Construction activity in 1996 to grow by 4 percent.

WASHINGTON, D.C.--(BUSINESS WIRE)--October 26, 1995--New construction contracts will advance 4 percent in 1996 to $311.1 billion, it was announced today in a forecast presented by the Construction Information Group of The McGraw-Hill Companies to an audience of leading building products executives.

On

balance, this year's Outlook expects slightly stronger growth in construction contracting for 1996, in keeping with a maturing cyclical expansion. The rate of increase should pick up to 4% from the 1% estimated for 1995, but still lag behind the gains registered during the first three years of this recovery.

According to Robert A. Murray, vice president of economic affairs for The McGraw-Hill Companies' Construction Information Group, "The subdued construction cycle of the 1990s has unfolded close to expectations. Housing has avoided the sharp swings of earlier decades, thanks to relatively stable interest rates and ongoing demographic support. While the slow and extended upturn in the income property group did not provide much help at first, its strength came at the right place at the right time, picking up slack from a slumping housing sector. The institutional and public works markets are relatively stable by nature, given their ties to broad demographic trends and public funding sources, so their enhanced share of activity is another reason for this recovery's muted cyclicality."

Favorable demographic trends, including growth of the 35 to 54 year-old group and higher levels of immigration, will keep the demand for single family housing strong during the second half of the 1990s. On balance, a safe estimate for single family housing demand in the mid-1990s continues to be about 1.0 million units annually. Given supportive demographics, economic forces will likely determine how far activity in 1996 deviates from that benchmark. On the financial markets side, fixed mortgage rates settled back after a momentary uptick in August. With moderate economic expansion of about 2.5%, there's little chance that inflation will reignite and mortgage rates should hold close to current levels. For the year ahead, construction of single family housing is expected to oscillate around the higher volume established in the third quarter of this year. This works out to a 1996 total of 1.0 million units, for a 3% increase over 1995's 970,000 units.

For 1996, the different structure types within the income property group will put in varied performances. Categories experiencing meager-to-fair recoveries -- offices, hotels, and multifamily housing -- should continue to expand, but the overheated store category is due for correction, which will pull down warehouse construction slightly as well.

Within the category, office construction is projected to improve to 130 million square feet, a gain of 8%; contracting for new hotels is projected to climb a moderate 7%, for a total volume of 48 million square feet; multifamily housing gains will slow to 4%, bringing the total to 290,000 units; volume of new store space is projected to slip 10% in 1996, to a still-healthy 235 million square feet; contracting will ease back to 170 million square feet for warehouses; and contracting for manufacturing buildings is expected to slide 3% in 1996 to 153 million square feet -- still the second highest total since the late 1980s.

The long-term pattern for institutional building has generally followed the gradual change in demographic and social trends. The increase in births since the 1970s has produced a sustained expansion for school construction that began in 1984 and is still in progress. Meanwhile, population growth at the other end of the spectrum-- those age 65 and over -- has contributed to rising demand for healthcare facilities. And, the tougher sentences now given for drug-related crimes has led to a sharp increase in the prison population, prompting an accompanying surge in new prison construction. As a result, square footage for the institutional sector is predicted to rise 1% in 1996, to a total of 422 million square feet.

Public works construction, including both transportation and environmental construction, is expected to slip back 1% to $58.9 billion due in part to the push to cut federal spending and the subsequent shift of the funding burden to the state and local level. Similarly, congressional delays in passing highway appropriations for 1996, as well as in designating the National Highway System, are near-term drags for highway and bridge construction.

F.W. Dodge has been the nation's leading source of construction information since 1891. Dodge markets a variety of detailed multimedia information services with marketing and sales planning applications for construction and real estate professionals.

The McGraw-Hill Companies' Construction Information Group, consisting of F.W. Dodge, the Sweet's Group, Architectural Record, Engineering-News Record and the Construction News Publishing Network, provides integrated solutions for construction professionals and building product marketers and active leadership in the industry by supporting associations and educational programs.

CONTACT: Eileen Gabriele

The McGraw-Hill Companies

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