Global
construction costs are forecast to rise 2-7% this year as geopolitical and economic uncertainty disrupt supply chains and increase prices.That’s according to a new report from global cost and project management firm Currie & Brown.
It forecast that costs will rise across all global regions and in most markets, driven by a shared set of three key factors.
Those are:
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Economic uncertainty driven by protectionism, political volatility and conflict in various parts of the world that make for an unsettled outlook, even as inflation levels off and interest rates stabilise. These factors will continue to put pressure on the cost and supply of materials and labour, according to Currie & Brown.
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The digital technology revolution, and the growth of AI in particular, will create opportunities for growth. But Currie & Brown warned that the growth will also generate “intense competition for scarce and specialised materials” that adds to global construction costs.
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A chronic lack of skilled construction workers is likely to push up the cost of labour – especially in high-growth sectors, such as renewable energy, digital technology infrastructure, and housing.
The findings are captured in Currie & Brown’s report ‘Building a resilient future: Adapting to uncertainty in 2025’.
It sets out its forecasts for individual regions across the world. Those expected to see the most significant increases in cost are Saudi Arabia and India, both of which are expected to see rises of 5-7%:
Saudi Arabia’s economic growth is due to accelerate to 4.4% in 2024, up from 1.4% in 2024 and construction activity is set to rise along with it. The country’s successful bid to host the 2024 soccer World Cup is fuelling demand for new stadiums, hotels and infrastructure, while megaprojects such as those within the Neom special economic area are also still ongoing.India is also set for strong economic growth of 6.7% in 2025, with government policies promoting investment in sectors such as semiconductor and chip manufacturing, and industrial infrastructure development. Currie & Brown said there was some uncertainty over the effect changing government policy and taxation would have on costs. Nonetheless, one of the major challenges for the Indian construction industry – a shortage of skilled workers – is expected to persist and to inflate prices in the process.Australia is another country expected to see a strong rise in construction costs of 5-6%, with labour shortages once again the biggest factor. Queensland, where preparations to host the 2032 Olympic Games are underway, is one area in particular that is forecast to see significant cost pressures.
In the USA, Currie & Brown said it expected costs to increase by 4%, although this depends on labour availability and evolving policy decisions under President Donald Trump.
In
China, where construction is expected to slow amid decelerating economic growth, construction costs are likely to remain steady.And in Europe, a combination of political uncertainty and sluggish economic growth is likely to keep a lid on construction cost increases. In France, costs are expected to rise by 2-3%. In Germany, the forecast is for a 2% increase. Italy, Spain and the UK are forecast to see rises of 2%, 3%, and 3-4% respectively.
Alan Manuel, group chief executive officer, Currie & Brown, said, “Year-on-year cost inflation has become a fact of life for the global construction industry. Clearly, this year will be no different with moderate rises on the horizon. But the real challenge is uncertainty, which will be exacerbated by continuing macro-economic and geopolitical volatility. So, resilience will be the key to survival and success in 2025 and beyond.”
Currie & Brown urged organisations to be adaptable, address skills shortages, and make use of granular data to stress-test projects.
Nick Gray, chief operating officer, UK and Europe, Currie & Brown, added, “Economic uncertainty, the digital revolution and acute skilled labour shortages are driving up construction costs in the UK and globally. To meet this challenge and others head-on, the industry must remain agile and seek opportunities to innovate. This will be key to driving sector growth and delivering more sustainable built environments for all.”
My Thoughts 💭
China is in major trouble if these projections come true. But the cost of construction doesn’t seem to be coming down for the USA anytime soon. But I am surprised to see the growth rates for Saudi and India be so high.