The U.S. construction industry saw a strong start to 2016 despite global economic uncertainty.

1. Global economic shifts are causing
decision makers to think more
strategically about development
United States
Construction Perspective
Q1 2016

2. Economic struggles from far away affect our own built environments more
as the world becomes more interconnected.
Although the United States had success in recovering after the financial crisis, several economic headwinds are
dampening the global recovery. These issues include:
• A reduction in investment, driven in part by low interest rates and the threat of deflation
• Political and economic uncertainty and unrest in various regions, including the refugee crisis and political change
• Stagnant productivity and employment growth
• Low commodity prices, especially in powerhouses like China and in oil producing countries
In a global import and export economy, those issues listed above will affect business demand, and in turn construction
demand, in the United States. Many large multinational corporations are having to consider future income streams
when deciding where to invest in capital expenditures. Consumers are dialing back spending, forcing retailers to come
up with new and exciting ways to attract and retain loyal customers. The upcoming presidential election has businesses
wary, as they weigh the pros and cons of each candidate.
Despite these concerns, the United States construction industry saw a strong first quarter, with projections of steady,
albeit lower level, growth in Q2. Even though developers and occupiers are proceeding with caution, they continue to
build. And as we keep monitoring the global economy, it is important to remember the construction industry lags the
broader economy one to two years, giving vigilant experts ample opportunity to asses portfolio strategy in advance of
any economic stagnation.

3. Global economics:
Growth is plateauing

4. Global interest rates in key economies remain low, as countries are
not bullish on future growth
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Reserve Bank
of Australia
Federal
Reserve
Swiss National
Bank
European
Central Bank
Bank of Japan Reserve Bank
of New Zealand
Bank of Canada Bank of
England
Interest rates: Major central banks
Rate cuts stimulate a
struggling economy, while high
interest rates show that a
government is confident about
future growth, or that inflation
is growing.
Average:
0.6 percent
Source: JLL Research, OECD

5. GDP growth is projected to grow slightly through 2017, though key
regions will have steep declines
5
GDP,PPPexchangerate,basispoints
Source: JLL Research, OECD Most recent available data at time of publication
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2015 2016 2017 GDP declines are partially due to the steep drop in oil
prices, the steel glut, and global debt.

6. China’s deceleration has some of the biggest ripples worldwide
6
The manufacturing behemoth's rapid GDP decline will affect demand for global construction
commodities
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2010 2011 2012 2013 2014 2015
GDP,PPPexchangerate,basispoints

7. Global employment declined 77.2 percent since the crisis
7
An employment slump sends ripples through the broader economy, as demand for import goods and
ability to manufacture export goods decline
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Q42015unemploymentrates,OECDcountries
Source: JLL Research, OECD Most recent available data at time of publication

8. Domestic economics: Still
growing, though cautiously

9. Domestic GDP grew more slowly QoQ in Q4, due in part to
downturns in nonresidential investment and a decrease in imports
9
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ContributionstopercentchangeinrealGDP(SAAR)
GDP growth declined YoY in Q4
2015, from growth of 2.0 percent to
1.4 percent growth. Though the rate
is continuing to slow, the U.S. has
seen the strongest recovery
worldwide since the recession.
Source: JLL Research, Bureau of Economic Analysis Most recent available data at time of publication

10. GDP per capita continues to grow at a steady rate domestically,
despite global concerns
10
Source: JLL Research, World Bank Most recent available data at time of publication
$42,000
$44,000
$46,000
$48,000
$50,000
$52,000
$54,000
$56,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
GDPpercapita

11. 11
Constructionemployment(numberofemployees,inthousands)
Overallemployment(numberofemployees,inthousands)
Domestic construction employment grew 4.7 percent YoY, despite a
slump in early 2016
Source: JLL Research, Bureau of Labor Statistics Most recent available data at time of publication
120,000
125,000
130,000
135,000
140,000
145,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2010 2011 2012 2013 2014 2015 2016
Construction Overall Employment

12. Productivity is increasing since 2009 lows, as laborers put in
increasingly more hours
12
Source: JLL Research, Bureau of Labor Statistics Most recent available data at time of publication
Construction workers are working more hours,
with higher wages, driving up overall construction
costs.
Percentchangeinhoursworked:Nonresidentialconstruction
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

13. Q4 Construction Backlog Indicator (CBI) declined in the West and
Northeast, while the South’s CBI grew 8.7 percent MoM
13
Infrastructure CBI grew 23.2 percent MoM, as big projects ramp up countrywide
7.1
months
11.2
months
8.4 months6.5
months
National average
construction backlog
8.4monthsThe CBI indicates the number of work that will
be performed by commercial/industrial
contractors in the next few months, based on
projects in the pipeline currently.
Source: JLL Research, Associated Builders and Contractors Most recent available data at time of publication

