McGraw Hill Executive Conference Shows Cautious Optimism for World of Construction

In addition to hosting the presentation of the 2014 Dodge Outlook results, McGraw Hill Construction also had several speakers who discussed the state of the global market Friday in Washington, D.C. Though they each spoke about different segments, the speakers agreed that while the U.S. was experiencing a slow recovery, they warned attendees to be cautious of global markets.

In her presentation, The Global Economic Outlook: Great Expectations, Beth Ann Bovino, chief economist at Standard and Poor’s, said that the U.S. was hit by the worst recession since World War II and “we still face headwinds.” Now in its fifth year, the U.S. faces export slowdown, stimulus reversal and fiscal log in the recession.

Bovino warned that several significant tail risks remain, including the potential for the European debt crisis to spread, more sharp near-term austerity in the U.S., oil prices to spike in Middle East turmoil and the Federal Reserve to remove liquidity sooner than expected. The recent partial government shutdown has also added a level of uncertainty, Bovino says.

Despite the insecurity, Bovino added that there were signs of optimism in the industry including Washington’s willingness to compromise to end the shutdown, private demand held up despite the shocks, housing prices are climbing higher now, consumers are spending on big-ticket items and manufacturing is returning to the U.S. “All of these suggest we are turning a corner,” she said.

Though the U.S. is still below pre-crisis highs, Bovino said, consumer debt is falling and the U.S. net worth is increasing. “The positive in that is that we are seeing the private sector hold up despite these headwinds and that’s where I see positive growth for the long term,” she added.

In another presentation, Harvey Bernstein, F.ASCE, LEED AP, vice president of industry insights and alliances for McGraw Hill Construction, said, “The leaders of our industry are really positive about the future,” adding that as a result of a greatly improved CICI, commercial construction has expanded. “This year retail and office are pulling and showing some good signs for improvement,” he said.

In a world gross domestic product forecast, Bernstein did warn attendees to watch for emerging markets, saying he anticipates 70 percent growth from emerging markets by 2025. “China is, in fact, still the largest construction market in the world,” he said.

Bernstein also noted that the use of prefab and modular construction is increasing. “Prefab and modular construction [have a] big impact on safety,” he said, adding that green starts are another growing segment. “Clearly green is becoming a standard practice … because of the savings and the impact it has on the occupants.” He also noted that children who go to green schools experience a variety of benefits, including higher grades and attendance rates, as well as fewer asthma attacks.

In the keynote presentation, The New Rules for Winning in a New World, speaker Roger Flanagan, professor and chairman for the steering committee for international affairs school of construction management and engineering at the University of Reading, echoed those statements.

“Green and sustainability is non-negotiable and it’s all around the world,” he said in his discussion about differentiating your construction company to stand out among emerging developing countries. “If you don’t look at the emerging and transitioning economies, you’re actually going to be getting a wake-up call,” Flanagan said. “What we see is the emergence of two different speeds—the developed world and the developing world. The developing world is moving very fast.”

He also said that internationalization is one trend in which U.S. construction companies need to take notice. “Whether you’re a small, medium or large enterprise, you can no longer afford to sit back and say ‘I don’t think we need that market,’ because you do,” Flanagan said.

U.S.-based companies need to work to stand out among the emerging economies by looking to their technology, in addition to understanding that they don’t operate under the same rules of tradition. They are fast-thinking, innovative economies that have learned by watching technologically developed countries.

Flanagan urged attendees to embrace these developing cultures and to also use what he calls the eight Ps to better your company. The eight Ps are ranked priorities to consider: people, planet, performance, profits, productivity, process, public and payment, respectively.

Taking that order of priority into consideration, Flanagan reminded attendees they need to work to stand out since, “the new kids on the block have learned fast and they’ve learned your ways and technologies … [they’re] hugely ambitious.”

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