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Predetermined Elements . . . . . . . Page 2

Critical Uncertainties . . . . . . . . . Page 7

SCENARIO PLANNINGFuture Trends and Uncertainties

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DEMOGRAPHICS, ECONOMICS AND HOUSING

In developing our scenarios we will want to take into account the most likely events, trends and developments (ETD’s) that will shape the next decade.

The most important and likely ETD’s can be classified as “pre-determined elements,” or the future trends that are so likely as to form the basic framework of all

the given scenarios. Here are some pre-determined future trends.

Aging in the North American population means that by 2025 most regions will change from a profile in which about 1 in 10 persons are over age 65, to one in which 1 in 5 persons are over 65. In a few states the density of the elder population will approach 25%. This will have profound effects on housing choices and priorities, as well as impacting infrastructure and social policies.

Growth in ethnic diversity is explosive. About 75 of all population growth in the U.S. from now to 2030 will be within minority groups—with Hispanics leading the way by contributing 40% of population growth in this time period. The median age of Latino’s in the U.S. today is 27, compared to a median age of 42 for non-Hispanic whites. Some 67,000 Latino young people turn 18 each month in the U.S.

While the global drywall market is forecast to grow 8.5% per year through 2016, 70% of this growth will come in China and North America, which are expected to grow at 11% and 12% per year respectively.

SCENARIO PLANNINGDriving Forces of Change—The Predetermined Elements

The end of the housing bust has arrived in most or all regions of the country in 2012. Virtually all regions show an upward trend in housing prices, and very low and still decreasing inventory of available new and previously occupied homes for sale. We can expect that a renewed home construction and housing market, when combined with energy exploration and development in North America, will generate durable tail winds for economic growth in the coming decade. Pent-up demand, continued historically low interest rates, and low initial inventory will contribute to growth in home construction.

Demand for rental properties and non-ownership housing options will increase. These new renters are seeking quality home options, a sense of community, and high-value for their money.

The Millennial generation, born between 1980 and 2000, is now entering the housing market in a major way. This group is larger in numbers than the Baby Boom generation, and is unique in being the first “digital native” generation, that is, born in the age of personal computers, the Internet, and mobile communications.

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The movement of population to urban and metro areas will continue through the coming decades, until as many as 75% of all people live in or near cities by 2050. According to the UN Habitat Group this will require the development equivalent of a new city of one million people every week for the next 30 years.

Demand growth will be seen in drywall. While the global drywall market is forecast to grow 8.5% per year through 2016, 70% of this growth will come in China and North America, which are expected to grow at 11% and 12% per year respectively.

The remodeling and/or reconstruction market will keep growing. Consumers who are deciding to stay in their homes and invest for the long term will include Baby Boomers who want to age in place.

Accessibility is big and likely only to get bigger, a result of aging Baby Boomers and even their aging parents. Baby Boomers in particular are starting to think about what their homes need to look like if they are going to stay in them as the years advance. That means more single-story homes, homes with grab bars in the bathroom, fewer stairs, even ramps. In the latest AIA survey, almost half of architects who responded said accessibility was a growing design priority. The opportunity exists to tie Universal Design (UD) to sustainable habitat as these quality decisions make for better home experiences for seniors.

A long-term trend to globalization and a sense of global citizenship especially among young people will increase mobility between and across countries, increasing as we come toward the end of the decade time horizon. The near term trend is less mobility while housing prices continue to recover.

Homes within homes—Almost one-third of American adults today are “doubled up,” or living in the same household as another adult generation, according to the Census Bureau. These adults may be “boomerang” kids who have come back to live with parents, or aging parents who have moved in with adult children, or non-family adults sharing housing for reasons of cost or convenience.

Aging public housing—Public housing, like other major public infrastructure, has aged without reinvestment. There will be new public housing projects, often developed in public-private partnerships, in the coming decade. These developments will have rigorous energy and water conservation specifications that will be non-negotiable, and will very likely have percentage requirements for locally sourced materials, a high percentage of recycled content, and a focus on passive energy savings.

ENVIRONMENT, ENERGY, SUSTAINABILITY, CITIES AND HABITAT

Repeated cycles of climate and global economic instability will put an emphasis on sustainability and resilience, in habitat and community design, and in company strategies.