14. Cost trends: Building costs growing
at a faster rate

15. Building costs grew 3.5 percent between 2014 and 2015 - and they
continue to grow
0
1000
2000
3000
4000
5000
6000
7000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Building cost index
BCI:20-citylaborandmaterialscostaverageindex
Overall costs are conservatively
projected to grow at an average of
1.5 percent annually through 2020.
Source: JLL Research, ENR

16. MaterialsIndex:weightedpricemovementofstructuralsteel,portlandcement
and2X4lumber
16
Commonlaborindex:Unionwageplusfringebenefits
Materials prices are projected to grow slightly and flatten through
2020, and labor costs will continue to grow
Source: JLL Research, ENR
0
500
1000
1500
2000
2500
3000
3500
4000
0
5000
10000
15000
20000
25000
30000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Common Labor Index Materials Index
Global trade flows of commodities are declining as well; total
volumes of imports and exports projected to grow by only 2.6
percent in 2015.

17. 17
Wages continue to grow, though the rate of growth dropped at the
end of 2015
Source: JLL Research, Bureau of Labor Statistics
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Privateindustrywagesandsalariesforconstructionindustries

18. 18
Nonresidentialputinplace($M)
Nonresidential put-in-place value is up 10.1 percent YoY, though it
saw a decline of 1.4 percent MoM in February
Source: JLL Research, U.S. Census Most recent available data at time of publication
$580.0
$600.0
$620.0
$640.0
$660.0
$680.0
$700.0
$720.0
Feb. 2015 Oct. 2015 Nov. 2015 Dec. 2015 Jan. 2016 Feb. 2016

19. Coastal cities remain the most expensive to build, in part due to high
demand and dwindling available space
19
0
20
40
60
80
100
120
140
2016RSMeansnationalcostindex
Source: JLL Research, RS Means

20. $0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
20
Three of the five most expensive markets are in the Bay Area, as
San Francisco rents come close to eclipsing New York
Source: JLL Research
Directaverageaskingrent($p.s.f.)
Some of the highest cost construction markets, including
Chicago and Philadelphia, do not have the highest rents.
It is cheaper for these markets to renovate existing
space than to try and attract occupiers from high cost
markets.

21. 0
5000
10000
15000
20000
25000
New York Boston San
Francisco
Chicago Washington,
DC
Los Angeles Seattle Portland Denver Phoenix
Q2 2015 Q4 2015
21
Cost of construction in major markets (Q4 2015)
RLB Comparative Cost Index
tracks the bid cost of
construction, including labor,
materials, contractor and
overhead costs.
RLBcomparativecostindex
High cost construction markets all saw approximately 1.0 percent
growth between Q2 and Q4 2015
Source: JLL Research, RLB Most recent available data at time of publication

22. 22
Construction put in place sector Feb. 2015 Feb. 2016
Highway and Street $80.3M $99.9M
Educational $79.2M $85.9M
Manufacturing $77.3M $77.9M
Commercial $64.1M $71.1M
Office $49.8M $62.4M
Healthcare $38.9M $40.2M
Infrastructure projects demand the majority of nonresidential
construction spend, with an increase of 24.4 percent YoY
Source: JLL Research, U.S. Census Most recent available data at time of publication

23. Construction put-in-place:
Activity is starting to flatten

24. The impacts of global uncertainty include lowering capital
expenditures
Companies are focusing on lean budgeting in the face of low economic confidence
24
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2010 2011 2012 2013 2014 2015 2016
Future capital expenditures
NYCdiffusionindex
Source: JLL Research, FRED

25. 25
22.5 m.s.f. 20.3 m.s.f. 13.6 m.s.f.
Q1 2013
12.5 m.s.f.
Q1 2014 Q1 2015 Q1 2016
Office starts declined 33.0 percent YoY in Q1 2016, as activity
begins to flatten
Source: JLL Research, Costar Group

26. 26
Industrial construction
Retail construction
157.7
m.s.f. under
construction
Q1 2016
Q1 2015
Q1 2016
178.0
m.s.f. under
construction
57.2
m.s.f. under
construction
70.2
m.s.f. under
construction
Q1 2015
Q1 2016
Office construction
Q1 2015
96.8
m.s.f under
construction
80.5
m.s.f under
construction
Retail construction grew 24.4 percent YoY due to an increase in
retail renovation used to attract new consumers
Source: JLL Research, CoStar Group Most recent available data at time of publication

27. 27
Office completions remained at the same level as Q1 2015, after Q4
2015 reached a five-year high
Source: JLL Research
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
YTDcompletions(s.f.)

