A disrupted recovery
Neil Bullen
Global Managing Director, Real Estate
We face headwinds on multiple fronts across the global construction sector and the broader international economy. The continued interconnectivity of markets is more apparent now than ever. We see near-universal inflationary trends founded on construction labour shortages, demand exceeding supply, and disruption in supply chains hitting costs and programmes. Companies need to adopt a more comprehensive, global view of their construction supply chains to manage the uncertainty as we brace for further challenging months.
The past 12 months have seen the post-pandemic recovery gathering momentum – but warning signs are now appearing. Constrained supply coupled with surging demand means inflation is soaring in many markets, creating a challenging economic backdrop for the construction sector.
Supply turmoil drives global inflation
Surging demand for consumer goods, building materials and manufacturing inputs have contributed to acute supply backlogs and delays.
Global migration has not yet reached pre-pandemic levels and labour shortages are also a factor fuelling inflation by driving up labour costs.
Interest rates are increasing in many countries to dampen demand and control rising inflation - central banks will be hoping to get the balance right and engineer a “soft landing”.
Given the volatility, the IMF predicts a reduced global growth rate of 3.6 percent in 2022 and 2023.
Taking the pulse of the construction industry
Against this difficult backdrop, our 2022 International construction market survey takes stock of how the construction industry is performing. It examines the challenges it faces – and how these can be mitigated.
- 88 global markets
- 42 countries
- 17 asset types
Our regional teams of experts have compiled detailed construction cost and sentiment data from 88 markets worldwide to build an unmatched picture of how rapidly rising demand and constrained supply are colliding to drive up material costs and schedule risk.
Top 10 most expensive cities to build in
San Francisco has reclaimed the top spot it previously occupied in 2019 as the world’s most expensive market to build in.
Our top ten most expensive markets in which to build for 2022 also include Hong Kong, New York, London and Geneva. Average construction costs to build key assets have increased in almost every region.
Global construction cost performance
Our survey data highlights acute construction challenges in three areas:
- Price escalation for crucial building materials
- Skills shortages and increased labour costs
- Supply delays extending construction programme durations.
Despite the industry facing tough conditions, construction activity continues to strengthen across global markets. 38.6 percent of markets surveyed were classified as ‘hot’ or ‘overheating’.
30.7 per cent of city markets are reporting construction inflation for 2022 of 10 percent or more, with no correction or fall in costs expected soon.
These are times of increasing complexity and risk for large organisations managing diverse capital programmes. Proactive clients are tackling these challenges head-on by:
- Forming closer supplier partnerships
- Sharing risk
- Embracing innovation.
Our International construction market survey provides intelligence and insight to help clients underpin their capital planning.
Access the International construction market survey 2022
Access the International construction market survey 2022
Access the report to see our full dataset and read our analysis of the global economic and construction landscape.
Further information
Real Estate Insights
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