2005 Outlook forU.S. Construction

December 16, 2004

Cliff BrewisSenior Director EditorialMcGraw-Hill Construction

U.S. Macroeconomic Picture

Change in Employment

-450

-300

-150

0

150

300

450

600

98 00 02 04

Thousands of Workers

Real GDP Growth - Quarterly

-4

-2

0

2

4

6

8

98 00 02 04

Annualized Percent Change

Consumer Price Index

0

1

2

3

4

5

98 00 02 04

Year-over-year Percent

30 Year T-Bonds3 Month T-Bills

CPI

Core CPI

The economy is working through the mid-2004 “soft patch”

Issues Impacting Recovery Pattern of Economic Expansion – Annual GDP2001 2002 2003 2004 2005

+0.8% +1.9% +3.0% +4.3% +3.5%

Jobless Recovery – Productivity

– Off Shore Employment

– Oil/Health Care

Cost of Money– Deficit

– Inflation

International– Iraq/Middle East

– China/India

Increasing Costs of Material – Tied to China/India

– Impacts different Building Sectors

U.S. Construction Market Indicators

150

250

350

450

550

650

90 92 94 96 98 00 02 04 06

M-H Construction Starts 2003 +5%

2004 +9%Billions of Dollars

400

575

750

925

1100

90 92 94 96 98 00 02 04 06

Construction Put in Place 2003+5%

2004+9%Billions of Dollars

4.2

4.7

5.2

5.7

6.2

6.7

7.2

90 92 94 96 98 00 02 04 06

Construction Employment 2003 -0-

2004 +3%Millions of Workers

Ohio

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Major U.S. Construction SectorsBy major sector, the construction start pattern has diverged. Single Family Housing

50

100

150

200

250

300

90 92 94 96 98 00 02 04

Billions of Dollars

2003 2004+13% +14%

Income Properties

40

55

70

85

100

115

130

90 92 94 96 98 00 02 04

Billions of Dollars 2003 2004 +6% +11%

Institutional Building

30

45

60

75

90

105

90 92 94 96 98 00 02 04

Billions of Dollars2003 2004 -0- +1%

Public Works

30

45

60

75

90

105

90 92 94 96 98 00 02 04

Billions of Dollars2003 2004 -6% +4%

U.S. Single Family HousingConstruction continues to be robust ...

Single Family Housing Starts

2002 1.304 million units +7%2003 1.417 million units +9%

2004 1.530 million units +8%

2005 1.425 million units -7%

Sales of New Single Family Homes

400

600

800

1000

1200

1400

90 92 94 96 98 00 02 04

Thousands

Single Family Housing

500

720

940

1160

1380

1600

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Thousands of Units

Mortgage Rates - Weekly

5

6

7

8

9

10

11

90 92 94 96 98 00 02 04

Percent

U.S. Single Family Housing

Ratio: U.S. Median Home Price to Median Income

2.5

3.0

3.5

4.0

4.5

5.0

70 75 80 85 90 95 00 05

Consumer Confidence

25

50

75

100

125

150

90 92 94 96 98 00 02 04 06

Monthly, 1985 = 100

Supply of Single Family Housing

2

4

6

8

10

90 92 94 96 98 00 02 04 06

Number of Months

Gr. Cincinnati: Single Family

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

U.S. Income Properties -- Stores

Store Construction2002 257 msf - 8%2003 283 msf +10%

2004 290 msf +3%

2005 300 msf +3%

(msf = million of sq. ft.)

Stores and Shopping Centers

100

150

200

250

300

350

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Millions of Square Feet

Gr. Cincinnati: Retail

0

200,000

400,000

600,000

800,000

1,000,000

1,200,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

U.S. Income Properties -- Offices

Office Construction

2002 157 msf -30% 2003 144 msf -9%

2004 155 msf +8% 2005 170 msf +10%

Offices

50

125

200

275

350

425

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Millions of Square Feet

U.S. Income Properties -- Offices

Change in Office Employment

-300

0

300

600

900

1200

1500

84 86 88 90 92 94 96 98 00 02 04

Thousands of Workers

0

5

10

15

20

25

84 86 88 90 92 94 96 98 00 02 04 06

Downtown

Suburban

U.S. Office Vacancy Rates CB Richard Ellis

U.S. Income Properties -- OfficesOffice Building Factors

Year 2004 (Jan. - Sept.) Top 10 Metro Areas for Office Building

Ranked by square feet of new office starts

1. Wash. DC +16% 6. Chicago

-19%

2. New York +181% 7. Baltimore

+36%

3. Atlanta +53% 8. Tampa

+24%

4. Phoenix -6% 9. Las Vegas

+140%

5. Dallas +21% 10. San Diego

+123%

Tech-Related Markets:11. Seattle +113%25. Boston +19%66. Austin -40%72. San Jose -37%160. San Francisco -92%