28. 28
8.3
m.s.f.
Dallas
3.4
m.s.f.
Seattle
4.7
m.s.f.
San
Francisco 3.3
m.s.f.
Silicon
Valley
5.7
m.s.f.
Houston
4.3
m.s.f.
Chicago
3.2
m.s.f.
Nashville
14.3
m.s.f.
New York
City
6.4
m.s.f.
Washington
DC
3.6
m.s.f.
Philadelphia
Q1 2016 under construction
Nashville became one of the top ten most active office construction
markets, while Houston slipped from the most active in 2015 to fourth
Source: JLL Research

29. Nashville, Salt Lake and San Francisco have the lowest vacancy
rates nationwide, making them ripe for new construction.
29
The highest vacancy rates were
in the Northeast, in New Jersey,
Fairfield County and
Westchester County.
Source: JLL Research
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
Nashville
Salt Lake City
San Francisco
Portland
Seattle-Bellevue
New York
Oakland-East Bay
Austin
Charlotte
Orange County
Totalvacancy(%)

30. 30
Industrial deliveries grew YoY in 2016, reflecting overall growth in
the domestic industrial sector
Source: JLL Research
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
YTDcompletions(s.f.)

31. 16.0
m.s.f.
Inland
Empire
7.7
m.s.f.
Reno
31
24.4
m.s.f.
Dallas 4.2
m.s.f.
Tampa
Bay
4.3
m.s.f.
Oakland
10.2
m.s.f.
Houston
16.9
m.s.f.
Chicago
5.1
m.s.f.
Kansas
City
15.3
m.s.f.
Atlanta
13.3
m.s.f.
Philadelp
hia
Tampa Bay saw a spike in activity in Q1, eclipsing Los Angeles in
the top 10 industrial construction markets
Source: JLL Research
Q1 2016 under construction

32. 32
Retail deliveries are down 16.8 percent YoY, though current activity
saw a spike
Source: JLL Research, CoStar
Retailcompletions(s.f.)
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016

33. 33
3.8
m.s.f.
Houston
1.9
m.s.f.
Los
Angeles
4.0
m.s.f.
Dallas
2.6
m.s.f.
Chicago
2.3
m.s.f.
Washing
ton, DC
3.1
m.s.f.
Northern
NJ
2.4
m.s.f.
Long
Island
2.6
m.s.f.
New
York City
2.1
m.s.f.
Boston
2.3
m.s.f.
Miami
Dallas had the most retail activity in Q1, up 73.9 percent QoQ;
activity on the coasts remained flat
Source: JLL Research
Q1 2016 under construction

34. 0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2008 2009 2010 2011 2012 2013 Q1 2014 Q2 2014Q3 2014Q4 2014Q1 2015Q2 2015 Q3 2015Q4 2015 Q1 2016
34
Percentvacant
-0.1 percent
QoQ
Retail vacancies continued to decline, though at a slower rate
Source: JLL Research, CoStar

35. What’s next for U.S.
construction?

36. Key construction markets
36
Source: JLL Research
Nashville has seen rapid construction growth, as employers take advantage of its low-cost, well-
educated workforce. This follows the broader trend in the Southeast, as office, industrial and retail
have all seen an uptick in activity in the last year.
San Francisco is catching up to New York in terms of cost to build, driven by demand and high labor
costs. It is possible San Francisco could become the most expensive market in 2016, though all major
coastal cities will continue to see cost growth.
The decline in energy prices has begun to hit Houston, which saw a decline of 120.1 percent in
office construction activity YoY. The market has seen a growth in subletting opportunities and has
low-cost labor, which could be attractive to occupiers wanting to avoid high-cost markets.
Dallas saw a hike in retail construction, as retailers followed population flows to Texas. It was one of
the lone markets that experienced retail development growth.

37. What’s next for construction?
Uncertainty will breed more caution: The 2016 election is ramping up and will affect consumer behavior as domestic
residents weigh who they think will become the next leader. Businesses are likely to proceed with caution when it
comes to construction investment as they prepare for future regulations or economic shifts coming from the new
president.
The Fed increased interest rates, indicating faith in the domestic economy; however, the global economy has
slowed, and contractors are uncertain how this may affect the markets. Most noticeably, many inputs, such as low-cost
steel, are manufactured in bulk in China. As its manufacturing sector continues to decline, materials prices will continue
to drop into 2016.
Wages will remain the key cost driver for construction, as materials prices remain relatively low in the short term.
There remains a dearth of trained construction employees, especially in trade positions, and wages are rising as a
result.
Construction follows the global economy but lags it by 1-2 years. General economic growth nationwide has
slowed, and the construction industry will be no different. However, demand from downstream markets will stay strong
and construction profit margins will continue to grow, keeping construction growing at a faster rate than the overall
economy. The effects of the global plateau won’t fully affect the construction industry until at least 2017.

38. © 2016 Jones Lang LaSalle IP, Inc.
All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Thank you
Dana Westgren
Research Analyst
Project and Development Services
+1 (202) 719 5003
Dana.Westgren@am.jll.com