Intense competition and falling demand polarise construction market

The global construction industry has polarised between intense competition and shrinking demand, according to Turner & Townsend’s latest International Construction Market Survey. Research by the professional services company shows a general slowdown in global construction activity and few locations seeing significant price growth throughout the year.

Overall however global construction costs are expected to rise by rise overall by 2.9% in 2016.The survey reveals construction costs in London are now the third-highest in the world,behind Zurich and New York, with the cost in London increasing by 5% in the 12 months to April 2016. Costs in the cpaital are also expected to grow by more than 5% cent over the next 12 months.

Key findings from the survey include: -

- Swiss city Zurich enters the survey as the world’s most expensive construction market, with typical costs reaching $3,683 per square metre.

- Beijing saw the biggest fall in construction costs in 2015 at 10%.

 - New York City and Seattle are identified as overheating.

- Global construction costs are expected to rise overall by 2.9% in 2016.

- Activity levels will increase over the next year in nine of the markets surveyed, stay the same in 19, and fall in ten.

- Commodity-reliant markets such as Johannesburg, Perth and São Paulo lead the list of markets that will cool in 2016.

- Markets reliant on Chinese demand such as Hong Kong, Kuala Lumpur and Singapore are also set to cool.

- London is now the third most expensive city in the world to build in.

Steve McGuckin, Global Managing Director – Real Estate, Turner & Townsend, said: “Two macro-economic factors – the sharp fall in oil prices and China’s slowdown – have rippled across the global construction industry over the past year and triggered a rapid polarisation of the market.

“Some regions are now facing acute overstretch, with construction demand outstripping what the industry is able to supply.  Meanwhile in markets with a heavy reliance on either trade with China or on commodities exports, both demand and levels of investment have fallen. However against this divergent backdrop, some challenges – and some solutions – are universal. Chief among the challenges is an endemic skills shortage, which risks driving up construction costs even in markets with weak demand