Developed construction markets will continue to take a back seat to emerging markets for the next decade according to Global Construction 2025, a post-recession study on the global construction and engineering market conducted by Global Construction Perspectives and Oxford Economics.
"One third of construction will be in the developed markets, while two thirds will occur in emerging markets," says Graham Robinson, director, Global Construction Perspectives and one of the study’s authors.
"Emerging markets will see growth of three to six per cent annually, while developed markets will largely be limited to one to two per cent. That’s a huge shift, globally, in construction activity."
Construction growth in emerging markets will largely be driven by economic growth, urbanization and an increase in the number of middle income families.
According to the report, construction will represent more than 13.5 per cent of global economic output in 2025 at a value of US$15 trillion, compared to US$8.7 trillion in 2012. The big seven of 2025 will account for 72 per cent of expected growth. In descending order, they are China, the U.S., India, Indonesia, Russia, Canada and Mexico.
"China is still number one in 2025, accounting for over a quarter of global construction activity," says Robinson.
"If we measure it according to what a dollar would buy in China against what a dollar would buy in the U.S., China would be half of that graph."
However, as the low-hanging fruit of industrialization and urbanization is realized, even the Chinese construction juggernaut will begin to slow by 2020.
China’s story is not only domestic. Robinson sees China as an international player, increasingly making large investments in the UK, Germany, Australia and North America as it seeks markets for construction services, equipment and materials.
North America will see the highest construction growth among developed regions, forecast to be almost 40 per cent larger in 2025 than in 2007.
"The U.S. has the highest growth rate of developed countries," says Robinson.
"That’s partly a cyclical rebound, with growth chiefly in housing, but very low growth in infrastructure."
It’s the opposite story in Canada, with infrastructure, not housing, driving construction growth.
"We’re predicting high growth in the Canadian infrastructure sector to 2025, with annual growth of 3.1 per cent," says Robinson.
"We don’t see any let-up in infrastructure demand."
He foresees good news in liquefied natural gas exports and associated infrastructure construction, driven by an increased demand from Europe.
"Europe is going to be a market for natural gas as they get away from Mr. Putin’s idea of supplying gas," he says.
Despite large immigration numbers, a downward shift in the percentage of working age Canadians will see moderate demand for housing construction, with an uptrend toward the end of the decade.
Western European construction will reflect its weak economic fundamentals with a market five per cent smaller in 2025 than its 2007 peak. Only the UK will buck that trend, with a growing construction market.
Sub-Saharan Africa is predicted to be the second-highest growth region, with Nigeria as a rising star. Construction growth in India is expected to outpace that of China to 2025.
"In a changing global construction landscape, Canada’s overall position in 2025 is still respectable," says Robinson.
Global Construction 2025 was sponsored by companies in the construction and engineering industry from market groups including: North America; Latin America; Europe; the Middle East and North Africa; sub-Saharan Africa; and, Asia Pacific. Robinson spoke at the recent CanaData construction forecasting conference held in Toronto.