Global Construction Prospects

The forecast review is from 2020-2024, analysing anticipated construction growth during this period.

The global construction market size is expected to contract from $11,217bn (2019) to $10,566bn (2020) according to Business Wire. The industry anticipates recovery across 2021 with a compound annual growth rate (CAGR) of 1.2 per cent between 2019 and 2021.

The pandemic caused great challenges, including the shutting down of facilities, the lack of available raw materials and impacted supply chains and logistics. Construction businesses and organizations are reacting across the globe to aid business continuity, with innovative solutions in the new world which will help maintain future growth and opportunities.

North America

The construction industry in North America is expected to reach $1,819bn by 2024. Construction output reportedly decreased in 2020 due to the pandemic by an estimated $122bn.

The USA is seeing a demand in construction for mixed-use projects. This is increasing with development in downtown areas and suburbs across the States. It is expected that the residential market will also start to pick up pace due to increased housing permit applications. In addition, there is also a demand for public investment in affordable housing which should also support the growth of the residential construction market.

During 2020, an infrastructure plan was announced for the funding of 20 projects across 20 states. This would form part of a plan to improve and connect communities. The grant program would invest in the schemes to enhance safety, improve transport infrastructure, such as major highways, and support economic growth.

Canada’s construction market is expected to grow to CAD $261bn by 2024. As reported by the Royal Institution of Chartered Surveyors (RICS), construction and infrastructure shortages of skills remains a risk for the industry along with the downfall of oil prices. The Minister of Infrastructure and Communities announced expenditure plans to upgrade hospitals, school rehabilitation centers and community improvement projects. Statistics Canada reported that the industry is striving to recover after the steepest decline in spending during the second quarter of 2020. New stimulus and recovery packages are in discussion across the regions to support infrastructure and construction.

Latin America

Forecasted by the United Nations Economic Commission for Latin American & the Caribbean (ECLAC), the Latin American GDP is expected to contract by -5.3 per cent, with the South American GDP by -5.2 per cent for 2020.

The reduction reflects the impact of the 2020 pandemic on Latin America and how the construction economy may only grow at a slow recovery rate over the remaining review period to 2024. Local construction economies were hit hard during 2020, and reports are promoting improved technological infrastructure and investment in developing ports, roads, railways and transportation facilities. Governments across Latin and South America have responded with stimulus packages specifically focusing on the infrastructure and construction sector in a bid to get the economy back to an improved pre-pandemic state. Mexico and Brazil are reported to have the strongest economies forecasted by the World Bank and Trading Economics for 2020, generating the greatest GDP’s and GDP from construction compared to other South American countries.

Europe

Western Europe was heavily impacted by the 2020 pandemic. This caused a ‘domino effect’ on construction investment and expenditure. Initial estimates during 2020 suggested that the EU construction industry fell by 11.7 per cent in April that year.

Euroconstruct revised its spending forecasts which allowed for a contraction of 11.5 per cent for 2020, and potentially will not witness a rebound to pre-pandemic levels until 2022 (S&P Global). Current predictions say the recovery will be quicker than the last economic crisis, with stimulus aimed to support civil engineering projects. The recovery is also likely to see a focus on renovation construction, opposed to new construction across the residential industry until confidence in consumer spending is visible. The Royal Institution of Chartered Surveyors reports that there is no consensus of construction industries rebounding across Europe, as activity during the lockdown varied between countries. As construction sites return to activity, the wait will be to determine the output between 2021 and beyond - this will be reliant on demand and Government funding. Some supporters believe that the funding of infrastructure and capital projects should not be affected, and deem it acceptable to live with increasing debt whilst benefiting from low interest rates.

Africa

The economic growth in Africa is expected to contract between -2.1 per cent and -5.1 per cent in 2020 (compared to 2.4 per cent in 2019). In Q2 2020, the World Bank approved $11.5bn in lending to the Africa region for various operations and projects.

This responded to emergency operations during the pandemic in 2020, whilst focusing on accelerating Africa’s digital economy, enhancing human capital and empowering women, increasing access to affordable renewable energy and building resilience against climate change. The results of these initiatives should see a demand for construction prospects within the education, healthcare and science and technology markets. The development of renewable energy sources and digital infrastructure appears to be a common theme globally and a clear opportunity post-pandemic.

Across Africa currently, there is a drive to provide access to information and communications technology for every individual, business and Government by 2030. The World Bank is also supporting the initiative for clean and reliable energy through electrical grid and transmission network expansions, new innovative electrification solutions and renewable energy generation.