The movement of population to urban and metro areas will continue through the coming decades, until as many as 75% of all people live in or near cities by 2050. According to the UN Habitat Group this will require the development equivalent of a new city of one million people every week for the next 30 years. The Shell scenario group puts the costs of development and operation of this urban infrastructure at $350 Trillion to 2040. They conclude that if this development is chaotic we will see cites with “sprawling mobility needs, highly inefficient use of energy and water, and large slums. If smarter sustainable development is achieved there will be more compact cities with high density, and highly efficient transportation, energy, water and waste systems.”

The management of cities, which produce almost 80% of carbon emissions, will become a central issue in the next decade and beyond.

Global food scarcity concerns will increase pressure for land-use and transportation policies that allow for density and farmland preservation and that decrease farm to market costs.

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Recent developments in shale gas technology will serve as a game changer in the energy picture over the coming decade. Abundant supplies will be available if the price remains sufficient to develop the resource. One of the greatest impacts, if gas resources are developed, is the prospect that new gas can replace growth in coal and thus provide a lower CO2 future at a reasonable cost in the next decade.

A desire for a reputation as a sustainable city will lead to increases in demonstrations of sustainability—for example, the development or retrofitting of entire neighborhoods as demonstration projects.

New or rebuilt communities that tackle both energy and water efficiency will have high appeal. This will include entire new Greenfield cities in developing nations, and perhaps even in North America.

Policy changes in mortgage structuring will allow energy efficiency and water efficiency costs to be rolled into mortgages and effectively sold with the house as an incremental increased value. ROI and therefore acceptance of energy efficient, even energy net-zero homes will come down as a result of taxing and rebate policies, and better materials, a concept moving squarely into the middle class. Once the realm only of “out there” people, net-zero energy homes—homes that generate as much energy as they consume—will go mainstream.

Water efficiency and conservation will become a sustainable housing concern, particularly in drought-prone regions.

…green building is expected to grow from 44% of all commercial and institutional construction in 2012 to 55% by 2016. Green home and renovation activity will increase from a 20% share of the market in 2012 to 28-39% by 2016, growing in value from $34 billion to as much as $116 billion.

As outdoor space becomes a premium in smaller homes on smaller lots, indoor-outdoor spaces that combine the home and outdoor experience, while also decreasing energy and water use, will be attractive.

According to the Shell 2011 scenario report Signals and Signposts, “Energy, resource and infrastructure companies have a significant opportunity to innovate in new supply chains for an increasingly urban world.”

The world oil supply is greater than thought just a few years ago. At the same time we have reached what could be called “peak cheap oil” as almost all new oil coming online, from shale oil to deep water and Arctic oil, to Canadian oil sands is quite expensive in terms of energy returned over energy invested for recovery (EROEI). Production prices are $60-90 per barrel, thus assuring that oil prices will remain relatively high through the coming decade.

According to the McGraw-Hill Construction’s 2013 Dodge Construction Green Outlook report, green building is expected to grow from 44% of all commercial and institutional construction in 2012 to 55% by 2016. Green home and renovation activity will increase from a 20% share of the market in 2012 to 28-39% by 2016, growing in value from $34 billion to as much as $116 billion.

One-third of all homebuilders in the U.S. expect to be fully dedicated to building green by 2016.

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SCIENCE AND TECHNOLOGY

Development of new materials will challenge conventional building materials. Examples include Nano concrete or Nano engineered substitutes for concrete, advanced intelligent glass, HVAC systems and building envelopes that exhibit biomimicry, responding to environmental stimuli.

The emergence of the digital native generation as the heart of the workforce and primary customers, combined with continued advances in online communications, mean that by the end of the decade all business will be conducted in a more digital environment, including design-build, customer and employee relations, sales and marketing, and management.

The use of Building Information Modeling (BIM) by architects, engineers, contractors and owners in North America will continue to increase significantly, as will high performance analysis of “big data” from building performance to market forecasting.

While the home construction industry will continue to be, in general, slow to adopt new materials and methods, the adoption of energy efficiency systems and materials will be an exception. This may include more extensive use of prefabricated and manufactured home systems.

Continued research in solar photovoltaic technology will lead to more efficient and affordable solar for habitats at a steady rate over the coming decade, with a chance that some breakthrough, whether via nanotech or 3D engineering, or a new material or coating method will lead to a quantum leap in the ability of solar to compete economically with conventional energy sources. The game changer may be large electronics and computer firms moving into the solar space.

