Davis Langdon, An AECOM Company World Construction 2012 2Constructionmarket overview2011 was yet another difficult year for On a regional basis, all regions apartconstruction globally. Construction from Western Europe and North Americaspending growth has stalled and saw positive construction spending2011 was the fourth consecutive growth, although at reduced levelsyear with little or no growth. Overall, to those of the recent past. Asia andworld construction spending grew Latin America were the fastest growingby just 0.5% to $4.6 trillion and is regions in 2011 by a wide margin.still below the levels achieved in2007. However, on a positive note, For the second year running China was2011 saw the first increases in world the largest construction market in 2011,construction spending since the and is forecast to be the fastest growingstart of the recession. Although, the market in 2012 (Figures 1 and 2). US $bnoutlook for 2012 is looking slightly 0 100 200 300 400 500 600 700 800more pessimistic as the developing There were some large regional China USAeconomies responsible for much of the differences throughout the year. Japangrowth in the recent past are starting to Construction spending in Western Germanyslow as their developed country export Europe was the most affected with Italymarkets continue to decline. a contraction of -3%, with the most France significant falls occurring in Portugal, Brazil UK Ireland, Italy, Greece and Spain. The Korea continuing sovereign debt problems and India Eurozone crises suggest that Western Mexico Europe will continue to struggle in the Spain near term. Australia OthersFigure 1: Global Construction Figure 2: Global ConstructionSpending 2011 (US $bn) Spending Growth 2011-12 (% change) US $bn 10 0 100 200 300 400 500 600 700 800 900 1000 China 8 USA 6 JapanGermany 4 Spain Italy 2 Italy USA % Change France 0 Brazil Australia Germany Mexico India UK Other countries France Korea Brazil China Japan UK -2 Korea -4 India Mexico -6 Spain -8Australia Others -10
Davis Langdon, An AECOM Company World Construction 2012 3 Regional overview Our review of world construction in 2011 Asia Pacific India, on the other hand, only accounted and outlook for 2012 concentrates on Asian markets are expected to continue for just over 10% of the total Asia the six main trading blocks, namely: to exhibit robust construction spending Pacific market. Given the current Africa, the Americas, Asia Pacific, growth in 2012. China (+9%) is the constraints on public finances, India Australasia, Europe and the Middle East. standout followed by India (+8%), is seeking increases in private funding Indonesia (+8%) and Vietnam (+7%). All solutions in the provision of much of the sectors are likely to exhibit significant new infrastructure needed. growth, largely led by non-residential construction. Japan is expected to see sizable increases in construction spending China not only exhibits significant through to 2015 as the earthquake/ levels of growth but is also the largest tsunami reconstruction effort gathers900 1000 market in the world. China accounted pace. However, the reconstruction is for 41% of the Asia Pacific total in only expected to provide a short-term 2011 (almost twice the size of the spike in construction activity which is Japanese construction market). likely to return to trend later in Construction spending in China is the decade. shifting from the coastal cities to the interior and western provinces. Through In Southeast Asia relatively strong to 2015, infrastructure spending construction spending growth is is expected to dominate China’s also expected in Indonesia (+8%) and construction spending. Vietnam (+7%) as both countries upgrade infrastructure to support their growing populations. China
Davis Langdon, An AECOM Company World Construction 2012 4 Europe Western Europe. The fastest growing Sovereign debt crises and the sector is forecast to be the non- uncertainty in the Eurozone are residential sector closely followed by continuing to constrain construction infrastructure. spending growth in many Western European markets. Only the The fastest growing countries in Scandinavian counties are likely to Eastern Europe in 2012 are expected to be largely immune from the impacts. be Poland (+9.1%) followed by Russia Infrastructure construction is expected (+6.5%) and Turkey (+5.5%), all with to see declines through to 2015 growth levels significantly above the with only limited growth forecast in average for the region as both non-residential and residential a whole. construction spending. Austerity measures in many Western European In Russia, construction spending countries have focused on the on preparations for the 2014 Winter postponement/cancellation of many Olympics and the 2018 FIFA World Cup planned infrastructure projects. are boosting already booming energy and transport infrastructure spending. Broadly speaking, construction spending in Western Europe is likely to Middle EastRussia remain stagnant for most of the decade In the Middle East, moderate with little or no growth expected. construction spending growth (+4.2%) Indeed, construction spending growth is expected in 2012. Much of the growth will be significantly lower in Western will be led by increases in infrastructure Europe than trend growth for the rest construction spending, in particular of the world. It is likely that it will be energy infrastructure. 