Global construction industry is showing strong signs of recovery
The global construction industry is showing strong signs of recovery, with a surge in property development outweighing the decline in oil and gas projects. That’s the conclusion of our international study of construction costs.
The international construction market survey 2015 analyses input costs – such as labour and materials – and charts the average construction cost per m2 for both commercial and residential projects in 35 markets around the world.
At $3,488 per m2, New York’s average construction costs are the highest from the markets surveyed. The US city has seen costs rise by five percent in the past 12 months, and is one of five hotspots identified by the report’s authors as likely to experience increased activity over the next year.
Other markets predicted to see rising activity levels are London (which has the world’s second highest construction costs at an average of $3,357 per m2), Tokyo, Seattle and the south of the UK.
All are experiencing booms in residential and commercial property development, with Seattle in particular benefitting from its reputation as a tech city.
Other cities given a boost by their ability to attract technology sector companies include Bangalore, Dublin and Singapore. However surging demand brings inflationary risk – average construction costs in Bangalore rose by 10 percent over the past 12 months.
At the other end of the scale, markets hit by the natural resources slump have seen a fall in activity; and there has been substantial cooling in São Paulo, Santiago, Perth and Atyrau in Kazakhstan.
The city hit hardest is Moscow, where the tumbling oil price has caused a dramatic slowdown in construction activity, and commercial property vacancy rates of almost 45 percent. Declining foreign investment has reduced the number of contractors able to tackle major projects – and over the past year this restricted supply has driven up average costs by 20 percent.
The following table ranks the 35 markets studied according to current levels of construction activity. “Hotter” markets have a higher number of projects, and consequently there is less competition for tenders, which tends to drive up prices. The report predicts that activity levels will increase over the next year in 17 of the markets, stay the same in 10, and fall in eight.
|London||UK - Central||Atyrau|
|Seattle||Hong Kong||Northern Ireland|
|UK - South||Houston||Brisbane|
|Munich||Ho Chi Minh City|
|UK - North||Kampala|
Vincent Clancy, Chief Executive Officer, commented:
“The global construction industry is finally showing strong signs of recovery, but while the picture is largely positive, it’s a changing landscape – with some markets seeing significant increases in activity, while others, which were booming, have fallen back.
“Many countries have significant plans to invest in infrastructure, and several cities are poised for further growth led by overseas investors. But for many it remains an uneven climb back to the levels of activity enjoyed before 2008.
“For investors and developers with global expansion plans, having accurate construction cost data from international markets is key to identifying where the opportunities lie. There are several locations with reasonable construction costs and favourable exchange rates that currently represent an attractive proposition.”