Major investments by the U.S. military in 3D printing will accelerate adoption of this technology. While it will not begin to compete with mass production in the next decade, manufacturing and the construction industry will see experimental advances in the uses of 3D printing. This may include onsite printing of certain components, up to proposals for 3D printing of large components and even whole structures.

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According to the McGraw-Hill Construction 2013 Dodge Construction Green Outlook, 81% of executive leaders in corporate America believe the public expects them to engage in sustainability - one of the key forces driving corporations to institutionalize some green efforts. 30% of senior executive officers report that they are greening two-thirds of the buildings in their portfolio - with 47% expecting to do so by 2015.

81% of executive leaders in corporate America believe the public expects them to engage in sustainability—one of the key forces driving corporations to institutionalize some green efforts. 30% of senior executive officers report that they are greening two-thirds of the buildings in their portfolio— with 47% expecting to do so by 2015.

SOCIETAL ATTITUDES AND VALUES

The housing bubble has resulted in decreased confidence in housing as a financial and trading-up commodity, particularly among Millennials. Home ownership has dropped to 65% across the U.S. These attitudes are likely to change slowly over the coming decade.

Millennials express a desire for sustainable housing, a sense of community and are more aware of the costs of energy than earlier generations.

All generations demonstrate an increased desire for living in walkable and more compact communities, though this trend can be easily exaggerated as a larger percentage continue to prefer detached housing on larger lots when affordable and available.

Public expectations that sustainable products will be affordable will increase.

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SCENARIO PLANNINGThe Critical Uncertainties

CRITICAL UNCERTAINTY: NATIONAL AND GLOBAL CLIMATE POLICY

Scenarios are built by assuming within the context of anticipatable trends there are uncertain developments that are not predictable and that break one

way or another. These are the “critical uncertainties.” Typically a 2 x 2 matrix is established using two critical uncertainties and then scenarios are written

assuming the various combinations. We might include three uncertainties in our scenario building, or choose two from uncertainties like the following.

A recent study from Pricewaterhouse Coopers indicates that at the current rate of consumption of carbon based resources, we will exceed not only 3 degrees Celsius of temperature rise, which has major implications for the health of communities, but we are headed for a 6 degree rise. Other very recent reports suggest that sea level rise is happening faster than models predicted, that greenhouse gases are at the highest level measured to date, and that Arctic ice is melting at a faster rate. There are many implications of these developments, but increased mega-storms, persistent drought and other weather patterns, and dislocated peoples are among the impacts expected.

The uncertainty is whether the global governance system and in particular the U.S. and Canadian governments will respond in a more proactive and organized way, up to and including a price on carbon and, most radically, establishing a glide path to the elimination of carbon. Or, will the global and national response continue to be disorganized and unfocused, with inconsistent regulation and sustainability initiatives, leaving any responses primarily to market forces.

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CRITICAL UNCERTAINTY: ECONOMIC SHOCKS THAT DERAIL STEADY U.S. RECOVERY

CRITICAL UNCERTAINTY: MAJOR DIASPORAS, CITY ABANDONMENT AND REPOPULATION

There is a growing consensus that the U.S. economy is likely to be in a modest but sustainable recovery in coming years, driven by the energy, housing, transportation, and technology sectors. While the growth rates are not expected to approach those of the late 1990’s, the recovery may be durable and robust compared to recent years.

This summary of trends was prepared by Glen Hiemstra, Futurist.com, with research by Mallory Smith, Futurist.com, and by Jean Brittingham, Brittingham Partners and formerly the Director for North America of the Cambridge University Prince of Wales Program on Business and the Environment.

The uncertainty is whether external economic shocks, primarily emanating from Europe, and centered in the global financial system, or perhaps centered in the Middle East and Asia, could derail a recovery and throw the economy back into recession or a very flat performance.

Extreme weather events, climate shifts such as persistent drought, terrorist attack, or an uncontrolled pandemic are factors that can result in major infrastructure failure. Infrastructure in these cases refers to physical infrastructure, government services, and social conventions that allow life to proceed safely and productively in cities. Recent weather events like hurricanes Katrina and Sandy provide broad evidence for the infrastructure challenges that may be faced.

The uncertainty is how we might respond to the loss of existing cities. The most likely response is an effort to rebuild, but in a more sustainable way. However, one possibility is a government response to create Greenfield cities, requiring a huge investment and initiating a trend away from rebuilding in the exact same locations. There is evidence that such an approach will become more socially acceptable, particularly if the new cities are deemed to be safer and more sustainable.