2020 before the market in Western Europe returns to output levels last Saudi Arabia, the largest market in the seen in 2007. region, is also expected to lead much of the growth in the region (+5% pa), The fastest growing countries in through to 2015. Followed by a return to Western Europe in 2012 are expected growth in the U.A.E. (+4% pa), much of to be Germany (+1.8%) and the U.K. which will be led by Abu Dhabi, rather (+1.6%). Ireland, Spain, Portugal, Italy than Dubai which remains subdued and and Greece are likely to experience is largely expected to remain that way continuing declines in construction through the forecast period. spending through to 2015, with little optimism about growth later in the In addition, prospects in Qatar continue decade. Indeed through to 2015, their to remain positive. Indeed, preparation share of the Western European market for the FIFA World Cup 2022 and is expected to decline significantly (by upgrading of associated infrastructure as much as 10%) while growth in the is expected to make construction remaining countries remains largely spending growth in Qatar amongst the stagnant. fastest in the world throughout the next decade. In Eastern Europe there is a more positive picture of construction spending growth through to 2015. However, it should be noted that these markets are significantly smaller in terms of volume than those in
Davis Langdon, An AECOM Company World Construction 2012 5AfricaFollowing the recent turmoil in much In Brazil, preparations for the 2014 FIFAof North Africa, construction spending World Cup and the 2016 Rio Olympicsremains constrained, although are well advanced and increases inthere are expected to be significant construction spending are largely beingopportunities going forward. In led by infrastructure upgrades.particular, reconstruction in Libya andinfrastructure upgrades in Egypt are Australasialikely to act as a stimulus for the region Construction spending in Australiathrough to 2015. However, much of this is expected to grow by close to 5% inhas yet to materialise given the ongoing 2012, boosted by the global demand foruncertainty in the region. natural resources. Similarly, construction spending in New Zealand is forecast toIn the rest of the region there is a rise as earthquake reconstruction movesmixed picture emerging, with some forward through to 2015.areas of strong growth, particularlyNigeria (+8%), with continuing declinesin others particularly South Africa.Infrastructure construction is forecastto be the fastest growing sector ofconstruction output through to 2015. PanamaThe AmericasConstruction spending continues tobe constrained in the U.S.A., largely asa result of the housing crisis and theimpending election. The constructionmarket in the U.S.A. is expected toremain stagnant in 2012, with littleor no growth forecast, much likeconstruction spending in WesternEurope. Some growth is expectedin Canada and Mexico, although theproblems in the U.S.A. are expectedto constrain growth in both marketsthrough to 2015.In contrast, much of South America isexpected to see significant growth inconstruction spending through 2012. Inparticular, the larger markets of Brazil,Argentina and Chile are forecast tosee construction growth of over 5% in2012. Indeed, Brazil and Panama arelikely to have construction spendinggrowth of over 10% pa through to2015, significantly above the averagefor the region as a whole. Much ofthe growth in South America will beled by increases in infrastructurespending (particularly energy andtransportation), closely followed byspending on non-residential structures.
Davis Langdon, An AECOM Company World Construction 2012 6 4% 2% 31% 35% 2005 2015General outlook 1% 3% 25%In the short term there is expected Figure 3: Share of construction spending by region 2015-20to be a degree of stagnation in global Source: IHS Global Insight (2011)construction spending in 2012, withmore sustained growth not expected 4% 2%until 2015 onwards. Developing Asiacountries are expected to lead growth Africain 2012. The strongest construction 31% North Americaspending growth will again be in China, Latin America 24%followed by India and Indonesia. In Western Europeaddition, reconstruction spending 35% 2015 Eastern Europein both Japan and New Zealand Middle Eastwill provide a temporary stimulus 1% 4%to construction spending in bothcountries. In Latin America, the onlyother major growth area, Brazil and 3% 25%Panama are also expected to exhibitrobust construction spending growth 4% 2% 5% 2%throughout the forecast period. 31%Going forward, the outlook for globalconstruction is likely to be dictated 24%by development status. Generally, the 46% 35% 2015 2020share of global construction spendingcontinues to shift from developed Asia 1%country markets to developing country 4% Africamarkets (Figure 3). In particular, the North America Latin AmericaAsian market has increased from a 3% 17%Western Europeshare of 31% in 2005 to a forecast share 25% 2% Eastern Europeof 46% by 2020. This shift is largely at Middle Eastthe expense of decline in the WesternEurope market which has shrunk from ashare of 35% in 2005 to a forecast shareof 24% in 2020.These are significant changes in thestructure of the global construction Asiamarket over a relatively short time- Africaframe (i.e. 15 years) and when North Americacombined with relative growth America Latinlevels (i.e. rapid spending growth in Western Europedeveloping countries and stagnation Eastern Europein developed countries) suggest a new Middle Eastfocus for global construction spendingin the future.
Davis Langdon, An AECOM Company World Construction 2012 7
David Crosthwaite Davis Langdon, an AECOM company March 2012DLx (03/12) | Designed in-house by AECOM’s PCC business development team Program, Cost, Consultancy www.davislangdon.com www.aecom.com