Over the past year, Currie & Brown’s global construction cost experts have reported consistent market trends and headwinds. Common experiences in all regions were post-pandemic recovery and historic hikes in materials prices.
In 2022, we project industry trends returning to some pre-pandemic norms—with construction activity growing, materials costs beginning to normalize and some regions projecting that labor shortages will take the hot seat again.
Director Richard Hill reports that the U.K. construction market saw an unprecedented mix of headwinds this year, including a sharp spike in raw materials prices, labor resource constraints, supply chain bottlenecks, driver shortages and inflationary energy prices. Looking to 2022, he projects construction growth of 5.9% despite these challenges, driven by the infrastructure, residential and public non-residential sectors.
Related link: ENR 2021 4Q Cost Report PDF
In Mexico, the industry showed signs of recovery in 2021. Its National Institute of Statistics and Geography said in September that construction companies reported a 9% rise in the value of their production compared to the same time in 2020. Construction employment and wages have also shown an upward trend, with total employed personnel and real average wages up 5.6% and 6.9%, respectively, in the past year.
Currie & Brown senior director Miguel Donovan anticipates the industry will continue to focus on federally funded megaprojects.
Like its peer countries in Latin America, Colombia has faced inflation pressures above target rates. Donovan says construction costs rose 6.5% between December 2020 and September due largely to materials price hikes, driven by mesh, iron, steel and wire. Construction costs trended up in Peru, with labor rising 3.3% and steel soaring 43% from August 2020 to September. So-called government-to-government (G2G) agreements signed with other nations will keep the country’s construction sector busy with infrastructure projects in 2022.
Countries in the Middle East-North Africa, particularly those belonging to the Gulf Cooperation Council, report very high COVID-19 vaccination rates that, along with rising oil prices, have supported a rapid economic bounceback.
Currie & Brown regional managing director Doug McGillivray expects inflationary price pressures, already present for steel, copper, aluminum and reinforcing bars, continuing into 2022 as more activity raises demand. With the region reliant on many imported materials, its construction industry will be sensitive to inflation and higher supply costs due to current global supply chain problems.
Increased activity will push demand for labor in 2022-2023 and may exacerbate local supply shortages and consequential inflationary pressures on salaries across the board. Potential growth sectors are green hydrogen manufacture and renewable energy as the region diversifies from fossil fuels.
Japan’s construction market has also seen surging building materials prices due to supply chain disruption and rising raw-materials costs. Din Wee Lee, associate director in Tokyo, reports construction prices up 6% in 2021. Data center construction costs outpaced inflation, rising up to 8% across the country. In 2022, Lee projects raw materials costs and overall materials prices stabilizing through the year.
Rising material costs will continue in China as its commitment to carbon emissions cuts by 2030 will restrict mass production of certain raw materials, says Alan Lam, regional managing director.In 2022, construction growth is expected to be stable as the government boosts the industry with infrastructure investments and looser finance rules for developers to encourage real estate development.
The hi-tech and data center sector will continue to grow as rapid-cloud demand increases. Construction labor and materials costs are expected to be stable in 2022, with no major fluctuation as the driving factors— including global supply chain disruptions, sanctions from the U.S. and European countries and tariffs—remain largely the same as in 2021.