Global construction prospects 2025

This review is for the period covering 2024 to 2028, analyzing anticipated construction growth during this time.

As outlined by the Business Research Company the global construction market is expected to reach USD 15.97 trillion in 2024 from USD 15.19 trillion in 2023 at a compound annual growth rate (CAGR) of 5.1 percent.

They also outlined that the market is expected to reach USD 19.86 trillion in 2028 at a compound annual growth rate (CAGR) of 5.6 percent.

The RICS Global Construction Monitor for Q2 2024 outlines that activity across global markets showed modest growth, with the Construction Activity Index level at +15, as outlined during Q2 of 2024. At regional levels, Europe saw increased activity during Q2 2024, while activity held steady in the Middle East, Africa and the Americas.

The Monitor also outlined the growth within the global infrastructure sector continues to lead the way. However, most global economies and construction markets are impacted and constrained by increasing material prices, fiscal pressures and continuing skills shortages.

According to the Business Research Company, the global construction market is witnessing significant growth, with strong market activity in China, Brazil, India, Saudi Arabia and Indonesia.

North America

GDP from construction across the main economies is expected to reach USD 978 billion across North America in 2024, with the US accounting for USD 856 billion. For the US market, this equates to circa 3.08 percent of all GDP generated from within the US economy. The remaining output value of USD 122 billion relates to the Canadian market, which accounts for 5.83 percent of total Canadian GDP.

A recent GlobalData review outlines that the US dominates the North American construction market ahead of Canada when comparing output values. GlobalData anticipates that the US market will reach USD 2.585 trillion in 2024 and grow by more than 3 percent CAGR over the forecast period of 2019-2028.

In addition, as per GlobalData, the residential sector is expected to lead the construction market with government-led initiatives across transportation, energy and social infrastructure also contributing to market output.

Additionally, manufacturing sectors are drawing investments to produce semiconductors, electronics, EVs, batteries and clean energy. Sectors such as biomanufacturing and heavy industry are also attracting inward investment.

Furthermore, RICS’ recent Global Construction Monitor suggested that infrastructure projects remain the key driver of market activity. Other findings include the continued skills shortages and increased caution regarding credit conditions in the US.

As per GlobalData, the Canadian construction market activity is projected to decline during 2024 due partly to a slowdown within the residential sector. However, according to RICS’ Global Construction Monitor, current workloads have begun to increase within the infrastructure sector. Like in 2023 the construction market in Canada continues to experience a shortage in skilled labor. The same RICS publication indicates a sentiment within the Canadian market that easing credit conditions will provide support to businesses.

Latin and South America

GDP from construction across the main economies is expected to reach USD 97 billion across Latin and South America in 2024, with Mexico accounting for USD 84.6 billion. This equates to circa 6.44 percent of all GDP generated from within the Mexican economy. Chile accounts for USD 3.6 billion of the overall construction market (1.09 percent of GDP). Peru accounts for a further USD 3.1 billion (1.27 percent of GDP), with Brazil contributing USD 3.09 billion (0.14 percent of GDP). The construction market of Colombia contributes USD 2.61 billion (0.74 percent of GDP).

According to the World Bank —Global Economic Prospects Report (2024), growth is forecast to reduce from 2.2 percent in 2023 to 1.8 in 2024 across the region. However, it is expected to rebound in 2025 to 2.7 percent. Looking further into the factors driving the reduced forecast it is evident that weakened economic activity in Argentina is the main reason for the 2024 forecast decline.

The same report outlines that further tightening of global financial conditions and increased debt levels would further impact economic prospects across the region.

Like in other regions, economic prospects across Latin and South America are vulnerable to a slowdown in economic activity in China and to climate change. Conversely, improved economic activity in the US could potentially lead to improved regional economic conditions.

Europe

GDP from construction across the main economies is expected to reach USD 185.3 billion across Europe in 2024, with the UK accounting for USD 47.2 billion. This equates to circa 1.40 percent of all GDP generated from within the UK economy. Following the UK, Germany accounts for USD 36 billion of the overall construction market (0.81 percent of GDP). France accounts for a further USD 33.7 billion (1.10 percent of GDP), with Italy contributing USD 26.1 billion (1.08 percent of GDP). The construction markets of Spain, Netherlands and Turkey make up the remaining output of the region’s main economies.

As outlined by the World Bank —Global Economic Prospects Report (2024), it is projected that growth across Europe and the Central Asian region will ease to 3.0 percent during 2024, with a further reduction projected across 2025 to 2.9 percent.

The main reasons cited for the easing in growth relate to lower output levels from Russia and Turkey. However, the same report outlines that if Russia, Turkey and Ukraine are excluded from consideration, the growth levels for 2024 and 2025 will look stable due to the continued easing of post-Covid inflation, interest rates and the growing export levels. Nevertheless, the ongoing regional and global geopolitical issues remain a risk factor.

A recent RICS Global Construction Monitor publication outlines how the European market has seen improvements, albeit at modest levels with the Construction Activity Index rising to +12 as outlined during Q2 of 2024, up from +6 during the preceding quarter.