Gr. Cincinnati: Offices

$0

$50,000

$100,000

$150,000

$200,000

$250,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

U.S. Income Properties -- Multifamily Housing

Multifamily Housing

2002 402,000 units -3%

2003 444,000 units +10%

2004 435,000 units -2%

2005 445,000 units +2%

Multifamily Housing

0

200

400

600

800

1000

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Thousands of Units

Gr. Cincinnati: Multi-Family

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

U.S. Institutional BuildingsSchool construction still strong, but slipping.

Educational Buildings

2002 254 msf -7%

2003 241 msf -5%

2004 217 msf -10%

2005 223 msf +3%

Educational Buildings

50

100

150

200

250

300

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Millions of Square Feet

U.S. Institutional Buildings

Student Enrollments, Grades K-8

29

32

35

38

41

1980 1985 1990 1995 2000 2005 2010 2015

Millions

Student Enrollments, Grades 9-12

10

12

14

16

18

1980 1985 1990 1995 2000 2005 2010 2015

Millions

U.S. Higher Education Enrollments

11

13

15

17

19

1980 1985 1990 1995 2000 2005 2010 2015

Millions

U.S. Institutional Buildings

MO .7

CO 7.6

AZ 9.7

AK 14.6

HI 13.8

CA 13.2

NV 7.7

NM 13.6

TX 10.4

OK .8

KS 3.0

WY 14.9

ID 13.6

UT 12.3

WA 5.5

OR 5.3

MT 6.0

IA -1.4NE

3.2

ND -1.9

SD 4.0

MN .1

IN .4

KY -3.0

MS -2.0

LA 1.0

AR -1.8

TN 1.7

IL .8

GA 5.3

AL -1.0

FL 4.0

VA 2.1NC -1.4

SC .7

MD .8

PA -3.0OH

-2.6WV -4.7

MI -1.2

WI .1

NY -3.8

NJ .7

DC 4.3

DE .9

CT -3.0

MA -2.6

VT -2.0

RI -.6

NH .0

ME -1.0

Increase 10% to 15%

Increase 5% to 10%

Increase 0% to 5%

Decrease

Change in K-12 Student Enrollments, 2003 - 2013By State, Source: National Center for Education Statistics

Gr. Cincinnati: Education

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

U.S. Institutional Buildings

Healthcare Facilities

2002 97 msf +6%

2003 91 msf -6%

2004 86 msf -6%

2005 88 msf +2%

Healthcare facilities settling back from a robust 2002.

Healthcare Facilities

0

15

30

45

60

75

90

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Millions of Square Feet

Clinics

Hospitals

Gr. Cincinnati: Medical

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

U.S. Public Works

Highways, Bridges

2002 $43.5 billion +1%

2003 $42.5 billion -2%

2004 $40.6 billion -5%

2005 $42.5 billion +5%

Highways and bridges now settling back ...

Highways and Bridges

10

20

30

40

50

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Billions of Dollars

OH: Highways

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,00019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

U.S. Total Construction for 2004/2005Billions of Dollars

2001 2002 2003 2004 2005_

Total Construction 496.6 503.5 529.8 576.6 585.4 +5% +1% +5% +9% +2%

Single Family Housing 186.9 214.2 242.3 276.6 267.6 +6% +15% +13% +14% -3%

Income Properties 103.1 94.0 99.5 110.0 119.5

-8% -9% +6% +11% +9% Institutional Bldgs. 90.8 90.0 89.9 91.2 97.4

+9% -1% -0- +1% +7%

Manufacturing Bldgs. 8.1 5.4 6.4 7.0 8.0 -8% -33% +19% +9% +15%

Public Works 83.6 87.9 82.8 85.9 87.4 +7% +5% -6% +4% +2%

Ohio 1999 2000 2001 2002 2003 2004 2005

Ohio $17,267,968 $16,269,995 $18,307,686 $17,182,895 $16,778,415 $19,383,349 $19,093,06794.2% 112.5% 93.9% 97.6% 115.5% 98.5%

