World Construction Report 2012

1. Program, Cost, Consultancy
World
Construction
2012

2. Davis Langdon, An AECOM Company World Construction 2012 2
Construction
market overview
2011 was yet another difficult year for On a regional basis, all regions apart
construction globally. Construction from Western Europe and North America
spending growth has stalled and saw positive construction spending
2011 was the fourth consecutive growth, although at reduced levels
year with little or no growth. Overall, to those of the recent past. Asia and
world construction spending grew Latin America were the fastest growing
by just 0.5% to $4.6 trillion and is regions in 2011 by a wide margin.
still below the levels achieved in
2007. However, on a positive note, For the second year running China was
2011 saw the first increases in world the largest construction market in 2011,
construction spending since the and is forecast to be the fastest growing
start of the recession. Although, the market in 2012 (Figures 1 and 2). US $bn
outlook for 2012 is looking slightly 0 100 200 300 400 500 600 700 800
more pessimistic as the developing There were some large regional China
USA
economies responsible for much of the differences throughout the year.
Japan
growth in the recent past are starting to Construction spending in Western Germany
slow as their developed country export Europe was the most affected with Italy
markets 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
Others
Figure 1: Global Construction Figure 2: Global Construction
Spending 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
Japan
Germany 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
-8
Australia
Others -10

3. 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 gathers
900 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

4. 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 East
Russia 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

5. Davis Langdon, An AECOM Company World Construction 2012 5
Africa
Following the recent turmoil in much In Brazil, preparations for the 2014 FIFA
of North Africa, construction spending World Cup and the 2016 Rio Olympics
remains constrained, although are well advanced and increases in
there are expected to be significant construction spending are largely being
opportunities going forward. In led by infrastructure upgrades.
particular, reconstruction in Libya and
infrastructure upgrades in Egypt are Australasia
likely to act as a stimulus for the region Construction spending in Australia
through to 2015. However, much of this is expected to grow by close to 5% in
has yet to materialise given the ongoing 2012, boosted by the global demand for
uncertainty in the region. natural resources. Similarly, construction
spending in New Zealand is forecast to
In the rest of the region there is a rise as earthquake reconstruction moves
mixed picture emerging, with some forward through to 2015.
areas of strong growth, particularly
Nigeria (+8%), with continuing declines
in others particularly South Africa.
Infrastructure construction is forecast
to be the fastest growing sector of
construction output through to 2015. Panama
The Americas
Construction spending continues to
be constrained in the U.S.A., largely as
a result of the housing crisis and the
impending election. The construction
market in the U.S.A. is expected to
remain stagnant in 2012, with little
or no growth forecast, much like
construction spending in Western
Europe. Some growth is expected
in Canada and Mexico, although the
problems in the U.S.A. are expected
to constrain growth in both markets
through to 2015.
In contrast, much of South America is
expected to see significant growth in
construction spending through 2012. In
particular, the larger markets of Brazil,
Argentina and Chile are forecast to
see construction growth of over 5% in
2012. Indeed, Brazil and Panama are
likely to have construction spending
growth of over 10% pa through to
2015, significantly above the average
for the region as a whole. Much of
the growth in South America will be
led by increases in infrastructure
spending (particularly energy and
transportation), closely followed by
spending on non-residential structures.

6. Davis Langdon, An AECOM Company World Construction 2012 6
4% 2%
31%
35%
2005 2015
General outlook 1%
3%
25%
In the short term there is expected Figure 3: Share of construction
spending by region 2015-20
to be a degree of stagnation in global Source: IHS Global Insight (2011)
construction spending in 2012, with
more sustained growth not expected
4% 2%
until 2015 onwards. Developing
Asia
countries are expected to lead growth
Africa
in 2012. The strongest construction 31%
North America
spending growth will again be in China, Latin America 24%
followed by India and Indonesia. In Western Europe
addition, reconstruction spending 35% 2015 Eastern Europe
in both Japan and New Zealand Middle East
will provide a temporary stimulus 1%
4%
to construction spending in both
countries. In Latin America, the only
other major growth area, Brazil and 3%
25%
Panama are also expected to exhibit
robust construction spending growth
4% 2% 5% 2%
throughout the forecast period.
31%
Going forward, the outlook for global
construction is likely to be dictated 24%
by development status. Generally, the 46%
35% 2015 2020
share of global construction spending
continues to shift from developed Asia
1%
country markets to developing country 4%
Africa
markets (Figure 3). In particular, the North America
Latin America
Asian market has increased from a
3% 17%Western Europe
share of 31% in 2005 to a forecast share
25%
2%
Eastern Europe
of 46% by 2020. This shift is largely at Middle East
the expense of decline in the Western
Europe market which has shrunk from a
share of 35% in 2005 to a forecast share
of 24% in 2020.
These are significant changes in the
structure of the global construction
Asia
market over a relatively short time-
Africa
frame (i.e. 15 years) and when
North America
combined with relative growth America
Latin
levels (i.e. rapid spending growth in
Western Europe
developing countries and stagnation
Eastern Europe
in developed countries) suggest a new
Middle East
focus for global construction spending
in the future.

7. Davis Langdon, An AECOM Company World Construction 2012 7

8. David Crosthwaite
Davis Langdon, an AECOM company
March 2012
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Program, Cost, Consultancy
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