Africa

GDP from construction across the main economies is expected to reach USD 10.1 billion across Africa in 2024, with South Africa accounting for USD 6.2 billion. This equates to circa 1.62 percent of all GDP generated from within the South African economy. Following South Africa, Tanzania accounts for USD 2.1 billion of the overall construction market (2.45 percent of GDP). Kenya accounts for a further USD 1.21 billion (1.07 percent of GDP), with Nigeria also contributing USD 0.5 billion (0.12 percent of GDP). The construction markets of Angola and Ghana make up the remaining output of the region’s main economies.

According to the World Bank —Global Economic Prospects Report (2024), growth across Sub-Saharan Africa for 2024 is projected to increase to 3.5 percent. The region may see growth of about 4.0 percent from 2025 to 2026. The reduction in interest rates and increased levels of consumption, in addition to higher levels of investment, are assisting growth. The Report also notes that ongoing global geopolitical conflicts, continued political instability across the region, a more pronounced slowdown of the Chinese economy, ongoing adverse weather events, and regional debt distress represent the main risks to economic activity.

Asia

GDP from construction across the main economies is expected to reach USD 1.570 trillion across Asia in 2024, with China accounting for USD 1.280 trillion. This equates to circa 6.86 percent of all GDP generated from within the Chinese economy. Following China, Japan accounts for USD 187 billion of the overall construction market (4.32 percent of GDP) and India accounts for a further USD 46 billion (1.21 percent of GDP). Indonesia accounts for USD 22 billion (1.40 percent of GDP), with South Korea contributing USD 17 billion (0.96 percent of GDP). The construction markets of Kazakhstan, Malaysia and Cambodia make up the remaining output of the region’s main economies.

Growth across the East Asia and Pacific region is projected to reduce from 5.10 percent in 2023 to 4.8 percent in 2024, primarily due to reduced activity within the Chinese economy, as outlined in the World Bank - Global Economic Prospects Report (2024). Additionally, growth will reduce to 4.20 percent in 2025 and 4.10 percent in 2026 due to a further slowdown in the Chinese economy. The Report notes that excluding China, regional growth will increase to 4.60 percent in 2024, due mostly to better global trade.

According to the World Bank —Global Economic Prospects Report (2024), risks to the projected outlook for the region relate to ongoing global conflicts, further trade policy fragmentation and a more pronounced slowdown of the Chinese economy. Tighter global financial conditions and ongoing adverse weather events are additional risks.

According to RICS’ Global Construction Monitor, India and the Philippines display positive Construction Activity Index levels, with India reporting a level of +57 for Q2 of 2024.

Australasia

GDP from construction across the main economies is expected to reach USD 32 billion across Australia and New Zealand, with Australia accounting for USD 29 billion. This equates to circa 1.63 percent of all GDP generated from within the Australian economy. The remaining output value of USD 3 billion relates to the New Zealand market, which accounts for 1.06 percent of total New Zealand GDP.

According to a Research and Markets report, the Australian construction industry is expected to grow by 6.9 percent and reach AUD 193 billion in 2024. Furthermore, a CAGR of 6.2% is projected for 2024– 2028, with the market expected to reach AUD 246 billion by 2028, indicating substantial growth potential.

A recent report by the Australian Institute of Quantity Surveyors 21 (AIQS) outlined that while the Australian economy still faces challenges, the outlook is optimistic. It notes that a downward trend in inflation is expected to continue due to eased supply constraints and reduced domestic activity pressures. Furthermore, the same report outlines that the economy is expected to grow at a moderate pace and will support the Australian construction industry. Additionally, it notes that the Australian Federal Government has committed to significant infrastructure spending in the coming years, particularly in areas such as transportation, renewable energy, and social infrastructure, while also implementing policies to address the housing affordability crisis, which will lead to increased demand for new housing construction across Australia.

Research and Markets reports that the New Zealand construction industry is expected to decline in real terms by 1.9 percent in 2024, due mainly to weaknesses within the residential sector and high inflation and corresponding construction costs. The report outlines that the New Zealand construction industry is expected to grow annually at an average rate of 3.4 percent from 2025 to 2028 due to supports in investments within sectors such as transport, health and education.

According to the RICS’ recent Global Construction Monitor publication, the infrastructure sectors in Australia, Singapore and Hong Kong comprise the main area of activity. Additionally, the RICS publication outlines that Australia saw a Construction Activity Index level of +10 during Q2 of 2024.

Conversely, the same report notes that Sri Lanka and New Zealand saw reduced activity within all sectors of their respective markets during Q2 of 2024, with the Construction Activity Index level in New Zealand falling from -13 to -42 when compared to the previous quarter.

International construction cost inflation

From the above graph, it is evident that construction inflation within the UAE increased upwards in the order of 5 percent and 6 percent in KSA during 2024, which is reflective of the market conditions. Over the course of 2024, the UK market has remained steady, with a slight increase seen during Q3. Other markets, such as Europe and the US, have continued to slide during 2024.