S Fam $5,945,777 $6,321,263 $6,704,667 $6,809,114 $7,403,319 $7,953,627 $7,727,293106.3% 106.1% 101.6% 108.7% 107.4% 97.2%

Multi Fam $902,791 $721,815 $826,284 $653,498 $665,736 $830,788 $931,49580.0% 114.5% 79.1% 101.9% 124.8% 112.1%

Highway $1,171,831 $1,243,809 $1,306,907 $1,346,683 $1,181,119 $1,256,175 $1,355,292106.1% 105.1% 103.0% 87.7% 106.4% 107.9%

Retail $847,763 $952,199 $841,289 $675,707 $779,285 $1,003,130 $1,098,204112.3% 88.4% 80.3% 115.3% 128.7% 109.5%

Ofc $1,313,296 $1,010,072 $706,509 $570,272 $604,633 $633,982 $739,18076.9% 69.9% 80.7% 106.0% 104.9% 116.6%

Hotel $340,610 $224,659 $100,410 $77,840 $83,314 $88,745 $93,73366.0% 44.7% 77.5% 107.0% 106.5% 105.6%

Mfg $618,075 $448,025 $332,051 $179,097 $301,477 $253,682 $335,37072.5% 74.1% 53.9% 168.3% 84.1% 132.2%

Edu $1,155,375 $1,291,202 $1,850,066 $2,010,393 $1,451,228 $1,465,093 $1,522,947111.8% 143.3% 108.7% 72.2% 101.0% 103.9%

Medical $766,150 $512,283 $661,221 $622,110 $876,527 $810,228 $941,02366.9% 129.1% 94.1% 140.9% 92.4% 116.1%

Pub $380,917 $294,985 $293,045 $273,512 $173,239 $170,657 $185,76277.4% 99.3% 93.3% 63.3% 98.5% 108.9%

Points of Perspective – U.S. ConstructionTotal Construction by CycleCyclical Trough (T) = 100, Based on Constant Dollars

80

100

120

140

160

180

T T+2 T+4 T+6 T+8 T+10 T+12 T+14

Years from Cyclical Trough

1991 - 2005

1982 - 1991

1975 - 1982

Questions?Cliff Brewis

Senior Director Editorial

McGraw-Hill Construction

130 Doolittle Dr Ste 1

San Leandro, CA 94577

510.383.1106 x14

cliff_brewis@mcgraw-hill.com

Colorado 2000 2001 2002 2003 2004 2005

Total $12,490,718 $12,388,899 $12,226,856 $12,224,574 $14,013,088 $13,847,646 99.18% 98.69% 99.98% 114.63% 98.82%

Single Fam $5,915,239 $5,843,420 $5,934,930 $6,622,416 $8,189,251 $7,560,905 98.79% 101.57% 111.58% 123.66% 92.33%

Multi Res $1,122,724 $1,306,177 $1,218,276 $709,455 $1,071,257 $1,147,736 116.34% 93.27% 58.23% 151.00% 107.14%

Retail $448,122 $491,091 $448,537 $403,900 $430,710 $510,832 109.59% 91.33% 90.05% 106.64% 118.60%

Ofc $1,134,694 $717,350 $423,632 $296,082 $288,137 $288,745 63.22% 59.06% 69.89% 97.32% 100.21%

Hotel $124,956 $82,545 $40,319 $219,539 $116,163 $120,380 66.06% 48.84% 544.51% 52.91% 103.63%

Mfg $68,941 $151,411 $70,906 $33,295 $108,562 $90,373 219.62% 46.83% 46.96% 326.06% 83.25%

Education $507,786 $749,169 $486,495 $520,366 $549,309 $570,482 147.54% 64.94% 106.96% 105.56% 103.85%

Medical $142,860 $330,628 $272,871 $330,097 $425,052 $376,872 231.43% 82.53% 120.97% 128.77% 88.67%

Public $292,369 $151,964 $80,327 $218,396 $77,181 $83,522 51.98% 52.86% 271.88% 35.34% 108.21%