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Construction Market Will Continue to Weaken in 2008, According to McGraw-Hill Construction Outlook

Expected 2% Decline Will Follow 8% Drop in 2007 as Credit Crunch Fallout Continues

NEW YORK, Oct. 25 /PRNewswire/ — McGraw-Hill Construction, part of The McGraw-Hill Companies (NYSE: MHP), today 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 homebuyers. 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 homebuyer 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.

The 2008 Construction Outlook is available for purchase at http://www.construction.com/Outlook2008/.

About McGraw-Hill Construction:

McGraw-Hill Construction, part of The McGraw-Hill Companies (NYSE: MHP), connects people, projects and products across the design and construction industry. Backed by the power of Dodge, Sweets (http://www.sweets.com), Engineering News-Record (http://www.enr.com), Architectural Record (http://www.architecturalrecord.com), GreenSource (http://www.greensourcemag.com), and Regional Publications, the company provides information, intelligence, tools, applications and resources to help customers grow their business. McGraw-Hill Construction serves more than one million customers within the $4.6 trillion global construction community. For more information, visit http://www.construction.com/.

About The McGraw-Hill Companies

Founded in 1888, The McGraw-Hill Companies is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor’s, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2006 were $6.3 billion. Additional information is available at http://www.mcgraw-hill.com.

SOURCE McGraw-Hill Construction

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