4 NOV 2021
Global construction markets continue to see activity strengthening, with workloads across all sectors expected to deliver a rise in output over the next year. Leading this growth is infrastructure, with 49% of built environment professionals predicting a rise in output, particularly in areas such as Energy and ICT, according to the latest feedback to the RICS Global Construction Monitor.
Although activity continues to strengthen, the pace of growth appears to have moderated slightly this quarter as the headline Construction Activity Index* dipped slightly, from +25% in Q2 to +18% in Q3 (in net balance). This slight easing in the rate of growth can be attributed to the continued pressures hindering activity, with 83% of respondents noting material price inflation as a key impediment and anticipating costs to increase by 7% over the next year.
At regional level, the Construction Activity Index shows Europe as the strongest region this quarter, with robust growth anticipated in the residential sector over the next year. Infrastructure though is the leading sector across the Americas, APAC and MEA.
Find out what other factors are leading recovery or softening the momentum across all regions covered:
Construction activity remains strong across the UK, however, problems sourcing materials and cost increases present significant pressures, challenging the strong workloads led by new infrastructure schemes underway. Though the headline Q3 reading of total activity slipped slightly from +38% in last quarter to 33%, respondents still note strong levels of construction work, led mostly by infrastructure projects, particularly in the areas of energy, roads and water.
Availability of construction materials was the biggest impediment to activity reported in the latest report, as respondents anecdotally cite the struggle of supply chains across the UK re-establishing themselves post-Brexit and the pandemic.
Find out more in the latest UK report.
This quarter North America sees the highest Construction Activity Index it has reached since the series began in 2019, reaching +46%. Infrastructure workloads have the strongest growth, broadly consistent with government stimulus measures that have either been introduced or are in the legislative process.
As businesses look to increase headcounts to ensure they have capacity to meet demand, respondents share concerns about skill shortages, with 74% in Canada and 67% in the US highlighting it as a factor holding back activity and noting a shortage for quantity surveyors.
Update: Ann Gray shares her insight on what Biden’s Infrastructure Bill means for the construction industry and what more needs to be done to deliver it.
"Biden's infrastructure bill will add to the already encouraging amount of construction industry enthusiasm as seen in the latest RICS GCM, but there are questions on how it will deliver. While the public funds for infrastructure are crucial to delivering projects for the benefit of the public, it will also be important that public agencies and leaders embrace public-private partnerships, design-build, quantity surveying and international cost management standards to extend the utility of available capital, ensure transparency and build trust in projects." - Ann Gray FRICS, RICS President Elect
Sentiment across the European construction market points to the recovery continuing to gain momentum at a headline level. All sectors continue to see growth, however private residential workloads stand out as the strongest area, with 55% of respondents noting an increase. The private commercial sector also saw an increase in workloads, evidenced by 35% of contributors noting a rise this quarter compared to +19% in Q2.
Expectations for the next year remain positive across all sectors, with employment levels also expected to grow as 35% foresee an improvement over the year to come, compared to 28% last quarter. The Netherlands, Germany, Poland, and Ireland anticipate the strongest increase in headcounts. However, cost pressures and labour shortages have intensified with a majority of respondents (82%) highlighting material costs impeding market activity and 72% noting labour shortages as a hindrance to activity (rising from 65% in the previous quarter).
Across the MEA region construction activity seems to gain impetus at the headline level, with projections for the next 12 months upbeat for workloads and headcount. This is evidenced by the Construction Activity Index increasing from +8% in Q2 to +18% this quarter, pointing to an acceleration in output growth, now sitting in line with the global average. Saudi Arabia outperforms all other countries in the region with the Construction Activity Index rising from +46% to +56% this quarter, making it one of the most elevated returns not just within the region but also globally.
Workloads across the region for infrastructure display strong momentum as well, growing from +6% to +24% in Q3, with ICT and energy projects noting the highest pick-up in output. Social, transport and water & waste categories also saw a rise in workloads.
Financial constraints and material costs are impeding activity however and dampen the positive overall sentiment slightly, with 84% and 83% of respondents respectively highlighting these as key issues.
A mixed picture for construction activity comes through from the APAC region this quarter, as headline sentiment slips from +21% last quarter to +3% in Q3. New Zealand, Australia, Philippines remain strong with improvements seen in India and Hong Kong, however momentum in China has stalled with the headline Index falling to -4% following four successive positive readings beforehand.
Despite the relatively subdued quarter, expectations for workloads over the next year remain more resilient, with infrastructure leading the way and non-residential and residential following behind as they note a rise in level of business.
*The Global Construction Activity Index is a weighted composite measure encompassing variables on current and expected market activity as well as margin pressures.