2008 McGraw-Hill Construction Outlook Cliff Brewis Senior Director Editorial McGraw-Hill Construction

2 U.S. Macroeconomic Picture

3 World Growth Remains Strong Source: Global Insight and S&P Real GDP, % change

4 U.S. Material Prices

5 Points of Perspective -- U.S. Construction

6 Major U.S. Construction Sectors (Starts)

7 U.S. Single Family Housing

8 Default Rates Highest In Midwest And South Source: Mortgage Bankers’ Association 2.48% to 3.47% Over 3.47% Under 2.47% Seriously Delinquent Rate, Q2

9 California: Single Family

10 California: Single Family Los Angeles San Diego

11 U.S. Multifamily Housing

12 U.S. Income Prop.-- Multifamily Housing Major metropolitan areas Multifamily Housing Top 10 Metros -- ranked by new dwelling units Year 2007 YTD %ch 07/06 1. New York -49% 2. Chicago -34% 3. Seattle +44% 4. Miami -54% 5. Orlando FL +13% 6. Atlanta -10% 7. Houston +41% 8. Los Angeles -35% 9. Washington DC -19% 10. Boston +1% Year 2006, %ch 06/05 1. New York Miami -22% 3. Chicago +27% 4. Los Angeles +20% 5. Dallas-Ft.Worth +32% 6. Washington DC -22% 7. Atlanta -13% 8. Orlando FL +22% 9. Seattle +41% 10. Las Vegas +22%

13 California: Multifamily Housing

14 California: Multi-Residential Los Angeles San Diego

15 U.S. Commercial Bldgs. -- Stores

16 Borrowing Against Your Home Source: Freddie Mac

17 California: Retail

18 California: Retail Los Angeles-Long Beach-Santa Ana, CALos Angeles-Long Beach-Santa Ana, CA STORESSTORES $853,760$853,760 $715,120$715,120 $542,711$542,711 $569,578$569,578 $566,829$566,829 $477,127$477,127 $583,649$583,649 $649,478$649,478 $753,616$753,616 $783,511$783,511 $606,693$606,693 $756,462$756,462 $629,364$629,364 $467,441$467,441 $446,947$446,947 $715,999$715,999 $659,170$659,170 $699,170$699,170 $601,170$601,170 Los Angeles San Diego

19 U.S. Commercial Bldgs.-- Hotels

20 California: Hotel

21 California: Hotel Los Angeles San Diego

22 U.S. Commercial Bldgs. -- Offices

23 U.S. Commercial Bldgs. -- Offices Office Building Factors

24 California: Office

25 California: Office Los Angeles San Diego

26 U.S. Institutional -- Educational Bldgs YTD Primary, Jr. Highs +1% -7% High Schools +15% -6% Colleges/Univ. +6% +5% Libraries -1% -7% Laboratories -24% +20% Museums +2% -7% Comm. Colleges +43% -12% Vocational Schools +35% -50%

27 U.S. Institutional -- Educational Bldgs.

28 California: Education

29 California: Education Los Angeles San Diego

30 U.S. Institutional -- Healthcare Buildings

31 California: Healthcare

32 U.S. Institutional Buildings

33 California: Public ex Schools

34 U.S. Manufacturing Buildings

35 California: Manufacturing

36 Governor’s Strategic Growth Plan  First Five Years  Transportation$42 Bil  Education $24 Bil  Flood Control/Water Supply$11 Bil  Public Safety/Courts$10.5 Bil  Total$$86.5 Bil  Bond Measures Passed$43 Bil  Requires Passage in the Legislature and Referendums

37 California  Legislation on Off-Road Diesel Emissions  Product is NOT Available  Reduce Capacity and Increase Unemployment  Spike in 2008/Declines in 2009  Federal Legislation/Regulation on Non-Matching Documentation  Tied Up in the Courts  Availability of Federal Highway Funds

38 U.S. Public Works -- Highways & Bridges

39 California: Highways

40 U.S. Public Works -- Environmental

41 California: Water Supply

42 U.S. Total Construction Starts for 2008 Billions of Dollars Total Construction %+13%+2%-8% -2% Single Family Housing %+12%-14%-25% -3% Multifamily Housing %+35%+2%-12% -8% Commercial Bldgs %+7%+27% +7% -6% Institutional Bldgs % +12%+10%+4% +4% Manufacturing Bldgs %+24%+33%+40% -11% Public Works %+9%+17%+5% +3%

43 California

44 Questions? Cliff Brewis Senior Director Editorial McGraw-Hill Construction