International construction market survey 2018

1 Turner & Townsend International construction market survey 2018 International construction market survey 2018 ContentsOverview01 Foreword 02 survey overview04 survey highlights06 Global economic overview10 Global cost performance analysis22 Opportunities and challengesAround the globeAfrica30 Kenya32 Rwanda34 South Africa36 Tanzania38 UgandaAsia40 China44 India46 Indonesia48 Japan50 Malaysia52 Singapore54 South Korea56 VietnamAustralasia58 AustraliaEurope60 France62 Germany64 Ireland66 Netherlands68 Poland70 Russia72 Spain74 Switzerland76 Turkey78 UKMiddle East82 Oman84 Qatar86 UAEN orth America88 Canada90 USAS outh America94 Argentina96 Brazil98 Chile100 ColombiaMethodology102 Comparing construction costs104 Terms and referencesForewordThere is an expectation of increasing construction activity around the globe with a few exceptions, notably a reduction in the UK.

2 Our 2018 International construction market survey shows that of the 46 markets examined 21 expect to warm up, 23 are set for stability with only two looking likely to cool. Good news is a repeated undertone in this year s survey . Underpinning this optimism is an accelerating global economy. In the ten years after the global financial crisis, growth among the major advanced economies has averaged half the pace of the previous ten years. This prompted an extended period of exceptionally low interest rates and sparked concern over stagnation and years of slow growth. But now the giant boiler rooms of the USA and European Union are once again fired-up and brightening global what has changed?

3 There has been a significant demographic shift. The United Nations (UN) estimates that in the last three decades, one billion people have been lifted out of extreme construction has been a major lever to unlock these higher living standards. It shapes the world in which we live, work and relax, increasingly so as nations urbanise. The UN also estimates that a third of the world s population was urbanised in 1960, compared to just over a half currently and by 2050, two-thirds will live in urban This progress, combined with technological advances and a more global outlook, means longer life spans and an expanding global middle class, which according to a forecast labour, on which historically construction has been reliant.

4 So, with a surge of workload ahead, the global industry faces more work with fewer workers. Inevitably, this will increase upwards pressure on costs. The average expected construction inflation across the markets covered is percent, up on the percent seen last year. Set against local consumer inflation rates, most markets will see modest rises. While this might not seem an excessive increase, it is an average and at the beginning of increasing global demand. There will be price spikes in some markets, but not only in those ahead of the less obvious but more profound conclusion from this year s survey is that, regardless of the cyclical ups and downs, productivity will become an even bigger global issue for the construction industry.

5 Despite the technical advances of the last generation, productivity in construction has barely improved. We all have a responsibility to drive change. The industry needs to collaborate and establish new delivery models that set requirements and design to a commercial baseline that reflects the capabilities and realities of individual markets. To establish an acceptable level of certainty in project outcome, reward needs to be based on performance, not just on allocation and management of risk. Without this, the industry has every excuse not to s no easy money!Global construction volume is on the up and the future is looking bright.

6 But the industry faces more work with fewer workers. The challenge for the supply chain is how to convert this increased output into profit. by Brookings Institute, will enlarge by 160 million people annually for some This means an ageing population, growing aspirations and more income to achieve International Monetary Fund (IMF) forecasts global GDP to increase by percent in 2018. The construction sector has a strong correlation with economic growth. When GDP rises above a moderate rate, construction s share of the economy expands in greater proportion. While this is exciting news for the global construction industry, higher medium term growth is a potential game changer that could go either way.

7 There may be big upsides for some players, but improved returns will be hard construction s three sectors, natural resources, infrastructure and real estate all in global growth mode, there are clear warnings for us all if we plan on a traditional approach, relying on risk transfer pricing alone. The recent downfall of high profile contractors in busy markets as diverse as the UK and New Zealand shows that irrespective of the market size or level of construction demand, things need to change. How ready is the industry to respond to the uplift in demand? A key measure is availability of skills and labour.

8 This year s survey shows skills shortages are prevalent across disparate markets. Just three of the 46 markets surveyed recorded a surplus. Skills shortages appeared in markets as different as Zurich, where labour costs USD104 an hour and Bangalore, with consequence of prosperity, global connectivity and growing aspirations, is a shrinking pool of cheaper migrant Steve McGuckin Global Head of Client Programmes overviewSurvey overviewThe 2018 International construction market survey brings together data and experience from 46 markets around the world, to provide an insight into the current state and direction of the global construction industry.

9 This year it also brings optimism. Our International construction market survey aims to deliver comparable data from real projects across the world that provides greater insight into the constantly changing dynamics of global construction activity. The data inevitably represents just a snapshot of what lies behind the analysis. Even so, one message should ring clear. Global construction is more buoyant than it has been for many years and in the short term at least, things are looking attention is paid to fast-developing nations, but the developed economies still account for about half of global construction .

10 So, with the giant US and EU economies surprising on the upside they are better able to support investment and they appear ready to do the array of new major projects coming on stream, infrastructure stands out as the hottest sector for the future, followed by commercial construction . The pursuit of expanding global infrastructure gets to the heart of two key global ambitions to increase productivity and reduce poverty. In developing and emerging nations especially, infrastructure can be a boon for both, opening access to both markets and resources and reducing the frictions within construction , investment in infrastructure delivers immediate workloads.