabric finish based on the “lotus plant”

Example: Thermobimetals Breathable skins for buildings that respond to fluctuating heat and weather conditions • Inspired by human skin, thermobimetals

encase buildings and allow them to “breathe” • Metal strips bend to shade building or open

to release heat

• Implication: Future HVAC systems will need to take into account these new energy-efficient, passive methods of ventilation

Biomimicry—Mimicking Nature—Will Contribute to Innovative New Products and Materials, Making Buildings More Efficient and Adaptive


Future workforce will need to hone higher-level skills such as critical thinking, innovating and problem solving

Through telepresence, technology robots will be controlled remotely from the home or office and walk a construction site observing what is being done

Smart machines and robots will perform more low-skill tasks

Construction Workforce of the Future


The Building of the Future

Source: Arup

Renewable Energy Systems, like

Wind and Solar

Building Membranes Convert CO2 into Oxygen

Heat Recovery Windows with Natural Ventilation

Façade Reacts to Changing Climate

Conditions (e.g. breathable windows)

Structural Framing Uses Renewable Resources

Modular Building Components and

Structures Designed for Adaptability

Robotic Cleaning and Maintenance

Phase Change Materials: Interiors Act as Heat Recovery

Water Collection and Graywater System Combined with Urban Agriculture System—Linked from Water Collection on the Roof

Algae Bio-Fuels


U.S. Construction Market Is Improving with Dramatic Increases in the Longer Term

Continued Growth of Green Will Lead to Higher Use of Graywater Recycling Systems and Other System Changes

Digital Design and Prefabrication/Modularization Will Transform Product Sales, Marketing and Distribution Strategies for Valve Manufacturers

Innovations in Product Materials and Greater Emphasis on Building System Performance Will Change Expectations of Product Manufacturers

Concluding Thoughts


MHC Resources

Dodge Project News Database construction.com/dodge

Market Research & SmartMarket Reports construction.com/market_research

Dodge Analytics construction.com/dodge/dodge-market-research.asp

Statistical Databases Dodge MarketShare—Market Opportunity and Forecasting Dodge SpecShare—Specification of products/brands in projects Dodge BuildShare—Industry player connections

Download reports for free: analyticsstore.construction.com/ market-trends/smartmarket-reports.html

Latest SMR

Releases

http://construction.com/dodge

http://construction.com/market_research

http://construction.com/dodge/dodge-market-research.asp

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