A disrupted recovery
Global Managing Director, Real Estate
We are facing headwinds on several fronts in the global construction industry and in the international economy in general. The continued interconnectedness of markets is more apparent than ever. We see near-universal inflationary trends based on construction labor shortages, demand exceeding supply, and disruptions in supply chains that affect costs and schedules. Companies need to take a more comprehensive holistic view of their construction supply chains to manage uncertainty as we prepare for more challenging months.
Over the past 12 months, post-pandemic recovery has accelerated, but warning signs are now emerging. Limited supply coupled with rising demand means inflation is soaring in many markets, creating a difficult economic backdrop for the construction industry.
Supply turbulence boosts global inflation
Increased demand for consumer goods, building materials and manufacturing inputs has contributed to severe backlogs and supply delays.
Global migration has yet to reach pre-pandemic levels and labor shortages are also a factor fueling inflation by driving up labor costs.
Interest rates are rising in many countries to dampen demand and control rising inflation – central banks are hoping to strike the right balance and stage a ‘soft landing’.
Given the volatility, the IMF expects a reduction in the global growth rate of 3.6% in 2022 and 2023.
Taking the pulse of the construction industry
In this difficult context, our 2022 study of the international construction market takes stock of the performance of the construction industry. He examines the challenges he faces – and how these can be alleviated.
- 88 world markets
- 42 countries
- 17 asset types
Our expert regional teams have compiled detailed construction cost and sentiment data from 88 markets around the world to paint an unrivaled picture of how rapidly rising demand and limited supply are colliding to drive up material costs and schedule risks.
Top 10 most expensive cities to build
San Francisco reclaimed the top spot it previously held the world’s most expensive market to build in 2019.
Our ten most expensive markets to build in for 2022 also include Hong Kong, New York, London and Geneva. Average construction costs to build key assets increased in almost all regions.
Overall construction cost performance
Our survey data highlights acute construction challenges in three areas:
- Rising prices of crucial building materials
- Skills shortage and rising labor costs
- Procurement delays extending the duration of construction programs.
Although the industry faces challenging conditions, construction activity continues to strengthen in global markets. 38.6% of the markets studied were classified as “hot” or “overheated”.
30.7% of urban markets report construction inflation for 2022 of 10% or more, without any corrections or cost reductions expected in the near future.
We are going through a period of increasing complexity and risk for large organizations managing various investment programs. Proactive customers tackle these challenges head-on by:
- Form closer partnerships with suppliers
- Risk sharing
- Embrace innovation.
Our international construction market survey provides intelligence and information to help clients support their capital planning.
Access the 2022 international construction market study
Access the report to view our full dataset and read our analysis of the global economic and construction landscape.