For nearly 18 months, governments, businesses and families have endured a once-in-a-century public health emergency. The world emerging from the global pandemic is very different to the one that entered it. Now as the post-pandemic recovery gets underway, world leaders are calling for the coming years to be more than just a period of growth – but of renewal and positive change too. Governments around the globe have called on the construction sector to step up and serve as an engine of wider economic growth.
Our 2021 International construction market survey takes stock of how the construction industry is doing, the challenges it faces – and the rewards on offer.
We examine how the strains imposed by diverging growth rates and intense competition for resources are placing speed bumps in the path of accelerating capital investment.
Our regional teams of experts have compiled detailed construction cost and sentiment data from 90 markets around the world, to build up an unmatched picture of how the global supply chain is handling the surge in capital spending.
We pinpoint where these two forces – rapidly rising demand and constrained supply – are colliding to drive up input costs and schedule risk.
As the world’s eyes turn to Tokyo for the delayed Olympic Games, our data reveals that the Japanese capital is the world’s most expensive market to build in.
Our top ten most expensive markets in which to build for 2021 also include Hong Kong, San Francisco, New York and Geneva.
But the challenging macroeconomic backdrop is only half the story. These are times of change and complexity for large organisations managing diverse capital programmes.
Both public and private sector clients are juggling multiple, competing goals and priorities. From accommodating hybrid working patterns, to embedding social value into their operations and taking concrete steps towards net zero, in the new world success is no longer judged by the traditional mantra of ‘better, faster, cheaper'.
COVID-19 has caused seismic disruption to business, trade, supply chains and staff. Now, the combined impact of countries’ differing strategies to cope with the pandemic is causing a reconfiguration of the entire global economic landscape. The extent and pace of change over the past 18 months is unprecedented in recent times.
The global economy contracted by -3.3 percent in 2020, according to the International Monetary Fund (IMF), as COVID-19 forced economic activity to halt. But as of mid-2021, recovery was well underway, despite significant uncertainties remaining.
The IMF is forecasting 6.0 percent growth for 2021 led by India, China and the United States – all increasing substantially, by 12.5, 8.4 and 6.4 percent respectively.
Nevertheless, the timeline to a full global economic recovery remains uncertain, as new COVID-19 variants result in major outbreaks and cause cases once again to surge. Currently, economic recovery remains highly uneven between countries, regions and industry sectors.
Construction activity continues to be heavily influenced by governments' response and handling of the COVID-19 pandemic, which is shaping an uneven recovery across the construction industry.
Traditional growth sectors are waning, with COVID-19 accelerating growth in emerging and fast growth sectors such as data centres and distribution facilities. Rising costs of construction, supply chain disruption and skilled labour shortages, however, are quickly becoming the biggest barriers to industry growth.
Many construction markets have seen a marked increase in activity levels in 2021 as the global economy continues to recover. This year’s survey paints an optimistic, yet cautious, picture for the construction industry. As activity accelerates, supply chain constraints are increasing and skills shortages are worsening, resulting in substantial construction cost inflation in many markets.
Typically, higher price inflation occurs in hot or overheating markets. However, the unique situation that COVID-19 has presented has meant that higher inflation is being seen in warm, lukewarm and cold markets, partly due to labour and supply constraints.
One of the biggest impacts the COVID-19 pandemic has had on the construction industry, driving inflation, is its ripple effect across global supply chains.
Well over a third of our respondents said the pandemic has had a high or significant impact on their supply chains.
While most manufacturers have now resumed their operations, and supply chain networks have adapted to the changing conditions, new supply challenges are being faced in 2021.
The impact of these global supply constraints has been evident in the building material cost data collected in this year’s survey. Structural steel beams, reinforcement bar, softwood timber and copper pipe have all risen sharply, with an increase of up to 40 percent (year-on-year) being observed in some markets.
Download the report to access our full dataset and read our analysis of the global economic and construction landscape.
Global Managing Director, Real Estate