During Q3 2020, the South African government announced 50 Strategic Infrastructure Projects (SIP’s) and 12 special projects in a bid to provide investment within the construction industry. The plan forms part of the Government’s wider infrastructure stimulus package worth R2.3 trillion across the next ten years. There is demand for infrastructure enhancements across South Africa, and the 2020 pandemic highlighted this (ESI Africa). Enhancing the region’s infrastructure will provide an opportunity for green technologies whilst enabling social and economic growth. The investment and upgrades will see communities integrated and aid easier access for employment opportunities. The economy is forecasted to contract by -7 per cent in 2020 (Q2 2020 estimate) against a 2019 growth forecast of 1 per cent.

Asia

ASEAN countries (including Indonesia, Malaysia, Philippines, Thailand and Vietnam), who were already less-developed than their neighboring Asia countries pre-pandemic, will identify key economic opportunities to enable both their recovery and future growth beyond 2020. McKinsey researched trends and determined five key recovery opportunities; manufacturing hubs, green infrastructure, digital investments, talent re-skilling and high-value food industries.

Southeast Asia has the fastest growing construction economy of the region and the Philippines and Vietnam are third and fifth respectively worldwide for construction growth (as of 2019 according to Asia Property Awards). Manilla should benefit from the government’s investment plans to improve travel around the city and access to the airports, which in turn will create job opportunities and encourage economic growth. The Malaysian construction sector is also strong ranking globally at 15th supported by government plans for affordable housing, the country’s market is growing albeit at a slower pace. Singapore’s construction market also grew steadily in 2019 and is expected to be influenced in the future by the governments implementation of Integrated Digital Delivery (IDD).

Thailand announced their aspiration to establish the country as an electric vehicle hub in five years (2025). This could lead to manufacturing and transport (road) infrastructure construction prospects.

Malaysia has new future investment opportunities, after building 4.3 gigawatts of solar-cell-module manufacturing capacity.

Google and LG have located their smartphone manufacturing in Vietnam, transpiring as a new popular destination for electronics manufacturing.

Focusing on infrastructure, Indonesia is identified as having a significant gap in basic infrastructure — specifically clean water and internet access. This requires investment and construction demand that supports economic growth and green infrastructure — all reliant on policy makers and investors. In this regard, Indonesia is currently planning 50 years into the future, with plans for a new capital city underway. Looking to the future includes; future planning flexibility, focusing on lessons learned from other cities, and embracing innovation within the masterplan. A focal point will be on transportation infrastructure, and being resilient based on climate and weather patterns. There are considerable investment prospects and the development is set to cost around $33bn.

Green infrastructure, such as renewable technology, has a huge potential across ASEAN countries looking to fast-track economic growth. Countries such as Thailand, Malaysia and Indonesia, lack adequate power provisions, meaning the demand is not being met. This shortfall could be mitigated with Government support for investment and the expansion of power supply. Green infrastructure investment would have a positive impact on planning against climate change, with financial incentives for consumer and business investment, as well as complex but critical infrastructure models across Government-owned assets.

China announced a fiscal stimulus aimed at transport and IT infrastructure which should assist their economic recovery caused by the pandemic. China’s plans include expanding their high-speed rail network over the next 15 years, developing public medical facilities and the roll out of the 5G phone network. Overall China’s GDP is set to grow 1.8 per cent for 2020-year end and official data shows growth in utilities, road and rail construction. The pipeline projects had a momentous effect on the price of metals during Q2 and Q3 of 2020.

Current construction sector forecasts for Singapore are suggesting a $10 billion shortfall in 2020. Singapore’s Building and Construction Authority (BCA) is expecting construction demand to recover from early 2021, despite public sector projects being postponed and demand falls for private sector projects. Looking ahead to recovery, public residential schemes, new healthcare facilities and transport infrastructure should help support construction demand.

Australia

The Australian Government released a budget in Q4 2020, in an attempt to conclude the economic decline for the remainder of 2020.

Real GDP is expected to contract by -1.5 per cent between 2020- 21, with minor growth forecasted from 2021-22 (Lexology). The budget details various construction and development stimulus plans aimed around environmental investments; funding technology that aims to reduce CO2 emissions, expanding the Australian gas industry, renewable energy initiatives and an estimated

investment of AUD $250 million over four years, revolutionizing recycling infrastructure within Australia. The Government also plans to support the residential sector through affordable social housing schemes, constructing new homes in regional areas. A budget of AUD $14bn is assigned for infrastructure projects, such as; road and rail projects and providing funding in the roll out of the 5G network.

Overall, the Australian construction industry is expected to record a CAGR of 5.4 per cent, AUD $253.1bn by 2024. The New Zealand construction industry is forecasted to contract by -3.5 per cent for 2020, with a rebound rate of 4.4 per cent in 2021 (Department of Commerce GDP Data). The economy started to recover during Q3 2020, as the effects of the pandemic were under control.