Industry Watch

McGraw-Hill Construction, part of The McGraw-Hill Companies (NYSE: MHP), recently 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 percent, to $614 billion, following an 8 percent 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 multi-family and commercial segments, as well as continued weakness in single-family home construction.”

There are some positives for the market in 2008, 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:
 • Single-family housing will weaken further, given the large inventory of unsold homes and diminished loan availability to homebuyers. A 3 percent drop in dollar volume is expected, corresponding to another 6 percent decline in the number of units.

 • Multi-family housing will slide 8 percent in dollars and 11 percent in units, following steeper declines in 2007. 

 • Commercial buildings will slip 6 percent in dollar volume and 11 percent 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 percent in dollar volume, while square footage edges up 1 percent. 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 percent in dollar volume, after a 40 percent 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 percent.

 • Public works construction will move up 3 percent, following the 5 percent 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, D.C., 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 2008 Construction Outlook is available for purchase at www.construction.com/Outlook2008/.

WIN Calls for Renewed Federal Funding
The Water Infrastructure Network (WIN) and its members called on Congress to celebrate the 35th anniversary of the Clean Water Act by re-establishing its commitment to investing in clean water infrastructure legislation.

One of the major tenets of the 1972 statute was the authorization of federal financial assistance to wastewater treatment and water quality improvements. But funding levels have dropped dramatically in recent years, producing an ever-widening gap between identified needs and resource commitments.
The Water Infrastructure Network estimates the 20-year need for clean water infrastructure at approximately $300 billion to $500 billion over the next 20 years. The WIN estimate is echoed by the EPA and the Congressional Budget Office.  

Despite this data, federal funds for water infrastructure have plummeted 70 percent since 1980 and almost 50 percent since 2001.

WIN believes the Senate should act as soon as possible to introduce and pass similar legislation to H.R. 720, the Water Quality Financing Act of 2007, which passed the House on a 303-108 vote and would provide $14 billion over four years for the Clean Water State Revolving Fund. WIN also believes a long-term, sustainable funding solution via a clean water trust fund is essential, and commends the October 16, 2007, House passage of H. Res. 725, making a commitment to work toward such a trust fund.