Construction sector begins to stir

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THE global outlook for construction is the most positive since the financial crisis began in 2008, according to a new report.

Asia, parts of Europe, the Middles East and the US are all starting to invest in housing and infrastructure again as shelved projects are dusted off around the world.

The international construction cost survey 2013, by Leeds-based construction consultancy Turner and Townsend, found that 13 out of the 23 markets surveyed expect to see more projects starting next year than they did in the previous 12 months.

Vincent Clancy, chief executive of Turner and Townsend, said: “After an unprecedented period of global economic instability, things are beginning to slowly improve.

“Many markets remain fragile but it’s clear that sentiment is improving. With recovery comes opportunity, and some key markets around the world are showing sustainable signs of growth.”

Construction costs are generally stable, according to the report, but there are exceptions.

In emerging economies, including China, India, Malaysia, Russia and South Africa, construction costs are expected to rise steadily.

But in certain hotspots, like future World Cup hosts Brazil and Qatar, costs are forecast to increase strongly.

Costs for offices in the UK rose by four per cent between 2010 and 2013 while comparable costs in India rose by 25 per cent.

Meanwhile, an office building in a Japanese business park would cost 24 per cent more to build than one in the UK.

The cost of high-rise apartments and central business district offices has risen gradually in most countries, although China, India, South Africa and Vietnam have all seen steeper rises.

Costs have remained stable in Australia, Ireland, Japan and the UK.

In the last 12 months, the US economy has begun to pick up and housing construction is increasing again.

House prices have grown by 12 per cent over the past 12 months. The US’s newest industry and source of energy, shale gas, is also injecting further growth into the economy.

Projects to construct the pipelines and associated infrastructure are ramping up, with the prospect of US energy self-sufficiency promising a big boost to the economy.

The report said European countries are expected to invest in infrastructure, which should help relieve the “chronic underemployment” holding several major European countries back.

It added that the Middle East is also increasing its construction activity, reawakening many of the ambitious projects that were put on hold by the global financial crisis. Construction projects worth 1.3 trillion US dollars are in the planning or tendering stages across the region.

Traditionally, strong markets such as Dubai are gradually coming back to full strength and new construction leaders such as Qatar are emerging, with big project portfolios.

Meanwhile, the report said Japan is making “substantial efforts” to stimulate its economy by pumping in money, causing the yen to fall dramatically. Construction is picking up but trade skills shortages are becoming a problem, it added.

However, the report said that although construction markets are warming up, tender prices will not follow suit immediately. In two-thirds of the markets surveyed, there is strong competition on tenders, with others reporting moderate competition.

“Flat prices go all along the value chain: engineers and architects’ and construction consultants’ costs are competitive and skilled labour is fairly easy to obtain in most markets,” it said.

Contractors’ margins in developed economies have been hard hit whereas countries in parts of Africa, Asia, the Middle East and Russia have indicated higher contractors’ margins.